Category: Hospitality & Hotel Dining

ORLANDO — Darden Restaurants Inc. announced its recent commitment to sourcing only cage-free eggs for its international locations by 2027. Over 1,850 locations in North America, Central America, South America and Asia are affected by the change in policy.

“One hundred percent of all egg products purchased by Darden for use in our US owned and operated restaurants are sourced from cage-free housing systems,” the company noted in its updated animal welfare policy. “Additionally, our international franchisees are working to source only cage-free eggs, as they are able, by the end of 2027.”

Darden Restaurants’ brands include Olive Garden, The Capital Grille, LongHorn Steakhouse, Bahama Breeze, Seasons 52, Yard House, Cheddar’s Scratch Kitchen and Eddie V’s.

“We applaud Darden’s decision to stop serving eggs from caged hens to its international guests,” said Kirsty Tuxford of Lever Foundation, a US-based non-profit which works with companies, including Darden Restaurants, on shifting toward cage-free egg sourcing in global markets. 

“The company’s new cage-free policy will greatly benefit the welfare of egg-laying hens in its international supply chain as well as increase food safety for customers.”

Other companies to have committed to sourcing only cage-free eggs include Bloomin’ Brands, Focus Brands, Inspire Brands, Restaurant Brands International, YUM Brands and JAB Holdings, among others.

DENVER — A total of $1.5 million in grants is being distributed to restore, improve and conserve grasslands and wildlife habitats in the Intermountain West, announced the National Fish and Wildlife Foundation (NFWF) on Nov. 29. Matching contributions of $2.5 million will create a total impact of $4 million.

The grants are funded through the Rocky Mountain Rangelands Program, the product of a partnership between NFWF, Cargill, Darden Restaurants Inc., the Department of the Interior’s Bureau of Land Management and the US Department of Agriculture’s Natural Resources Conservation Service (NRCS).

“The Intermountain West is a region rich with wildlife and unique habitats,” said Jeff Trandahl, executive director and chief executive officer of NFWF. “Through voluntary collaborations and impactful grants such as these, we can make major progress toward conserving and restoring this important working landscape and providing improved habitat for native species including elk, mule deer, sage-grouse and songbirds.”

Five grants are being spread across the Intermountain West, which includes habitats in Colorado, Idaho, Montana, Nevada, Oregon, Utah and Wyoming. The recipients include:

• Pheasants Forever (receiving two grants), to (1) restore rangelands in southern and central Idaho by removing invasive annual cheatgrass and reseeding native grasses to benefit sage-grouse and other native species; and (2) remove invasive western juniper in southwestern Idaho to restore greater sage-grouse habitat. 
• Grand Teton National Park Foundation, to restore a previously cultivated section of the Kelly Hayfields in Grand Teton National Park to benefit bison, elk, pronghorn, sage-grouse, songbirds and other native wildlife through replanting native grasses, fobs and shrubs. 
• National Audubon Society, to implement replicable grazing/seeding techniques and infrastructure to increase native forage and protect riparian habitat to benefit greater sage-grouse and other native species in Utah and Wyoming. 
• The Mule Deer Foundation, to enhance rangeland habitat across the Rocky Mountain Region to benefit mule deer, sage-grouse, and other native wildlife species through fencing removal, replanting native sagebrush, and management of invasive annual grasses and juniper. 

Together, the five grants will improve grazing management on 37,500 acres of land for cattle and wildlife, open wildlife migration corridors by removing or improving 28 miles of fencing, install six water tanks to provide alternate water sources for livestock, and restore more than 12,000 acres of rangelands with native grasses, forbs and brush.

NFWF said that thanks to the program’s partners, the projects funded through the Rocky Mountain Rangelands Program have the potential to sequester up to 107,000 metric tonnes of carbon dioxide equivalents by 2030.

“Restoring and maintaining a sustainable, natural ecosystem for wildlife and livestock to cohabitate is a top priority for Cargill,” said Jeffrey Fitzpatrick, leader of Cargill’s BeefUp Sustainability Program. “As part of the BeefUp Sustainability initiative, we continue to focus our efforts on bringing together the programs and partners that can make the most significant impact on climate change. It is exactly these types of public-private partnerships, connecting the right resources to the right organizations, that support that type of environment, building an agricultural supply chain to feed the world in a safe, responsible and sustainable way.” 

“At Darden, we’re committed to doing our part to protect our planet for future generations,” said Bryan Valladares, director of sustainability at Darden. “We’re proud to support the work that NFWF is leading to help promote climate resiliency by restoring grazing lands in the Rocky Mountain Rangelands and enhancing conservation projects in this vital ecosystem.”

ORLANDO, FLA.— Darden Restaurants Inc. has agreed to acquire Ruth’s Hospitality Group Inc.

Under the agreement, Darden will acquire all of the outstanding shares of Ruth’s Hospitality for $21.50 per share. The equity value is approximately $715 million.

Ruth’s, owner and operator of Ruth’s Chris Steak House or Ruth’s Chris, was founded in New Orleans in 1964 by Ruth Fertel. The company has 154 locations consisting of 80 company-owned restaurants and 74 franchised restaurants.

“Ruth’s Chris is a strong and distinctive brand in the fine dining segment with an impressive history of delivering elevated dining experiences to their loyal guests,” said Rick Cardenas, president and chief executive officer of Darden. “It fits the criteria we have for adding a brand to our portfolio and supports our winning strategy. Ruth’s Chris is a great complement to our portfolio of brands, and I’m pleased to welcome their nearly 5,000 team members to Darden.”

The transaction is expected to be completed in June, subject to customary closing conditions.

ORLANDO, FLA. — Some good news came Darden Restaurant Inc.’s way in the first quarter ended Aug. 27. Same-restaurant sales rose 5%, and executives increased expected synergies from the acquired Ruth’s Chris Steak House brand.

Still, Orlando-based Darden stuck to its fiscal-year outlook of adjusted diluted net earnings per share from continuing operations of $8.55 to $8.85 per share. Rajesh Vennam, chief financial officer, said he has seen “mixed data” on consumer patterns.

“The primary biggest risk is obviously on the consumer: What happens with the consumer?” he said in a Sept. 21 earnings call to discuss first-quarter results. “Second is on the commodities. We’re trying to understand what’s going to happen, especially with beef — 22% of our basket is beef. So there’s some risk there. Now the pricing in beef has remained pretty high because of the supply being down in the mid-single digits. We’re starting to see some additional imports that might help on the beef front, but it’s too early.

“So I guess all things considered at this point, we felt like it was prudent to stay with the guidance we provided.”

In the quarter Darden had net earnings of $195 million, or $1.61 per share on the common stock, which was up 0.7% from $193 million, or $1.58 per share, in the previous year’s first quarter. The Ruth’s Chris transaction and integration-related costs had a negative impact of 18¢ per share.

Total sales jumped 12% to $2.73 billion from $2.45 billion, driven by the same-restaurant sales increase and sales from adding 77 company-owned Ruth’s Chris Steak House restaurants and 46 other net new restaurants.

The results failed to boost Darden’s stock price, which closed at $145.49 per share on the New York Stock Exchange Sept. 21, down 2.7% from a close of $149.46 on Sept. 20.

While same-restaurant sales in the quarter increased 6% for Olive Garden and 8% for LongHorn Steakhouse, they decreased 2.8% in fine-dining restaurants.

“We are seeing a little softness versus last year with household incomes above $125,000, and that primarily affects our fine-dining brands, but it does affect all of our brands,” said Ricardo Cardenas, president and chief executive officer of Darden Restaurants.

Permitting delays also are hindering plans to open new restaurants.

“We also are being a little selective, especially where inflation and costs have made the economics of the deals a little less attractive, and we generally like to have good margin of error with our projects,” Cardenas said. “And so we’ve turned down a few projects just because costs are a little higher than we wanted them to be.”

Darden Restaurants completed its acquisition of Ruth’s Hospitality Group, Inc. on June 14.

“Previously, we anticipated $20 million in annualized run-rate synergies,” Vennam said. “We now expect approximately $35 million of gross run-rate synergies and other cost savings, and we anticipate investing approximately $10 million into the business, resulting in annualized net run rate synergies of approximately $25 million, and for fiscal 2024, we now expect approximately $12 million of net synergies.”

KANSAS CITY, MO. — The National Restaurant Association’s (NRA) Restaurant Performance Index (RPI) over the past year shows an important industry category in turmoil. Inflation, consumers with less disposable income and rising labor costs are only some of the issues that have combined to challenge the ability of operators to run their businesses profitably.

The RPI is a monthly composite index that tracks the health of the US restaurant industry. It is published on the last business day of each month, and the index is measured in relation to a value of 100, with values above 100 indicating a period of expansion and values below 100 representing category contraction.

For May, the RPI stood at 99.1, up slightly from 98.8 in April. In May 2023, the RPI was 99.6, down 1.3% from 100.9 in April.

Underpinning the RPI are two components — the Current Situation Index that measures current trends in same-store sales, traffic, labor and capital expenditures, and the Expectations Index that measures the six-month outlook of restaurant operators for same-store sales, employees, capital expenditures and business conditions.

The Current Situation Index in May was 98.7, up 0.6% over April but down from 99.7 in May 2023. May 2024 marked the eighth consecutive month the Current Situation Index was in contraction territory due to weak sales and customer traffic, according to the NRA.

The Expectations Index rose to 99.6 in May from 99.5 in April. In May 2023, the Expectation Index also was 99.5. The NRA said the May 2024 index level shows restaurant operators remain uncertain about both sales and the overall economy in the months ahead.

Interestingly, 30% of restaurant operators who responded to the NRA survey said they expected higher sales in six months versus the same period of the previous year. Twenty-five percent indicated they expected lower sales in six months. But when asked about their outlook for general economic conditions in six months, 43% indicated they expect it to be worse versus 13% who expect better conditions in six months.

Lower-income consumers have been the most adversely affected by the economic climate, and Ricardo Cardenas, president and chief executive officer of Darden Restaurants, the owner of restaurant concepts including Olive Garden, Ruth’s Chris and Yard House, said the weakness has hurt the company’s results.

McDonald’s Corp. has seen similar behavior shifts and introduced a national value menu last month to recapture some of its lost business.

But it may be shortsighted to solely blame restaurant category weakness on the overall economy and behavior changes among lower-income consumers. While both are contributors, restaurant outlets operate on slim margins, and other economic shifts related to higher labor costs, reduced traffic at some outlets due to more people working from home and the adoption of a four-day work week by some businesses also may be contributing to this period of contraction.

The restaurant industry has been buffeted by significant challenges since the COVID-19 pandemic. While the category has weathered many of the difficulties, operators may only now be understanding the full scope of changes to the market that have occurred since March 2020.