Summary of DRI 10k 2023

These are some of the basic notes after reading DRI's (Darden Restaurant Inc.) 10k 2023. This is not detailed analysis but basic info based on the public filing. This focused more on fundamental analysis.

• Owns 1,914 locations under brand:
• Olive Garden  (OG) (Total locations: 949): 
  • Started in 1982, focused on Italian food. 
  • Most prices from $11 to $21. Check per person $22.50. 
  • Alcoholic drink:  5.3% of sales.
  • 21% profit margin
• LongHorn Steakhouse (LHS) (Total locations: 580), 
  • Started 1981, primarily based in eastern US
  • Most prices from $13.5 to $38, Average check per person: $25.5
  • Alcoholic drink: 8.9% of sales
  • 16.5% profit margin
• Cheddar’s Scratch Kitchen (CSK)  (Total locations: 184), 
  • Started 1979, primarily based in Texas
  • Acquired in April 2017
  • Most prices from $8 to $23. Check per person: $18
  • Alcoholic drink:  7.9% of sales
• Yard House (YH) (Total locations: 86), 
  • Started in 1996. 
  • Most prices from $10 to $48. Check per person: $34.50
  • Alcoholic drink:  32.60% of sales.
• The Capital Grille  (TCG)  (64), 
  • Started in 1990, acquired in October 2007 
  • Most prices from $35.00  to $95.00. Check per person: $97.00
  • Alcoholic drink:  26.90% of sales.
• Seasons 52 (44), 
  • Started in 2003, in Orlando, FL 
  • Most prices from $13.00  to $49.00. Check per person: $49.50
  • Alcoholic drink:  23.80% of sales.
• Bahama Breeze (BB) (43), 
  • Started in 1996, in Orlando, FL
  • Most prices from $9 to $25. Check per person: $32.50
  • Alcoholic drink:  21.80% of sales.
• Eddie V’s Prime Seafood  (EV)  (29),
  • Opened in 2000, mostly in large metro area.
  • Most prices from $38.00 to $107.00. Check per person: $114.50
  • Alcoholic drink:  29.1% of sales.
• The Capital Burger (TCB) (4)
  • Started in 2018, located mostly in major metro areas
  • Most prices from $17.00 to $39.00. Check per person: $34.00
  • Alcoholic drink:  30.5% of sales.
• These brands are all over the place, many of these brand are not related to other. At least all of them are in the same sector (fast/casual food). 
• Pg. 1 Has locations by owned/franchised, national/international. 
  • Owns and operates 1,914 locations (all in US and Canada), franchises 34 locations in US and 35 locations outside US. 
  • It’s little different from other companies in the fast food industry in that it does not do lot of franchise, its mostly company owned locations and some very small brands. 
• Incorporated in Florida. Was acquired by GM in 1970, then public in 1995. 
• In June 14, 2023 took over Ruth’s Hospitality Group. Ruth has 155 locations, 81 company owned and 74 franchised. 

• Pg. 5 has really amazing chart with detail info about capital investment, approximately sq ft, dining areas in table format for each brand.    

• Restaurant Operations:     
  • Each OG is led by General manager.  LHS and CSK is led by Managing Partner. Each has additional 3-6 additional manager.  Each about 35-200 employees each. 
    • General Manager and Managing Partner report to Director of Operations who is responsible for 5 - 11 restaurants. 
    • Director of Operations report to Senior Vice President of Operations who is responsible for 80 - 120 restaurants. 
  • Each YH, BB is led by General Manager, TCG, Seasons 52, EV, TCB is led by Managing Partner. Each has 3-10 additional manager. 
    • Each YH, TCG, Seasons 52, and EV has one Exec Chef, and 1-2 sous chef.  
    • Each TCB has one sous chef and BB has 1-3 culinary managers. 
    • Each location employs 60-200 hourly employees. 

 

• Purchasing and Distribution       
  • Has more than 1,500 suppliers, products originate rom more than 35 countries. 

• Human Capital:    
  • Has hourly team turnover (in 2023) of 93%. Which is apparently one of the lowest rate in restaurant industry. 
  • Management turnover of 19%. 
  • Vice president and above has ~over 17yrs experience with Darden, General Manger/Managing Partners has ~over 14yrs experience with Darden. 

• Seasonality: Typically higher in Winter and Spring, followed by Summer and lowest in Fall. 
  • Kind of odd, because most have lowest in winter and higher in summer and fall. Probably because of type of restaurant they run. 

• Government regulations: 
  • Total of 11.2% of sales was alcohol. So all the local rules about the alcohol sale applies.

• Properties: 
  • Land Only lease (Owns building and equipment): 962
  • Ground and Building leases: 661
  • Space/In-Line/Other Leases: 216
  • Total: 1,839

• Expenses (percent of sales):     
  • Food/Beverage:                        32%
  • Restaurant Labor:                    31.9%
  • Restaurant Expense:               16.2%
  • Marketing Expense:                  1.1%
  • General Admin:                         3.7%
  • Depreciation:                             3.7%
  • Operating Income:                    11.5%
  • Net Income from operations:    9.4%

• Liquidity and Capital Resources:     
  • Long term Debt Ratings:   Moody’s: Baa2,   S&P: BBB,    Fitch: BBB
  • Commercial Paper:   Moody’s: P-2,   S&P: A-2,   Fitch: F-2
  • On Sept 10 2021, entered into $1 billion revolving credit line with BOA. No outstanding balance right now. How this revolving credit interest rate  is complex for no reason (pg. 34). 
  • Most of its current debt is purchase obligations and lease. They have large long term debt due in future.