The situation continues to decline with both the Olive Garden and Red Lobster restaurant chains, as both revenue and foot-traffic continue on a downward spiral which began with the economic downturn. Neither chain has been able to recover thus far, as customers seem to be seeking, and finding, quality food at better prices from other restaurants.
Both Olive Garden and Red Lobster are owned by Darden Restaurants Inc., which is the largest full-service restaurant company in the world. As the Inquisitr recently reported, Darden has implemented a new marketing plan for the Olive Garden chain, including a logo redesign that has caught quite a bit of flack from critics for its simplistic design. Darden has also announced a plan to spin-off the Red Lobster chain, divesting it from Darden‘s main holdings due to its dismal performance.
Adding to Darden‘s problems is the Barington Capital Group, an activist investor group which is now putting pressure on Darden to replace its CEO, Clarence Otis Jr., according to Nation’s Restaurant News. Otis has been CEO of Darden since 2004. Barington would also like to see Darden appoint a separate chairman, which Otis has also filled the role of since 2005. Another activist investor group, Starboard Value, have also previously made a request for Darden to separate the CEO and chairman positions within the company.
In a letter to Darden Restaurants, Barington Capital said that it has “long questioned why the board did not select a person with stronger operating experience in the industry to run Darden.”
“While we are patient, long-term investors, we are deeply concerned by the rapidly deteriorating financial performance of Darden under the leadership of Mr. Otis.”
“In addition, we are dismayed by his efforts to separate Red Lobster and its valuable real estate from the company without shareholder approval, notwithstanding the fact that this controversial transaction could potentially diminish shareholder value and appears to us to be self-serving,”
Darden replied by saying “As we have said previously, our focus is on doing what is in the best interest of all Darden shareholders, and the board is confident in the actions the company is taking to deliver on this responsibility.”
According to a report by The Republic, Barington would like to see Darden separate both the Olive Garden and Red Lobster franchises as a pair from Darden’s more successful restaurant chains, including Longhorn Steakhouse, and Capital Grille.
With more than $929 million in sales in the third quarter, Olive Garden remains the largest sales driver under the Darden umbrella, even while some stores have seen sales slide as much as 5.4% during that quarter.