Orlando, Florida, U.S.A.-based Darden Restaurants and Ruth's Hospitality Group entered into a definitive merger agreement in which Darden will acquire all of the outstanding shares of Ruth's in an all-cash transaction valued at approximately USD 715 million (EUR 647 million).
Ruth’s, based in Winter Park, Florida, operates 154 Ruth's Chris Steak House restaurants globally that serve steaks and upscale seafood dishes such as garlic-crusted sea bass. The company generated systemwide sales of more than USD 860 million (EUR 778 million) and total revenue surpassing USD 500 million (EUR 452 million) in 2022, Darden said in a press release.
The company will complement Darden's portfolio of varied brands that includes Olive Garden, LongHorn Steakhouse, Yard House, The Capital Grille, Seasons 52, and others.
“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,” Darden President and CEO Rick Cardenas said. “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.”
Cheryl Henry, president, CEO, and chairperson of Ruth’s Chris, will continue to lead the brand as president and will report to Cardenas.
“We are excited about the opportunity to join the Darden family,” Henry said. “Our strategy and operating philosophy aligns well with Darden, and we have a strong cultural fit that should ensure a smooth transition. This transaction will also provide more opportunities for our team members to develop in their careers as we continue to grow our 57-year-old iconic brand.”
Darden has recovered well from the initial profit losses incurred by the Covid-19 pandemic, reporting a 13.8 percent increase in sales to USD 2.8 billion (EUR 2.5 billion) in its fiscal third quarter, which ended 26 February, 2023.
Olive Garden’s sales grew 12.3 percent during the quarter, LongHorn Steakhouse sales rose 10.8 percent, and its fine-dining business sales jumped 11.7 percent. Additionally, Darden’s diluted net earnings per share increased 21.2 percent.
“I'm proud that we significantly exceeded the industry for both same-restaurant sales and traffic this quarter, outperforming even more on traffic than on sales,” Cardenas said in March. “Our ability to invest in pricing below inflation over time provides strong value to our guests and reinforces the power of our strategy and our restaurant teams' commitment to being brilliant with the basics.”
Higher food and labor costs have impacted Darden along with all other restaurant operators. Darden’s expenses were 240 basis points higher in its fiscal second quarter of 2023, driven by commodities inflation of around 13 percent, “which significantly outpaced our pricing,” Darden Chief Financial Officer Rajesh Vennam said on an investor call.
Vennam said the company expects to experience inflation of around 7 percent and commodity inflation between 8 percent and 9 percent for the full fiscal year.
However, the company’s scale and vendor partnerships have helped minimize the impact of inflation and higher prices relative to the general market, Vennam said.
For its 2023 fiscal year, Darden predicted its total sales to reach USD 10.45 billion (EUR 9.5 billion), and it said it expects its same-restaurant sales growth of 5 percent to 6.5 percent. The company also plans to open 55 to 60 new restaurants.
Overall, the U.S. restaurant industry has bounced back from the pandemic and expects to reach the USD 1 trillion (EUR 905 billion) milestone in 2023 for the first time in history, according to foodservice consulting firm Technomic, per Restaurant Business.
Photo courtesy of The Image Party/Shutterstock
