Darden has reportedly struck a deal to finally sell off the ailing Red Lobster brand to Golden Gate Capital for $2.1 billion. The loss of the Red Lobster brand caused an expected drop in share prices for Darden, but the financial stimulus of the deal, plus the reduction of losses from the failing restaurant chain should provide the company a lot of needed relief. The big question will be if Golden Gate Capital has what it takes to turn Red Lobster’s performance around. You might expect to see some upcoming changes at the restaurant in the near future, as this change of management could be the critical play that the organization really needed.
Image From Darden
The cash deal allowed Darden to be able to pay off nearly $1 billion is outstanding debt that the company owed, and they plan to spend the other half of the cash to reinvigorate the remaining Olive Garden restaurant chain. Olive Garden’s sales performance has also been falling in recent years, though not as badly as Red Lobster has been. By spending some time and money to add some vitality in Olive Garden’s public image, Darden hopes that sales will pick back up in years to come. There is certainly a lot of competition in the casual restaurant business, and Olive Garden’s image and reputation have just been stagnant for the past years.
Golden Gate Capital, on the other hand, has already struck a deal to sell most of the real estate that the Red Lobster stores are situated on to a real estate holding company. The immediate sale helped Golden Gate Capital to recoup some of their financial investment in the Red Lobster brand. The company now plans to lease the land back from the real estate company, which could prove mutually beneficial for both parties.
There are no plans yet on what changes are to come to the Red Lobster restaurants, other than the already hashed out corporate and real estate changes. There have been no announcements made about any upcoming changes to menus, promotions, or the restaurant’s image. It may not take much for the performance of Red Lobster to turn around, as long time fans have been hoping that it just doesn’t fade into obscurity.
$2.1 Billion For Red Lobster, That’s A Lot Of Cheddar Bay Biscuits!
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