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Orlando’s Darden Restaurants said Monday it will snatch up discount casual dining chain Cheddar’s Scratch Kitchen for $780 million.
Cheddar’s has 165 locations in 28 states, including 25 franchised restaurants. It specializes in value-priced dishes at its full-service restaurants including chicken fried steak, which sells for $9.29, or a sirloin steak listed as $9.99.
Cheddar’s will join Darden’s portfolio including Olive Garden, LongHorn Steakhouse, Capital Grille, and Yard House. A Darden spokesman said they hope to close the deal by the end of May.
"Cheddar's is an undisputed casual-dining value leader with broad appeal and strong average restaurant volumes," said Darden CEO Gene Lee in a statement. "Cheddar's is a great fit in the Darden portfolio because it complements our existing brands.”
Lee said Cheddar’s can also benefit from two of Darden’s strengths: scale, and data and insights.
It’s the first time Darden (NYSE: DRI) has bought a restaurant brand since 2012 when it bought upscale sports bar Yard House.
Darden will pay another $10 million to Cheddar’s for transaction-related costs.
Cheddar’s was run by private equity firms L Catterton and Oak Investment Partners. It is headquartered in Irving, Texas.
The deal also reunites Cheddar’s CEO Ian Baines with Darden, his former employer. Baines ran Darden’s Smokey Bones chain until 2012, when Darden spun off the chain and sold it.
Baines is staying at Darden and will now report to Lee as president of Cheddar’s.
Cheddar’s has four restaurants in Central Florida -- two in Orlando and one each in Kissimmee and Sanford.
Most of Cheddar’s restaurants are in Texas and the Southeast, giving Darden brand with growth potential, said John Gordon, a restaurant consultant with Pacific Management Consulting Group.
“They have a lot of room to grow up the eastern seaboard and out west,” Gordon said.
Darden is the largest company headquartered in Orlando and has 1,000 employees at its headquarters off John Young Parkway.
Darden also announced its fiscal third-quarter earnings Monday, with sales were up 1.7 percent to $1.87 billion.
Same-restaurant sales were up just 0.9 percent for the quarter.
"We continued to gain market share as we outperformed industry same-restaurant sales by a considerable margin again this quarter," Lee said in the statement.
At Olive Garden, same-restaurants sales were up 1.4 percent for the quarter at flagship brand Olive Garden compared to same period in the previous year, but sales were slower at other brands.
LongHorn Steakhouse’s sales were up just 0.2 percent and sales at existing Yard House restaurants were down 1 percent.
Olive Garden traffic was even down slightly for the quarter, as was traffic at LongHorn.
Despite slow sales growth, profits got a nice boost. Darden net earnings increased 54 percent to $220.2 million and earnings per share were $1.32, up 57 percent compared to the year before.
Before the deal, Darden had about 1,500 restaurants worldwide and 150,000 employees.