Darden has been up front about its struggles with Cheddar’s Scratch Kitchen. The casual chain, purchased for $780 million last April, was the only concept in Darden’s eight-brand portfolio to report negative same-store sales in the fourth quarter at negative 4.7 percent. For the entire fiscal 2018, Cheddar’s dropped 2 percent, year-over-year.
Darden has cautioned patience in regards to the brand’s performance, saying the integration of 165-unit Cheddar’s was never going to be an overnight swing. Even LongHorn, which has posted positive gains for 21 consecutive quarters, skewed red in its first year under Darden’s umbrella. That was the lone and only negative run for the 504-unit steakhouse since Darden purchased it along with The Capital Grille for $1.2 billion, plus debt, in 2007.
When will this arrow reverse? Darden has been reluctant to chart any definitive timeframe, but this part of the turnaround is certain: The company will forge ahead with different leadership.
Darden told employees last week Ian Baines, the president at Cheddar’s, was “stepping away,” from the role and leaving the company, as reported by The Orlando Sentinel. Seasons 52 president Brian Foye is also departing after more than a decade directing polished brands Capital Grille, Bahama Breeze, and Seasons 52.
Dave George, often credited with Olive Garden’s revival, will oversee Cheddar’s as it searches for Baines’ full-time replacement. George was named president of Olive Garden in 2013 and executive vice president of Darden in 2016. This past January, the company appointed him to a newly created role of executive vice president and chief operating officer. George was appointed president of LongHorn in 2007. Before that, he was senior vice president of operations for the chain from 2001–2003 and vice president of operations for Capital Grille from 2000–2001.
Capital Grille and Eddie V’s leader John Martin will direct Seasons 52 in Foye’s absence. Seasons 52, which has 42 locations, was the lowest performing concept in Q4 behind Cheddar's with comps growth of 0.4 percent (The Capital Grille lifted 2.6 percent; Olive Garden 2.4 percent; LongHorn 2.4 percent; Eddie V’s 3.5 percent; Yard House 1.4 percent; and Bahama Breeze 0.6 percent.)
For fiscal 2018, Seasons 52's same-store sales lagged at negative 0.6 percent—the only Darden legacy brand to not report positive (Capital Grille 2.8 percent; Yard House 1.1 percent; LongHorn 2.7 percent; Bahama Breeze 1.1 percent; Eddie V's 4.1 percent; Olive Garden 2.4 percent).
In an emailed statement to the Orlando Business Journal, Darden spokesman Rich Jeffers said: “We constantly evaluate our organizational structure to ensure we have the right talent in the right positions to deliver on our commitments to our guests, our team members and our shareholders. We believe that these organizational adjustments position Darden and our brands for long-term success."
Baines was Cheddar’s CEO before Darden’s acquisition of the brand and had some familiarity with the company. Previously, he was the CEO and president of Darden’s Smokey Bones concept, leaving in 2010 when it was sold. He then worked at Brinker International before joining UNO Restaurant Holdings as president and CEO in January 2013. Baines started at Cheddar’s in fall 2014.
The first quarter of fiscal 2019 will mark the first time Darden counts Cheddar’s in its comps base, and the casual-dining leader had to lower guidance in anticipation of further soft sales, calling for 1–2 percent expected growth. To compare, sans Cheddar’s, Darden’s blended comps lifted 2.2 percent in Q4.
Darden’s integration of Cheddar’s has been particularly complicated for a bevy of reasons. When the company acquired Cheddar’s, the chain was fragmented into three different businesses, each with unique systems, policies, and pricing structures. Transitioning Cheddar’s to Darden’s proprietary point-of-sale, which hit in Q4, was no simple undertaking. In addition, dealing with Cheddar’s 25 franchised units has been a pressing challenge. Darden had to integrate the chain’s two largest franchisees when it purchased Cheddar’s, and weakened the base restaurants in doing so, Darden CEO Gene Lee said, by pulling resources from those units to help staff the acquired ones.
Lee said bringing Cheddar’s up to speed has hurt its day-to-day operations at the store level.
“As we’ve pushed the integration process to completion it became apparent that the team was losing focus on the basic operating fundamentals,” Lee said in a June 21 conference call. “Therefore, we decided to suspend marketing and promotional activities. We believe this was the correct decision even though we were rolling over a heavy period of promotional activities last year prior to and immediately after we closed the acquisition.”
Among the issues: Lee said many of the restaurants need additional staff, and better scheduling. Cheddar’s must learn how to use the tools and updated technology Darden provides. Lastly, Cheddar’s complex operation needs to be simplified to improve execution, a similar method deployed at Olive Garden and LongHorn to great success.
In June, Darden also said LongHorn executive vice president of operations Paul Livrieri, who witnessed firsthand the steakhouse chain’s integration into Darden, is leading Cheddar’s operational team.
“At this point in time, we believe we have the recipe, no pun intended, to really improve the operations in the Cheddar’s system and drive same-restaurant sales,” Lee said in the call. “But we all know that trying to drive same-restaurant sales to operational improvements takes more time than coming up with an advertising promotion or advertising gimmick to drive sales. We want to build a foundation that can move this business forward and make it sustainable for long-term. That’s our plan and we’re going to stick to it.”