Struggling restaurant chain likely to shut down or be sold | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

Sometimes, the small things get lost when owned by a large company.

In multiple cases, Chipotle shut down nascent brands because it seemed impossible for them to grow to a point where they materially impacted earnings. That’s also partially why McDonald’s sold its stake in Chipotle, well before the Mexican chain became the giant it has grown into.

McDonald’s itself recently closed down its CosMc’s experiment because it made more sense to integrate some of that chain’s beverage menu into the core brand rather than growing another chain.

It’s hard to be a small brand at a company that owns multiple larger brands, because it’s not worth it for management to focus efforts on your growth. When a company owns multiple major restaurant chains with high growth potential, it may not be the right owner for a smaller, more niche chain.

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That’s not a comment on whether than chain offers good food — McDonald’s probably always liked the menu at Chipotle — but a decision as to where resources can best be used.

Darden Restaurants Inc. (DRI) has come to that decision about one of its brands, and the end of that relationship may not be pretty.

Bahama Breeze will either be sold or closed down.

Image source&colon; Shutterstock

Darden shares plans for Bahama Breeze

Darden has decided to walk away from the Bahama Breeze brand. That’s something CEO Ricardo Cardenas talked about during his company’s fourth-quarter earnings call.

“We made the decision to close 15 Bahama Breeze locations in May, leaving the 28 highest-performing Bahama Breeze restaurants in our portfolio. After further review, we have made the difficult decision that these remaining locations and the Bahama Breeze brand are not a strategic priority for us. We also believe that this brand and these restaurants have the potential to benefit from a new owner,” he shared.

While a sale is a possibility, other options are being considered.

“Consequently, we will be considering strategic alternatives for Bahama Breeze, including a potential sale of the brand, or converting restaurants to other Darden brands. Excluding any onetime potential impacts, which are unknown as of today, we do not expect these strategic alternatives including a potential sale to have a material impact on our financial results,” he added.

The CEO offered more color on the decision to shut down or sell Bahama Breeze.

“And then lastly, on the decision on Bahama Breeze, we have, when we look at our portfolio and we try to determine what brands we add to our portfolio, we have criteria. And [those] criteria should be what we look at to keep brands in our portfolio,” he shared.

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Bahama Breeze, he noted, no longer fits the criteria.

“And we think that they have a lot of growth potential with another owner. We were not going to be putting a lot of investment into Bahama Breeze. And so to give those team members and those managers growth opportunities, it’s better for them to be under a different ownership,” he added.

Darden’s Olive Garden is growing

While Bahama Breeze did not meet Darden’s criteria, its Italian restaurant chain, Olive Garden, has been adding locations around the world. The company has also sold some Olive Gardens to a franchise partner.

“We also signed a definitive agreement to sell the eight Olive Garden locations in Canada to Recipe Unlimited, the largest full-service operator in Canada, and we are on track to close that deal soon. These eight restaurants will become franchised and upon close, Darden and Recipe Unlimited will enter into an area development agreement to open 30 more Olive Gardens over the next 10 years,” Cardenas said.

Those are not the only restaurant plans for Olive Garden and other Darden brands.

“In addition to the agreement with Recipe Unlimited, we also have new agreements with partners in India and Spain, each of which calls for the development of 40 Olive Garden locations as well as an agreement with our existing Ruth’s Chris franchise partner in Asia for the development of 6 Capital Grill locations,” he added.