Darden Restaurants, Inc. : A portfolio of iconic restaurant brands

Published: 2025-06-27 04:54:53 ET DRI

Published on 06/27/2025 at 04:54

By Grégoire Legrand

Darden Restaurants operates as one of the world's largest full-service restaurant company with 195,000 employees and 420+ million annual guest. The company owns and operates more than 2,100 Olive Garden, LongHorn Steakhouse, Yard House, Ruth's Chris Steak House, Cheddar's Scratch Kitchen, The Capital Grille, Chuy's, Seasons 52, Eddie V's and Bahama Breeze restaurants. Let’s take a closer look.

Founded in 1938 by 19-year-old Bill Darden, who opened his first restaurant - The Green Frog - with the motto “Service with a Hop,” the company remains rooted in its original values nearly 90 years later. Darden continues to place a strong emphasis on hospitality, holding to the belief that great service starts with treating everyone equally.

Darden focuses on providing dining experiences across multiple price points and cuisine types through its portfolio of restaurant brands, generating revenue at company-owned locations, with minimal franchise operations compared to industry peers, providing higher revenue per location but requires greater capital investment and operational complexity.

As of May 2024, the group owned and operated 2,023 restaurants in the US, and 8 in Canada while having only 146 franchised including 95 in the US, 35 in Latin America, 6 in Canada, 17 in Asia, 1 in Middle East, and 2 in the Caribbean.

Darden operates in a highly competitive and evolving full-service restaurant (FSR) industry that has been steadily recovering since the pandemic but now faces new headwinds. Inflation and economic uncertainty are pressuring consumer spending, with nearly half of U.S. adults in 2025 saying they dine out less than they’d like - up to the highest level since early 2022. At the same time, costs of goods continue to rise, making dining out feel increasingly like a luxury for many households. Still, the FSR segment remains resilient, with projected 2025 output nearing $82 billion and strong consumer demand for in-person dining experiences. Atmosphere remains the top driver, and most Americans still spend between $11 and $30 per meal.

Despite the growing convenience of food delivery, full-service dining continues to dominate consumer preferences, with almost 70% of respondents in 2024 naming casual dining as their go-to option. The landscape is diverse and fragmented, with over 34,000 FSR franchise locations and more than 150,000 independent operators. Within this space, Darden’s flagship brand, Olive Garden, remains a key player, though 2024 marked the first time in a decade that Texas Roadhouse surpassed it in total sales. While Texas Roadhouse led in customer satisfaction, Olive Garden retained a slight edge in overall popularity. In this environment, Darden’s ability to balance value, experience, and operational efficiency will be critical to maintaining its leadership.

Q4 wrapped up a strong year for Darden: quarterly sales climbed 10.6 % to $3.3 billion on a 4.6 % blended same-restaurant lift plus the addition of 103 Chuy’s units and 25 other net openings. Growth was broad-based—Olive Garden up 8.1 %, LongHorn 9.3 %, and the “Other” cluster (Cheddar’s, Yard House, Bahama Breeze, Seasons 52, Chuy’s) surging 22.4 %—while margins expanded to 23.8 % at Olive Garden and 20.1 % at LongHorn. Reported EPS came in at $2.58 and adjusted EPS rose 12.5 % to $2.98. Capital returns stay a priority: Darden bought back 0.2 million shares for $51 million this quarter and has a new, open-ended $1 billion repurchase authorization.

For the full year, sales reached $12.1 billion (+6.0 %), compare to $6.7 billion in 2015, with adjusted EPS grew 7.5 % to $9.55. EBITDA rose 7.2 % to $1.95 billion in FY 2025, while EBIT grew 5.5 % to $1.44 billion. The EBITDA margin is now above 16 % and is projected to reach 16.8 % by 2027; the EBIT margin should hold at 12–12.5 %. Net income inched up 2 % to just over $1 billion this year and is forecast to climb 18 % to $1.24 billion in 2026. By 2027, management expects to recapture 2022-level profitability with targets of 9.7 % for net margin and 12.6 % for operating margin. FCF already tops $1 billion, and return on equity is a robust 49.7 %, projected to surpass 51 % over the next two years, though return on assets remains around 9–10 %.

Darden’s 2025 valuation sits near its 10-year average: the stock trades at roughly 23x forward earnings versus a decade mean of 23.6x, with multiples projected to ease to 20.7x in 2026 and 19.2x in 2027. Price-to-book is the outlier - expected at 11.7x, almost double the long-run norm of 5.9x - while EV/revenue is broadly steady at 1.66x (vs. 1.7x historically). By comparison, 2025 P/E ratios for key peers are 21.3x for Brinker International, 28.1x for Texas Roadhouse, and 7.99x for Bloomin’ Brands.

Darden’s top competitors include Brinker International, Texas Roadhouse, and Bloomin’ Brands - each leveraging unique brand portfolios and strategies in the full-service dining space. Brinker has shown strong momentum, with Chili’s good performance while Texas Roadhouse continues to gain market share with its focused steakhouse concept and high customer satisfaction. Meanwhile, Darden also faces growing competition from independent restaurants, fast-casual chains, and delivery-first brands that appeal to shifting consumer preferences - especially in urban markets. However, this landscape comes with risk: as competitors innovate around digital ordering, labor efficiency, or pricing flexibility, Darden’s broader portfolio and scale could limit its agility, particularly in a high-cost environment marked by inflation, staffing challenges, and macroeconomic pressure on consumer spending.

Darden Restaurants stands out as a mature, well-run operator with strong brand recognition and scale advantages in full-service dining. Its diversified portfolio and solid execution give it resilience and room to gain share through consolidation and efficiency. Growth will be shaped by smart acquisitions, margin improvement, and expansion, as the company navigates a saturated market, shifting consumer habits, rising labor costs, and integration of Chuy’s.

Grégoire Legrand