News From Terre Haute, Indiana

December 27, 2013

Red Lobster will stay open

Chain will become independent in 2014; rumors of closing untrue

Staff Report
The Tribune-Star

TERRE HAUTE — A change is coming on the corporate level for Red Lobster restaurants nationwide after Darden Restaurants announced that the brand will spin off on its own next summer.

That change will not affect customers or employees of the Terre Haute restaurant location, said Hunter Robinson, manager of media relations and communication for Darden. The good news is that all Red Lobster restaurants will remain open.

“Any reports that Red Lobster restaurants are closing is simply not true,” Robinson wrote Friday in an email. “In fact, the earliest anything will happen with this spin-off is July 2014.”

No information was available on the finances of the local restaurant.

The Darden company announced the change Dec. 19 at its company headquarters in Orlando, Fla. Darden also operates the Olive Garden and LongHorn Steakhouse brands, as well as several other full-service restaurant.

According to the company’s comprehensive plan, no final decision has been made on the form of separation, but the company expects to execute a tax-free spin-off of Red Lobster to its shareholders. A sale of the Red Lobster business may also be considered.

The company will also suspend new growth at Olive Garden and will limit new growth at LongHorn Steakhouse.

Robinson explained that Red Lobster will be operated with a different board of directors, chief executive officer and a new stock listing for shareholders.

The company states that Red Lobster is the largest full service dining seafood specialty restaurant operator in North America with 705 restaurants in the United States and Canada. Red Lobster has annual sales of about $2.6 billion in fiscal 2013. The separation will give Red Lobster more freedom to tailor its marketing and operating strategies to its core consumers.

Robinson said the move was undertaken to benefit shareholders, who saw a decrease in second-quarter earnings.

The company’s website reports that Olive Garden’s second-quarter sales of $869 million were higher than the prior year, resulting in more profit. However, Red Lobster’s second-quarter sales of $561 million were about 5 percent lower than the prior year. That was attributed to higher costs for food and beverage, restaurant expenses and labor, while selling and administrative expenses were lower, resulting in less profit than last year.

Red Lobster was founded in 1968 in Lakeland, Fla., by entrepreneur Bill Darden. General Mills acquired Red Lobster in 1970 and expanded the company nationwide.

In 1995, General Mills spun off its restaurant division, including Red Lobster, forming Darden Restaurants.