The parent company that owns Olive Garden has confirmed that plans to acquire a tiny restaurant chain are underway. Darden said on Tuesday that the deal will be worth about $780 million. The company is looking to acquire Cheddar’s, a small restaurant chain with 165 locations around the country. This is merely a sixth of all the total Olive Garden locations. The small restaurant chain has been operating in 28 major states including Ohio, Kentucky, Tennessee, Indiana, North Carolina, Virginia, and also West Virginia.
Cheddar’s has built a reputation in the restaurant space for its Baby-back ribs, the Monte Christo Sandwich, Chicken Fingers, and other delicacies. The planned acquisition will make Darden one of the biggest restaurant chain owners in the US. Despite a number of challenges over the years, the restaurant sector in the US has remained quite resilient. Even though the entry of smaller chains has helped boost growth, the role of big chains still remains relatively big. In 2017 alone, revenues from the restaurant sector are expected to top up $800 Billion.
This will be an eighth consecutive year of growth. In addition to this, the restaurant sector will still employ in excess of 14.7 million people making it the second largest private sector employer in the US. This outlook and other favorable market factors have inspired Darden to expand its presence in the restaurant business with the planned acquisition. Olive Garden, in particular, has been a massive success and there is hope that the niche that Cheddar’s has already cut for itself will add a crucial element into Darden’s already expanding market.
Customer feedbacks on the menus at Cheddar’s have been largely positive. However, what really seems to be a huge selling point for the restaurant is its ability to offer a great dining experience and a diversified menu without hefty prices. Before the $780 million acquisition, Cheddar was owned by two private equity firms namely Oak Investments and L Catterton. The new owners are definitely going to shake things up. Although Cheddar’s is fairly small in terms of size and market presence, there is enough potential to expand it.
Darden will undertake this expansion plan. In a statement released just moments after the acquisition, Darden noted that Cheddar’s has already shown significant growth opportunities in both new and existing markets. Until the acquisition, Cheddar’s was averaging a tune of about $4.4 Million for every location. This was very close to the average posted by the Olive Garden the same year which stood at about $ 4.5 Million. These numbers show that Cheddar’s has sales, profitability, and potential even if it’s a small chain. With the acquisition, Darden hopes to unlock its full potential through expansion to new markets and setting up of new locations across different states in the US.
