This time it plans to acquire Ruth's Hospitality Group, owner of Ruth's Chris Steakhouse, for $715 million. On May 3, Darden announced another acquisition. Today, it operates 179 locations, and Darden has further augmented its buying power along the way. At its acquisition, Cheddar's had 140 company-owned locations (with another 25 franchise locations). Also, based on Cheddar's relatively modest restaurant count, it offered expansion potential as well. This casual dining brand was a good fit with Darden's portfolio, which already included the roughly similar concept YardHouse. That is why Darden's 2017 purchase of Cheddar's for $750 million was so attractive. Having brands that serve similar food and in similar environments amplifies its buying power. With a market cap of $18.5 billion and roughly 1,850 restaurants, Darden has to buy a lot of ingredients. Plus, seafood prices can be volatile, and Red Lobster was nearly as large as Olive Garden in restaurant count, exposing Darden to too much variability on the cost front, while not providing enough synergies elsewhere. One of the key reasons for the sale was that Red Lobster's sales were trending in the wrong direction. For example, it once owned the Red Lobster brand, but sold it in 2014. In some ways investors should probably think of Darden as a brand manager more than a pure restaurant company.
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