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Darden to buy Cheddar’s for $780M

Deal gives company its eighth brand

Darden Restaurants Inc. said on Monday that it has agreed to buy Cheddar’s Scratch Kitchen from the private-equity groups L Catterton and Oak Investment Partners for $780 million in an all-cash deal.r

The acquisition, coming three years after Darden sold Red Lobster, gives the Orlando-based casual-dining operator its eighth concept — along with Olive Garden, LongHorn Steakhouse, Yard House, The Capital Grille, Seasons 52, Bahama Breeze and Eddie V’s.

“Cheddar’s is an undisputed casual-dining value leader with broad appeal and strong average restaurant volumes,” Darden CEO Gene Lee said in a statement. “Cheddar’s is a great fit in the Darden portfolio because it complements our existing brands. This addition will also enable Darden to further strengthen two of our most competitive advantages: Our significant scale and our extensive data and insights.”

Darden had been speculated to be on the lookout for another acquisition candidate, and one with room to grow, so it could generate sales growth targets.

In Cheddar’s, Darden gets a high-volume concept with more room to grow. The casual-dining chain was founded in 1979 in Arlington, Tex., and has 165 locations in 28 states. The locations boast average unit volumes of $4.4 million.

The $780 million represents a multiple of 10.4 times Cheddar’s 2016 cash flow.

Ian Baines, Cheddar’s CEO, will remain president of Cheddar’s and will report to Lee. The deal is expected to be complete this spring. 

“We are excited about the opportunity to be part of Darden,” Baines said in a statement. “Our operating philosophy and values are similar and we believe this transaction provides a great opportunity for our team members to continue to grow and develop in their careers. Additionally, Darden’s expertise will enable us to further capitalize on our growth potential.” 

The deal comes just weeks after Cheddar’s bought its largest franchisee, the 44-unit Greer Companies. That left Cheddar’s with 25 franchised locations and 140 company-owned units. The company long ago decided to concentrate on company-owned units.

Darden is a largely company-run operation.

Contact Jonathan Maze at [email protected]

Follow him on Twitter at @jonathanmaze

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