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Darden Restaurants wants to separate from Red Lobster.
Darden said Thursday it wishes to either spin off or sell Red Lobster as a way to boost value for shareholders. The company also plans to suspend the opening of new Olive Garden locations as well as limit the amount of new LongHorn Steakhouses. Darden Restaurants also will not be acquiring new restaurants in “the foreseeable future.”
The Huffington Post notes that restaurant chains have suffered since consumers take more care in the way they spend their money. Red Lobster has 705 restaurants in the U.S. and Canada, and the restaurant chains fiscal 2013 sales were about $2.6 billion.
Darden Chairman and CEO Clarence Otis said Red Lobster has been unable to capture high-income customers unlike its other restaurants. Otis believes a separation from the company will give Red Lobster the opportunity to focus more on its audience.
According to the LA Times, investment firm Barington Capital LP recommended that Darden split into two separate companies. The firm, which represents a group holding more than 2 percent of Darden stock, said they should have one company housing Olive Garden and Red Lobster and the other housing its remaining brands. The contents of the proposal were made public in October.
Darden anticipates that after separating from Red Lobster, it will be able to report higher restaurant sales as well as new restaurant sales. Darden’s board need to approve the Red Lobster separation, but it does not require a shareholder vote. If it is approved, the separation will occur in 2015.