Darden to Grow in Latin America - Analyst Blog
February 28 2013 - 1:28PM
Zacks
Multi-concept, full-service restaurant operator Darden
Restaurants Inc. (DRI) recently announced that it has
inked a development agreement with renowned restaurant operator,
International Meal Company (IMC) to enter four Latin American
countries − Brazil, Colombia, the Dominican Republic and
Panama.
IMC will develop and operate 57 restaurants under three of Darden's
brands -- Red Lobster, Olive Garden and LongHorn Steakhouse -- in
these countries. The terms of the deal were not disclosed.
IMC is a Brazil-based renowned multi-brand restaurant operator with
more than 350 company-owned units in South and Central America and
the Caribbean. It manages the operations of the Frango Assado and
Viena flagship brands, which when put together have been around for
almost 100 years and are recognized by their patrons for their
quality of food and services.
Given its familiarity with local food habits a strong presence
in the same industry, we believe, IMC remains a strategic fit for
Darden’s expansion plan.
Last month, Darden expanded its partnership agreement with
Restaurant Operators to open its Red Lobster brand of restaurants
in Puerto Rico. Darden presently has its LongHorn brand in Puerto
Rico and is also in agreement to launch the Olive Garden brand in
the country.
Notably, last year, Darden joined forces with a Mexican casual
dining company, CMR, to enter the Mexican market. The above
mentioned deals affirm management’s intent to make Latin America
one of the prime markets for Darden’s international expansion.
Darden sees tremendous growth potential in this market where it
finds takers for American dining brands.
Further, the region’s middle-income population is also rising,
which could materially benefit the country’s food and beverage
market. The company seeks to capitalize on this opportunity. We
believe that the company is trying to spread its presence beyond
the U.S. more aggressively following cut-throat competition in the
rather saturated domestic casual dining market.
Darden currently retains a Zacks Rank #3 (Hold). Restaurant
companies that appear to be better positioned at current levels
include Red Robin Gourmet Burgers Inc. (RRGB) with
a Zacks Rank #1 (Strong Buy) and AFC Enterprises
Inc. (AFCE) and Burger King Worldwide
Inc. (BKW) with a Zacks Rank #2 (Buy).
AFC ENTERPRISES (AFCE): Free Stock Analysis Report
BURGER KING WWD (BKW): Free Stock Analysis Report
DARDEN RESTRNT (DRI): Free Stock Analysis Report
RED ROBIN GOURM (RRGB): Free Stock Analysis Report
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