darden resturants policy final presentation
TRANSCRIPT
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Policy Presentation Zach Bach, A.J. Buono,
Jacob Kopinetz, Samantha Picciott, Nicole Taylor, Robert Zappaterrini
DARDEN RESTAURANTS,
INC.
Zach Bach, AJ Buono,Jake Kopinetz, Samantha Picciott,Nicole Taylor, Robert Zappaterrini
STRATEGIC MENU
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Brands:
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“Be financially successful through great people consistently delivering outstanding food, drinks and service in an inviting atmosphere, making
every guest loyal!”
Mission:
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Overview:Sales by Segment
Olive Garden
LongHorn Steakhouse
Yard House
The Capital Grille
Bahama Breeze
Season’s 52
Eddie V’s
56.03%
22.84%
6.95%
5.96%
3.09%
1.43%
3.53%
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Overview:Sales by Segment
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Strengths Weaknesses
-Poor Waste Management
-Lack of Focus onSmaller Brands-Bahama Breeze
-Diversified Restaurant Mix
-Large Operational Network
-Dietary Approved Menu
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Opportunities Threats
-More Efficient Technology Available
-Favorable Growth Trends
-Intense Competition
-Economic Trends In Consumer Spending
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SITUATION ANALYSIS:KEY FINANCIALS
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First Course:Overview
Bahama Breeze Divestiture
Stagnant Historical and Future Projected Growth for Bahama Breeze
Bahama Breeze Sales Growth
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First Course:Objective
Sell Bahama Breeze: $335.5 million
Focus on Long-Term Stability
Focus on Darden’s current growing brands
Pay off long term debtNote 8: 2035 $150 Million
Prevent future negative sales of the brandSell Bahama Breeze:
$283.5 million
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First Course:Financials
Bahama Breeze Divestiture:Purchase Value: $283.5 Million
Sales Value: $209 Million
PP&E Value: $74.5 Million
Selling Price Net of Tax: $208 Million
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First Course:Pro Forma
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Second Course:Overview
CREATING AN EXPERIENCE BASED ON:
“GRAB YOUR FRIENDS,
WE’LL HAVE THE BEER”
Yard HouseAdvertising
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Second Course:Objective
Increase Yard House Marketing Expense:
$9.76 Million
31% Increase in Advertising Spend
Focusing on the Specific Market Segment of Millennial Males
Increase Brand Loyalty and Brand Recall
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Second Course:Implementation
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Second Course:Implementation
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Second Course:Implementation
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FISCALYEAR
SALES INCREASE
2016 12%2017 10%2018 8%2019 6%2020 6%
An increase in spending on advertising will drive an increase in revenue for
Yard House Restaurants
Second Course:Financials
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Second Course:Pro Forma
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COURSE TWO:OverviewThird Course:Overview
Inventory Optimization
28 ½ Blue Whales
10 MILLION POUNDS OF AVOIDABLE FOOD WASTE
ANNUALLY
125 Tractor Trailers 22 Statues of Liberty
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Third Course:Objective
5.5 million implementation cost
$$$ Annual subscription cost
Integrate additional POS system:
SyrusDecrease Cost of Goods Sold
Increase Bottom Line
Third Course:Objective
$5.5 Million Initial Investment
Decrease Food Cost
Increase Darden’s Bottom Line
Implementation of Additional POS Software
Forecast Inventory
Minimizes Over Purchasing
Supply Chain Management
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Third Course:Financials
Initial Cost: $5,487,200Year 2: $2,797,200Year 3: $2,833,200Year 4: $2,869,200Year 5: $2,905,200
*Initial Cost accounts for one-time training, implementation, and consulting fees
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Third Course:Pro Forma
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Dessert:
BOTTOM LINE BY 2020:With Strategies:$720.9 Million
Without Strategies:$530.8 MillionDifference:
$190.1 MillionPercent Change:
35.81%
TOP LINE BY 2020:With Strategies: $9,696.8 Million
Without Strategies: $9,563.3 Million
Difference: $133.5 Million
Percent Change: 1.4%
LONG TERM OBJECTIVES:Continue to lower Long-Term
Debt Obligations
Focus our remaining brands to continue strong
growth
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Dessert:Combined Projected Pro Forma
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Policy Presentation Zach Bach, A.J. Buono,
Jacob Kopinetz, Samantha Picciott, Nicole Taylor, Robert Zappaterrini
DARDEN RESTAURANTS,
INC.
BILL
QUESTIONS?
Thank You! Please Come Again.30
Situation Analysis $20
Divestiture of Bahama Breeze $20
Yard House Advertising Plan $10
Inventory Optimization System $30
TIP
TOTAL PROJECT
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Appendix
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International Expansion Same Brand Sales Growth Advertising Plan Inventory Optimization
Brand Restructuring Disposable Personal Income Olive Garden Rebrand Inventory Optimization NPV
Free Cash Flows Bahama Breeze Key Assumptions Yard House Persona Common Size - Combined
Additional Four Locations Bahama Breeze Divestiture Yard House Maps Common Size - Divest
Distribution Centers Bahama Breeze Divestiture (Excel) Yard House Key Assumptions Common Size – YH
Entrée/Ticket Price Red Lobster Yard House Advertising Plan Common Size – Inv Op
Stores in United States Yard House Effect on Net Earnings Yard House Media Schedule Common Size - Base
Sales Key Figures Yard House Marketing and Media Yard House Social Media
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International Expansion
Darden has not had consistent success with international operations
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Brand RestructuringBAHAMA BREEZE: 8000
YARD HOUSE: 12,652
REJECTED: On basis of not having enough square footage for Yard House
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Free Cash Flows
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Avoid Additional Four Locations
Initial Investment -$37,158,960
CF1 $2,452,378
CF2 $4,091,729
CF3 $6,491,641
CF4 $7,207,842
CF5 $7,941,618
WACC 3.08%
NPV -$11,793,858
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Distribution CenterConkillin, New York
Anover Park, Illinois
Westborough, Massachusetts
Farmingdale, New York
Oakwood, Ohio
Savage, Maryland
Arlington, Tennessee
Worcester, Massachussets
Orlando, Florida
Terrell, Texas
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Entrée/ Ticket Price by Restaurant
Olive
Garden
LongHorn
Steakhouse
The Capital
Grille
Bahama
Breeze
Yard
House
Eddie
V’s
Seasons
52
Lunch $7-15 $7-15 $12-39 $7-21 $7-32 N/A $8-31
Dinner $10-20 $12-25 $16-59 $9-30 $7-32 $18-61 $11-31
Average $17 $20 $75 $45 $31 $90 $26
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Stores in the United States Olive
Garden
LongHorn
Steakhouse
The Capital
Grille
Bahama
Breeze
Yard
House
Eddie
V’s
Seasons
52
Stores 846 480 54 36 59 16 43
Franchised 20 13 1 0 0 0 0
2015 2014 2013
Olive Garden 846 837 828LongHorn Steakhouse 480 464 430Yard House 59 52 44The Capital Grille 54 54 49Bahama Breeze 36 37 33Seasons 52 43 38 31Eddie V’s 16 15 12
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Sale Key Figures2015 2014 2013
Sales (Millions)
$6,764.0 $6,285.6 $5,921.0
2015 2014 2013
Olive Garden 56.03% 57.96% 62.23%
LongHorn Steakhouse
22.84% 22.02% 20.79%
Yard House 6.95% 6.66% 4.36%
The Capital Grille
5.96% 5.78% 5.60%
Bahama Breeze
3.09% 3.21% 2.93%
Seasons 52 3.53% 3.12% 2.67%
Eddie V’s 1.43% 1.25% 1.10%
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Same Brand Sales Growth
2016 2017 2018 2019 2020Olive Garden 2% 2% 2% 2% 2%LongHorn Steakhouse 12% 12% 12% 12% 12%Yard House 18% 16% 14% 12% 10%The Capital Grille 10% 10% 10% 10% 10%Bahama Breeze 4% 4% 4% 4% 4%Seasons 52 20% 20% 20% 20% 20%Eddie V’s 22% 22% 22% 22% 22%
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Disposable Personal Income CalculationCredibility Weighted Forecast
Disposable Personal Income Yearly Increases
2016 - .24%
2017 - .22%
2018 - .21%
2019 - .21%
2020 - .21%
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Disposable Personal Income Calculation (contd.)
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BAHAMA BREEZE BACKUP SLIDES
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Bahama Breeze Key AssumptionsBB Sales $209 million Followed treatment for Red Lobster DisposalBB PP&E Valuation $54.6 million BB’s Portion of Darden’s PP&E
BB Land-Only Leases 16 Portion of Total Restaurants
Ground and Building Leases 2 Portion of Total Restaurants
Space/In-Line/Other Leases 5 Portion of Total Restaurants
Owned Sites 13 Portion of Total Restaurants
BB Food/Beverage Expense $69.5 million Portion of Total Sales
BB Restaurant Labor Expense $69.9 million Portion of Total Sales
BB Restaurant Expenses $37 million Portion of Total Sales
BB Marketing Expenses $0.4 million Darden Marketing Plan - Red Books
BB Depreciation Expense $52 million Straight-line depreciation
Interest Expense from Note 8 $18.6 million $150 million note at 6% interest due in 2035
Red Lobster % of Sales 85.77% Darden 10-K (2014)
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Bahama Breeze Divestiture
Bahama Breeze Divestiture (Sales)
BB Sales $209,000,000
Tax Rate 26.63%
BB Sales, net of Tax $153,340,000$208 million
(after tax)Bahama Breeze Divestiture (PP&E)
BB PP&E, net depreciation $74,450,000
Tax Rate 26.63%
BB PP&E, net of Tax $54,620,000
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Red LobsterRed Lobster Divestiture (Sales)
Restaurant Sales $2.46 billion
RL Sale Price $2.11 billion
% of Sales 85.77%
Red Lobster Sales Info
2013 $2.62 billion
2012 $2.67 billion
2011 $2.52 billion
2010 $2.49 billion
2009 $2.62 billion
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PROPERTY, PLANT, EQUIPMENT, AND SALES VALUATION OF BAHAMA BREEZE
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YARD HOUSE BACKUP SLIDES
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YH Advertising Effect on Net Earnings
2016 2017 2018 2019 2020$0.00
$10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 $80.00 $90.00
Net Income (mil-lions)
Net Income (millions)
2016 2017 2018 2019 2020
YH Plan $610.87 $769.70 $939.03 $1108.05 $1285.34
YH Org. Growth 554.48 643.20 733.25 821.24 903.36
Difference 56.39 126.50 205.78 286.82 381.98
Addn’l F/B 17.60 39.83 65.26 91.48 122.37
Addn’l Labor 17.69 39.30 63.20 86.95 114.15
Addn’l Rest. Exp 9.37 21.02 34.12 47.38 62.79
Net Earnings $11.72 $26.35 $43.20 $61.01 $82.67
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Yard House Marketing and MediaCraft Beer Buzz Words:
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Advertising Plan
FISCALYEAR
SALES INCREASE
2016 12%
2017 10%
2018 8%
2019 6%
2020 6%
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Yard House: Target Persona
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Olive Garden Rebrand (2014)
2015 2014 2013
Olive Garden $3,789.60 $3,643.10 $3,684.80
Darden spent an additional $11 million on marketing exclusively for Olive Garden which increased sales by 5.5%.
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Yard House Map of Locations/Stadiums
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Yard House – Additional Locations
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Yard House Marketing Plan Key AssumptionsYard House Sales Base Business Pro FormaMarketing Sales Increase in sales of 12% (2016), 10% (2017),
8% (2018), 6% (2019), and 6% (2020)
YH Food/Beverage Expense (2016) $14.6 million Portion to YH Sales
YH Labor Expense (2016) $14.8 million Portion to YH SalesYH Restaurant Expense (2016) $7.8 million Portion to YH Sales
YH Increase in Sales Followed treatment for Olive Garden re-brand
Olive Garden Rebrand Sales Increase 5.5% Darden 10-K (2014)
Social Media Reach % Increase 20% Followed treatment for Olive Garden re-brand
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Advertising Plan
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Media Schedule
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Social Media Plan
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INVENTORY OPTIMIZATION BACKUP
SLIDES
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Percentage Allocation: Food 87.49% Darden 10-K; Proportion of Breakdown of Beverages
Percentage Allocation: Beverage 12.51% Darden 10-K; Cost Breakdown of Beverages
Syrus Consulting Cost $500,000 Syrus Industry Professional
# of Employees to Train 140,000 Darden 10-K
Minimum Wage $7.95 Average of 50 States
Hours of Training 2 Consultation with Syrus Industry Professional
Annual Software Cost Per Store $1,800 Consultation with Syrus Industry Professional
Annual Store Increase 20 Darden 10-K; Historic Growth Trends
Food Cost Decrease 2%-4% Consultation with Syrus Industry Professional
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Key Assumptions
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Initial Investment $5,487,200
CF1 $39,390,000
CF2 $52,270,000
CF3 $66,250,000
CF4 $81,290,000
CF5 $97,250,000
WACC 3.08%
NPV $297,970,804
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NPV Analysis
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Capital Grille
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Eddie V’s
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Seasons 52
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Darden Restaurants
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Overview: Presence of Darden Restaurants per State
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Common Size – Base Projections
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Common Size – Combined Strategies
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Common Size - Divestiture
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Common Size – Marketing Plan
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Common Size – Inventory Optimization
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Common Size – Inventory Optimization