Financing

With Ruth's Chris deal, Darden doubles down on fine dining

The 154-unit steakhouse chain will more than double the company's fine-dining footprint. But it won't compete with Darden's other upscale concepts, executives said.
Ruth's Chris awning
Ruth's generated $860 million in sales last year, more than Darden's three fine-dining brands combined. / Photograph: Shutterstock

When Darden Restaurants announced Wednesday that it planned to acquire Ruth’s Chris Steak House for $715 million, it raised some eyebrows in the restaurant industry. 

Observers wondered where the 58-year-old fine-dining chain fits into a portfolio that already includes the upscale Capital Grille, Eddie V’s and Seasons 52 concepts, as well as the more casual LongHorn Steakhouse.

But Darden executives emphasized Thursday that Ruth’s is different from those brands. “We see this as actually complementary to our portfolio,” CFO Raj Venam said during a call with analysts.

Fine dining currently makes up the smallest portion of Darden’s business, which is dominated by the 893-unit Olive Garden. But Ruth’s, with 154 restaurants and $860 million in annual sales, will more than double Darden’s fine-dining profile. Its three existing concepts have 133 locations and did $776.2 million in sales last fiscal year.

And executives said Ruth’s won’t cannibalize its smaller counterparts. Transaction data shows there is little overlap among guests who visit Ruth’s and the 61-unit Capital Grille, Venam said. 

That could be a function of their different real estate strategies. Darden tends to put its fine-dining brands in urban areas, while Ruth’s skews more toward the suburbs.

“They won’t necessarily go after the same piece of property,” Darden CEO Rick Cardenas said. 

Executives said Ruth’s differentiation will help Darden grow its fine-dining business, a segment that has thrived coming out of the pandemic. 

Same-store sales at Darden’s three fine-dining brands increased by 62.7% in the company’s last fiscal year, far outpacing growth at Olive Garden (24.1%), LongHorn (28.1%) and its other full-service brands (42.4%). 

Ruth’s comps, meanwhile, increased 13.8% last year. 

“The fine-dining segment is growing a little bit faster, and we expect that to continue for a while,” Cardenas said. 

One area in which fine dining has lagged is unit growth. Darden has netted just one fine-dining location over the past year, while Ruth’s added three restaurants in 2022. But executives still view Ruth’s as a growth brand, at least by Darden’s terms.

“We believe that Ruth’s can grow at the high end of our unit growth framework,” Cardenas said, noting that a 10% annual growth rate is the limit for all of its concepts.

Darden has been able to grow its other fine-dining brands, albeit off much smaller bases. 

The Capital Grille had 28 locations when Darden bought it in 2007; it now has 61, a 117% increase. Eddie V’s has gone from eight locations when acquired in 2011 to 29 now. 

Ruth’s, meanwhile, has grown by 11% worldwide over the past decade, but has shrunk more recently. Total unit count is down about 3% since 2019, according to Technomic.

Once it’s integrated, executives expect Ruth’s to benefit from the cost advantages and data that come from being part of a multibrand company like Darden. They added that Ruth’s people-focused, results-oriented culture makes it a strong fit.

Ruth’s philosophy does differ from Darden’s in one key way: 74 of its restaurants—nearly half the chain—are franchisee-operated, a rarity among Darden brands. Twenty-three of those locations are overseas.

Cardenas said the company has no plans to buy out those operators, but that Darden expects to remain largely company-owned moving forward. 

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