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The week’s head-spinning moments: Darden smackdown edition

Gordon Ramsay would wince at the dress-down Darden Restaurants and its CEO were given this week. Chuckle-headed competitors might relish the very public caning of the class goodie-goodie. Operators who don’t need their toes to count past 10 will realize there’s a lesson to yesterday’s over-achiever being recast as today’s Dennis Rodman, Diplomat. Two lessons, in fact.

One is undoubtedly how quickly a restaurant company can morph from god to goat, and not only in the eyes of investors. Because of admitted misguidance of the company’s two legacy brands, comps for Red Lobster and Olive Garden fell 8.8 percent and 5.4 percent respectively for Darden’s third quarter. Customers aren’t buying top management’s moves, either. Two years ago, the brands’ prospects looked like one big Lobster Fest.

No wonder shareholder and avid back-seat-driver Barington Capital called this week for the replacement of Darden CEO Clarence Otis, a longtime former darling of Wall Street and as respected a restaurant-chain leader as there was in the business.

The second lesson is the common-sense principle Mom drummed into the kinder and gentler among us: The people you pass on the way up may be the same ones you encounter on the way down.

In Otis’ case, that translates into the sort of twist you’d see in a movie. Otis bested a number of highly qualified competitors to succeed Joe Lee, a legendary leader of Darden, as CEO.  As Lee was being sedan-chaired into retirement, several inside candidates were evaluated as possible successors.  One of the aspirants who lost to Otis was Brad Blum, who subsequently left to head Burger King for what proved a short and bumpy stint.

Barington has a sympathizer in Starboard Value, another significant investor in Darden. Who did Starboard hire as its hired gun for calling out Otis? Brad Blum.

The call for Otis’ head and the backstairs drama it fostered weren’t the only Darden-related developments to rotate necks this week. The executive team also revealed …

  • A 35 percent spike in shrimp costs will cut into Red Lobster’s profits by an additional $30 million.
  • Development of a Darden over-achiever, the Seasons 52 polished-casual brand, will be slowed this year in the face of inconsistent comps. With unit-level managers remaining at their posts for longer stretches, instead of being poached to man new stores, sales should improve more consistently, according to management.
  • Darden is also reconsidering where it will build future Season 52s. President Gene Lee explained that units opened in downtown business areas and less-visible mall locations fell below the chain’s sky-high sales norms. Darden now plans to stick with high-visibility suburban locations, Lee said.
  • Yard House is emerging as Darden’s main growth vehicle. The chain will grow this fiscal year by a total of eight stores, including a 22,000-square-foot showcase that recently opened in Las Vegas.

Head-spinning briefs: AirBnB, the hotel-chain alternative that finds travelers accommodations in people’s homes at a cut rate, was valued several days ago by the investment community at $10 billion. Why should restaurateurs care? Emerging in AirBnB’s shadow is a similar dining-out phenomenon, where travelers and locals can have a restaurant-caliber meal in someone’s home for a bargain price. It’s called meal-sharing … Consumers are shaking off the hunker-down mentality that fostered a surge in home cooking during the Great Recession, according to the NPD Group data. In November, 80 percent of Americans’ meals were prepared at home, or the same proportion the researcher noted in November 2012. The figure had been rising since 2008. 

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