101-Unit Tex-Mex Eatery Joins Portfolio with Olive Garden, LongHorn Steakhouse, More
Darden Restaurants will buy Chuy’s Holdings, a Tex-Mex restaurant chain, for roughly $605 million. Darden’s portfolio includes Olive Garden, LongHorn Steakhouse, Yard House, Capital Grille, Ruth’s Chris Steak House, Bahama Breeze, Cheddar’s Scratch Kitchen, Seasons 52 and Eddie V’s Prime Seafood brands. Some of these restaurant brands have franchise sites, with many of them located in airports and in other countries.
Since 2020, many restaurants have struggled financially because of the Covid pandemic and on its heels, rapidly escalating inflation. (In its report on the Darden-Chuy’s merger, in fact, The Wall Street Journal noted that while casual-dining competitors like Applebee’s and Chili’s were offering meal deals to combat the slowdown in customer traffic, Darden’s Olive Garden chain has raised menu prices more slowly than inflation and then emphasized the value of their menu items in marketing.) Despite those factors, fast-casual restaurants – which are mainstays in Darden’s portfolio – appear to have a promising future. The value of the global fast-casual restaurant market was $168.1 billion last year, according to the market analytics organization Straits Research. It should reach $301.6 billion by 2032, Straits Research projected, which reflects a compound annual growth rate of 6.6% starting this year.
What CEOs Say about Merger
The CEOs of Darden and Chuy’s praised the merger in a news release. Rick Cardenas, CEO of Darden Restaurants, described Chuy’s as a differentiated brand with growth potential. “Based on our criteria for adding a brand to the Darden portfolio, we believe Chuy’s is an excellent fit that supports our winning strategy,” Cardenas said in a news release about the deal.
In its report, Restaurant Business quoted Steven Hislop, chairman, CEO and President of Chuy’s, as saying that Darden would expand the brand with new locations. Hislop added that “Darden shares many of our same core values, particularly our operating philosophy and strong team member cultures.”
About Chuy’s and Darden
Chuy’s restaurants are known for their eclectic, funky ambiance and fresh foods, including handmade tortillas and several varieties of salsa, an Associated Press article said. Founded and headquartered in Austin, Texas, Chuy’s has 101 restaurants, operates in 15 states and has approximately 7,400 employees. Orlando-based Darden has some 190,000 workers in its 1,900 restaurants.
Darden reported $11.4 billion in revenue during its last fiscal year, and Chuy’s had total revenues exceeding $450 million for the past year, The Journal said. AP stated, however, that during the first quarter of 2024, Chuy’s posted a 5% decline in same-store sales.
Details of the Deal
Darden will purchase all outstanding shares of Chuy’s for $37.50 each. Those shares closed at $25.27 on July 17 and rose to $37 in after-hours trades following announcement of the deal, The Journal said. Reuters worked out the math, calculating that Darden’s purchase offer reflected a 48.4% premium over the stock’s closing price just before the deal was revealed. Darden shares fell 1% in after-hours trading.The boards of directors for Darden and Chuy’s have approved the merger, which is subject to the approval of Chuy’s shareholders, AP said. The all-cash deal for the Tex-Mex chain comes a year after Darden bought Ruth’s Hospitality Group, whose holdings include Ruth’s Chris Steak House, for $715 million. Darden expects the transaction to be concluded in its fiscal second quarter, CNBC reported.
