DEFA14A

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

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Soliciting Material Pursuant to §240.14a-12

DARDEN RESTAURANTS, INC.

(Name of Registrant as Specified In Its Charter)

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Operating Darden with the Right 
Talent, Plan, and Priorities
SEPTEMBER 2014

Forward-Looking Statement
These materials may contain forward-looking statements concerning the Company’s expectations, goals or objectives. Forward-looking
statements in this communication that are not historical facts, including without limitation statements concerning our future economic
performance, plans or objectives and expectations regarding the performance of the Company following the sale of Red Lobster and
related matters, are made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Any forward-looking
statements
speak
only
as
of
the
date
on
which
such
statements
are
made,
and
we
undertake
no
obligation
to
update
such
statements
to
reflect events or circumstances arising after such date except as required by law. We wish to caution investors not to place undue
reliance on any such forward-looking statements. By their nature, forward-looking statements involve risks and uncertainties that could
cause
actual
results
to
materially
differ
from
those
anticipated
in
the
statements.
The
most
significant
of
these
uncertainties
are
described in Darden's Form 10-K, Form 10-Q and Form 8-K reports (including all amendments to those reports). These risks and
uncertainties include the ability to achieve Darden's strategic plan to enhance shareholder value including realizing the expected benefits
from the sale of Red Lobster, actions of activist investors and the cost and disruption of responding to those actions, including any proxy
contest for the election of directors at our annual meeting, food safety and food-borne illness concerns, litigation, unfavorable publicity,
risks relating to public policy changes and federal, state and local regulation of our business including health care reform, labor and
insurance costs, technology failures, failure to execute a business continuity plan following a disaster, health concerns including virus
outbreaks, intense competition, failure to drive sales growth, our plans to expand our smaller brands Bahama Breeze, Seasons 52 and
Eddie V's, a lack of suitable new restaurant locations, higher-than-anticipated costs to open, close, relocate or remodel restaurants, a
failure to execute innovative marketing tactics and increased advertising and marketing costs, a failure to develop and recruit effective
leaders, a failure to address cost pressures, shortages or interruptions in the delivery of food and other products, adverse weather
conditions
and
natural
disasters,
volatility
in
the
market
value
of
derivatives,
economic
factors
specific
to
the
restaurant
industry
and
general macroeconomic factors including unemployment and interest rates, disruptions in the financial markets, risks of doing business
with
franchisees
and
vendors
in
foreign
markets,
failure
to
protect
our
service
marks
or
other
intellectual
property,
impairment
in the
carrying value of our goodwill or other intangible assets, a failure of our internal controls over financial reporting, or changes in
accounting standards, an inability or failure to manage the accelerated impact of social media and other factors and uncertainties
discussed from time to time in reports filed by Darden with the Securities and Exchange Commission.

Important Additional Information
Important Additional Information
The
Company,
its
directors
and
certain
of
its
executive
officers
are
participants
in
the
solicitation
of
proxies
from
stockholders in
connection with the Company’s 2014 annual meeting of stockholders (the “Annual Meeting”). Information regarding the names and
interests of such participants in the Company’s proxy solicitation is set forth in the Company’s definitive proxy statement, filed with the
SEC
on
September
9,
2014.
Additional
information
can
be
found
in
the
Company’s
Annual
Report
on
Form
10-K
for
the
year
ended
May
25, 2014, filed with the SEC on July 18, 2013. These documents are available free of charge at the SEC’s website at www.sec.gov.
The Company will be mailing its definitive proxy statement and proxy card to the stockholders entitled to vote at the Annual Meeting.
WE URGE INVESTORS TO READ ANY PROXY STATEMENT (INCLUDING ANY SUPPLEMENTS THERETO) AND ANY OTHER RELEVANT
DOCUMENTS THAT THE COMPANY MAY FILE WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Stockholders will be able to obtain, free of charge, copies of any proxy
statement and any other documents filed by the Company with the SEC in connection with the proxy solicitation at the SEC’s website at
www.sec.gov. In addition, copies will also be available at no charge at the Investors section of the Company’s website at
http://investor.darden.com/investors/investor-relations/default.aspx.

•
We have had numerous conversations with our shareholders, including Starboard, over the past several months regarding
Darden's operating plan and the Olive Garden Brand Renaissance
•
Olive Garden’s turnaround is underway, with signs of improvement acknowledged
by many members of the analyst
community:
•
LongHorn continues to achieve tremendous growth with same-restaurant sales exceeding the industry by 3.8% in fiscal 2014
and guest counts exceeding the industry for the 19th consecutive
quarter in first quarter, fiscal 2015
•
Our Specialty Restaurants continue to provide strong unit growth
and competitively superior same-restaurant sales growth
•
In fiscal 2015, our cost saving efforts resulted in SG&A expense
planned at less than 9.0% and total G&A spend of
approximately 5.0%, with the potential for further reductions going forward
•
As Starboard's plan adopts many of these Darden initiatives as its own, we are pleased that Starboard agrees with the
actions we are taking to reinvigorate restaurant performance, reduce costs, and drive growth
•
Darden’s
recommendation
of
a
new
Board,
a
new
independent
Chairman,
new
Board
committees,
and
a
new
CEO
will
lead to substantial, positive change
We Believe Our Current Initiatives Are Already Delivering
Results, and Address Most of Starboard’s Suggestions
Vote on the BLUE
proxy card “FOR ALL”
of Darden’s highly-qualified,
independent nominees to the Board of Directors
–
New menu items have reinforced value, expanded variety, and supported increased demand from key customer
segments, including millennials
–
Technology-enabled online ordering is in place and strengthening take out business
–
Guest experience and satisfaction scores are improving
–
Testing of tablet technology is underway and generating encouraging results

We Built Darden into the Premier Full-Service Restaurant
Company in the Industry
PREMIER BRANDS
Darden is the leading multi-brand restaurant operator
with a unique and differentiated portfolio well-
positioned to drive growth
Developed brands to have industry-leading average unit
volumes, margins and restaurant-level returns
Increased sales by $5.1 billion and unit growth by 934
units since FY95 (excluding Red Lobster)
Historically outperformed Knapp-Track™, the casual
dining index and industry benchmark in same-restaurant
sales
Strong cash flow generation has allowed us to return
over $4 billion of capital to shareholders since FY95
Became the first full-service restaurant company named
to FORTUNE’s “100 Best Companies to Work For”
list
(2011, 2012, 2013, and 2014)
Darden Total Sales ($ in billions, excl. Red Lobster)
$3.2
$5.3
$5.7
$5.9
$6.7
$7.2
$7.1
$7.5
$8.0
$8.6
$8.8
Sales Combined Basis (incl. Red Lobster)
Darden Total Units (excl. Red Lobster)
1,243
1,268
1,292
1,324
1,700
1,771
1,824
1,894
1,994
2,138
2,207
Units Combined Basis (incl. Red Lobster)
$1.2
$2.5
$2.8
$3.0
$4.0
$4.6
$4.6
$5.0
$5.3
$5.9
$6.3
FY95
…
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
567
589
610
644
1,020
1,081
1,130
1,196
1,289
1,431
1,501
FY95
…
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14

•
Nearly
30
years
of
restaurant
operating
experience;
was
named
to
his
current
role
in
September
2013
•
Prior to this role, Gene served as President of Darden’s Specialty Restaurants Group for six years
Under Gene’s leadership, Specialty Restaurants grew from 60 to 175 restaurants, including the acquisition of
two restaurant concepts
Delivered
annualized
sales
growth
of
17%
and
annual
restaurant
earnings
growth
of
26%
•
Gene joined Darden in October 2007 as part of the Company’s acquisition of RARE Hospitality International, where
he served as President and Chief Operating Officer
After being named President and COO in January 2001, Gene led a successful turnaround plan to revitalize
both LongHorn and The Captial Grille
RARE’s market cap rose during that timeframe from $420mm to $1,170mm
•
Proven industry leader with more than 35 years of restaurant operating experience
•
Dave was named President of Olive Garden in January 2013
•
Before this appointment, Dave served as President of LongHorn Steakhouse for nine years
•
Dave joined LongHorn in April 1998 as Vice President of Operations. Two years later, he was promoted to Vice
President of Operations for The Capital Grille.  He returned to LongHorn in October 2001 and was named President
in 2003
•
Earlier in his career, Dave served as Vice President of Operations for Battleground Restaurant Group.  He began his
restaurant career straight out of college as an Assistant Manager with Houlihans.   During his 12 years with
Houlihans, he held positions of increasing responsibility including Area Director of Operations for eight restaurants
We Are Convinced Darden Has the Right Leaders to Continue the
Positive Momentum
Gene Lee, President and Chief Operating Officer
Dave George, President of Olive Garden

•
Successful
leader
with
nearly
20
years
of
restaurant
operational
experience
•
Valerie was named President of LongHorn Steakhouse in January 2013
•
Before this promotion, Valerie served as Chief Restaurant Operations Officer (CROO) for Darden where she led
strategic operations initiatives across the enterprise
•
Prior to becoming CROO,  she served as Executive Vice President (EVP) of Olive Garden for seven years, where she
successfully opened nearly 200 restaurants while maintaining operational excellence at existing restaurants
•
Valerie
joined
Darden
in
January
1997
as
Director
of
Purchasing.
In
1998,
she
was
promoted
to
Vice
President
of
Distribution and quickly advanced to Vice President of Operations Improvement in 2000, and then to Senior Vice
President of Operations for Olive Garden’s Dallas division in June 2001
•
Restaurant entrepreneur and proven business leader with more than 25 years of experience
•
Harald was named to his current role in January 2014.  Previously, Harald served as President of Yard House, a brand
he helped launch in 1996 and successfully grew to critical acclaim, and was later acquired by Darden in 2012
In the mid 1990’s Harald met Steele Platt, who was developing a restaurant concept with a simple formula: the
world’s largest selection of draught beer coupled with great food and a classic rock music program
Harald was tapped to help launch the flagship Yard House in Southern California
Yard House quickly emerged as one of Southern California’s most financially successful independent
restaurants,
and
less
than
two
years
later
Harald
was
made
partner
as
the
Company
began
to
expand
into
other markets
We Are Convinced Darden Has the Right Leaders to Continue the
Positive Momentum (Cont’d)
Valerie Insignares, President of LongHorn Steakhouse
Harald Herrman, President of Specialty Restaurant Group

Since Gene Lee’s promotion to President and Chief Operating Officer in
September 2013, Darden has launched a number of initiatives to improve
restaurant-level operations:
•
Food:
Differentiated menus that leverage quality ingredients, flavorful
recipes, and artistically presented food to deliver on the guests’
needs
without adding operational complexity
•
Service:
Friendly, timely and competent service
•
Atmosphere:
Focus on maintaining clean, appropriately-lit restaurants
with an energizing feel to provide a comfortable environment that guests
enjoy
•
Operational Controls:
Realign support functions to link with brand goals:
Gene Lee Has Sharpened the Company’s Focus on Restaurant-
Level Operations and Guest Experience Through A Proven “Back-
to-Basics”
Approach
—
Restructured key support functions to improve efficiency
—
Expedited day-to-day decision-making
—
Introduced social media support to actively engage with guests

Darden’s People Have Expressed Their Affection for, Confidence in
and Commitment to the Company in the Clearest Ways Possible
We Care About Our People, And Our People Care About Darden
1
People Report is an HR service that tracks retention, staffing levels, turn-over and provides compensation data for restaurant industry on
monthly, quarterly and annual basis.
Recognition
For
four
consecutive
years,
Darden
has
been
listed
as
one
of
the
Fortune
100
Best
Companies
to
Work For, a ranking that reflects a comprehensive and independently administered survey of our
frontline employees
Olive Garden, LongHorn Steakhouse, and The Capital Grille are recognized by People Report¹, a leading
industry Human Resources organization, as leaders when it comes to employee engagement and
retention. These same leadership, compensation, and other practices are employed across all our
brands at Darden
Retention is competitively superior to our Industry
Darden’s annual turnover in each frontline employee segment is well below the casual dining industry
average –
10 points below the industry for managers, and 25 points below the industry for hourly
employees
Careers are made at Darden
Nearly 50% of our restaurant managers are promoted from within
99% of our General Managers and Managing Partners (GM/MP) are promoted from restaurant manager.
And, 99% of our Director of Operations leaders were promoted from GM/MP
Compensation is competitive, if not better than, the Industry
We believe Darden's restaurant General Managers' salaries are competitive. In addition, their targeted
performance-based compensation is approximately 40% of base salary and is uncapped
We Care About Our People, And Our People Care About Darden

We Believe Olive Garden Holds an Enviable Position with Leading
AUVs, Restaurant-Level Profitability and Guest Satisfaction
Scores
Source: 2014 Nation’s Restaurant News Top 100 Report (June 2014), Company information for Olive
Garden; most recent 10K filings for all others
1
Reflects
latest
reported
fiscal
year.
EBITDAR
Per
Restaurant
=
(Company
owned
restaurant
sales
–
food
&
beverage
expenses
–
restaurant
labor
–
restaurant
expenses
(excluding
rent
and
marketing)
-
pre-opening
expenses) / company owned restaurants.
Guest Satisfaction Scores²
2 
Source: NPD Crest as of fiscal 2014 Year End.
3 
Nationally-advertised competitors is the aggregate of Applebee’s, Chili’s, TGI Friday’s and Ruby Tuesday.
Industry Leading AUVs ($ in millions)…
…
and EBITDAR Per Restaurant ($ in millions)¹
$ 4.4
$ 3.2
$ 2.8
$ 1.7
$ 1.1
$ 0.8
$ 0.7
$ 0.3
42%
44%
35%
35%
51%
52%
43%
37%
Quality of Food
Pleasant Friendly Service
Atmosphere Ambiance
Good Value for Money
Olive Garden
Nationally-Advertised Competitors³

The Olive Garden Brand Renaissance Is Underway and
Delivering Results
1
3
2
4
We Believe Core Menu Innovation is Driving Base Guest
Count Growth Through Expanded Relevance and Value
Operations Are Highly Focused on
Delivering Flawless Guest Experiences
•
We are making menu changes that reinforce value and
relevance, improve quality and simplify processes to enhance
the guest experience and manage costs
•
New core menu is successfully delivering better value at all
price ranges on the menu
•
Key attributes on taste and quality of food as measured by NPD
Crest have improved
•
The Cucina Mia platform, which is attractive to Millennials,
along with higher quality beef and seafood offerings are
examples
•
Our restaurant operations leadership, together with our team
members, are energized and working toward a common goal
•
An intensified emphasis on service and food quality is leading to
enhanced guest experiences
•
In the first quarter, the “Great Food Go”
rally cry was launched
with initial concentration on improving execution of most popular
menu
items
(similar
to
“Brilliant
with
Basics”
program
suggested
by Starboard)
•
In addition, revisit intent scores, as measured by NPD Crest, have
increased over prior year, a leading indicator of growth
Broader Media Reach with a Variety of Messages
Reimaging Program Showing Signs of Success
•
Broadening the way we reach out to guests through secondary
television, digital messages and relying less on deep-discount or
bundled promotions
•
Olive Garden’s social media presence is considerably more
active and relevant than in the past
•
Using a return on investment approach for measuring media,
we are gradually reducing TV spend and investing in digital for a
net reduction in total advertising spend
•
Reimaging many guest touch points including plate ware, server
uniforms, new logo, exterior signage, and new tabletop
merchandising
•
Newly remodeled restaurants are averaging over 10% traffic
growth
•
We are realizing an increase in alcohol sales and total average
check in the remodeled restaurants
•
We are on track for 75 remodels in fiscal 2015

Renaissance Plan Update: Core Menu Evolution
New Dinner
Menu Test
Lunch Menu
Refresh
•
Optimize our Cucina
Mia everyday value
platform
•
Increase entrees
under $15
•
Tuscan Trio
Combinations
•
70 combinations
under $10
Choice / Variety
•
Lighter, fresher,
“better for you”
options
•
New flatbread,
sandwich
selections, and
salad toppers
Convenience
•
National roll-out
of online ordering
•
Test lunch time
guarantee
Brand Renaissance Elements Having a Positive Impact
•
New menu items have reinforced value, expanded variety and supported increased demand from
key customer segments, including millennials
•
•
By leveraging metrics made available in our new technology platform, we have significantly
reduced false waits
•
More affordable entry-level price points on the menu and more  strategic pricing actions have led
to reduced price sensitivity
•
Guest experience and satisfaction scores are improving across the system as a result of an
intensified focus on service and food quality, while negative indicators, as measured by
customer complaints, are decreasing
•
National launch of our To-Go Platform, including a redesigned web experience is in place and
strengthening the take-out business
•
In first quarter of fiscal 2015, Olive Garden achieved a 13% increase in its takeout business
compared to the first quarter of last year
1
Online Ordering Driving New Growth and Potential Margin Expansion
Strategic Initiatives
Progress to Date
1
Complaints per million guests.
²
Brand perception (recipes, product quality, value, marketing, etc.).
2
Customer Complaints Are Decreasing ¹
48
59
69
53
37
19
26
29
27
18
66
120
84
81
68
FY11
FY12
FY13
FY14
Q1 FY15
FY11
FY12
FY13
FY14
Q1 FY15
FY11
FY12
FY13
FY14
Q1 FY15
Service
Food
Brand Negatives
Pronto Lunch: We reduced dine times for guests seeking a quicker lunch experience
Value Focus

Renaissance Plan Update: Culinary Operations and Service
Enhancements
Simplify Operations
•
Ongoing culinary
simplification program
•
Testing tabletop tablets
Improve Food & Beverage Quality
•
Elevate focus on soup,
salad and bread stick
execution
•
New training tools and
applications to certify and
validate beverage
knowledge
Intensify Focus on the Guest
•
Greater leadership focus on
underperforming restaurants
•
Training and development of all team
members through recertification
•
Introduce tabletop tablets to enhance the
guest experience
•
Testing of tablet technology in restaurants is
underway and has generated encouraging results
•
80% of guests where the technology is in use are
interacting with the device, and 60% of them are
paying the check on the tablet
•
Tablet use has increased add-on sales, increased
table turns, increased guest survey response rates,
and increased tip percentage for servers
•
The Company expects tablet technology to be
installed system-wide by the end of 2015
2
Strategic Initiatives
National launch of
online platform
Online Adoption Rate Improving For To-Go Sales¹
Progress to Date
1
Percentage of online orders from internet as opposed to the phone.

Renaissance Plan Update: Olive Garden Approach to
Advertising & Promotions
Strategic Initiatives
Progress to Date
Brand Communication
Communications Strategy
•
Balance limited time offers and
equity messages
•
Greater use of digital /
social media engagement
•
Communicate balance of base-building and traffic-
boosting messages
•
Always-on digital support for search and social
•
Hybrid national/local Hispanic support
Promotional Messaging
Promotion Elevation
•
Continue to inject new
news into our promotions
•
Launch new advertising campaign
emphasizing culinary credentials and
emotional connection
•
Targeted messaging
with relevant incentives
Unique & differentiated promos
•
•
Minimize investment/complexity
•
In-Restaurant Merchandising
Merchandising Evolution
•
Redesign all merchandising materials
to reinforce culinary expertise,
elevating menu news, and ease of
navigation
•
Fewer pieces on table
•
Ownable food photography
•
Tabletop Tablets
3
Limit repeating promotions
Value-added versus discounted promotions
-
Parents’
Night
Out
-
Dinner & A Movie
Leverage core menu items
Leverage weekday offers
We have minimized investment in our promotions, while
reducing operational complexity without compromising
guest appeal
Utilize “Starting At…” price points with multiple buy-ups

The Four Walls
•
Remodel the interior and exterior of 75
restaurants in fiscal 2015
Guest Touchpoints
•
Rollout new signs with new logo and
plateware in all remodeled markets
Renaissance Plan Update: Reimaging Program
Initial Sales Results from the Pilot Remodel Program are Encouraging
•
Three
remodels
completed
average
more
than
a
10%
increase
in
traffic,
increased
alcoholic
beverage sales, and higher average check
4
Strategic Initiatives
Progress to Date
Confidence in Reimagining Program Supported by Focus Group Results
•
Overall, the remodel design does a good job of conveying remodeling objectives of warmth,
approachability, and inviting environment while being up-to-date
•
Based on focus group feedback, guests feel the remodel is even more Italian than before, because of
the wine cues and Mediterranean colors
Unaided ‘Look & Feel’
Restaurant Descriptions
Tuscan
Farmhouse
Remodel
–
Italian
Kitchen
Exterior
Signage

We Believe Olive Garden's Initiatives Result in Reduced
Complexity, Cost Savings, and Improved Guest Experience
COGS
~$3mm
Waste
~$2mm
Paper
~$1mm
45-50 Hours
Eliminated
~$28mm
Fiscal Year 2014 Simplification Project Has Resulted in Cost Savings of Over $30mm…
Taste of Food
+4pts
Culinary
Expertise
Enabling Menu
Innovation
Pride, Passion
& Commitment
CULTURE
91 Pars
Eliminated
41% Reduction
1
…
And Olive Garden Key Performance Metrics Are Improving
1
+7
+6
+5
+5
+4
+3
Attentiveness
Value for Money
Overall Experience
Pace of Meal
Overall Comfort
Overall
Cleanliness
Guest satisfaction metrics are top box improvements for FY14 vs. FY11-FY13 average.

The Outlook for the Future Is Bright, with a Number of Our
Initiatives Underway to Drive Growth
•
We are committed to elevating Olive Garden's relevance through the Brand Renaissance project
and believe that the core elements highlighted above will result
in a resurgence of the Olive
Garden business results
•
In addition to our Company-wide cost savings of $150 million, we are pursuing a $50 million
Olive Garden cost savings program, with plans to reinvest those savings in the business
•
We have a highly-qualified leadership team and highly-engaged team of employees who believe
in our Olive Garden plan
Feedback from Our Internal Management Following Recent General Manager Conference
Core Menu
Innovation
Focused Operations Delivering
a Flawless Guest Experience
Broad Media Reach
Reimaging Program Showing
Signs of Success
“Dave
and
Gene
really
seem
to
understand
what
being
a
GM
is
all
about
and
the
challenges
of
our
jobs.
Having
said
that
they
know
exactly
what
we
should
be
capable
and
have
no
problem
holding
us
to
that
standard.
I
have
never
worked
for
better
leaders.
When
they
were
done
speaking to us I felt I could run a marathon in an hour.”
“I am excited and motivated for the future and looking forward to fighting to take back our guests!”
“I feel
very
good
about
the
leadership
and
direction
we
are
going.
I’m
all
in!”

LongHorn: Journey to Becoming America’s Favorite
Steakhouse
National Penetration Opportunity ($ in millions)
Pre-RARE
Acquisition
Today
Ultimate
Potential
No. of Restaurants
288
464
700
AUV
$3.0
$3.1
$3.4
Total Sales²
$790
$1,380
$2,400
Significant Progress Has Been Made
•
Increased appeal to higher income households and
added attractive business travel and entertainment-
related consumers
•
Leveraged and drove further integration of Darden’s
restaurant support platform
•
Elevated brand marketing capabilities and completed
“roadhouse to ranch house”
brand positioning
•
Invested in increased media, completed Steak House
remodel and launched new dinner and lunch menus
FY15 Strategic Imperatives
•
Drive same-restaurant sales and profit growth by:
Continuing to differentiate the LongHorn guest   
experience
Delivering value-creating new restaurants
Strengthening the business model
Note: Numbers on map represent restaurants per state. Potential AUVs and total sales are shown in current dollars.
1
With households in the upper half of the income continuum.
²
Total sales reflect most recent annual period prior to RARE acquisition. 
1
2
3
SAME-RESTAURANT SALES EXCEEDED THE INDUSTRY BY 3.8% IN FISCAL 2014 AND
GUEST COUNTS EXCEEDED THE INDUSTRY FOR THE 19TH CONSECUTIVE QUARTER
Broad Footprint with Significant White Space for Growth
1

Specialty Restaurants: Strong Brands with Unique Differentiation
Demographic Appeal
Well-Positioned…
•
Acquired in FY13
•
Strong appeal to millennial and Generation X
households
•
…For SRS success while adding at least 100 new
restaurants
•
Accelerating beverage and culinary innovation
•
Expanding late night occasion
•
Building organizational and people capability for growth
•
Developed internally and introduced in FY03
•
Broadly appealing and particularly strong with
higher income and Generation X households
•
…For SRS success as focus turns to sites that are
generating the strongest performance and plans to add
at least 100 new restaurants
•
Increasing brand awareness in new markets
•
Evolving seasonal/regional menu strategy
•
Elevating operations excellence
•
Acquired in FY08
•
Strong appeal to higher income households and
adds attractive business travel and entertainment-
related consumers
•
…To maintain current SRS growth momentum as it
approaches national penetration with the addition of at
least 30 new restaurants
•
Developed internally, introduced in FY96, and
successfully repositioned over past five years
•
Broadly appealing and particularly strong with
Generation X and multicultural households
•
…To maintain current SRS growth momentum as the
penetration of the eastern third of the United States is
completed with the addition of at least 50 new
restaurants
•
Acquired in FY12
•
Strong appeal to higher income and Generation X
households and adds attractive business travel and
entertainment-related consumers
•
…For SRS success while adding at least 50 new
restaurants
STRONG UNIT GROWTH AND FOCUS ON INCREASING BRAND AWARENESS TO
DELIVER COMPETITIVELY SUPERIOR SAME-RESTAURANT SALES GROWTH

“To
what
degree
do
these
activists
know
about
running
some
of
these
companies…
Thank
you.
Thank
you
JC
Penney activists…
I think a more focused company without the anvil around the neck of Red Lobster is
capable
of
doing
more
things
than
we
thought…I
think
a
progression
is
what
we
want
to
see.
I
love
the
way
Olive Garden is turning here.”
“We
are
maintaining
our
Buy
rating
on
DRI
as
we
believe
change
is
underway
at
Olive
Garden
whether
or
not activist investor Starboard Value is able to secure a Board majority at the upcoming shareholder meeting.
The
initial
read
on
the
Olive
Garden
remodel
program
appears
promising
and
we
believe
there
are
considerable operational and cost-cutting opportunities ahead.”
“Longhorn
(~22%
of
revs)
performing
well.
Comps
were
+2.8%,
and
operating
profits
and
margins
both
expanded.
This
is
impressive
given
beef
pressure
is
driving
above-average
food
cost
inflation.”
“Specialty Restaurant Group possesses significant growth potential…good returns on capital and significant
expansion potential for all of the brands (which should help to increase brand awareness and sales volume
over time) continues to justify growing this segment at a rate faster than the other brands.”
Many Industry Analysts and Commentators Are Recognizing that the
Turnaround Is Gaining Momentum
Note: Permission to use quotations in these materials was neither sought nor obtained. Bolding added for emphasis.
(Jim Cramer, CNBC’s Squawk on the Street, 12-Sep-2014)
(Sterne Agee, 12-Sep-2014)
(Oppenheimer, 12-Sep-2014)
(Robert W. Baird, 12-Sep-2014)

“We believe Darden’s proposed slate represents a prudent approach in that it would yield a group that could bring fresh
perspective to DRI while allowing for some continuity that would
not be associated with Starboard’s plan to replace the entire
board. We see risk that the replacement of the entire Board (as proposed by Starboard) and broader management changes
could
cause
distraction/disruption
that
could
impede
progress
on
improving
core
operating
fundamentals.”
(Baird, 12-Sep-2014)
“In our view, the disruption is likely to intensify after the October 10th shareholder meeting and vote no matter which side
prevails. In our opinion, there is high risk of short-term disruption that could be damaging to the business.”
(Bank of America Merrill Lynch, 12-Sep-2014)
““With 1QF15 complete, attention is now squarely on the upcoming ‘14 Annual Meeting on 10/10. The focus will be board
representation, with activist Starboard (8.8% holder) pushing for full board turnover (12 members). We struggle with such
drastic
change
in
the
midst
of
a
major
portfolio
transformation,
as
we
are
somewhat
more
conservative
in
nature,
rather
believing a hybrid of new and old board members the best approach. This would allow for significant fresh perspective, while
maintaining an element of continuity.”
(Barclays, 12-Sep-2014)
“In our view,
continued pressure from Starboard and other activist investors could disrupt management’s strategic action
plans
and adds another layer of uncertainty to future free cash flow projections.”
(Morningstar Equity Research, 08-Jul-2014)
Many Industry Analysts also Recognize the Risks of Implementing
Starboard’s Plan
Note: Permission to use quotations in these materials was neither sought nor obtained. Bolding added for emphasis.