Darden Restaurants Inc., whose brand portfolio includes the Olive Garden, Red Lobster and LongHorn Steakhouse brands, has agreed to acquire craft beer-focused restaurant and bar chain Yard House from private equity firm TSG Consumer Partners LLC for $585 million. The all-cash deal, which is expected to close by Darden’s fiscal second quarter (ending November 25, 2012), will include all of Irvine, California-based Yard House’s 39 units, located throughout Arizona, California, Colorado, Florida, Hawaii, Illinois, Kansas, Massachusetts, Nevada, New York, Virginia and Texas. The brand’s average unit volumes total approximately $8.4 million.
Founded in 1996 by restaurant industry veteran Steele Platt and partners Harald Herrmann and Carlito Jocson, Yard House is known for its contemporary American cuisine and a wide selection of more than 100 craft and specialty beers, including its own private-label offerings. The restaurant’s beverage program also features a variety of premium cocktails, sake and wines by the glass and bottle.
Herrmann, who’s president of Yard House and will remain with the company, recently told Shanken News Daily that expansion into the Pacific Northwest, Ohio and North Carolina was in the works. On the Darden deal, he said in a statement that it will advance Yard House’s “evolution to become a national brand.” During an analyst call yesterday evening, Darden revealed that it expects Yard House to ultimately total between 150 and 200 restaurants, giving Darden greater exposure to “younger and more financially resilient” segments.
The craft beer craze has helped the chain maintain an average annual unit growth of about 15%. “It’s been a validation for us,” Herrmann said of craft beer’s popularity. “It shows that we’re on the right track.”
Yard House will be part of Darden’s Specialty Restaurant Group, joining Capital Grille, Bahama Breeze, Seasons 52 and Eddie V’s. “With this addition, Darden’s Specialty Restaurant Group will have nearly $1 billion in annual sales and be even better positioned to sustain annual sales growth of 15% to 20% for years to come,” said Darden chairman and CEO Clarence Otis. In addition to Herrmann, Yard House’s executive team will remain intact under Darden Specialty Restaurant Group president Gene Lee.