Darden To Part With Red Lobster, Cuts Cap-Ex By $100 Million

Darden Restaurants, which announced plans last month to sell or spin off its Red Lobster chain, is suspending the opening of new Olive Garden locations and cutting back on the number of new LongHorn Steakhouse restaurants.

Red Lobster, which has 705 restaurants in the U.S. and Canada, has seen stagnant same-store sales in the past few years. An activist investor group holding about 2% of Darden’s shares has been pressing the Orlando, Fla., company to split into two companies, with one company as owner/operator of the Olive Garden and Red Lobster brands and the other as manager of its other six concepts.

The company will not close any Red Lobster units, but says its reduced growth plans mean lower capital spending by at least $100 million a year. Darden has targeted the spinoff or sale of Red Lobster to be completed early in its fiscal 2015, which begins May 26, 2014. The sale requires approval from Darden’s board, but does not require a shareholder vote. Darden owns and operates 2,174 casual-dining restaurants, including 834 Olive Garden, 445 LongHorn Steakhouse, 52 Capital Grille, 48 Yard House, 36 Bahama Breeze, 35 Seasons 52 and 13 Eddie V’s locations.