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Darden Resturants Policy Final Presentation

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Darden Resturants Policy Final Presentation

  1. 1. Policy Presentation Zach Bach, A.J. Buono, Jacob Kopinetz, Samantha Picciott, Nicole Taylor, Robert Zappaterrini DARDEN RESTAURANTS, INC. Zach Bach, AJ Buono, Jake Kopinetz, Samantha Picciott, Nicole Taylor, Robert Zappaterrini STRATEGIC MENU
  2. 2. 2
  3. 3. 3 Brands:
  4. 4. “Be financially successful through great people consistently delivering outstanding food, drinks and service in an inviting atmosphere, making every guest loyal!” Mission: 4
  5. 5. Overview: Sales by Segment Olive Garden LongHorn Steakhouse Yard House The Capital Grille Bahama Breeze Season’s 52 Eddie V’s 56.03% 22.84% 6.95% 5.96% 3.09% 1.43% 3.53% 5
  6. 6. Overview: Sales by Segment 6
  7. 7. 7
  8. 8. Strengths Weaknesses -Poor Waste Management -Lack of Focus on Smaller Brands -Bahama Breeze -Diversified Restaurant Mix -Large Operational Network -Dietary Approved Menu 8
  9. 9. Opportunities Threats -More Efficient Technology Available -Favorable Growth Trends -Intense Competition -Economic Trends In Consumer Spending 9
  10. 10. SITUATION ANALYSIS: KEY FINANCIALS 10
  11. 11. 11
  12. 12. First Course: Overview Bahama Breeze Divestiture Stagnant Historical and Future Projected Growth for Bahama Breeze Bahama Breeze Sales Growth 12
  13. 13. First Course: Objective Sell Bahama Breeze: $335.5 million Focus on Long-Term Stability Focus on Darden’s current growing brands Pay off long term debt Note 8: 2035 $150 Million Prevent future negative sales of the brandSell Bahama Breeze: $283.5 million 13
  14. 14. First Course: Financials Bahama Breeze Divestiture: Purchase Value: $283.5 Million Sales Value: $209 Million PP&E Value: $74.5 Million Selling Price Net of Tax: $208 Million 14
  15. 15. First Course: Pro Forma 15
  16. 16. Second Course: Overview CREATING AN EXPERIENCE BASED ON: “GRAB YOUR FRIENDS, WE’LL HAVE THE BEER” Yard House Advertising 16
  17. 17. Second Course: Objective Increase Yard House Marketing Expense: $9.76 Million 31% Increase in Advertising Spend Focusing on the Specific Market Segment of Millennial Males Increase Brand Loyalty and Brand Recall 17
  18. 18. Second Course: Implementation 18
  19. 19. Second Course: Implementation 19
  20. 20. Second Course: Implementation 20
  21. 21. FISCAL YEAR SALES INCREASE 2016 12% 2017 10% 2018 8% 2019 6% 2020 6% An increase in spending on advertising will drive an increase in revenue for Yard House Restaurants Second Course: Financials 21
  22. 22. Second Course: Pro Forma 22
  23. 23. COURSE TWO: Overview Third Course: Overview Inventory Optimization 28 ½ Blue Whales 10 MILLION POUNDS OF AVOIDABLE FOOD WASTE ANNUALLY 125 Tractor Trailers 22 Statues of Liberty 23
  24. 24. Third Course: Objective 5.5 million implementation cost $$$ Annual subscription cost Integrate additional POS system: Syrus Decrease Cost of Goods Sold Increase Bottom Line Third Course: Objective $5.5 Million Initial Investment Decrease Food Cost Increase Darden’s Bottom Line Implementation of Additional POS Software Forecast Inventory Minimizes Over Purchasing Supply Chain Management 24
  25. 25. Third Course: Financials Initial Cost: $5,487,200 Year 2: $2,797,200 Year 3: $2,833,200 Year 4: $2,869,200 Year 5: $2,905,200 *Initial Cost accounts for one-time training, implementation, and consulting fees 25
  26. 26. Third Course: Pro Forma 26
  27. 27. 27
  28. 28. Dessert: BOTTOM LINE BY 2020: With Strategies: $720.9 Million Without Strategies: $530.8 Million Difference: $190.1 Million Percent Change: 35.81% TOP LINE BY 2020: With Strategies: $9,696.8 Million Without Strategies: $9,563.3 Million Difference: $133.5 Million Percent Change: 1.4% LONG TERM OBJECTIVES: Continue to lower Long-Term Debt Obligations Focus our remaining brands to continue strong growth 28
  29. 29. Dessert: Combined Projected Pro Forma 29
  30. 30. Policy Presentation Zach Bach, A.J. Buono, Jacob Kopinetz, Samantha Picciott, Nicole Taylor, Robert Zappaterrini DARDEN RESTAURANTS, INC. BILL QUESTIONS? Thank You! Please Come Again. 30 Situation Analysis $20 Divestiture of Bahama Breeze $20 Yard House Advertising Plan $10 Inventory Optimization System $30 TIP TOTAL PROJECT
  31. 31. Appendix 31 International Expansion Same Brand Sales Growth Advertising Plan Inventory Optimization Brand Restructuring Disposable Personal Income Olive Garden Rebrand Inventory Optimization NPV Free Cash Flows Bahama Breeze Key Assumptions Yard House Persona Common Size - Combined Additional Four Locations Bahama Breeze Divestiture Yard House Maps Common Size - Divest Distribution Centers Bahama Breeze Divestiture (Excel) Yard House Key Assumptions Common Size – YH Entrée/Ticket Price Red Lobster Yard House Advertising Plan Common Size – Inv Op Stores in United States Yard House Effect on Net Earnings Yard House Media Schedule Common Size - Base Sales Key Figures Yard House Marketing and Media Yard House Social Media
  32. 32. International Expansion Darden has not had consistent success with international operations 32
  33. 33. Brand Restructuring BAHAMA BREEZE: 8000 YARD HOUSE: 12,652 REJECTED: On basis of not having enough square footage for Yard House 33
  34. 34. Free Cash Flows 35
  35. 35. Avoid Additional Four Locations Initial Investment -$37,158,960 CF1 $2,452,378 CF2 $4,091,729 CF3 $6,491,641 CF4 $7,207,842 CF5 $7,941,618 WACC 3.08% NPV -$11,793,858 35
  36. 36. Distribution Center Conkillin, New York Anover Park, Illinois Westborough, Massachusetts Farmingdale, New York Oakwood, Ohio Savage, Maryland Arlington, Tennessee Worcester, Massachussets Orlando, Florida Terrell, Texas 36
  37. 37. Entrée/ Ticket Price by Restaurant Olive Garden LongHorn Steakhouse The Capital Grille Bahama Breeze Yard House Eddie V’s Seasons 52 Lunch $7-15 $7-15 $12-39 $7-21 $7-32 N/A $8-31 Dinner $10-20 $12-25 $16-59 $9-30 $7-32 $18-61 $11-31 Average $17 $20 $75 $45 $31 $90 $26 37
  38. 38. Stores in the United States Olive Garden LongHorn Steakhouse The Capital Grille Bahama Breeze Yard House Eddie V’s Seasons 52 Stores 846 480 54 36 59 16 43 Franchised 20 13 1 0 0 0 0 2015 2014 2013 Olive Garden 846 837 828 LongHorn Steakhouse 480 464 430 Yard House 59 52 44 The Capital Grille 54 54 49 Bahama Breeze 36 37 33 Seasons 52 43 38 31 Eddie V’s 16 15 12 38
  39. 39. Sale Key Figures 2015 2014 2013 Sales (Millions) $6,764.0 $6,285.6 $5,921.0 2015 2014 2013 Olive Garden 56.03% 57.96% 62.23% LongHorn Steakhouse 22.84% 22.02% 20.79% Yard House 6.95% 6.66% 4.36% The Capital Grille 5.96% 5.78% 5.60% Bahama Breeze 3.09% 3.21% 2.93% Seasons 52 3.53% 3.12% 2.67% Eddie V’s 1.43% 1.25% 1.10% 39
  40. 40. Same Brand Sales Growth 2016 2017 2018 2019 2020 Olive Garden 2% 2% 2% 2% 2% LongHorn Steakhouse 12% 12% 12% 12% 12% Yard House 18% 16% 14% 12% 10% The Capital Grille 10% 10% 10% 10% 10% Bahama Breeze 4% 4% 4% 4% 4% Seasons 52 20% 20% 20% 20% 20% Eddie V’s 22% 22% 22% 22% 22% 40
  41. 41. Disposable Personal Income Calculation Credibility Weighted Forecast Disposable Personal Income Yearly Increases 2016 - .24% 2017 - .22% 2018 - .21% 2019 - .21% 2020 - .21% 41
  42. 42. Disposable Personal Income Calculation (contd.) 42
  43. 43. BAHAMA BREEZE BACKUP SLIDES 43
  44. 44. Bahama Breeze Key Assumptions BB Sales $209 million Followed treatment for Red Lobster Disposal BB PP&E Valuation $54.6 million BB’s Portion of Darden’s PP&E BB Land-Only Leases 16 Portion of Total Restaurants Ground and Building Leases 2 Portion of Total Restaurants Space/In-Line/Other Leases 5 Portion of Total Restaurants Owned Sites 13 Portion of Total Restaurants BB Food/Beverage Expense $69.5 million Portion of Total Sales BB Restaurant Labor Expense $69.9 million Portion of Total Sales BB Restaurant Expenses $37 million Portion of Total Sales BB Marketing Expenses $0.4 million Darden Marketing Plan - Red Books BB Depreciation Expense $52 million Straight-line depreciation Interest Expense from Note 8 $18.6 million $150 million note at 6% interest due in 2035 Red Lobster % of Sales 85.77% Darden 10-K (2014) 44
  45. 45. Bahama Breeze Divestiture Bahama Breeze Divestiture (Sales) BB Sales $209,000,000 Tax Rate 26.63% BB Sales, net of Tax $153,340,000 $208 million (after tax)Bahama Breeze Divestiture (PP&E) BB PP&E, net depreciation $74,450,000 Tax Rate 26.63% BB PP&E, net of Tax $54,620,000 45
  46. 46. Red Lobster Red Lobster Divestiture (Sales) Restaurant Sales $2.46 billion RL Sale Price $2.11 billion % of Sales 85.77% Red Lobster Sales Info 2013 $2.62 billion 2012 $2.67 billion 2011 $2.52 billion 2010 $2.49 billion 2009 $2.62 billion 46
  47. 47. PROPERTY, PLANT, EQUIPMENT, AND SALES VALUATION OF BAHAMA BREEZE 47
  48. 48. YARD HOUSE BACKUP SLIDES 48
  49. 49. YH Advertising Effect on Net Earnings $0.00 $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 $80.00 $90.00 20162017201820192020 Net Income (millions) Net Income (millions) 2016 2017 2018 2019 2020 YH Plan $610.87 $769.70 $939.03 $1108.05 $1285.34 YH Org. Growth 554.48 643.20 733.25 821.24 903.36 Difference 56.39 126.50 205.78 286.82 381.98 Addn’l F/B 17.60 39.83 65.26 91.48 122.37 Addn’l Labor 17.69 39.30 63.20 86.95 114.15 Addn’l Rest. Exp 9.37 21.02 34.12 47.38 62.79 Net Earnings $11.72 $26.35 $43.20 $61.01 $82.67 51
  50. 50. Yard House Marketing and Media Craft Beer Buzz Words: 50
  51. 51. Advertising Plan FISCAL YEAR SALES INCREASE 2016 12% 2017 10% 2018 8% 2019 6% 2020 6% 51
  52. 52. Yard House: Target Persona 52
  53. 53. Olive Garden Rebrand (2014) 2015 2014 2013 Olive Garden $3,789.60 $3,643.10 $3,684.80 Darden spent an additional $11 million on marketing exclusively for Olive Garden which increased sales by 5.5%. 53
  54. 54. Yard House Map of Locations/Stadiums 54
  55. 55. Yard House – Additional Locations 55
  56. 56. Yard House Marketing Plan Key Assumptions Yard House Sales Base Business Pro Forma Marketing Sales Increase in sales of 12% (2016), 10% (2017), 8% (2018), 6% (2019), and 6% (2020) YH Food/Beverage Expense (2016) $14.6 million Portion to YH Sales YH Labor Expense (2016) $14.8 million Portion to YH Sales YH Restaurant Expense (2016) $7.8 million Portion to YH Sales YH Increase in Sales Followed treatment for Olive Garden re-brand Olive Garden Rebrand Sales Increase 5.5% Darden 10-K (2014) Social Media Reach % Increase 20% Followed treatment for Olive Garden re-brand 56
  57. 57. Advertising Plan 57
  58. 58. Media Schedule 58
  59. 59. Social Media Plan 59
  60. 60. INVENTORY OPTIMIZATION BACKUP SLIDES 60
  61. 61. Percentage Allocation: Food 87.49% Darden 10-K; Proportion of Breakdown of Beverages Percentage Allocation: Beverage 12.51% Darden 10-K; Cost Breakdown of Beverages Syrus Consulting Cost $500,000 Syrus Industry Professional # of Employees to Train 140,000 Darden 10-K Minimum Wage $7.95 Average of 50 States Hours of Training 2 Consultation with Syrus Industry Professional Annual Software Cost Per Store $1,800 Consultation with Syrus Industry Professional Annual Store Increase 20 Darden 10-K; Historic Growth Trends Food Cost Decrease 2%-4% Consultation with Syrus Industry Professional 61 Key Assumptions
  62. 62. Initial Investment $5,487,200 CF1 $39,390,000 CF2 $52,270,000 CF3 $66,250,000 CF4 $81,290,000 CF5 $97,250,000 WACC 3.08% NPV $297,970,804 62 NPV Analysis
  63. 63. Capital Grille 63
  64. 64. Eddie V’s 64
  65. 65. Seasons 52 65
  66. 66. Darden Restaurants 66
  67. 67. Overview: Presence of Darden Restaurants per State 67
  68. 68. Common Size – Base Projections 68
  69. 69. Common Size – Combined Strategies 69
  70. 70. Common Size - Divestiture 70
  71. 71. Common Size – Marketing Plan 71
  72. 72. Common Size – Inventory Optimization 72 Common Size – Inventory Optimization

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