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Fire Goes Out at Darden's Smokey Bones Chain

Darden Restaurants to Divest 126-Restaurant Smokey Bones Chain
May 7, 2007
Darden's Smokey Bones Exits Several States
Darden's Smokey Bones Exits Several States
Unsuccessful in its attempts to grow its Smokey Bones barbeque chain into a national footprint similar to its Olive Garden and Red Lobster brands, Darden Restaurants, Inc. (NYSE:DRI), Orlando-based restaurant operator and a Fortune 500 company, put the remaining 73 Smokey Bones restaurants up for sale after closing 54 underperforming restaurants on Saturday May, 5th, the day of the announcement.

The company estimates it will absorb a pre-tax charge of $260 million in the fourth quarter, including a non-cash asset impairment charge of $235 million for all 129 Smokey Bones and Rocky River restaurants, $15 million for lease contract termination costs, $4 million in severance benefits for terminated employees, $3 million in restaurant-level closing costs, and $3 million in other costs. The company expects the resulting net loss from discontinued operations for fiscal 2007 to be $1.16 to $1.21 per share, but expects earnings per share from continuing operations to be a strong $2.48 to $2.52 per share, which is an 11 to 12% improvement over the previous year.

Darden has been struggling to turn the Smokey Bones chain around for some time. A revamped menu for the home-style barbeque chain was not received as well as Darden had hoped. In addition, the company tested an alternate concept with two converted Smokey Bones restaurants, called Rocky River Grillhouse, which was built upon a fire-grilled, more expensive menu and focused on the Lodge atmosphere. Although the new concept appeared promising to start, long-term performance of that concept declined and as a result, those two restaurants are among Saturday's closures.

Darden operated 127 Smokey Bones restaurants in 28 states before the most recent closures. "The Smokey Bones concept and related business model was designed to be a nationally advertised brand. Since it is not on a path to achieving this vision, we have concluded that it is not a meaningful growth vehicle for Darden. As a result, we've decided to exit the Smokey Bones business and offer it and the related assets for sale," Clarence Otis, Darden's chairman and CEO stated in press release.

The average Smokey Bones restaurant is a freestanding building, 7,000 square-feet in size and located on a major thoroughfare near a major mall or shopping center on a busy retail corridor and features a distinctive log-cabin, lodge-style exterior and interior.

Emilio Amendola, president of DJM Realty, a leading national retail disposition firm that has disposed of restaurant portfolios, commented on the Smokey Bones assets, "My guess is that they would sell a large number of restaurants to one user, with the majority sold to different users, and the balance parceled off. If the portfolio is marketed right, they could demand a premium, as there could be tremendous value in the portfolio for a user wanting to aggressively enter new markets." Darden has not announced a specific firm engaged to dispose of the assets.

According to a CoStar COMPs, the average 5,000 to 10,000 square-foot restaurant sold in the past year sells for an average price-per-square-foot of $268, at a cap rate of 7%, and remains on the market for approximately 6 months, ultimately selling at 87% of its asking price.

The company exited AL, AK, LA, ME, MO, MS, NH, OK, TX, WI, and WV completely with the closure of these 54 restaurants. The restaurants closed as of Saturday, May 5, 2007 are as follows:

AL Montgomery 2465 Eastern Blvd. Promenade Shopping Center
AL Mobile 4011 Airport Blvd Corner of Airport Blvd. and Azalea Rd.
AR Fayetteville 43 E. Van Asche Dr Just South of Arkansas Mall
FL Tallahassee 3131 Capital Circle NE At Exit 199, I-10 and Capital Circle NE
FL Pensacola 4952 Bayou Blvd at Bayou Blvd and Entrance of Cordova Mall
FL Ft. Walton Beach 321 Mary Esther Blvd. Across from Santa Rosa Mall
GA Dunwoody 4764 Ashford Dunwoody Rd Ashford Place
GA Duluth 1555 Pleasant Hill Rd Sweetwater Blvd and Pleasant Hill Rd
GA Alpharetta 7900 North Point Pkwy North Point Pkwy and Mansell
GA Douglasville 6855 Douglas Blvd. Across from Arbor Place Mall
GA Gainesville 1701 Browns Bridge Rd Across from Gallery Furniture
GA Morrow 1971 Mt. Zion Rd 1 Mi East of Southlake Mall
IL Aurora 44435 Fox Valley Center East Side of Fox Valley Mall
IL Schaumburg 680 N. Mall Drive South of Woodfield Mall
IL Champaign 1910 N. Neil St. Neil St. and Convenience Center
IN Evansville 6636 E. Lloyd Expy Lloyd Crossing Shopping Center
IN Merrillville 740 E. 81st Ave Star Plaza
IN Castleton 5910 E. 82nd Street Castleton Square Mall
IN Avon 10143 US Hwy. 36 Target Shopping Center
IN Mishawka 4010 N. Main St. Corner of Main
IN Indianapolis 201 S. Meridian St. Corner of Georgia and Meridian downtown
IN Bloomington 2980 W. Whitehall Crossing Blvd. Whitehall Crossing
LA Baton Rouge 6330 Siegen Lane Quarter Mile East of I-10
LA Shreveport 7231 Youree Dr. South on Youree Dr. before 70th St.
ME Bangor 605 Hogan Rd. Across from Bangor Mall
MO Fenton 140 Gravois Bluff Circle Gravois Bluffs Plaza
MO Springfield 2040 E. Independence Ave. Hwy 65 and 60 Ave.
MO Chesterfield 17000 Chesterfield Rd Chesterfield Commons
MS Southaven 6575 Airways Blvd On Airways Blvd 1/2mi. South of Goodman Rd.
NC Wilmington 1055 International Dr Mayfaire Town Center
NH Newington 5 Piscataqua Dr. Across from Fox Run Mall
NH Concord 317 Loudon Rd Just north of Steeplegate Mall
NY Amherst 4120 Maple Rd. 1/2 Mi. North of Niagara Falls Bv on Maple Rd
OH Dayton 1060 Miamisburg Centerville Rd 1.5 Mi East of Dayton Mall on SR 725
OH Elyria 1585 West River Rd Across from Midway Mall
OH Toledo 4155 Talmadge Rd Across from Westfield Mall
OH Akron 283 Howe Ave. On Howe Ave.
OK Oklahoma City 2521 W. Memorial Rd. In front of Quail Springs Mall
OK Tulsa 9111 E. 71st St. On 71st between Mingo and Memorial
PA Dickson City 4005 Commerce Blvd. Near Viewmont Mall
PA Langhorne 2250 East Lincoln Hwy. Next to Oxford Valley Mall
PA Philadelphia 9495 E. Roosevelt Bv. Corner of Grant and Roosevelt
RI Providence 134 Providence Place Mall Providence Place Mall
SC Columbia 410 Columbiana Dr. Near Columbiana Centre
SC Myrtle Beach 1218 North Retail Ct. At Coastal Grand Mall
TN Memphis 6980 Winchester Rd Corner of Winchester and Riverdale
TN Brentwood 1634 Service Merchandise Rd. I-65 and Moores Lane Exit
TN Bartlett 8324 Hwy 64 Across from Wolf Chase Mall
TX Willowbrook 7465 West Greens Rd Tomball Pkwy Exit at Greens Rd
TX Waco 4719 S. Jackson Kultgen Fwy. Central Texas Marketplace
TX South Austin 901 C Little Texas Lane Next to Metropolitan Movie Theatre
TX Humble 20502 Hwy 59 East of Deerbrook Mall
TX San Antonio 14402 N. US Hwy 281 Just north of Bitters Rd on Hwy 281
WI Madison 418 S. Gammon Rd Near West Towne Mall
WI Ashwaubenon 2475 S. Oneida Street Bay Park Square Mall
WV Charleston 121 Cross Terrace Blvd South Ridge Center
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