A very large brand often has trouble growing new concepts because the growth path to making a meaningful impact on the bottom line seems impossible.
McDonald’s, for example, once held a stake in Chipotle, before selling it in 2006.
“By 2005, McDonald’s decided to refocus on its core brand. The company’s leadership wanted to streamline operations and pour all its resources back into strengthening the McDonald’s identity. Owning other brands, including Chipotle, Boston Market, and Donatos Pizza, was seen as a distraction,” acccording to Flavor 365.
Exiting two of those three brands turned out to be good moves, but selling Chipotle, a decision confirmed in a 2006 McDonald’s press release, turned out to be a major strategic misstep.
Large restaurant companies often struggle to scale smaller concepts in ways that meaningfully impact overall earnings. A similar dynamic is now playing out at Darden Restaurants, which has decided to close its Bahama Breeze brand, citing it as a smaller concept in the company’s portfolio, according to a Darden press release.
Earlier this year, Darden shared “the Bahama Breeze brand, and its 28 locations, were no longer a strategic priority and that it would consider strategic alternatives, including a potential sale of the brand or converting restaurants to other Darden brands,” the company shared in a press release.
Now, the restaurant operator that owns Olive Garden, with over 900 locations, and Longhorn Steakhouse, which has 591 restaurants, has decided to simply end the Bahama Breeze brand by closing 14 locations and converting the remaining 14 locations into another Darden brand.
“The company does not expect these actions to have a material impact on its financial results,” it shared.
Black Box Vice President of Insights and Knowledge Victor Fernandez sees operating chains with declining sales as a challenge.
“In an environment where cumulative inflation has driven costs up by nearly a third since 2019, it is virtually impossible for a unit to remain viable after losing 30% or more of its peak sales,” he said in a statement to Nation’s Restaraunt News.
Darden’s decision matches an ongoing trend among large restaurant operators.
“Closing Bahama Breeze and repurposing half of the sites looks like Darden doubling down on brands where it sees clearer returns on each restaurant, similar to how peers such as Brinker International and Bloomin’ Brands focus capital on their core banners like Chili’s and Outback,” Simply Wall St. reported.
The Bahama Breeze in Kissimmee, Fla., where I have occasionally eaten over the years, will be one of the last to close. On a recent visit, earlier this year, the restaurant was busy with about a 20-minute wait, which has been typical during my previous trips to that location.
