Darden owns well-known dining chains including Red Lobster, Olive Garden, and LongHorn Steakhouse. While it calls itself the largest full-service restaurant company in the world, Darden's brands are currently located almost exclusively in the U.S. and Canada. Though the company has grown mostly through domestic expansion of its core brands, in 2007 it acquired RARE Hospitality, parent of LongHorn and the Capital Grille. Darden's buyouts followed several years of failed attempts to develop a new high-performing brand on its own.
Darden's announcement represents a major leap by management, since the company has never had a presence outside North America (with the exception of a dollop of franchised locations in Japan). Darden enlisted the Americana Group to lead its concepts in this endeavor. Americana, the largest food-service franchiser in the Middle East, operates international franchises in that region for Krispy Kreme Doughnuts
A strategy all its own
Darden's strategy appears to be very different from that of notable international successes McDonald's
In contrast, Darden's announcement is the equivalent of a cannonball. Rather than expanding to a region that is similar to the U.S., management decided on a bold move to the Middle East. International expansion to an area of the world with significant economic and cultural differences is a risky but potentially lucrative move for a company that has limited experience outside North America. We can only assume that Darden has a ton of confidence in Americana's experience.
The bottom line
As Darden continues to search for growth, international expansion with proven brands makes a lot of sense. It's gone too long without creating a winning concept of its own. While expanding internationally certainly has its risks, expanding domestically with untested concepts can be even riskier.
Fool contributor Stephen Marini doesn't own shares in any of the companies mentioned above. Chipotle is a Motley Fool Rule Breakers selection. Chipotle is a Motley Fool Hidden Gems pick. The Fool owns shares of Chipotle and Yum! Brands. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.