Sentinel Staff Writer
November 2, 2008
Together, in a series of meetings, Otis, Lee and another key leader, Drew Madsen, set goals for Orlando's only Fortune 500 company.
"We took a hard look," Otis said. "And we established a big dream."
Now, Otis, 52, is facing an economic crisis that threatens to undermine the health of his company and the dream to create a multibrand restaurant powerhouse. The credit crunch and housing slump have conspired to crimp consumer spending, particularly at full-service restaurants such as the more than 1,700 run by Darden, including Olive Garden and Red Lobster.
Costs are rising, squeezing already razor-thin profits. And signs suggest that consumers might be tiring of the sameness that pervades casual-dining restaurants.
But Otis is still thinking big.
Four years after taking over the company, Otis has remade Darden in his own image. He has replaced much of the senior management team, focused on the bottom line, bought a steak chain and ditched a barbecue division he once ran. Many of the changes were in keeping with the goals that Otis, Madsen and Lee sat down to plot out.
Otis admits that the current climate is "challenging" for his restaurants. But he says Darden can manage costs because its size and the company's big, well-known brands will help it stand out from the competition.
Most of all, Otis is not willing to let short-term obstacles distract from long-term goals.
In fact, Otis says, Darden will likely have to snap up more restaurant chains to satisfy his company's -- and investors' -- appetite for growth.
"Sometime down the road, we'll add more brands, but when that is going to happen remains to be seen," Otis said during a recent interview at the company's Orlando headquarters on Lake Ellenor Drive.
The immediate future is likely to be challenging.
"Casual dining is going to have a rough go of it this year and through 2009," said John Owens, a restaurant-stock analyst for investment-research firm Morningstar.
'He is very focused'
Considered a restaurant-industry novice when he joined Darden in 1995, Otis has replaced most of the senior staff with people loyal to him. Indeed, key members of the company's longtime leadership team under Lee, including Blaine Sweatt and Rich Walsh, have left the company.
"Basically, Clarence came in and said, 'I have got to have people [who] I pick,' " said Mark Given, a former regional vice president of Olive Garden who had close ties to senior management.
Sweatt, who was in charge of new restaurant concepts, announced his retirement from the company in 2007. Walsh retired in 2006.
"He is smart, and he is very focused," Walsh said of Otis. "I think he has navigated some very rough waters the past few years very well."
Dick Rivera, a former Darden vice chairman and president who worked alongside Otis, said he proved to be a fast learner of the restaurant business, despite coming from a financial background.
"He's pretty savvy about food and beverage," Rivera said, adding that he thinks Otis and Darden's executive team have made the "right moves."
Madsen, president and chief operating officer, is Otis' right-hand man and runs the day-to-day operations.
With his executive team in place, Otis embarked on a growth strategy that led him to buy a steak chain and dump Smokey Bones.
"It's always tough to make a decision like that," Otis said of Smokey Bones. "But as we looked at the performance over time . . . it was pretty easy to reach the conclusion that it didn't support the business model we had developed for it."
LongHorn Steakhouse, which had posted positive sales numbers for a number of years, looked like a better fit. So Otis engineered the $1.4 billion purchase in October 2007 of the chain's owner, Rare Hospitality International, which also operated the high-end Capital Grille steak chain.
Those who have followed Darden closely for many years say Otis put his stamp on the company with that deal.
"I'm not sure if Joe would have done the Rare deal," Lynn Collier, a restaurant-stock analyst for KeyBanc Capital Markets, said. After witnessing a string of restaurant acquisitions fall flat when Darden was a division of General Mills, Lee became cautious about buying outside chains and preferred to develop them internally, Collier said.
LongHorn a good fit?
The rocky performance of internally developed concepts -- China Coast was shut down in 1995, Smokey Bones was sold and Bahama Breeze has yet to become a growth engine -- convinced Otis and others at Darden that the developing restaurants from within may not be the right path.
"The thing is with existing [outside] brands, you get something that is prepared to grow immediately," Otis said.
Whether LongHorn turns out to be a winner still remains to be seen. The steak chain -- like many other casual-dining restaurants -- has posted several quarters of sales declines.
Otis and Madsen say the recent poor performance of LongHorn has more to with its restaurants' locations in areas of the United States that have been harder hit by the downturn, for example, Florida, and its menu prices that are a bit higher than the average in casual dining.
Analysts also see short-term struggles for LongHorn, but some think the chain will turn out to be the right fit for Darden.
"In the long term, it's going to be a nice acquisition for them, but in the short term, it is going to cause them a few headaches," Collier said.
About a year from now, Darden will move into its $100 million steel-and-glass headquarters off John Young Parkway near the BeachLine Expressway. It will be the first time in the company's history that executives and support personnel -- 1,550 people out of the company's 179,000 staffers -- will work under one roof.
"It will be an atmosphere people will be proud to work in," Madsen said.
For Otis, the new headquarters also create an opportunity for the company to become an even bigger player on the national stage.
Mark Chediak can be reached at firstname.lastname@example.org or 407-420-5240.