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Darden: New LongHorn Steakhouse Units Pass Olive Garden

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Unit growth

At the end of fiscal 2014, Darden Restaurants (DRI) had a total of 1,501 restaurants in the US and Canada. The chart below shows the breakdown of these restaurants by brands and the four-year unit growth trend.

Over the past four years, Darden Restaurants added the highest number of LongHorn Steakhouse restaurants, or 110 units. The company added 34 LongHorn restaurants in 2014 alone. Darden added 83 units of Olive Garden and 21 units of Seasons 52 over the past four years.

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With ~80% of revenues coming from Olive Garden and LongHorn Steakhouse, it’s not surprising that Darden Restaurants focuses heavily on expanding the restaurant units of these two brands in particular. Moreover, the company states that LongHorn Steakhouse will continue to lead unit growth in 2015, adding more LongHorn Steakhouse units than Olive Garden units.

Unit count of the competition

Darden Restaurant (DRI) operates seven brands with a total of 1,501 units, all earning a total revenue of $6,285 million. Similarly, Bloomin’ Brands (BLMN) also operates five brands, with a total of 1,510 units in the system, generating $4,415 million in revenue.

Comparatively, Texas Roadhouse (TXRH), which operates a single brand with a total of 451 units, generated revenues of $1,568 million. Buffalo Wild Wings (BWLD) operated 1,082 restaurants generating $1,422 million in sales in 2014.

Investing in the Consumer Discretionary Select Sector SPDR ETF (XLY) is a good way to get an exposure to several restaurant stocks at once. XLY holds 10% of restaurant stocks in its portfolio.

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