With the considerable operating cash flow generated by two multibillion-dollar brands, not only is Darden able to appropriately reinvest in our business, but we are also able to return considerable capital to our shareholders.
To win in the New Era, we have to reinvest to protect the broad appeal of our brands and sustainably grow same-restaurant traffic. As we reinvest, Olive Garden and Red Lobster are guided by three broad strategic priorities; 1) addressing the heightened market share contest within casual dining by responding more aggressively to the elevated guest need for affordability — while being careful not to dilute our brands or guest experiences; 2) delivering our current guest experiences at a competitively superior level more consistently within each of our restaurants and across our restaurant systems; and 3) meaningfully innovating and redefining our guest experiences in ways that make them more attractive to new guests and for new occasions.
Olive Garden’s broad appeal and powerful unit economics are the key reasons why it has grown to over 800 locations generating $3.7 billion in total sales and average unit sales volumes of $4.6 million. As a result, Olive Garden’s annual cash contribution to Darden exceeds $455 million. In fiscal 2014, Olive Garden will reduce new restaurant expansion to 15 net new restaurants from the 36 opened last year, in order to better focus on regaining sales momentum and consistently delivering a high-quality guest experience in existing restaurants.
Red Lobster continues to have a business model that creates significant value, with annual sales of $2.6 billion and average unit sales volumes of $3.7 million. As a result, Red Lobster’s annual cash contribution to Darden is more than $200 million. In fiscal 2014, Red Lobster will continue its Bar Harbor remodel program, which it expects to complete in early fiscal 2015, while opening one net new restaurant.
Olive Garden and Red Lobster’s annual cash contributions, after appropriate reinvestment to ensure success in the New Era, are the foundation for Darden’s strong and consistent return of capital to shareholders through the combination of dividends and share repurchase.