A customer arrives at a Darden Restaurants Inc. Olive Garden location in San Antonio, Texas, U.S., on Thursday, June 14, 2018.
Callaghan O’Hare | Bloomberg | Getty Images
Despite the number of permanent restaurant closures from the pandemic, Darden Restaurants isn’t seeing many deals on real estate right now.
“There’s tremendous speculation in the real estate market driving prices,” CEO Gene Lee told analysts on Thursday during the company’s quarterly earnings call.
Lee did not elaborate on what the speculation means for Darden. However, restaurant chains that survived the downturn were expecting to snap up closed locations at a discount or receive more accommodations from landlords, like permission to build a drive-thru lane.
Industry tracker Black Box Intelligence estimates that 12% of full-service restaurants in the U.S. that were open before the pandemic have closed.
Private equity firms and other investors have swooped in, betting on commercial real estate. The Wall Street Journal reported in May that commercial real estate prices have been climbing since July, wiping out almost half of the pandemic declines.
During its fiscal fourth quarter, Darden opened 14 new restaurants, bringing its total restaurant count to 1,834 across its portfolio, which includes Olive Garden, LongHorn Steakhouse and The Capital Grille. In fiscal 2022, it expects to add about 35 to 40 new locations.
Shares of Darden rose 3% in morning trading after the company topped Wall Street’s estimates for its fourth-quarter earnings and revenue. The company said that diners are returning to its restaurants, bringing same-store sales nearly back to pre-pandemic levels.