Staying the course it set last fall, Darden Restaurants picked Gene Lee on Monday to lead a company trying to revive its ailing flagship Olive Garden.
Lee has been running Darden as interim CEO since October, shortly after activist investor Starboard Value persuaded shareholders to replace the company’s board.
He won the job outright Monday when the new board made him the unanimous choice for the third CEO in the company’s 20-year history.
As CEO, Lee also will preside over potentially major decisions such as selling Darden’s real estate portfolio and its specialty restaurant division.
“He isn’t really an insider even though he has been with the company since 2007,” said John Gordon, a restaurant consultant and founder of Pacific Management Consulting Group. “He’s a very tenured restaurant guy, and I see him as stronger with restaurant operations than the people that came before him.”
Lee will earn a base salary of $925,000, a bonus of up to the same amount and stock options of up to $2.6 million.
Darden has been looking for a new CEO since Clarence Otis announced his departure in July after months of fighting with investment groups over the company’s direction. Otis was criticized for the $2.1 billion sale of Red Lobster to Golden Gate Capital and years of lagging sales at Olive Garden.
“It was clear that Gene was the best candidate and was the board’s unanimous choice,” said Darden Chairman and Starboard CEO Jeffrey Smith in a statement. “Gene brings the perfect combination of restaurant-level operating experience, brand- and corporate-level management expertise, and thoughtful, focused, hands-on leadership.”
Lee came to Darden with the acquisition of RARE Hospitality International, where he was president. It was the parent company of LongHorn Steakhouse and Capital Grille.
Darden, Orlando’s only Fortune 500 company, is the parent of Olive Garden, LongHorn Steakhouse, Seasons 52, Yard House, Capital Grille, Eddie V’s and Bahama Breeze restaurants. The company has 150,000 employees at 1,500 restaurants.
Before becoming interim CEO, Lee worked for a year as chief operating officer for Darden and for six years as president of the specialty restaurant group.
“As president and chief operating officer, and then as interim CEO of Darden, I fully appreciate the possibilities of an improved and reinvigorated Darden,” Lee said in a statement. “I believe Darden has a fantastic future and look forward to continuing to work with Darden’s talented employee base in our collective effort to return Darden to the pinnacle of full service dining.”
Before working at RARE, Lee served in executive positions at Uno Restaurant Corp. and York Steak House Systems. Lee grew up in Massachusetts and earned his MBA from Suffolk University in Boston.
The selection of an existing Darden executive puzzled some analysts, since Starboard Value and investment firm Barington Capital spent nearly a year criticizing the company’s leadership.
“It seems very counterintuitive to have a historic upheaval in the board and then go with someone that was part of that team,” said Howard Penney, an analyst with Hedgeye.
Darden has shown some improvements in same-restaurant sales at Olive Garden in recent months. Penney said the next few quarters also should look strong for Darden, since the restaurant industry as a whole is improving.
“You won’t know for the next year whether this is the right choice or not,” Penney said.
Olive Garden has had just one quarter of positive same-restaurant sales since May 2013, after being a leader in the casual dining sector for nearly two decades.
“Olive Garden is such a massive presence at Darden,” Gordon said. “Now they need get the menus and the buildings up to snuff.”
Olive Garden revamped some of its menus in 2014 and embarked on remodeling restaurants. But the renovations were put on hold in December so management could take a look at their impact on sales.
Casual-dining restaurants have struggled in general because of pressure on middle-class wallets and increased competition from fast-casual chains such as Chipotle and Five Guys Burgers and Fries.
Barington Capital CEO James Mitarotonda, who lobbied for months to remove Otis, endorsed the CEO selection.
“We congratulate Gene Lee on his appointment and support him in the execution of Darden’s new strategic plan,” Mitarotonda said in a statement.
karnold@orlandosentinel.com or 407-420-5664
