THE WALL STREET
Darden Restaurants Names Gene Lee CEO
Lee has been
serving as interim chief of Olive Garden parent since October
Darden Restaurants’ management has been working to turn around
its Oliver Garden chain. ILLUSTRATION: ANTHONY92931/WIKIPEDIA
Ilan Brat and
Joann S. Lublin
Updated Feb. 23, 2015 3:28 p.m. ET
Inc. named interim chief Eugene Lee Jr. to
the permanent CEO job, signaling that a board revamped by an activist
investor has grown confident that an insider can engineer the
Mr. Lee, an eight-year Darden veteran, took the helm at
the owner of the Olive Garden and LongHorn Steakhouse chains
in a temporary capacity in October
after shareholders voted to replace the board with a slate of 12
directors nominated by activist shareholder Starboard Value LP. New
York-based Starboard had blasted Darden’s management and called for
sweeping changes, recommending everything from spinning off higher-end
chains to salting the pasta water at Olive Garden.
Darden’s board has been impressed with the efforts of
the 53-year-old Mr. Lee to bolster the company’s restaurant brands and
employees’ attitudes, countering any resistance to the idea of hiring
an insider, according to people familiar with the matter.
In December, Darden posted quarterly results that
showed improvement at Olive Garden, with the chain posting its first
positive quarter of same-store sales in more than a year and beating
Darden, which changed search firms last fall to help it
select a permanent CEO, narrowed its hunt to a short list of finalists
earlier this month, one of the people said. Another contender was
Bradley Blum, an outside Darden director elected last year and former
head of Burger King and Olive Garden, said people familiar with the
matter. Mr. Blum declined to comment through a spokesman.
Restaurants named Eugene Lee permanently to its top executive
Mr. Lee, previously president and chief operating
officer, took over as Darden’s interim leader from longtime CEO
Clarence Otis, who had come under pressure starting in 2013 from both
Starboard and fellow activist Barington Capital Group LP.
Under Mr. Lee, a 30-year industry veteran, Darden
introduced online ordering that increased Olive Garden’s takeout
business, rolled out lower-calorie dishes and speeded up lunch
service. Moving away from discounts, the company also instituted a
$9.99 everyday-value menu to attract customers to Olive Garden.
“Gene has already done a terrific job improving the
energy and attitude inside Darden and we expect the reinvigorated
culture to continue to improve,” Jeffrey Smith, Darden’s nonexecutive
chairman and CEO of Starboard, said Monday.
Mr. Lee is known as a hands-on restaurant operator who
pays close attention to details. While dining at Darden-owned
restaurants, he has at times confronted servers for failing to
promptly refill water glasses, according to a longtime acquaintance
who has dined with him. “He would get up and go to the individual
server and the manager and say, ‘That’s not acceptable,’” this
Mr. Lee’s plans for the Orlando, Fla., company aren't
expected to completely align with a nearly 300-page investor
presentation issued last year by Starboard, according to a different
person familiar with the matter. That blueprint, heavy on financial
engineering, called for cutting more than $200 million in costs and
spinning off chains including The Capital Grille, Bahama Breeze and
The company in November unveiled a plan to trim $20
million in annual costs that included eliminating a management layer
at the Olive Garden and LongHorn chains and selling the company’s
airplanes. At the time, Darden also announced that finance chief C.
Bradford Richmond would be retiring, and on Monday the company said it
was turning its focus to appointing his successor.
—David Benoit contributed to this article.
Ilan Brat at
firstname.lastname@example.org and Joann S.