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Darden to Grow in Latin America

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Multi-concept, full-service restaurant operator Darden Restaurants Inc. (DRI - Free Report) recently announced that it has inked a development agreement with renowned restaurant operator, International Meal Company (IMC) to enter four Latin American countries − Brazil, Colombia, the Dominican Republic and Panama.

IMC will develop and operate 57 restaurants under three of Darden's brands -- Red Lobster, Olive Garden and LongHorn Steakhouse -- in these countries. The terms of the deal were not disclosed.

IMC is a Brazil-based renowned multi-brand restaurant operator with more than 350 company-owned units in South and Central America and the Caribbean. It manages the operations of the Frango Assado and Viena flagship brands, which when put together have been around for almost 100 years and are recognized by their patrons for their quality of food and services.

Given its familiarity with local food habits a strong presence in the same industry, we believe, IMC remains a strategic fit for Darden’s expansion plan.

Last month, Darden expanded its partnership agreement with Restaurant Operators to open its Red Lobster brand of restaurants in Puerto Rico. Darden presently has its LongHorn brand in Puerto Rico and is also in agreement to launch the Olive Garden brand in the country.

Notably, last year, Darden joined forces with a Mexican casual dining company, CMR, to enter the Mexican market. The above mentioned deals affirm management’s intent to make Latin America one of the prime markets for Darden’s international expansion. Darden sees tremendous growth potential in this market where it finds takers for American dining brands.

Further, the region’s middle-income population is also rising, which could materially benefit the country’s food and beverage market. The company seeks to capitalize on this opportunity. We believe that the company is trying to spread its presence beyond the U.S. more aggressively following cut-throat competition in the rather saturated domestic casual dining market.

Darden currently retains a Zacks Rank #3 (Hold). Restaurant companies that appear to be better positioned at current levels include Red Robin Gourmet Burgers Inc. (RRGB - Free Report) with a Zacks Rank #1 (Strong Buy) and AFC Enterprises Inc. and Burger King Worldwide Inc. with a Zacks Rank #2 (Buy).

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