Darden Restaurants CEO Gene Lee to retire in May
Current president, Rick Cardenas, to replace him
Gene Lee, who successfully led Orlando-based Darden Restaurants through the COVID-19 pandemic and the aftermath of an activist investor revolt, plans to retire as CEO in May.
Rick Cardenas, currently president and chief operating officer, was unanimously selected by the board to replace Lee in the top job, the company that owns Olive Garden and other chains revealed Friday. Lee will retire May 29, and
Cardenas will become CEO May 30. Lee will remain chairman of the board.
“This is the right time for this transition and I look forward to continuing to serve as Darden’s chairman,” Lee said. “Our company is in a clear position of strength, and this is also the right time for me and my family.”
Lee, 60, was named CEO in 2015 after serving in an interim role with the departure of Clarence Otis the prior year. He joined Darden with the acquisition of RARE Hospitality International in 2007, the parent company of LongHorn Steakhouse and Capital Grille where Lee was president.
He took over after an activist investor convinced shareholders to replace the company’s board. Otis had been criticized for the 2014 sale of Red Lobster to Golden Gate Capital and years of lagging sales at Olive Garden.
San Diego-based restaurant analyst John Gordon described Lee as an “extremely strong, steady hand that steadied the company.”
“Then when the pandemic hit, this is where I really think about Gene Lee,” Gordon said. “This is really where I think of Gene at a
virtuoso level where he and the rest of the team were just so masterful in terms of handling the pandemic.”
Darden established a paid sick leave policy around the start of the pandemic as well as emergency pay for workers furloughed from restaurants where dining rooms were closed.
“There was never any doubt about the survival of Darden,” Gordon said.
Lee was also at the helm for Darden’s acquisition of Cheddar’s Scratch Kitchen in 2017, which is now the company’s third-largest brand with 172 restaurants.
Darden’s revenues increased by more than $2 billion during Lee’s tenure and its market capitalization grew about threefold to nearly $20 billion, said Charles Sonsteby, Darden’s lead independent director, in a news release.
“Gene has successfully led the company through significant change and unpredictability — most recently during the COVID-19 pandemic — with an unwavering focus on our guests and our team members,” Sonsteby said.
Cardenas, 53, became Darden’s chief financial officer in 2016 and was then named chief operating officer and president in January of this year. His history with the company goes back much further than his top executive jobs: he started as an hourly employee in 1984 before joining its restaurant support center in 1992.
“I really think the strategy that we have is the right strategy,” Cardenas said on an earnings call held Friday. “I don’t see a big change in our strategic priorities, partly because I was a big part of writing them.”
Lee called Cardenas a “tremendous partner over the last seven years” and “one of the best strategic thinkers I’ve worked alongside.”
“Rick is the perfect person to lead Darden into the next chapter,” Lee said. “On behalf of the board, Darden’s management team, and our 170,000 team members I want to congratulate Rick and wish him all the best.”
Lee will remain on the company’s board as chairman until the 2022 annual shareholders meeting, where it is expected he will stand for re-election to the board, the release said.
On the call, Cardenas also revealed the company was going to ensure no employee makes less than $12 an hour, a figure that includes money from tips and is an increase from $10, starting in January.
The raise was originally planned to take place in January 2023.
He said with the change restaurant employees will earn on average about $20 per hour.
Lee said “very few” employees at the company make the minimum.
“This is what I would call entry-level wage and more in rural America,” Lee said. “In the major cities, you’re not hiring anybody for $12 an hour today. This is an increase and a guarantee to our workforce that will probably have more impact on Cheddar’s than any of our other brands.”
Darden has more than 1,850 restaurants including Olive Garden, LongHorn Steakhouse, Cheddar’s Scratch Kitchen, Yard House, The Capital Grille, Seasons 52, Bahama Breeze and Eddie V’s.
In its earnings report for the quarter ending Nov. 28, the company said total sales increased 37% from the same time last year to $2.27 billion, with same-restaurant sales up 34.4%.
“Despite the toughest inflationary environment we’ve seen in years, we achieved strong profitable sales growth,” Lee said.
Darden’s stock fell Friday after the earnings release and the announcement of Lee’s retirement and was down nearly 5% to $139.83 at the closing bell.
Lee is the latest top executive at an Orlando restaurant chain to retire this year, with Kim Lopdrup retiring from the CEO job at Red Lobster. Lopdrup had been at the helm of the seafood chain since Darden sold it in 2014. Former Chili’s Grill & Bar brand president Kelli Valade was named Red Lobster’s new chief executive.