Red Lobster 2012 Annual Report Download - page 19

Operating Leverage Should Accelerate
Cash Flow:
We remain confident we have a winning formula
for growth. Our success will be driven by strong
total sales growth and consistent margin expan-
sion as we leverage our collective experience and
expertise and an increasingly efficient support
platform. To complement all of this, we are also
working to capture adjacent business opportunities.
These include further accelerating new-unit growth
through the development of Synergy locations,
as well as extending brands to international
markets via franchising partnerships. Synergy
restaurants combine any two of our larger three
brands into a single facility, which allows us to
optimize the capital investment and key operating
costs in the kitchen and management teams.
This new format provides us the opportunity to
penetrate smaller markets that could not support
two brands on a stand-alone basis. On the inter-
national front, in fiscal 2011 we entered into an
agreement involving the opening of a minimum
of 60 restaurants across the Middle East over
the next five years. To date, we have opened
Red Lobsters in Dubai and Qatar. In fiscal 2012,
we announced agreements that envision opening
a minimum of 37 locations across Mexico and
a minimum of 11 locations in Puerto Rico, both
over the next five years. In addition, we continue
to pursue future potential opportunities in Asia
and South America.
SUPPLY CHAIN
AUTOMATION
We are working to more fully automate our
supply chain, from product pricing and
demand forecasting through replenishment
ordering and shipment to our restaurants.
In addition, optimizing the interface with
our manufacturing and distribution process,
including storage, freight and receiving,
is also foundational to this initiative. We
believe this program can reduce costs
$60 million to $65 million annually, and
we are over halfway there.
FACILITIES
MAINTENANCE
CENTRALIZATION
Centralizing our facilities maintenance,
when fully implemented, will allow
restaurant Managers anywhere in the
country to call a single 800 number to
get help with their common restaurant
maintenance needs. At that point, our
national service center will take over,
leveraging national pricing and a pre-
approved set of vendors. This program
should generate annual savings of
$15 million to $20 million and, more
importantly, allow our managers to spend
more time with employees and guests.
SUSTAINABLE
PRACTICES
Sustainable restaurant operating practices
are about changing practices to reduce the
amount of water, energy and cleaning
supplies used in our restaurants. Actions
include installing low-flow water nozzles in
our kitchens and restrooms, implementing
power-up and power-down schedules for
equipment, installing more energy-efficient
lighting in our kitchens, parking lots and
dining rooms, and adhering more closely to
dining room temperature standards. This
program can ultimately save $25 million
to $30 million on an annual basis.
LABOR
OPTIMIZATION
Labor optimization focuses on key areas
such as improving guest count and labor
scheduling, refining key restaurant team
pay practices across Red Lobster, Olive
Garden and LongHorn Steakhouse and
identifying the optimal balance between
full-time and part-time hourly employees
at each brand. All this work was guided
by our commitment to improve both the
guest and employee experiences. These
changes will allow us to save $40 million
to $45 million on an annual basis.
Darden Restaurants, Inc. 2012 Annual Report 15