Darden Restaurants, Inc. (NYSE:DRI), operator of several casual and upscale restaurants, announced late Wednesday it has agreed to purchase Chuy's Holdings, Inc. (Nasdaq: CHUY) in a deal valued at approximately $605 million. The Chuy's deal gives Darden its first Mexican restaurant concept and tenth overall brand.
"Chuy's is a differentiated brand within the full-service dining industry with strong performance and growth potential," said Darden President and CEO Rick Cardenas. "Based on our criteria for adding a brand to the Darden portfolio, we believe Chuy's is an excellent fit that supports our winning strategy."
Founded in Austin, Texas in 1982, Chuy's operates full-service restaurants serving a menu of authentic, made-from-scratch "Tex-Mex inspired" dishes. It was not until 2009 that the company expanded beyond Texas with a restaurant in Franklin, a suburb of Nashville. The company entered the Atlanta market in December 2011 with a location along Perimeter Center West in Dunwoody. The Atlanta market had by 2017 grown to four locations with a fifth planned, but there are just two in the area today.
The Dunwoody restaurant and the Kennesaw restaurant on Barrett Parkway remain open, but others at Akers Mill Square near Cumberland Mall, and near Avalon in Alpharetta closed in late 2019 and early 2020, respectively. A location planned for Peachtree Corners Town Center in Peachtree Corners was abandoned before it was ever built, with Lazy Dog Restaurant & Bar having opened on its site instead.
Chuy's went public in 2012 at which time it had 36 restaurants across eight states. Today, the company has 101 restaurants in 15 states, but about half of the units are in Texas. In the twelve months ended March 31, 2024, the company had an average annual restaurant volume of $4.5 million per unit.
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| For some Texans, Chuy's is as beloved as its larger Lone Star businesses |
The company has struggled to find the same kind of consistent, multi-unit success in new markets that it enjoys in Texas. In addition to the Akers Mill closure, the company closed a restaurant in Miami in January 2019 after only six months in business, followed by closures in Annapolis, Maryland, and Tuscaloosa, Alabama. A short-lived restaurant in the Miami suburb of Kendall later closed, as did units in Lakewood, Colorado (April 2024), and Kansas City, Missouri (June 2024).
Darden, an experienced operator with nearly 2,000 restaurants, will likely be seeking to leverage their size and marketing prowess as they look for future growth opportunities.
Chuy's prides itself in serving its food in a fun, eclectic and irreverent atmosphere, with each location offering a unique, "unchained" look and feel, as expressed by Chuy's motto "If you've seen one Chuy's, you've seen one Chuy's!" This originality would seem to be the antithesis of Darden, a huge operator of chain restaurants. For many customers, the bigger [Read: less special] a chain gets, the less compelling it becomes.
Darden is no doubt diversifying its portfolio in search of growth, but it must walk a careful course so as not to make Chuy's too "chainy."
In May Darden closed two "underperforming" LongHorn locations in metro Atlanta including one on Piedmont Road that served as the replacement of the brand's first ever restaurant.
2025 will likely be the year metro Atlanta becomes home to outposts of all current and upcoming Darden concepts. ToNeTo Atlanta reported in January 2024 that Eddie V's, Darden's upscale seafood and steak restaurant, is entering the market with a restaurant planned for Haynes Bridge Road in Alpharetta. The restaurant is expected to open next year.
What are your thoughts on Darden's purchase of Chuy's? Do you think Chuy's will change under Darden's ownership? What is your favorite Tex-Mex restaurant in metro Atlanta?
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