Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

(Mark One)



☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended May 31, 2020



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-13666

DARDEN RESTAURANTS, INC.

(Exact name of Registrant as specified in its charter)



Florida			59-3305930
(State or other jurisdiction of incorporation or organization)			(IRS Employer Identification No.)

1000 Darden Center Drive,	Orlando,	Florida	32837
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (407) 245-4000

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, without par value	DRI	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark if the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer	☒		Accelerated filer	☐
Non-accelerated filer	☐	(Do not check if a smaller reporting company)	Smaller reporting company	☐
			Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value of Common Stock held by non-affiliates of the Registrant based on the closing price of $114.67 per share as reported on the New York Stock Exchange on November 22, 2019, was approximately: $13,915,679,000.

Number of shares of Common Stock outstanding as of May 31, 2020: 129,893,801.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Proxy Statement for its Annual Meeting of Shareholders on September 23, 2020, to be filed with the Securities and Exchange Commission no later than 120 days after May 31, 2020, are incorporated by reference into Part III of this Report.

DARDEN RESTAURANTS, INC.

FORM 10-K

FISCAL YEAR ENDED MAY 31, 2020

TABLE OF CONTENTS



PART I		Page
Item 1.	Business	1
Item 1A.	Risk Factors	16
Item 1B.	Unresolved Staff Comments	26
Item 2.	Properties	26
Item 3.	Legal Proceedings	26
Item 4.	Mine Safety Disclosures	26

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	27
Item 6.	Selected Financial Data	29
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 8.	Financial Statements and Supplementary Data	45
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	89
Item 9A.	Controls and Procedures	89
Item 9B.	Other Information	89

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	89
Item 11.	Executive Compensation	89
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	90
Item 13.	Certain Relationships and Related Transactions, and Director Independence	90
Item 14.	Principal Accountant Fees and Services	90

PART IV
Item 15.	Exhibits and Financial Statement Schedules	90
	Signatures	91

Cautionary Statement Regarding Forward-Looking Statements

Statements set forth in or incorporated into this report regarding the expected increase in the number of our restaurants and capital expenditures in fiscal 2021, and all other statements that are not historical facts, including without limitation statements with respect to the financial condition, results of operations, plans, objectives, future performance and business of Darden Restaurants, Inc. and its subsidiaries that are preceded by, followed by or that include words such as “may,” “will,” “expect,” “intend,” “anticipate,” “continue,” “estimate,” “project,” “believe,” “plan,” “outlook” or similar expressions, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are included, along with this statement, for purposes of complying with the safe harbor provisions of that Act. Any forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update such statements for any reason to reflect events or circumstances arising after such date. By their nature, forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by such forward-looking statements. In addition to the risks and uncertainties of ordinary business obligations, and those described in information incorporated into this report, the forward-looking statements contained in this report are subject to the risks and uncertainties described in Item 1A below under the heading “Risk Factors.”

PART I

Item 1. BUSINESS

Introduction

Darden Restaurants, Inc. is a full-service restaurant company, and as of May 31, 2020, we owned and operated 1,804 restaurants through subsidiaries in the United States and Canada under the Olive Garden^®, LongHorn Steakhouse^®, Cheddar’s Scratch Kitchen^®, Yard House^®, The Capital Grille^®, Seasons 52^®, Bahama Breeze^® and Eddie V’s Prime Seafood^®trademarks. We served over 355 million meals in fiscal 2020. As of May 31, 2020, we also had 62 restaurants operated by independent third parties pursuant to area development and franchise agreements. The following table details the number of company-owned and operated restaurants, as well as those operated under franchise agreements, as of May 31, 2020:



Number of restaurants	Olive Garden	LongHorn Steakhouse	Cheddar’s Scratch Kitchen (2)	Yard House	The Capital Grille (3)	Seasons 52	Bahama Breeze	Eddie V’s	Total
Owned and operated:
United States (1)	861	522	165	81	60	44	41	23	1,797
Canada	7	—	—	—	—	—	—	—	7
Total	868	522	165	81	60	44	41	23	1,804
Franchised:
United States (4)	7	16	6	—	—	—	1	—	30
Middle East	3	—	—	—	—	—	—	—	3
Latin America	26	1	—	—	2	—	—	—	29
Total	36	17	6	—	2	—	1	—	62


(1)	Includes three restaurants that are owned jointly by us and third parties, and managed by us.


(2)	Includes seven franchised locations acquired in fiscal 2020.


(3)	Includes two company-owned The Capital Burger restaurants.


(4)	Includes Puerto Rico and Guam.

Darden Restaurants, Inc. is a Florida corporation incorporated in March 1995, and is the parent company of GMRI, Inc., also a Florida corporation. GMRI, Inc. and certain other of our subsidiaries own and operate our restaurants. GMRI, Inc. was originally incorporated in March 1968 as Red Lobster Inns of America, Inc. We were acquired by General Mills, Inc. in 1970 and became a separate publicly held company in 1995 when General Mills distributed all of our outstanding stock to the stockholders of General Mills. Our principal executive offices and restaurant support center are located at 1000 Darden Center Drive, Orlando, Florida 32837, telephone (407) 245-4000. Our corporate website address is www.darden.com. We make our reports on Forms 10-K, 10-Q and 8-K, Section 16 reports on Forms 3, 4 and 5, and all amendments to those reports available free of charge on our website the same day as the reports are filed with or furnished to the Securities and Exchange Commission. Information on our website is not deemed to be incorporated by reference into this Form 10-K. Unless the context indicates otherwise, all references to “Darden,” “the Company,” “we,” “our” or “us” include Darden Restaurants, Inc., GMRI, Inc. and our respective subsidiaries.

We have a 52/53 week fiscal year ending the last Sunday in May. Our fiscal year 2020 ended May 31, 2020 and consisted of 53 weeks, fiscal 2019 ended May 26, 2019 and consisted of 52 weeks, and fiscal 2018 ended May 27, 2018 and consisted of 52 weeks.

The following description of our business should be read in conjunction with the information in Part II of this report under the caption “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8 - Financial Statements and Supplementary Data.”

COVID-19 Pandemic

increase of 4.1 percent over the prior year period. The COVID-19 pandemic negatively impacted this strong performance, and for most of the fourth quarter of fiscal 2020, we operated with all of our dining rooms closed and served our guests in a To Go only or To Go and delivery format. Our sales for the fourth quarter of fiscal 2020 declined 43.0 percent from the fourth quarter of fiscal 2019. As we continue to navigate through the pandemic, we have taken significant steps to adapt our business to allow us to continue to serve guests, support our team members and secure our liquidity position to provide financial flexibility, including:


•	Modifying our business operations in order to continue serving guests at our restaurants as safely and effectively as possible, including, initially transitioning all restaurant locations to a To Go only or To Go and delivery model;


•	Reducing or eliminating fixed costs in our restaurants and restaurant support center as well as eliminating or delaying most nonessential capital spending;


•	Furloughing a substantial number of hourly restaurant employees as a result of the closure of our dining rooms and reduction in sales;


•	Protecting our team members’ safety and wellbeing, including sourcing additional sanitation supplies and personal protective equipment, implementing paid sick leave for all hourly restaurant team members, providing a $75.0 million emergency pay program and covering $4.1 million of health and welfare insurance premiums for furloughed team members;


•	Suspending the quarterly cash dividend, with the intention of reviewing our dividend policy as developments warrant;


•	Fully drawing on our $750.0 million Revolving Credit Agreement, which was subsequently repaid in May 2020;


•	Securing a $270.0 million term loan;


•	Raising $505.1 million in net proceeds from a follow-on equity offering;


•	Suspending our share repurchase activity; and


•	Implementing a careful, phased reopening of our dining rooms where permitted by local regulations.

The impact on our operating results as well as the operational and financial measures we have implemented in response to the COVID-19 pandemic have been included throughout this document. In late April 2020, state and local governments began to allow us to open dining rooms at limited capacities, along with other operating restrictions, and as of the date of filing this report, 89.0 percent of our restaurants were able to open their dining rooms to some extent. While increasing our in-restaurant dining capacity is subject to the ordinances in the jurisdictions where we operate, we are focused on increasing capacity where possible, continuing to provide a safe environment for our team members and guests, and maintaining many of the efficiencies established over these past few months. For most of the fourth quarter of fiscal 2020, our cash flows from operations were negative, but by the end of the quarter, with the increasing dining room capacity, we were back to near break-even cash flow levels. Although we expect our restaurants’ dining room capacity to increase as public health conditions improve and restrictions are eased, it is possible additional outbreaks could require us to reduce our capacity or further suspend our in-restaurant dining operations.

Segment Information

We manage our restaurant brands in North America as operating segments. The brands operate principally in the U.S. within full-service dining. We aggregate our operating segments into reportable segments based on a combination of the size, economic characteristics and sub-segment of full-service dining within which each brand operates. We have four reportable segments: 1) Olive Garden, 2) LongHorn Steakhouse, 3) Fine Dining (which includes The Capital Grille and Eddie V’s) and 4) Other Business (which includes Cheddar’s Scratch Kitchen, Yard House, Bahama Breeze, Seasons 52 and results from our franchise operations). External sales are derived principally from food and beverage sales, we do not rely on any major customers as a source of sales and the customers and long-lived assets of our reportable segments are predominantly in the U.S. There were no material transactions among reportable segments.

Restaurant Brands

Olive Garden

Olive Garden is an internally-developed brand and is the largest full-service dining Italian restaurant operator in the United States. Olive Garden offers a variety of Italian foods featuring fresh ingredients presented simply with a focus on flavor and quality, and a broad selection of imported Italian wines. In 1982, Olive Garden opened its first restaurant in Orlando, Florida.

Most dinner menu entrée prices range from $9.00 to $19.50, and most lunch menu entrée prices range from $8.00 to $10.00. The price of each entrée includes as much fresh salad or soup and breadsticks as a guest desires. During fiscal 2020, the average check per person (defined as total sales divided by number of entrées sold) was approximately $19.50, with alcoholic beverages accounting for 5.9 percent of Olive Garden’s sales. Olive Garden maintains different menus for dinner and lunch and different menus across its trade areas to reflect geographic differences in consumer preferences, prices and selections, as well as a smaller portioned, lower-priced children’s menu.

LongHorn Steakhouse

LongHorn Steakhouse is a full-service steakhouse restaurant with locations primarily in the eastern United States, operating in an atmosphere inspired by the American West. LongHorn Steakhouse opened its first restaurant in 1981 and we acquired LongHorn Steakhouse in October 2007 as part of the RARE Hospitality International, Inc. (RARE) acquisition. LongHorn Steakhouse restaurants feature a variety of menu items including signature fresh steaks and chicken, as well as salmon, shrimp, ribs, pork chops, burgers and prime rib.

Most dinner menu entrée prices range from $12.00 to $30.00, and most lunch menu entrée prices range from $8.00 to $16.50. The price of most entrées includes a side and/or salad and as much freshly baked bread as a guest desires. During fiscal 2020, the average check per person was approximately $22.50, with alcoholic beverages accounting for 8.9 percent of LongHorn Steakhouse’s sales. LongHorn Steakhouse maintains different menus for dinner and lunch and different menus across its trade areas to reflect geographic differences in consumer preferences, prices and selections, as well as a smaller portioned, lower-priced children’s menu.

Cheddar’s Scratch Kitchen

Cheddar’s Scratch Kitchen is a full-service restaurant operating in Texas and throughout the southern, midwestern and mid-Atlantic regions of the United States. The casual dining menu features modern classics and American favorites cooked from scratch. Cheddar’s Scratch Kitchen opened its first restaurant in 1979 and we acquired Cheddar’s Scratch Kitchen in April 2017.

Most lunch and dinner menu entrée prices range from $6.50 to $18.50. During fiscal 2020, the average check per person was approximately $15.00, with alcoholic beverages accounting for 8.6 percent of Cheddar’s Scratch Kitchen’s sales. Cheddar’s Scratch Kitchen features different menus across its trade areas to reflect geographic differences in consumer preferences, prices and selections, as well as a smaller portioned, lower-priced children’s menu.

Yard House

Yard House is a full-service restaurant operating in metropolitan areas across the United States and is known for great food, classic rock and over 100 draft beer offerings. The American menu includes more than 100 chef driven items with a wide range of appetizers, snacks, burgers and steaks, street tacos, salads, sandwiches and a generous selection of vegetarian dishes. Yard House opened its first restaurant in 1996 and we acquired Yard House in August 2012.

Yard House design elements create a contemporary, yet casual, “come as you are” environment. Most lunch and dinner menu entrée prices range from $9.00 to $36.00. During fiscal 2020, the average check per person was approximately $32.00, with alcoholic beverages accounting for 35.4 percent of Yard House’s sales. Yard House maintains different menus and selections of craft beers across its trade areas to reflect geographic differences in consumer preferences, prices and selections, as well as a smaller portioned, lower-priced children’s menu.

The Capital Grille

The Capital Grille is a fine dining restaurant with locations in major metropolitan cities in the United States featuring relaxed elegance and style. The Capital Grille opened its first restaurant in 1990 and we acquired The Capital Grille in October 2007 as part of the RARE acquisition. Nationally acclaimed for dry aging steaks on the premises, the restaurants feature an award-winning wine list offering over 350 selections, personalized service, a comfortable club-like atmosphere, and premiere private dining rooms.

Most dinner menu entrée prices range from $31.00 to $95.00 and most lunch menu entrée prices range from $18.00 to $48.00. During fiscal 2020, the average check per person was approximately $84.00, with alcoholic beverages accounting for 29.0 percent of The Capital Grille’s sales. The Capital Grille offers different menus for dinner and lunch and varies its wine list to reflect geographic differences in consumer preferences, prices and selections.

Seasons 52

Seasons 52 is an internally-developed full-service restaurant brand with a casually sophisticated, fresh grill and wine bar that offers a seasonally changing menu. The menu includes an international collection of wines, featuring 52 wines available by the glass, along with exceptional signature handcrafted cocktails. In 2003, Seasons 52 opened its first restaurant in Orlando, Florida.

Most dinner menu entrée prices range from $15.00 to $41.50, and most lunch entrée prices range from $11.50 to $41.50. During fiscal 2020, the average check per person was approximately $46.50, with alcoholic beverages accounting for 25.1 percent

of Seasons 52’s sales. Seasons 52 maintains an all-day menu in addition to different seasonal offerings, a pared-down lunch menu and a happy-hour menu.

Bahama Breeze

Bahama Breeze is an internally-developed full-service restaurant brand operating primarily in the eastern United States, that offers guests the feeling of a Caribbean escape, with food, drinks and atmosphere found in the islands. The menu features distinctive, Caribbean-inspired fresh seafood, chicken and steaks as well as handcrafted tropical cocktails. In 1996, Bahama Breeze opened its first restaurant in Orlando, Florida.

Most lunch and dinner menu entrée prices range from $7.50 to $26.00. During fiscal 2020, the average check per person was approximately $31.00, with alcoholic beverages accounting for 23.5 percent of Bahama Breeze’s sales. Bahama Breeze maintains different menus across its trade areas to reflect geographic differences in consumer preferences, prices and selections, as well as a smaller portioned, lower-priced children’s menu.

Eddie V’s

Eddie V’s is a fine dining restaurant with locations in major metropolitan cities in the United States, with a sophisticated and contemporary ambiance, featuring live nightly music in the V Lounge. The menu is inspired by the great classic restaurants of New Orleans, San Francisco and Boston, with an emphasis on prime seafood creations, USDA prime beef and chops, and fresh oyster bar selections. The atmosphere provides a comfortable dining experience reminiscent of a modern day Gatsby “where your pleasure is our sole intention.” Eddie V’s opened its first restaurant in 2000 and we acquired Eddie V’s in November 2011.

Most dinner menu entrée prices range from $27.00 to $100.00. During fiscal 2020, the average check per person was approximately $103.00, with alcoholic beverages accounting for 31.7 percent of Eddie V’s sales. Eddie V’s maintains different menus for dinner and varies its wine list to reflect geographic differences in consumer preferences, prices and selections.

The following table shows our growth and lists the number of restaurants owned and operated by each of our brands as of the end of the fiscal years indicated. The table excludes our restaurants operated by independent third parties pursuant to area development and franchise agreements. The final column in the table lists our total sales from continuing operations for the fiscal years indicated.



Fiscal Year	Olive Garden	LongHorn Steakhouse	Cheddar’s Scratch Kitchen	Yard House	The Capital Grille (3)	Seasons 52	Bahama Breeze	Eddie V’s	Total Restaurants (1)(2)	Total Sales (in millions)
2001	477						16		493	$1,780.0
2002	496						22		518	$1,966.1
2003	524					1	25		550	$2,097.5
2004	543					1	23		567	$2,359.3
2005	563					3	23		589	$2,542.4
2006	582					5	23		610	$2,775.8
2007	614					7	23		644	$2,965.2
2008	653	305			32	7	23		1,020	$3,997.5
2009	691	321			37	8	24		1,081	$4,593.1
2010	723	331			40	11	25		1,130	$4,626.8
2011	754	354			44	17	26		1,196	$4,980.3
2012	792	386			46	23	30	11	1,289	$5,327.1
2013	828	430		44	49	31	33	12	1,431	$5,921.0
2014	837	464		52	54	38	37	15	1,501	$6,285.6
2015	846	480		59	54	43	36	16	1,534	$6,764.0
2016	843	481		65	54	40	37	16	1,536	$6,933.5
2017	846	490	140	67	56	41	37	18	1,695	$7,170.2
2018	856	504	156	72	58	42	39	19	1,746	$8,080.1
2019	866	514	161	79	58	44	42	21	1,785	$8,510.4
2020	868	522	165	81	60	44	41	23	1,804	$7,806.9


(1)	Includes only restaurants included in continuing operations. Excludes other restaurant brands operated by us in these years that are no longer owned by us, and restaurants that were classified as discontinued operations.


(2)	Includes company-owned synergy restaurants as follows: one in fiscal 2011, one in fiscal 2012, four in fiscal 2013, and four in fiscal 2014. We converted the four synergy restaurants to Olive Garden restaurants in the first quarter of fiscal 2015.


(3)	Includes The Capital Burger restaurants as follows: one in fiscal 2018, one in fiscal 2019 and two in fiscal 2020.

Strategy

We believe that capable operators of strong multi-unit brands have the opportunity to increase their share of the restaurant industry’s full-service segment. Generally, the restaurant industry is considered to be comprised of three segments: quick service, fast casual, and full-service. All of our restaurants fall within the full-service segment, which is highly fragmented and includes many independent operators and small chains. We believe we have strong brands, and that the breadth and depth of our experience and expertise sets us apart in the full-service restaurant industry. This collective capability is the product of investments over many years in areas that are critical to success in our business, including restaurant operations excellence, brand management excellence, supply chain, talent management and information technology, among other things.

Although the fourth quarter of fiscal 2020 required us to focus on adapting our business to account for the impacts of the COVID-19 pandemic, our operating philosophy remains focused on strengthening the core operational fundamentals of the business by providing an outstanding guest experience rooted in culinary innovation, attentive service, engaging atmosphere, and integrated marketing. Darden enables each brand to reach its full potential by leveraging its scale, insights, and experience in a way that protects uniqueness and competitive advantages. Additionally, our brands can capitalize on data insights to deliver customized one-to-one customer relationship marketing. We hold ourselves accountable for operating our restaurants with a sense of urgency to achieve our commitments to all of our stakeholders.

Recent and Planned Restaurant Growth

During fiscal 2020, we added 19 net new company-owned restaurants in the United States. Our fiscal 2020 actual restaurant openings and closings, fiscal 2021 projected openings, and approximate capital investment, square footage and dining capacity, by brand, are shown below:



	Actual - Fiscal 2020			Projected - Fiscal 2021	Pro-Forma New Restaurants
	Restaurant Openings	Acquired (1)	Restaurant Closings (2)	New Restaurant Openings	Capital Investment Range (3) (in millions)			Square Feet (4)	Dining Seats (5)
Olive Garden	13	—	11	8 -10	$3.5	-	$4.5	7,700	250
LongHorn Steakhouse	12	—	4	12 - 15	$2.6	-	$3.6	5,660	184
Cheddar’s Scratch Kitchen	2	7	5	5 - 7	$3.5	-	$4.5	8,000	280
Yard House	3	—	1	3 - 5	$6.5	-	$8.0	11,000	360
The Capital Grille (6)	3	—	1	1 - 2	$7.5	-	$8.5	10,000	320
Seasons 52	1	—	1	0 - 1	$5.0	-	$6.0	9,000	250
Bahama Breeze	—	—	1	0 - 1	$4.5	-	$5.5	9,000	350
Eddie V’s	2	—	—	2 - 3	$7.5	-	$8.5	10,000	320
Totals	36	7	24	35 - 40


(1)	Includes seven Cheddar's Scratch Kitchen restaurants acquired from existing franchisees during fiscal 2020.


(2)	Includes 11 underperforming restaurants that were permanently closed related to the economic impact of COVID-19 during the fourth quarter of fiscal 2020. The remaining 13 closures were primarily related to lease expirations or relocations.

(3)

Includes cash investments for building, equipment, furniture and other construction costs; excludes internal capitalized overhead, pre-opening expenses, tenant allowance and future lease obligations. Olive Garden, LongHorn Steakhouse and Cheddar’s Scratch Kitchen capital investments are based on costs associated with land-only leases; Yard House, The Capital Grille, Seasons 52, Bahama Breeze and Eddie V’s capital investments are based on ground and building leases. Actual costs can vary significantly depending on the specific location.


(4)	Includes all space under the roof, including the coolers and freezers.


(5)	Includes bar dining seats and patio seating, but excludes bar stools.


(6)	Fiscal 2020 restaurant openings include one The Capital Burger restaurant. Pro-forma new restaurant data excludes The Capital Burger.

While our objective is to continue to expand all of our restaurant brands, the actual number of openings for each of our brands for fiscal 2021 will depend on many factors, including local operating restrictions related to COVID-19, our ability to locate appropriate sites, negotiate acceptable purchase or lease terms, obtain necessary local governmental permits, complete construction, and recruit and train restaurant management and hourly personnel.

We consider location to be a critical factor in determining a restaurant’s long-term success, and we devote significant effort to the site selection process. Prior to entering a market, we conduct a thorough study to determine the optimal number and placement of restaurants. Our site selection process incorporates a variety of analytical techniques to evaluate key factors. These factors include trade area demographics, such as target population density and household income levels; competitive influences in the trade area; the site’s visibility, accessibility and traffic volume; and proximity to activity centers such as shopping malls, hotel/motel complexes, offices and universities. Members of senior management evaluate, inspect and approve each restaurant site prior to its acquisition. Constructing and opening a new restaurant typically takes approximately 180 days on average after the site is acquired and permits are obtained.

We systematically review the performance of our restaurants to ensure that each one meets our standards. When a restaurant falls below minimum standards, we conduct a thorough analysis to determine the causes, and implement operational and marketing plans to improve that restaurant’s performance. If performance does not improve to acceptable levels, the restaurant is evaluated for relocation, closing or conversion to one of our other brands. Permanent closures are typically due to economic changes in trade areas, the expiration of lease agreements, or site concerns. Accordingly, we continue to evaluate our site locations in order to minimize the risk of future closures or asset impairment charges.

Restaurant Operations

We believe that high-quality restaurant management is critical to our long-term success. Our restaurant management structure varies by brand and restaurant size. We issue detailed operations manuals covering all aspects of restaurant operations, as well as food and beverage manuals which detail the preparation procedures of our recipes. The restaurant management teams are responsible for the day-to-day operation of each restaurant and for ensuring compliance with our operating standards.

The management structures below describe our restaurant operations during the normal and fully operational conditions that were in place for the first three quarters of fiscal 2020. As the COVID-19 pandemic began affecting our business, the staffing requirements of each restaurant varied widely as all dining rooms closed for portions of the fourth quarter of fiscal 2020 and then changed further as dining rooms began reopening with various opening configurations towards the end of the quarter. As our restaurant operations continue to evolve in response to the pandemic, we are evaluating our operational structure and making adjustments where appropriate. As a result, the descriptions below may not reflect the current or future structure of our restaurant operations.

Each Olive Garden restaurant is led by a general manager, and each LongHorn Steakhouse and Cheddar’s Scratch Kitchen restaurant is led by a managing partner. Each also has three to six additional managers, depending on the operating complexity and sales volume of the restaurant. In addition, each restaurant typically employs between 60 to 175 hourly team members, most of whom work part-time. Restaurant general managers or managing partners report to a director of operations who is responsible for approximately five to ten restaurants. Each director of operations reports to a Senior Vice President of Operations who is responsible for between 80 and 100 restaurants. Restaurants are visited regularly by operations management, including officer level executives, to help ensure strict adherence to all aspects of our standards and to solicit feedback on opportunities for improvement.

Each Yard House and Bahama Breeze restaurant is led by a general manager, and each The Capital Grille, The Capital Burger, Seasons 52 and Eddie V’s restaurant is led by a managing partner. Each has two to eight managers. Each Yard House, The Capital Grille, The Capital Burger, Seasons 52 and Eddie V’s restaurant has one executive chef, and one to two sous chefs, and each Bahama Breeze restaurant has one to three culinary managers. In addition, each restaurant typically employs between 65 to 200 hourly team members, most of whom work part-time. The general manager or managing partner of each restaurant reports directly to a director of operations, who has operational responsibility for approximately three to eleven restaurants. Restaurants are visited regularly by operations management, including officer level executives, to help ensure strict adherence to all aspects of our standards and to solicit feedback on opportunities for improvement.

Our Learning and Employee Development team in partnership with each brand’s training leader, together with senior operations executives, is responsible for developing and maintaining our operations training programs. These efforts include a 10 to 12-week training program for management trainees and continuing development programs for all levels of leadership. The emphasis of the training and development programs varies by restaurant brand, but includes leadership, restaurant business management and culinary skills. We also use a highly structured training program to open new restaurants, including deploying training teams experienced in all aspects of restaurant operations. The opening training teams typically begin work one and a half weeks prior to opening and remain at the new restaurant for up to three weeks after the opening. They are re-deployed as appropriate to enable a smooth transition to the restaurant’s operating staff.

We maintain performance measurement and incentive compensation programs for our management-level team members. We believe that our leadership position, strong results-oriented culture and various short-term and long-term incentive programs, including stock-based compensation, enhances our ability to attract and retain highly motivated restaurant managers.

Quality Assurance

Our Total Quality Department helps ensure that all restaurants provide safe, high-quality food in a clean and safe environment.

Food Safety and our Total Quality Program

Through rigorous supplier and risk-based product evaluations, we purchase only products that meet or exceed our product specifications. We rely on independent third parties to inspect and evaluate our suppliers and distributors. Suppliers that produce “high-risk” products are subject to a food safety evaluation by Darden personnel at least annually. We require our suppliers to maintain sound manufacturing practices and operate with the comprehensive Hazard Analysis and Critical Control Point (HACCP) food safety programs and risk-based preventative controls adopted by the U.S. Food and Drug Administration. These programs focus on preventing hazards that could cause food-borne illnesses by applying scientifically-based controls to analyze hazards, identify and monitor critical control points, and establish corrective actions when monitoring shows that a critical limit has not been met. We require routine food safety verification for high-risk products from our suppliers. Our total quality

managers and third party auditors visit each restaurant regularly throughout the year to review food handling and to provide education and training in food safety and sanitation. The total quality managers also serve as a liaison to regulatory agencies on issues relating to food safety.

Restaurant, Guest and Team Member Safety in Response to COVID-19

In response to the COVID-19 pandemic, we have enhanced restaurant safety practices and made other enhancements to our operations to comply with state and local government regulations and health recommendations to ensure team member wellness, maintain clean restaurants, practice social distancing and wear protective equipment. Some of our COVID-19 enhanced procedures include:

•All team members are being screened to ensure they are symptom-free before returning to work, and we are conducting daily health and temperature checks at every restaurant before team members are allowed to begin their shift. We provide paid sick leave for our restaurant team members so that they can stay home if they do not feel well.

•Prior to welcoming guests back into our dining rooms following our temporary dining room closures, we thoroughly cleaned and sanitized each of our restaurant buildings using proven procedures and processes known to protect against contagious viruses like COVID-19. In addition to our already strict restaurant cleaning procedures, which exceed Centers for Disease Control and Prevention (CDC) guidelines, we have continued to regularly disinfect all guest and team member touchpoints using our CDC-approved disinfectant. These include, but are not limited to: disinfecting guest tables after each use, as well as regularly disinfecting table top tablets, check presenters, menus, pens, restrooms, door handles and other common surfaces.

•We have and continue to reconfigure our dining rooms to create more space between tables. We are also taking steps to ensure there is no congregating in our lobby and bar areas where regulations require.

•In accordance with the CDC’s guidance regarding face coverings and many state and local orders, we require all team members to wear masks. Our culinary team members wear gloves, and all team members will continue to practice frequent and effective handwashing.

•Third party auditors also ensure that restaurant team members are adhering to COVID-19 preventive guidelines.

Purchasing and Distribution

Our ability to ensure a consistent supply of safe, high-quality food and supplies at competitive prices to all of our restaurant brands depends on reliable sources of procurement. Our purchasing staff sources, negotiates and purchases food and supplies from more than 1,500 suppliers whose products originate in more than 35 countries. Suppliers must meet our requirements and strict quality control standards in the development, harvest, catch and production of food products. Competitive bids, long-term contracts and strategic supplier relationships are routinely used to manage availability and cost of products.

In response to the COVID-19 pandemic, we have taken the following steps to enhance the safety and reliability of our supply chain.

•Safety: The Company’s cross functional COVID-19 task force implemented CDC-based guidelines for restaurants described in Quality Assurance, above. We also implemented and communicated guidelines for our distributors and other suppliers providing services inside our restaurants, including required use of personal protective equipment (PPE). To support these enhanced safety protocols, we secured a supply of the necessary volumes of PPE and cleaning products for our restaurants and team members.

•Sourcing: As we transitioned to increased To Go business during the temporary closure of our dining rooms, we secured supplies of new and additional packaging products to better support food and beverage transport. We also sourced alternate formats of alcohol beverages for To Go in order to comply with state laws that permitted To Go sales of alcohol. To mitigate the potential risk of geographic trade disruptions, we created contingency plans in anticipation of supply chain obstacles. The purchasing team also mitigated obsolete/expiring inventory exposure by selling products to retail outlets.

•Distribution: We increased inventory levels for brand-critical items, restaurant cleaning products, and PPE supplies to ensure sufficient supply of necessary products. An internal cross-functional team was created specifically to ensure successful restaurant ramp-down and quick reopening support.

We believe that our significant scale is a competitive advantage and our purchasing team leverages this purchasing capability. Our purchasing staff travels routinely within the United States and internationally to source top-quality food products

at competitive prices. During the COVID-19 pandemic, we are monitoring our suppliers remotely, hosting virtual visits with potential new suppliers and conducting virtual request for proposal processes. We believe that we have established excellent long-term relationships with key suppliers and usually source our product directly from producers (not brokers or middlemen). We actively support several national minority supplier organizations to ensure that we incorporate women- and minority-owned businesses in our purchasing decisions.

We have entered into long-term agreements with multiple third-party national distribution companies to deliver food and supplies to our restaurants. Under these arrangements we maintain ownership of the food and supplies inventory through our subsidiary Darden Direct Distribution, Inc. (Darden Direct). This inventory is stored in distribution company warehouses that are wholly or primarily dedicated to Darden where practical to do so. Because of the relatively rapid turnover of perishable food products, inventories in the restaurants have a modest aggregate dollar value in relation to sales.

We continue to drive automation of our supply chain by collaborating with our suppliers, logistics partners and distributors to improve optimization with information visibility and other technological advances. These and other terms of Darden Direct’s long-term supply agreements further enable our purchasing staff to integrate demand forecasts into our purchasing operations, driving efficiencies in our operations.

Advertising and Marketing

Integrated marketing is a key element of our strategy, and our scale enables us to be a leading advertiser in the full-service dining segment of the restaurant industry. Olive Garden leverages the efficiency of national network television advertising, supplemented with cable, local television and digital advertising. LongHorn Steakhouse uses local television and digital advertising to build engagement and loyalty by market. Cheddar’s Scratch Kitchen, Yard House, The Capital Grille, Seasons 52, Bahama Breeze and Eddie V’s do not use television advertising, but rely on local and digital marketing. In response to the COVID-19 pandemic, we significantly reduced our television advertising spending and directed our marketing efforts towards growing and promoting our To Go options and off-premise dining business. Our restaurants appeal to a broad spectrum of consumers and we use advertising to build awareness and strengthen our brands’ relevance. We implement periodic promotions as appropriate to maintain and increase our sales and profits, as well as increase frequency of visitation by our guests. We also rely on outdoor billboard, direct mail and email advertising, as well as radio, newspapers, digital coupons, search engine marketing and social media such as Facebook® and Instagram®, as appropriate, to attract, engage and retain our guests. We have developed and consistently use sophisticated consumer marketing research techniques to monitor guest satisfaction and evolving food service trends and marketplace dynamics.

In fiscal 2020, we continued a multi-year effort to implement new technology platforms that allow us to digitally engage with our guests and team members and strengthen our marketing and analytics capabilities in an increasingly connected society. We also continued making improvements to our online and mobile ordering system for Olive Garden and LongHorn Steakhouse and accelerated rollout of online and mobile ordering and payment systems across all of our other brands. In addition, we continued working on developing sophisticated customer relationship management programs, data analytics, and data-driven marketing approaches to effectively and efficiently target our existing and potential guests across our portfolio of brands. This enables us to tailor our messaging and offerings depending on guest visit history, preferences and brand loyalty.

Employees

At the end of fiscal 2020, we employed approximately 177,000 people (team members) in the United States and Canada. In response to the COVID-19 pandemic and the temporary closure of all of our dining rooms discussed above, we placed many restaurant and corporate team members on furlough for portions of the fourth quarter of fiscal 2020. At the highest point during that quarter, approximately 150,000 team members were on furlough, but that number had reduced to 95,000 as of the end of fiscal 2020, as local and state governments began permitting the reopening of dining rooms throughout the month of May 2020. Of the 177,000 total team members, approximately 167,000 were hourly restaurant personnel. The remainder were restaurant management personnel located in the restaurants or in the field, or were located at our restaurant support center facility in Orlando, Florida.

Our executives have an average of 16 years of experience with Darden. The restaurant general managers and managing partners average 13 years with us. We believe that we provide working conditions and pay and benefits that compare favorably with those of our competitors. Most team members, other than restaurant management and corporate management, are paid on an hourly basis. None of our team members are covered by a collective bargaining agreement. We consider our employee relations to be good.

As a full-service restaurant company, food is always top of mind, but our team members make the difference: they are at the heart of everything we do. We believe the guest experience can never exceed the team member experience, so we hire the best and retain them by fostering an environment of respect, where diversity of thought and background is valued and everyone has the

opportunity to develop and grow their careers. We offer our team members flexible work schedules and competitive pay and benefits, including paid sick leave, which we introduced in March 2020.

Consistent with one of our core values of diversity, we are committed to attracting, retaining, engaging and developing a workforce that mirrors the diversity of our guests. Approximately 51 percent of our hourly restaurant team members are minorities and 56 percent are female. Additionally, we employ members of five generations of the United States population: Traditionalists, Baby Boomers, Generation X, Millennials and Centennials.

Consistent with our core values of respect and caring and teamwork, in fiscal 1999 we established a program called Darden Dimes to help fellow Darden team members in need. Darden Dimes provides short-term financial grants to team members experiencing financial need caused by unexpected emergencies or catastrophic natural disasters. Participating team members donate as little as 10 cents from each paycheck to the Darden Dimes fund, which raises and grants more than $1.5 million annually.

We succeed because of our people, and with our success come rewards, recognition and great opportunities for our team members. We invest in their careers every step of the way by providing the tools they need to succeed in their current roles, to grow personally and professionally, and to deliver exceptional experiences to our guests each day. With thousands of leadership positions across our restaurants, we provide a pathway and training for thousands of individuals across the country to advance from entry-level jobs into management roles. In addition, our geographic footprint often puts us in a position to offer our restaurant team members jobs in their current roles when personal circumstances require relocation. This is one of the reasons Darden has enjoyed the lowest annual turnover rates for hourly team members in the industry. While we are experiencing unprecedented circumstances during the COVID-19 pandemic, our people first philosophy stands firm and we will continue to find and offer growth opportunities to team members aspiring for more in their careers.

Information Technology and Cybersecurity

We strive for leadership in the restaurant business by using technology as a competitive advantage and as an enabler of our strategy. We have implemented technology-enabled business solutions to improve financial control, cost management, guest service and employee effectiveness, as well as enable e-commerce. These solutions are designed to be used across restaurant brands, yet are flexible enough to meet the unique needs of each restaurant brand. Our strategy is to fully integrate systems to drive operational efficiencies and enable restaurant teams to focus on restaurant operations excellence. Restaurant hardware and software support for all of our restaurant brands is provided or coordinated from the restaurant support center facility in Orlando, Florida. Our data network sends and receives business data to and from the restaurants throughout the day and night, providing timely and extensive information on business activity in every location. Our data center contains sufficient computing power to process information from all restaurants quickly and efficiently. Our information is processed in a secure environment to protect both our data and the physical computing assets. We guard against business interruption by maintaining a disaster recovery plan, which includes storing critical business information off-site, testing the disaster recovery plan at a host-site facility and providing on-site power backup. We also conduct a third-party security review of our network and systems on a regular basis. We use internally developed proprietary software, cloud-based software as a service (SaaS) as well as purchased software, with proven, non-proprietary hardware.

In response to the COVID-19 pandemic, we accelerated implementation of online ordering and payment for brands that did not previously provide this option, including Cheddar’s Scratch Kitchen, Seasons 52, The Capital Grille, and Eddie V’s. All Darden brands now share a secure, robust digital platform with online ordering and other guest-facing capabilities. We will continue to leverage our digital platform to address changing guest needs. Additionally, we made changes to our restaurant systems that were necessary to efficiently support increasing demand for To Go and curbside pickup orders and to facilitate social distancing requirements once dining rooms started to reopen.

We maintain a robust system of data protection and cybersecurity resources, technology and processes. We remain constantly vigilant of new and emerging risks and ever-changing legal and compliance requirements and make strategic continued investments in those systems to keep Company, guest and team member data secure. We monitor risks of sensitive information compromise at our business partners where relevant and reevaluate those relationships if necessary. We provide annual security awareness training to our management and restaurant support center team members. We also provide annual credit card handling training following Payment Card Industry (PCI) guidelines to all team members that handle guest credit cards.

Our management believes that our current systems and practice of implementing regular updates positions us well to support current needs and future growth. We use a strategic information systems planning process that involves senior management and is integrated into our overall business planning. We provide data protection and cybersecurity reports to the Audit Committee of the Company’s Board of Directors on a quarterly basis and periodically to the full Board of Directors. Information systems projects are prioritized based upon strategic, financial, regulatory and other business advantage criteria.

Competition

The restaurant industry is intensely competitive with respect to the type and quality of food, price, service, restaurant location, personnel, brand, attractiveness of facilities, availability of carryout and home delivery, internet and mobile ordering capabilities and effectiveness of advertising and marketing. The restaurant business is often affected by changes in consumer tastes; national, regional or local economic conditions; demographic trends; traffic patterns; the type, number and location of competing restaurants; and consumers’ discretionary purchasing power. We compete within each market with national and regional chains and locally-owned restaurants for guests, management and hourly personnel and suitable real estate sites. We also face growing competition from the supermarket industry, which offers convenient meals in the form of improved entrées, side dishes or meal preparation kits from the deli or prepared foods sections. In addition, improving product offerings at fast casual restaurants and quick-service restaurants and expansion of home delivery services, together with negative economic conditions, could cause consumers to choose less expensive alternatives. We expect intense competition to continue in all of these areas.

Other factors pertaining to our competitive position in the industry are addressed under the sections entitled “Purchasing and Distribution,” “Advertising and Marketing” and “Information Technology and Cybersecurity” in this Item 1 and in our Risk Factors in Item 1A of this Form 10-K.

Trademarks and Service Marks

We regard our Olive Garden^®, LongHorn Steakhouse^®, Cheddar’s Scratch Kitchen^®, Yard House^®, The Capital Grille^®, The Capital Burger ^®, Seasons 52^®, Bahama Breeze^®, Eddie V’s Prime Seafood^®,Darden^®and Darden Restaurants^®service marks, and other service marks and trademarks related to our restaurant businesses, as having significant value and as being important to our marketing efforts. Our policy is to pursue registration of our important service marks and trademarks and to vigorously oppose any infringement of them. Generally, with appropriate renewal and use, the registration of our service marks and trademarks will continue indefinitely.

Franchises, Joint Ventures and New Business Development

As of May 31, 2020, we operated 1,804 restaurants through subsidiaries in the United States and Canada. We own all of those locations, except for 3 restaurants managed by us and owned by joint ventures in which we hold a majority ownership. We control the joint ventures’ use of our service marks and the joint ventures pay management fees to us, which are not material to our consolidated financial statements.

As of May 31, 2020, franchisees operated 30 franchised restaurants in the United States and 32 franchised restaurants outside of the United States. We have area development, franchise and/or license agreements in place with unaffiliated operators to develop and operate Olive Garden, LongHorn Steakhouse, Cheddar’s Scratch Kitchen, The Capital Grille and Bahama Breeze restaurants in the following regions:


•	United States,


•	Middle East (Kuwait and the United Arab Emirates),


•	Mexico,


•	Central and South America (Brazil, Chile, Costa Rica, Ecuador, El Salvador and Panama), and


•	Philippines

The open and operating franchised restaurants are all reflected in the table under the “Introduction” section of this Item 1. We do not have an ownership interest in any of these franchisees, but we receive fees under the area development and franchise agreements and royalty income under the franchise or license agreements. The amount of income we derive from our franchise arrangements is not material to our consolidated financial statements.

We license the sales and distribution of several items including Olive Garden salad dressings, salad croutons, LongHorn Steakhouse seasoning and Olive Garden seasoning through various channels including wholesale distribution chains and major grocery chains. The amount of income we derive from these licensing arrangements is not material to our consolidated financial statements.

Seasonality

Our sales volumes fluctuate seasonally. Typically, our average sales per restaurant are highest in the winter and spring, followed by the summer, and lowest in the fall. Holidays, changes in the economy, severe weather and similar conditions may impact sales volumes seasonally in some operating regions. Because of the seasonality of our business, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year. We are not able to predict the impact that the COVID-19 pandemic may have on the seasonality of our business.

Government Regulation

We are subject to various federal, state, local and international laws affecting our business. Each of our restaurants must comply with licensing requirements and regulations by a number of governmental authorities, which include health, safety and fire agencies in the state or municipality in which the restaurant is located. The development and operation of restaurants depend on selecting and acquiring suitable sites, which are subject to zoning, land use, environmental, traffic and other regulations. To date, we have not been significantly affected by any difficulty, delay or failure to obtain required licenses or approvals.

The COVID-19 pandemic has caused a panoply of federal, state and local government regulations affecting our business to be issued and frequently revised on a daily and/or weekly basis beginning in March 2020 and continuing through the date of this report. Regulations relating to paid sick leave, opening and closing of bars, restaurants and dining rooms, business hours, sanitation practices, To Go alcohol sales, guest spacing within dining rooms and other social distancing practices and PPE usage by both team members and guests have materially affected the way we operate our business and serve our guests.

During fiscal 2020, 11.4 percent of our sales were attributable to the sale of alcoholic beverages. Regulations governing their sale require licensure by each site (in most cases, on an annual basis), and licenses may be revoked or suspended for cause at any time. These regulations relate to many aspects of restaurant operation, including the minimum age of patrons and employees, hours of operation, advertising, wholesale purchasing, inventory control and handling, and storage and dispensing of alcoholic beverages. During the fourth quarter of fiscal 2020, many states modified their regulations to permit To Go sales of alcoholic beverages, and during the temporary closure of our restaurants we offered a variety of alcoholic beverages, including in bottles, from draft and mixed drinks To Go. The failure of a restaurant to obtain or retain these alcoholic beverage licenses or to comply with regulations governing the sale of alcoholic beverages would adversely affect the restaurant’s operations. We also are subject in certain states to “dram shop” statutes, which generally provide an injured party with recourse against an establishment that serves alcoholic beverages to an intoxicated person who then causes injury to himself or a third party. We carry liquor liability coverage as part of our comprehensive general liability insurance.

We also are subject to federal and state minimum wage laws and other laws governing such matters as overtime, tip credits, working conditions, paid leave, safety standards, and hiring and employment practices.

Since 1995, Darden has had a Tip Rate Alternative Commitment (TRAC) agreement with the Internal Revenue Service. TRAC requirements, which include increased educational and other efforts in each restaurant to increase the reporting compliance of employees with respect to cash tips, are applied across all of our brands. Compliance with TRAC requirements reduces the likelihood of potential employer-only FICA tax assessments related to cash tips that are unreported by employees at Darden’s covered units. Consistent with our long-standing agreement with the IRS, we work proactively with IRS personnel responsible for tip compliance to ensure that we are taking the appropriate steps to continue to meet our TRAC obligations.

We are subject to federal and state environmental regulations, but these rules have not had a material effect on our operations. During fiscal 2020, there were no material capital expenditures for environmental control facilities and no material expenditures for this purpose are anticipated.

Our facilities must comply with the applicable requirements of the Americans with Disabilities Act of 1990 (ADA) and related state accessibility statutes. Under the ADA and related state laws, we must provide equivalent service to disabled persons and make reasonable accommodation for their employment, and when constructing or undertaking significant remodeling of our restaurants, we must make those facilities accessible.

We are subject to federal and state regulations relating to employer-provided health insurance, but these rules have not had a material effect on our operations. We continue to monitor the status of the health care reform discussions at the federal and state levels.

We are subject to laws and regulations relating to the preparation and sale of food, including regulations regarding product safety, nutritional content and menu labeling. We are subject to laws and regulations requiring disclosure of calorie, fat, trans fat, salt and allergen content.

We are subject to laws relating to information security, privacy, cashless payments and consumer credit, protection and fraud. An increasing number of governments and industry groups worldwide have established data privacy laws and standards for the protection of personal information, including social security numbers, financial information (including credit card numbers), and health information. As a merchant and service provider of point-of-sale services, we are also subject to the Payment Card Industry Data Security Standard issued by the Payment Card Industry Council (PCI DSS).

We are subject to anti-corruption laws in the United States and in the international jurisdictions where we do business, including the Foreign Corrupt Practices Act. We are also subject to a variety of international laws relating to franchising and licensing of intellectual property in the various countries across the world where we are engaged in franchising our restaurant brands.

See Item 1A “Risk Factors” below for a discussion of risks relating to federal, state and local regulation of our business, including in the areas of health care reform, data privacy and environmental matters.

Sustainability

The sustainability of our food sources and restaurant operations is a key component of providing great service and food to our guests. The COVID-19 pandemic necessitated that we focus on business critical items in the short-term, but we continue to believe that sustainability contributes to our overall business success over the long-term. We will continue to adapt our approach in the current economic environment with intent to return to our integrated and strategic priorities in the near term across the enterprise, from the food we source to the operation of our restaurants.

We are proud to operate some of the most efficient restaurants in the United States. Darden manages energy and water conservation within our restaurant operations. Over the last decade we have realized a 15% reduction in energy use per restaurant and a 20% reduction in water usage on average per restaurant, and we continue to realize cost savings from historical reductions in our daily operating costs. Darden continues to reduce landfill waste by minimizing food loss and optimizing food donation programs across all of our restaurants. In fiscal 2019, we conducted an in-depth waste characterization at Olive Garden and LongHorn Steakhouse to continue to optimize waste diversion programs. As our portfolio has grown over time, we have done so sustainably. Since 2008, we have reduced our greenhouse gas emissions per restaurant by 18 percent, as measured in accordance with the Corporate Accounting and Reporting Standard of the Greenhouse Gas Protocol.



Greenhouse Gas (GHG) Emissions
	Fiscal Year Ended
(in metric tons CO2e)	May 26, 2019	May 27, 2018⁽³⁾	May 28, 2017⁽³⁾
Average Per Restaurant ^{(1) (2)}	444	460	467
Total - Scope 1 and 2 ⁽²⁾	783,940	766,302	719,992


(1)	Per restaurant Intensity Ratio includes only Scope 1 and 2 totals (as defined in the Corporate Accounting and Reporting Standard of the GHG Protocol) divided by the total number of restaurants.


(2)	Updated 2016 eGrid sub-region emission factors for Electric Power were published by the EPA in 2019, and therefore Darden’s GHG emissions were restated for FY 2017, FY 2018 and FY 2019.


(3)	FY 2017 and FY 2018 excludes Cheddar's Scratch Kitchen due to lack of verified GHG data prior to acquisition.

We shared Darden’s Food Principles in 2016 to outline our commitment to guests in areas of sustainable sourcing, nutritional disclosure, food safety and animal welfare. Darden’s Food Principles connect each of these strategic business efforts in a guest-centered platform, including sourcing and ingredient commitments to our guests. We have set commitments related to the following food attributes: animal welfare, chickens raised without medically-important antibiotics, cage-free eggs and gestation crate-free pork. We are on track to meet our Food Principles commitments and we continue to monitor progress with our suppliers.

Building on our Food Principles, Darden established an Animal Welfare Policy that adopts an outcomes-based approach to continue to ensure high level of care for farm animals in the food supply chain. In support of the Policy, we established and convened our first Animal Welfare Council session with key academics and thought leaders with expertise in the care of animals in food supply chains. The Council advises on and will support Darden’s efforts to advance strategy and implementation of an outcomes-based approach, from supplier collaborations to reporting improvements. The COVID-19 pandemic has prevented us from additional convening in 2020, but we expect to continue our efforts with the Council when feasible.

More information about our sustainability strategy, our commitment to our guests on Food Principles and our progress to date is available at www.darden.com.

Darden Foundation and Community Affairs

We are recognized for a culture that rewards caring for and responding to people. That defines service for Darden. The Darden Restaurants, Inc. Foundation (Foundation) works to bring to life this spirit of service through its philanthropic support of charitable organizations across the country as well as the volunteer involvement of our team members. The Foundation does this by focusing its philanthropic efforts on programs that enhance the communities in which our team members and guests live and work. In addition, team members at the Darden Restaurant Support Center are eligible for 16 hours per calendar year of paid time for approved community service activities during scheduled work hours.

In fiscal 2020, the Foundation awarded approximately $3.8 million in grants to national organizations as well as local nonprofits including Second Harvest Food Bank of Central Florida and the Heart of Florida United Way. These organizations provide service to the public through hunger relief, community engagement, disaster preparedness and the promotion of career opportunities in the culinary industry.

The Foundation continued its partnership with Feeding America in fiscal 2020 with a $2.0 million grant to provide food to hungry families in the communities where we do business. The Foundation’s contribution will support food banks across the country and help provide meals for people facing hunger. This donation will mark a total of $9.8 million that the Foundation and Darden have contributed to the Feeding America network over the past decade.

Our support of Feeding America and the fight against hunger goes hand-in-hand with our Darden Harvest program, which began in 2003 as a mechanism for delivering fresh and healthy food to people who need it. Each day, across every one of our restaurants, we collect surplus, wholesome food that is not served to guests and, rather than discarding the food, we prepare it for donation to local nonprofit feeding partners. In fiscal 2020, Darden contributed approximately 6.3 million pounds of food, the equivalent of more than 5 million meals provided to people in need across the communities served by our restaurants. As an added benefit of the Darden Harvest program, we are able to divert millions of pounds of surplus food from waste streams every year, making the Darden Harvest program a key part of our goal to one day send zero waste to landfills.

The Foundation’s funding also helps support the National Restaurant Association Educational Foundation’s ProStart program, a national high school program that introduces students to the restaurant industry and provides them with an industry-driven curriculum on topics ranging from culinary techniques to management skills. The Foundation’s $250,000 annual contribution also supports the Opportunity Youth-Restaurant Ready program to engage and encourage disconnected young people to pursue a path to employment and improve their quality of life. In fiscal 2020, the Foundation donated an additional $200,000 to the National Restaurant Association Educational Foundation to endow a scholarship fund for students at Marjory Stoneman Douglas High School in Parkland, Florida. Each year, four graduating seniors from Marjory Stoneman Douglas High School pursuing degrees in restaurant, hospitality or foodservice related programs will be eligible to receive a scholarship at a post-secondary educational institution in honor of those hospitality connected students who lost their lives in the 2018 tragedy.

We are a proud member of the American Red Cross’ Annual Disaster Giving Program, which enables the Red Cross to respond to the needs of individuals and families impacted by disasters anywhere in the United States. In fiscal 2020, the Foundation provided $500,000 to the American Red Cross for the program. In addition to financial support, our restaurants regularly donate meals to feed first responders and victims of natural disasters.

More information about the Foundation and its efforts to enhance the quality of life in the communities where we do business is available on our website at www.darden.com.

Executive Officers of the Registrant

Our executive officers as of the date of this report are listed below.

Eugene I. Lee, Jr., age 59, has been our President and CEO since 2015. Prior to that, Mr. Lee served as President and Interim CEO since October 2014, and as President and COO of the Company from September 2013 to October 2014. He served as President, Specialty Restaurant Group from our acquisition of RARE in 2007 to 2013. Prior to the acquisition, he served as RARE’s President and COO from 2001 to 2007. From 1999 until 2001, he served as RARE’s Executive Vice President and COO.

Matthew R. Broad, age 60, has been our Senior Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary since 2015. Prior to joining Darden, he served as Executive Vice President, General Counsel and Chief Compliance Officer for OfficeMax, Incorporated from 2004 to 2013. Prior to that, he was Associate General Counsel with Boise Cascade Corporation from 1989 to 2004.

Todd A. Burrowes, age 57, has been our President, LongHorn Steakhouse since 2015. He rejoined the Company after serving as President, Ruby Tuesday Concept and Chief Operations Officer of Ruby Tuesday, Inc. from 2013 to 2015. Prior to that, he served as Executive Vice President of Operations for LongHorn Steakhouse from 2008 until 2013. He joined the Company in 2002 as Regional Manager of LongHorn Steakhouse before being promoted to Director of Management Training. In 2004, he was promoted to Regional Vice President of Operations for LongHorn Steakhouse.

Ricardo Cardenas, age 52, has been our Senior Vice President, Chief Financial Officer since 2016. He was Senior Vice President, Chief Strategy Officer of the Company from 2015 to 2016, prior to which he served as Senior Vice President, Finance, Strategy and Technology from 2014 to 2015. He was Executive Vice President of Operations for LongHorn Steakhouse from 2013 to 2014 and Senior Vice President of Operations for LongHorn Steakhouse’s Philadelphia Division from 2012 to 2013. He served as Senior Vice President of Finance for Red Lobster, which the Company previously owned, from 2010 to 2012. Mr. Cardenas originally joined the Company in 1984 as an hourly employee and served in various positions of increasing responsibility, including Vice President of Finance for Olive Garden, prior to the positions described above.

Susan M. Connelly, age 49, has been our Senior Vice President, Chief Communications and Public Affairs Officer since 2019. She served as Senior Vice President, Communications and Corporate Affairs from 2015 to 2019. She joined the Company in 2007 as Director, State and Local Government Relations and was promoted to Vice President, Government Relations in 2014.

David C. George, age 64, has been our Executive Vice President and Chief Operating Officer since 2018, prior to which he was our President, Olive Garden and Executive Vice President, Darden Restaurants since 2016. He served as President, Olive Garden from 2013 through 2016 and he served as our President, LongHorn Steakhouse from 2007, when we acquired RARE, until 2013. Prior to the acquisition, he served as RARE’s President of LongHorn Steakhouse from 2003 until 2007. From 2001 until 2003, he was RARE’s Senior Vice President of Operations for LongHorn Steakhouse and from 2000 until 2001 was RARE’s Vice President of Operations for The Capital Grille. Mr. George will retire from the Company on August 2, 2020 pursuant to the terms of an agreement with the Company dated as of June 24, 2020, filed as an exhibit to this report.

Daniel J. Kiernan, age 59, has been our President, Olive Garden since 2018, prior to which he was our Executive Vice President of Operations for Olive Garden since 2011. He began his career with Olive Garden in 1992 as a Manager in Training and has held a series of roles of increasing responsibility with Olive Garden, serving as a General Manager from 1993 to 1994, as Director of Operations from 1994 to 2002, as Senior Vice President of the Chicago Division from 2002 to 2008 and as Senior Vice President, Operations Excellence from 2008 to 2011.

Sarah H. King, age 50, has been our Senior Vice President, Chief Human Resources Officer since 2017. Prior to joining Darden, Sarah spent 19 years with Wyndham Worldwide Corporation in various human resources leadership positions worldwide. Most recently, from 2010 through 2017, she served as Executive Vice President, Human Resources for Wyndham Vacation Ownership.

John W. Madonna, age 44, has been our Senior Vice President, Corporate Controller since 2016, prior to which he served as our Senior Vice President, Accounting since 2015. Prior to that, he was a Director in Corporate Reporting from 2010 through 2013 when he was promoted to Senior Director, Corporate Reporting and then to Vice President of Corporate Reporting in 2014. He joined the Company in 2005 as Manager, Corporate Reporting. He joined the LongHorn Steakhouse team in 2009 as Manager, Financial Planning & Analysis.

Douglas J. Milanes, age 57, has been our Senior Vice President, Chief Supply Chain Officer since 2015, prior to which he served as Senior Vice President, Purchasing since 2013. Prior to joining Darden, Doug served as Vice President, Global Procurement and Operations for Pfizer Inc. from 2008 to 2012 and as Chief Financial Officer for Pfizer's Capsugel Division from 2005 to 2008.

Richard L. Renninger, age 53, has been our Senior Vice President, Chief Development Officer since 2016. Prior to joining Darden, he was Chief Development Officer for First Watch Restaurants, Inc., from 2012 to 2016. Prior to that, he served as Executive Vice President & Chief Development Officer for OSI Restaurant Partners (now Bloomin' Brands, Inc.) from 2008 to 2012 and Senior Vice President of Real Estate and Development from 2005 to 2008. Prior to joining OSI, he served as Vice President of Real Estate for RARE from 2002 to 2005.

Item 1A. RISK FACTORS

Various risks and uncertainties could affect our business. Any of the risks described below or elsewhere in this report or our other filings with the Securities and Exchange Commission could have a material impact on our business, financial condition or results of operations. It is not possible to predict or identify all risk factors. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also impair our business operations.

The COVID-19 pandemic has disrupted and is expected to continue to disrupt our business, which has affected and could continue to materially affect our operations, financial condition and results of operations for an extended period of time.

The COVID-19 pandemic, federal, state and local government responses to COVID-19 and our Company’s responses to the outbreak have all disrupted and will continue to disrupt our business. In the United States, individuals are being encouraged to practice social distancing, restricted from gathering in groups and for portions of the fourth quarter of fiscal 2020, placed on complete restriction from non-essential movements outside of their homes in some areas. In response to the COVID-19 pandemic and these changing conditions, during the fourth quarter of fiscal 2020, we closed the dining rooms in all of our restaurants for some portion of the quarter and operated in a To Go or To Go plus delivery format only. As of the date of this report, we have 89.0% of our dining rooms open in at least a limited capacity. We have closed certain restaurants, modified work hours for our team members and identified and implemented cost savings measures throughout our operations. As the COVID-19 pandemic continues to spike in certain areas of the country, there could be additional federal, state or local responses that restrict in-person dining and/or movement of guests or otherwise impact our business. The COVID-19 pandemic and these responses have affected and will continue to adversely affect our guest traffic, sales and operating costs and we cannot predict how long the outbreak will last or what other government responses may impact us.

The COVID-19 pandemic has also adversely affected our ability to open new restaurants. Due to the uncertainty in the economy and to preserve liquidity, we paused nearly all construction of new restaurants and certain remodeling projects at existing restaurants during the fourth quarter of fiscal 2020. While we resumed most of these construction projects as of the date of this report, these pauses may materially adversely affect our ability to grow our business.

In order to reinforce our liquidity position, we entered into a new, $270.0 million 364-day Term Loan Credit Agreement in April 2020. A material increase in our level of debt or material impairments of our assets could cause our debt to total capitalization ratio to exceed the maximum level permitted under the covenants in our Revolving Credit Agreement and Term Loan Credit Agreement. We also raised $505.1 million in a public offering of the Company’s common stock that closed in April 2020. If the business interruptions caused by COVID-19 last longer than we expect, we may continue to seek other sources of liquidity. There can be no guarantee that additional liquidity will be readily available or available on favorable terms, especially the longer the COVID-19 outbreak lasts.

Our restaurant operations could be further disrupted if large numbers of our employees are diagnosed with COVID-19. If a significant percentage of our workforce is unable to work, whether because of illness, quarantine, limitations on travel or other government restrictions in connection with COVID-19, our operations may be negatively impacted, potentially materially adversely affecting our liquidity, financial condition or results of operations.

Our suppliers could be adversely impacted by the COVID-19 outbreak. If our suppliers’ employees are unable to work, whether because of illness, quarantine, limitations on travel or other government restrictions in connection with COVID-19, we could face shortages of food items or other supplies at our restaurants and our operations and sales could be adversely impacted by such supply interruptions. We provide PPE to our team members and have added additional supplies of sanitization products to our restaurants for team member and guest use. A shortage of supply of PPE or sanitization products could adversely impact our restaurant operations.

Additional government regulations or legislation as a result of COVID-19 in addition to decisions we have made and may make in the future relating to the compensation of and benefit offerings for our restaurant team members could also have an adverse effect on our business. We cannot predict the types of additional government regulations or legislation that may be passed relating to employee compensation as a result of the COVID-19 outbreak. We have implemented paid sick leave, emergency pay policies and taken other compensation and benefit actions to support our restaurant team members during the COVID-19 business interruption, but those actions may not be sufficient to compensate our team members for the entire duration of the business interruption resulting from COVID-19. Those team members might seek and find other employment during that interruption, which could materially adversely affect our ability to properly staff and reopen our restaurants with experienced team members when the business interruptions caused by COVID-19 abate or end.

Health concerns arising from food-related pandemics, outbreaks of flu, viruses or other diseases may have an adverse effect on our business.

In addition to the novel coronavirus that causes COVID-19, the United States and other countries have experienced, or may experience in the future, outbreaks of other viruses, such as norovirus, avian flu or “SARS,” “MERS,” H1N1 or “swine flu,” or other diseases. To the extent that a virus or disease is food-borne, or perceived to be food-borne, future outbreaks may adversely affect the price and availability of certain food products and cause our guests to eat less of a product, or could reduce public confidence in food handling and/or public assembly. For example, public concern over avian flu may cause fear about the consumption of chicken, eggs and other products derived from poultry. The inability to serve poultry-based products would restrict our ability to provide a variety of menu items to our guests. If we change a restaurant menu in response to such concerns, we may lose guests who do not prefer the new menu, and we may not be able to attract a sufficient new guest base to produce the sales needed to make the restaurant profitable. We also may have different or additional competitors for our intended guests as a result of such a change and may not be able to successfully compete against such competitors. If a virus is transmitted by human contact or respiratory transmission, our employees or guests could become infected, or could choose, or be advised, to avoid gathering in public places, any of which could adversely affect our restaurant guest traffic and our ability to adequately staff our restaurants, receive deliveries on a timely basis or perform functions at the corporate level. We also could be adversely affected if the World Health Organization and/or the CDC were to restrict travel to affected geographic areas where we source our products, thus possibly impacting the continuity of supply. Additionally, jurisdictions in which we have restaurants may impose mandatory closures, seek voluntary closures or impose restrictions on operations. Even if such measures are not implemented and a virus or other disease does not spread significantly, the perceived risk of infection or significant health risk may cause guests to choose other alternatives to dining out in our restaurants which may adversely affect our business.

We rely heavily on information technology in our operations, and insufficient guest or employee facing technology or a failure to maintain a continuous and secure cyber network, free from material failure, interruption or security breach, could harm our ability to effectively operate our business and/or result in the loss of respected relationships with our guests or employees.

We rely heavily on information systems across our operations, including for e-commerce, marketing programs, employee engagement, management of our supply chain, the point-of-sale processing system in our restaurants, and various other processes and transactions. Our ability to effectively manage our business and coordinate the production, distribution and sale of our products depends significantly on the reliability, security and capacity of these systems. In addition, we must effectively respond to changing guest expectations and new technological developments. Disruptions, failures or other performance issues with guest facing technology systems could impair the benefits that they provide to our business and negatively affect our relationship with our guests. The failure of these systems to operate effectively, problems with transitioning to upgraded or replacement systems, a material network breach in the security of these systems as a result of a cyber attack, phishing attack or any other failure to maintain a continuous and secure cyber network could result in substantial harm or inconvenience to the Company, our team members or guests. This could include the theft of our intellectual property, trade secrets or sensitive financial information, or the improper use of personal information or other “identity theft” of either guest or employee information. Some of these essential business processes that are dependent on technology are outsourced to third parties. While we make efforts to ensure that our providers are observing proper standards and controls, we cannot guarantee that breaches or failures caused by these outsourced providers will not occur.

Any such failures, disruptions or data privacy breaches may cause delays in guest service, reduce efficiency in our operations, require significant capital investments to remediate the problem, result in customer, employee or advertiser dissatisfaction or otherwise result in negative publicity that could harm our reputation. We could also be subjected to litigation, regulatory investigations or the imposition of penalties. As privacy and information security laws and regulations change and cyber risks evolve, we may incur additional costs to ensure we remain in compliance and protect guest, employee and Company information.

A failure to maintain food safety throughout the supply chain and food-borne illness concerns may have an adverse effect on our business.

Food safety is a top priority, and we dedicate substantial resources to ensuring that our guests enjoy safe, quality food products. Even with strong preventative interventions and controls, food safety issues could be caused at the source or by food suppliers or distributors and, as a result, be out of our control and require prompt action to mitigate impact. In addition, regardless of the source or cause, any report of food-borne illnesses such as E. coli, hepatitis A, norovirus or salmonella, and other food safety issues including food tampering or contamination, at one of our restaurants could adversely affect the reputation of our brands and have a negative impact on our sales. Even instances of food-borne illness, food tampering or food contamination occurring solely at restaurants of our competitors could result in negative publicity about the food service industry generally and adversely impact our sales. The occurrence of food-borne illnesses or food safety issues could also adversely affect the price and availability of affected ingredients, resulting in higher costs and lower margins.

The inability to hire, train, reward and retain restaurant team members and determine and maintain adequate staffing may impact our ability to achieve our operating, growth and financial objectives.

Our long-term growth depends substantially on our ability to recruit and retain high-quality team members to work in and manage our restaurants. Adequate staffing and retention of qualified restaurant team members is a critical factor impacting our guests’ experience in our restaurants. Maintaining adequate staffing in our existing restaurants and hiring and training staff for our new restaurants requires precise workforce planning which has been complicated by the impacts of the COVID-19 pandemic on our business and on consumer preferences. The market for the most qualified talent continues to be competitive and we must provide competitive wages, benefits and workplace conditions to maintain our most qualified team members. Depending on the length of restaurant team member furloughs, team members may seek other employment and decline to return when we recall them to work in our restaurants. Personal or public health concerns related to COVID-19 might make some existing team members or potential candidates reluctant to work in enclosed restaurant environments. A shortage of quality candidates who meet all legal citizenship or work authorization requirements, failure to recruit and retain new team members in a timely manner or higher than expected turnover levels all could affect our ability to open new restaurants, grow sales at existing restaurants or meet our labor cost objectives. An inability to adequately monitor and proactively respond to team member dissatisfaction could lead to poor guest satisfaction, higher turnover, litigation and unionization which could jeopardize our ability to meet our growth targets.

A failure to recruit, develop and retain effective leaders or the loss or shortage of personnel with key capacities and skills could impact our strategic direction and jeopardize our ability to meet our business performance expectations and growth targets.

Our future growth depends substantially on the contributions and abilities of key executives and other leadership team members. We must continue to recruit, retain and motivate management team members in order to achieve our current business objectives and support our projected growth. Changes in senior management could expose us to significant changes in strategic direction and initiatives. A failure to maintain appropriate organizational capacity and capability to support leadership excellence (adequate resources, innovative skill sets and expectations) and build adequate bench strength required for growth or a loss of key skill sets could jeopardize our ability to meet our business performance expectations and growth targets.

We are subject to a number of risks relating to public policy changes and federal, state and local regulation of our business, including in the areas of health care reform, environmental matters, minimum wage, unionization, data privacy, menu labeling, immigration requirements and taxes, and an insufficient or ineffective response to legislation or government regulation may impact our cost structure, operational efficiencies and talent availability.

The restaurant industry is subject to extensive federal, state, local and international laws and regulations. The development and operation of restaurants depend to a significant extent on the selection and acquisition of suitable sites, which are subject to building, zoning, land use, environmental, traffic and other regulations and requirements. We are subject to licensing and regulation by state and local authorities relating to health, sanitation, safety and fire standards and the sale of alcoholic beverages. We are subject to laws and regulations relating to the preparation and sale of food, including regulations regarding product safety, nutritional content and menu labeling. We are subject to federal, state, and local laws governing employment practices and working conditions. These laws cover minimum wage rates, wage and hour practices, labor relations, paid and family leave, workplace safety, and immigration, among others. The myriad of laws and regulations being passed at the state and local level creates unique challenges for a multi-state employer as different standards apply to different locations, sometimes with conflicting requirements. We must continue to monitor and adapt our employment practices to comply with these various laws and regulations.

We also are subject to federal and state laws which prohibit discrimination and other laws regulating the design and operation of facilities, such as the ADA. Compliance with these laws and regulations can be costly and increase our exposure to litigation and governmental proceedings, and a failure or perceived failure to comply with these laws could result in negative publicity that could harm our reputation. New or changing laws and regulations relating to union organizing rights and activities may impact our operations at the restaurant level and increase our labor costs.

We are subject to a variety of federal, state and local laws and regulations relating to the use, storage, discharge, emission and disposal of hazardous materials. There also has been increasing focus by United States and overseas governmental authorities on other environmental matters, such as climate change, the reduction of greenhouse gases and water consumption. This increased focus may lead to new initiatives directed at regulating a yet to be specified array of environmental matters. Legislative, regulatory or other efforts to combat climate change or other environmental concerns could result in future increases in the cost of raw materials, taxes, transportation and utilities, which could decrease our operating profits and necessitate future investments in facilities and equipment.

We are subject to laws relating to information security, privacy, cashless payments and consumer credit, protection and fraud. An increasing number of governments and industry groups worldwide have established data privacy laws and standards for the protection of personal information, including social security numbers, financial information (including credit card numbers), and health information. Compliance with these laws and regulations can be costly, and any failure or perceived failure to comply with these laws or any breach of our systems could harm our reputation or lead to litigation, which could adversely affect our financial condition.

The impact of current laws and regulations, the effect of future changes in laws or regulations that impose additional requirements and the consequences of litigation relating to current or future laws and regulations, or an insufficient or ineffective response to significant regulatory or public policy issues, could negatively impact our cost structure, operational efficiencies and talent availability, and therefore have an adverse effect on our results of operations. Failure to comply with the laws and regulatory requirements of federal, state and local authorities could result in, among other things, revocation of required licenses, administrative enforcement actions, fines and civil and criminal liability. Compliance with these laws and regulations can be costly and can increase our exposure to litigation or governmental investigations or proceedings.

Litigation, including allegations of illegal, unfair or inconsistent employment practices, may adversely affect our business, financial condition and results of operations.

Our business is subject to the risk of litigation by employees, guests, suppliers, business partners, shareholders, government agencies or others through private actions, class actions, administrative proceedings, regulatory actions or other litigation. These actions and proceedings may involve allegations of illegal, unfair or inconsistent employment practices, including wage and hour violations and employment discrimination; guest discrimination; food safety issues including poor food quality, food-borne illness, food tampering, food contamination, and adverse health effects from consumption of various food products or high-calorie foods (including obesity); other personal injury, including claims related to COVID-19; violation of “dram shop” laws (providing an injured party with recourse against an establishment that serves alcoholic beverages to an intoxicated party who then causes injury to himself or a third party); trademark infringement; violation of the federal securities laws; or other concerns. The outcome of litigation, particularly class action lawsuits and regulatory actions, is difficult to assess or quantify. Plaintiffs in these types of lawsuits may seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time. The cost to defend litigation may be significant. There may also be adverse publicity associated with litigation that could decrease guest acceptance of our brands, regardless of whether the allegations are valid or we ultimately are found liable. Litigation could impact our operations in other ways as well. Allegations of illegal, unfair or inconsistent employment practices, for example, could adversely affect employee acquisition and retention. As a result, litigation may adversely affect our business, financial condition and results of operations.

Unfavorable publicity, or a failure to respond effectively to adverse publicity, could harm our reputation and adversely impact our guest counts and sales.

The good reputation of our restaurant brands is a key factor in the success of our business. Actual or alleged incidents at any of our restaurants could result in negative publicity that could harm our brands. Even incidents occurring at restaurants operated by our competitors or in the supply chain generally could result in negative publicity that could harm the restaurant industry overall and, indirectly, our own brands. Negative publicity may result from allegations of illegal, unfair or inconsistent employment practices, employee dissatisfaction, guest discrimination, illness, injury, or any of the other matters discussed above that could give rise to litigation. Regardless of whether the allegations or complaints are valid, unfavorable publicity relating to a limited number of our restaurants, or to only a single restaurant, could adversely affect public perception of the entire brand. Negative publicity also may result from health concerns including food safety and flu or virus outbreaks, publication of government or industry findings concerning food products, environmental disasters, crime incidents, data security breaches, scandals involving our employees, or operational problems at our restaurants, all of which could make our brands and menu offerings less appealing to our guests and negatively impact our guest counts and sales. Adverse publicity and its effect on overall consumer perceptions of our brands, or our failure to respond effectively to adverse publicity, could have a material adverse effect on our business.

Our inability or failure to recognize, respond to and effectively manage the accelerated impact of social media could have a material adverse impact on our business.

There has been a marked increase in the use of social media platforms and similar devices which allow individuals access to a broad audience of consumers and other interested persons. Many social media platforms immediately publish the content their subscribers and participants post, often without filters or checks on accuracy of the content posted. Information posted on such platforms at any time may be adverse to our interests or may be inaccurate, each of which may harm our performance, prospects, or business. The harm may be immediate without affording us an opportunity for redress or correction. The dissemination of information online could harm our business, prospects, financial condition, and results of operations, regardless of the information’s accuracy.

Many of our competitors are expanding their use of social media and new social media platforms are rapidly being developed, potentially making more traditional social media platforms obsolete. As a result, we need to continuously innovate and develop our social media strategies in order to maintain broad appeal with guests and brand relevance. As part of our marketing efforts, we rely on social media platforms and search engine marketing to attract and retain guests. We also continue to invest in other digital marketing initiatives that allow us to reach our guests across multiple digital channels and build their awareness of, engagement with, and loyalty to our brands. These initiatives may not be successful, resulting in expenses incurred without the benefit of higher revenues, increased employee engagement or brand recognition. In addition, a variety of risks are associated with the use of social media, including the improper disclosure of proprietary information, negative comments about us, exposure of personally identifiable information, fraud, or out-of-date information. The inappropriate use of social media vehicles by our guests or employees could increase our costs, lead to litigation or result in negative publicity that could damage our reputation.

A majority of our restaurants are operated in leased properties and we are committed to long-term and non-cancelable leases that we may want to cancel, and may be unable to renew the leases that we may want to extend at the end of their terms.

As of May 31, 2020, 1,730 of our 1,804 restaurants operating in the United States and Canada operate in leased locations. If we close a restaurant in a leased location, we may remain committed to perform our obligations under the applicable lease, which would include, among other things, payment of the base rent for the balance of the lease term. Additionally, the potential losses associated with our inability to cancel leases may result in our keeping open restaurant locations that are performing significantly below targeted levels. As a result, ongoing lease obligations at closed or underperforming restaurant locations could impair our results of operations. In addition, at the end of the lease term and expiration of all renewal periods, we may be unable to renew the lease without substantial additional cost, if at all. As a result, we may be required to close or relocate a restaurant, which could subject us to construction and other costs and risks, and may have an adverse effect on our operating performance.

We may be subject to increased labor and insurance costs.

Our restaurant operations are subject to United States and Canadian federal, state and local laws governing such matters as minimum wages, working conditions, overtime and tip credits. As federal, state and local minimum wage rates increase, we may need to increase not only the wages of our minimum wage employees, but also the wages paid to employees at wage rates that are above minimum wage. Labor shortages, increased employee turnover and health care and other benefit mandates could also increase our labor costs. This in turn could lead us to increase prices which could impact our sales. Conversely, if competitive pressures or other factors prevent us from offsetting increased labor costs by increases in prices, our profitability may decline. In addition, the current premiums that we pay for our insurance (including workers’ compensation, general liability, property, health, and directors’ and officers’ liability) may increase at any time, thereby further increasing our costs. The dollar amount of claims that we actually experience under our workers’ compensation and general liability insurance, for which we carry high per-claim deductibles, may also increase at any time, thereby further increasing our costs. Further, the decreased availability of property and liability insurance has the potential to negatively impact the cost of premiums and the magnitude of uninsured losses.

Our inability or failure to execute on a comprehensive business continuity plan following a major natural disaster such as a hurricane or manmade disaster, at our corporate facility could have a materially adverse impact on our business.

Many of our corporate systems and processes and corporate support for our restaurant operations are centralized at one Florida location. We have disaster recovery procedures and business continuity plans in place to address most events of a crisis nature, including hurricanes and other natural or manmade disasters, and back up and off-site locations for recovery of electronic and other forms of data and information. However, if we are unable to fully implement our disaster recovery plans, we may experience delays in recovery of data, inability to perform vital corporate functions, tardiness in required reporting and compliance, failures to adequately support field operations and other breakdowns in normal communication and operating procedures that could have a material adverse effect on our financial condition, results of operation and exposure to administrative and other legal claims.

We face intense competition, and if we have an insufficient focus on competition and the consumer landscape, our business, financial condition and results of operations could be adversely affected.

The full-service dining sector of the restaurant industry is intensely competitive with respect to pricing, service, location, personnel, take-out and delivery options and type and quality of food, and there are many well-established competitors. We compete within each market with national and regional restaurant chains and locally-owned restaurants. We also face growing competition as a result of the trend toward convergence in grocery, deli and restaurant services, particularly in the supermarket industry which offers “convenient meals” in the form of improved entrées, side dishes or meal preparation kits from the deli or prepared foods sections. We compete primarily on the quality, variety and value perception of menu items. The number and location of restaurants, type of brand, quality and efficiency of service, attractiveness of facilities and effectiveness of advertising and marketing programs are also important factors. We anticipate that intense competition will continue with respect to all of these factors. If we are unable to continue to compete effectively, our business, financial condition and results of operations could be adversely affected.

We are subject to changes in consumer preferences that may adversely affect demand for food at our restaurants.

Consumers have continually changing health and dietary preferences. As a result, our diverse portfolio of restaurant brands are continually challenged to evolve our menu offerings to appeal to these changing customer preferences, while maintaining our brand character and retaining popular menu items. In response to the COVID-19 pandemic, many consumers have preferred to order food To Go or for delivery rather than dining in at full-service restaurants, and if these preferences continue and consumers continue to avoid gathering in public places in large groups, we may need to further adapt our offerings to accommodate these changes. New information or changes in dietary, nutritional, allergen or health guidelines or environmental or sustainability concerns, whether issued by government agencies, academic studies, advocacy organizations or similar groups, may cause some groups of consumers to select foods other than those that are offered by our restaurants. If we fail to anticipate changing trends or other consumer preferences, our business, financial condition and results of operations could be adversely affected.

Our failure to drive both short-term and long-term profitable sales growth through brand relevance, operating excellence, opening new restaurants of existing brands, and acquiring new restaurant brands could result in poor financial performance.

As part of our business strategy, we intend to drive profitable sales growth by increasing same-restaurant sales at existing restaurants, continuing to expand our current portfolio of restaurant brands, and acquiring additional brands that can be expanded profitably. This strategy involves numerous risks, and we may not be able to achieve our growth objectives.

At existing brands, we may not be able to maintain brand relevance and restaurant operating excellence to achieve sustainable same-restaurant sales growth and warrant new unit growth. Existing brand short-term sales growth could be impacted if we are unable to drive near term guest count and sales growth, and long-term sales growth could be impacted if we fail to extend our existing brands in ways that are relevant to our guests. A failure to innovate and extend our existing brands in ways that are relevant to guests and occasions in order to generate sustainable same-restaurant traffic growth and produce non-traditional sales and earnings growth opportunities, insufficient focus on our competition, or failure to adequately address declines in the casual dining industry, could have an adverse effect on our results of operations. In addition, we may not be able to support sustained new unit growth or open all of our planned new restaurants, and the new restaurants that we open may not be profitable or as profitable as our existing restaurants. New restaurants typically experience an adjustment period before sales levels and operating margins normalize, and even sales at successful newly-opened restaurants generally do not make a significant contribution to profitability in their initial months of operation. The opening of new restaurants can also have an adverse effect on guest counts and sales levels at existing restaurants.

The ability to open and profitably operate restaurants is subject to various risks, such as the identification and availability of suitable and economically viable locations, the negotiation of acceptable lease or purchase terms for new locations, the need to obtain all required governmental permits (including zoning approvals and liquor licenses) on a timely basis, the need to comply with other regulatory requirements, the availability of necessary contractors and subcontractors, the ability to meet construction schedules and budgets, the ability to manage union activities such as picketing or hand billing which could delay construction, increases in labor and building material costs, the availability of financing at acceptable rates and terms, changes in weather or other acts of God that could result in construction delays and adversely affect the results of one or more restaurants for an indeterminate amount of time, our ability to hire and train qualified management personnel and general economic and business conditions. At each potential location, we compete with other restaurants and retail businesses for desirable development sites, construction contractors, management personnel, hourly employees and other resources. If we are unable to successfully manage these risks, we could face increased costs and lower than anticipated sales and earnings in future periods.

We also may not be able to identify and successfully acquire and integrate additional brands that are as profitable as our existing restaurants or that provide potential for further growth.

A lack of availability of suitable locations for new restaurants or a decline in the quality of the locations of our current restaurants may adversely affect our sales and results of operations.

The success of our restaurants depends in large part on their locations. As demographic and economic patterns change, current locations may not continue to be attractive or profitable. Possible declines in neighborhoods where our restaurants are located or adverse economic conditions in areas surrounding those neighborhoods could result in reduced sales in those locations. In addition, desirable locations for new restaurant openings or for the relocation of existing restaurants may not be available at an acceptable cost when we identify a particular opportunity for a new restaurant or relocation. The occurrence of one or more of these events could have a significant adverse effect on our sales and results of operations.

We may experience higher-than-anticipated costs associated with the opening of new restaurants or with the closing, relocating and remodeling of existing restaurants, which may adversely affect our results of operations.

Our sales and expenses can be impacted significantly by the number and timing of the opening of new restaurants and the closing, relocating and remodeling of existing restaurants. We incur substantial pre-opening expenses each time we open a new restaurant and other expenses when we close, relocate or remodel existing restaurants. The expenses of opening, closing, relocating or remodeling any of our restaurants may be higher than anticipated. An increase in such expenses could have an adverse effect on our results of operations.

A failure to identify and execute innovative marketing and guest relationship tactics, ineffective or improper use of other marketing initiatives, and increased advertising and marketing costs could adversely affect our results of operations.

If our competitors increase their spending on advertising and promotions, if our advertising, media or marketing expenses increase, if our advertising and promotions become less effective than those of our competitors, or if we do not adequately leverage technology and data analytic capabilities needed to generate concise competitive insight, we could experience a material adverse effect on our results of operations. A failure to sufficiently innovate, develop guest relationship initiatives, or maintain adequate and effective advertising could inhibit our ability to maintain brand relevance and drive increased sales.

As part of our marketing efforts, we rely on social media platforms and search engine marketing to attract and retain guests. These initiatives may not be successful, and pose a variety of other risks, as discussed above under the heading: “Our inability or failure to recognize, respond to and effectively manage the accelerated impact of social media could have a material adverse impact on our business.”

A failure to address cost pressures, including rising costs for commodities, labor, health care and utilities used by our restaurants, and a failure to effectively deliver cost management activities and achieve economies of scale in purchasing could compress our margins and adversely affect our sales and results of operations.

Our results of operations depend significantly on our ability to anticipate and react to changes in the price and availability of food, ingredients, labor, health care, utilities and other related costs over which we may have little control. Operating margins for our restaurants are subject to changes in the price and availability of food commodities, including beef, pork, chicken, seafood, cheese, butter and produce. The introduction of or changes to tariffs on imported food products, such as produce and seafood, could increase our costs and possibly impact the supply of those products. We cannot predict whether we will be able to anticipate and react to changing food costs by adjusting our purchasing practices, menu offerings, and menu prices, and a failure to do so could adversely affect our operating results. We attempt to leverage our size to achieve economies of scale in purchasing, but there can be no assurances that we can always do so effectively. We are also subject to the general risks of inflation.

Increases in minimum wage, health care and other benefit costs may have a material adverse effect on our labor costs. We operate in many states and localities where the minimum wage is significantly higher than the federal minimum wage. Increases in minimum wage may also result in increases in the wage rates paid for non-minimum wage positions. Many states and localities are also passing laws regulating employment practices and working conditions which could have a material adverse effect on our labor costs in those areas.

Our restaurants’ operating margins are also affected by fluctuations in the price of utilities such as electricity and natural gas, whether as a result of inflation or otherwise, on which the restaurants depend for their energy supply. In addition, interruptions to the availability of gas, electric, water or other utilities, whether due to aging infrastructure, weather conditions, fire, animal damage, trees, digging accidents or other reasons largely out of our control, may adversely affect our operations. Our inability to anticipate and respond effectively to an adverse change in any of these factors could have a significant adverse effect on our sales and results of operations.

We may lose sales or incur increased costs if our restaurants experience shortages, delays or interruptions in the delivery of food and other products from our third party vendors and suppliers.

Shortages, delays or interruptions in the supply of food items and other supplies to our restaurants may be caused by inclement weather; natural disasters such as hurricanes, tornadoes, floods, droughts and earthquakes; labor issues or other operational disruptions at our suppliers, vendors or other service providers; the inability of our vendors or service providers to manage adverse business conditions, obtain credit or remain solvent; or other conditions beyond our control. Such shortages, delays or interruptions could adversely affect the availability, quality and cost of the items we buy and the operations of our restaurants. We have a limited number of suppliers and distributors for certain of our products and services. Supply chain risk could increase our costs and limit the availability of products that are critical to our restaurant operations. If we raise prices as a result of increased food costs or shortages, it may negatively impact our sales. If we temporarily close a restaurant or remove popular items from a restaurant’s menu, that restaurant may experience a significant reduction in sales during the time affected by the shortage or thereafter as a result of our guests changing their dining habits.

Adverse weather conditions and natural disasters could adversely affect our restaurant sales.

Adverse weather conditions can impact guest traffic at our restaurants, cause the temporary underutilization of outdoor patio seating and, in more severe cases such as hurricanes, tornadoes or other natural disasters, cause temporary closures, sometimes for prolonged periods, which would negatively impact our restaurant sales. Changes in weather could result in construction delays, interruptions to the availability of utilities, and shortages or interruptions in the supply of food items and other supplies, which could increase our costs. Some climatologists predict that the long-term effects of climate change and global warming may result in more severe, volatile weather or extended droughts, which could increase the frequency and duration of weather impacts on our operations.

Volatility in the market value of derivatives we may use to hedge exposures to fluctuations in commodity and broader market prices may cause volatility in our gross margins and net earnings.

We use or may use derivatives to hedge price risk for some of our principal ingredient, labor and energy costs, including but not limited to coffee, butter, wheat, soybean oil, pork, beef, diesel fuel, gasoline and natural gas. Changes in the values of these derivatives may be recorded in earnings currently, resulting in volatility in both gross margin and net earnings. These gains and losses are reported as a component of cost of sales in our Consolidated Statements of Earnings included in our consolidated financial statements.

Volatility in the United States equity markets affects our ability to efficiently hedge exposures to our market risk related to equity-based compensation awards.

The equity markets in the United States have been extremely volatile due to the COVID-19 pandemic and the recessionary cycle affecting the United States economy and the Company’s stock price has fluctuated significantly. We have equity hedges in place to protect the Company from exposure to market risk related to future payout of equity-based compensation awards. However, because these hedges also net settle on a cash basis quarterly, we have been and may in the future be required to make cash payments at those quarterly settlement dates and the amounts of those payments are difficult to predict due to the recent extreme volatility of the equity markets. These cash payments may ultimately be offset by payments to us from the hedge counterparties or reductions in expected payouts to employees when those equity hedges finally fully settle and the related equity awards pay out.

Certain economic and business factors specific to the restaurant industry and other general macroeconomic factors including unemployment, energy prices and interest rates that are largely beyond our control may adversely affect consumer behavior and our results of operations.

Our business results depend on a number of industry-specific and general economic factors, many of which are beyond our control. The full-service dining sector of the restaurant industry is affected by changes in international, national, regional and local economic conditions, seasonal fluctuation of sales volumes, consumer spending patterns and consumer preferences, including changes in consumer tastes and dietary habits, and the level of consumer acceptance of our restaurant brands. The performance of individual restaurants may also be adversely affected by factors such as demographic trends, severe weather including hurricanes, traffic patterns and the type, number and location of competing restaurants.

General economic conditions, including economic downturns related to the COVID-19 pandemic, have also adversely affected our results of operations and may continue to do so. The current economic recession, a protracted economic slowdown, a worsening economy, increased unemployment, increased energy prices, rising interest rates, a downgrade of the U.S. government’s long-term credit rating, imposition of retaliatory tariffs on important U.S. imports and exports or other industry-wide cost pressures have affected and can continue to affect consumer behavior and spending for restaurant dining occasions and

lead to a decline in sales and earnings. Job losses, foreclosures, bankruptcies and falling home prices have caused and may continue to cause guests to make fewer discretionary purchases, and any significant decrease in our guest traffic or average profit per transaction will negatively impact our financial performance. In addition, if gasoline, natural gas, electricity and other energy costs increase, and credit card, home mortgage and other borrowing costs increase with rising interest rates, our guests may have lower disposable income and reduce the frequency of their dining occasions, may spend less on each dining occasion or may choose more inexpensive restaurants.

Furthermore, we cannot predict the effects that actual or threatened armed conflicts, terrorist attacks, efforts to combat terrorism, heightened security requirements, or a failure to protect information systems for critical infrastructure, such as the electrical grid and telecommunications systems, could have on our operations, the economy or consumer confidence generally. Any of these events could affect consumer spending patterns or result in increased costs for us due to security measures.

Unfavorable changes in the above factors or in other business and economic conditions affecting our guests could increase our costs, reduce traffic in some or all of our restaurants or impose practical limits on pricing, any of which could lower our profit margins and have a material adverse effect on our sales, financial condition and results of operations.

Disruptions in the financial and credit markets may adversely impact consumer spending patterns and affect the availability and cost of credit.

Our ability to make scheduled payments or to refinance our debt and to obtain financing for acquisitions or other general corporate and commercial purposes will depend on our operating and financial performance, which in turn is subject to prevailing economic conditions and to financial, business and other factors beyond our control. Turmoil in global credit markets could adversely impact the availability of credit already arranged, and the availability and cost of credit in the future. There can be no assurances that we will be able to arrange credit on terms we believe are acceptable or that permit us to finance our business with historical margins. A lack of credit could have an adverse impact on certain of our suppliers, landlords and other tenants in retail centers in which we are located. If these issues occur, they could negatively affect our financial results. Any new disruptions in the financial markets may also adversely affect the U.S. and world economy, which could negatively impact consumer spending patterns.

We face a variety of risks associated with doing business with franchisees and licensees.

Certain of our domestic and all of our international locations other than in Canada are operated by franchisees or licensees. We believe that we have selected high-caliber operating partners and franchisees with significant experience in restaurant operations, and are providing them with training and support. However, the probability of opening, ultimate success and quality of any franchise or licensed restaurant rests principally with the franchisee or licensee. If the franchisee or licensee does not successfully open and operate its restaurants in a manner consistent with our standards, or guests have negative experiences due to issues with food quality or operational execution, our brand values could suffer, which could have an adverse effect on our business.

We face a variety of risks associated with doing business with business partners and vendors in foreign markets.

We are making efforts to expand our brands overseas through licensing and franchising relationships. There is no assurance that international operations will be profitable or that international growth will continue. Our international operations are subject to all of the same risks associated with our domestic operations, as well as a number of additional risks. These include, among other things, international economic and political conditions, foreign currency fluctuations, and differing cultures and consumer preferences. In addition, expansion into international markets could create risks to our brands and reputation.

We also are subject to governmental regulations throughout the world that impact the way we do business with our international franchisees and vendors. These include antitrust and tax requirements, anti-boycott regulations, import/export/customs regulations and other international trade regulations, the USA Patriot Act, the Foreign Corrupt Practices Act, and applicable local law. Failure to comply with any such legal requirements could subject us to monetary liabilities and other sanctions, which could harm our business, results of operations and financial condition.

Failure to protect our service marks or other intellectual property could harm our business.

We regard our Olive Garden^®, LongHorn Steakhouse^®, Cheddar’s Scratch Kitchen^®, Yard House^®, The Capital Grille^®, The Capital Burger ^®, Seasons 52^®, Bahama Breeze^®, Eddie V’s Prime Seafood^®,Darden^®and Darden Restaurants^®service marks, and other service marks and trademarks related to our restaurant businesses, as having significant value and being important to our marketing efforts. We rely on a combination of protections provided by contracts, copyrights, patents, trademarks, service marks and other common law rights, such as trade secret and unfair competition laws, to protect our restaurants and services from infringement. We have registered certain trademarks and service marks in the United States and foreign jurisdictions. However,

we are aware of names and marks identical or similar to our service marks being used from time to time by other persons. Although our policy is to oppose any such infringement, further or unknown unauthorized uses or other misappropriation of our trademarks or service marks could diminish the value of our brands and adversely affect our business. In addition, effective intellectual property protection may not be available in every country in which we have or intend to open or franchise a restaurant. Although we believe we have taken appropriate measures to protect our intellectual property, there can be no assurance that these protections will be adequate, and defending or enforcing our service marks and other intellectual property could result in the expenditure of significant resources.

Impairment of the carrying value of our goodwill or other intangible assets could adversely affect our financial condition and results of operations.

Goodwill represents the difference between the purchase price of acquired companies and the related fair values of net assets acquired. A significant amount of judgment is involved in determining if an indication of impairment of goodwill exists. Factors may include, among others: a significant decline in our expected future cash flows; a sustained, significant decline in our stock price and market capitalization; a significant adverse change in legal factors or in the business climate; unanticipated competition; the testing for recoverability of a significant asset group within a reporting unit; and slower growth rates. Any adverse change in these factors could have a significant impact on the recoverability of these assets and negatively affect our financial condition and results of operations. We compute the amount of impairment by comparing the fair value of the reporting unit with the carrying amount of that reporting unit. We are required to record a non-cash impairment charge if the testing performed indicates that goodwill has been impaired.

We evaluate the useful lives of our other intangible assets, primarily the LongHorn Steakhouse^®, Cheddar’s Scratch Kitchen^®,The Capital Grille^®, Yard House^®and Eddie V’s Prime Seafood^® trademarks, to determine if they are definite or indefinite-lived. Reaching a determination on useful life requires significant judgments and assumptions regarding the future effects of obsolescence, demand, competition, other economic factors (such as the stability of the industry, legislative action that results in an uncertain or changing regulatory environment, and expected changes in distribution channels), the level of required maintenance expenditures, and the expected lives of other related groups of assets.

As with goodwill, we test our indefinite-lived intangible assets (primarily trademarks) for impairment annually and whenever events or changes in circumstances indicate that their carrying value may not be recoverable. Subsequent to our fiscal 2020 annual analysis, we identified an indication of impairment related to the impacts of the COVID-19 pandemic requiring us to assess our goodwill and trademarks for impairment as of May 31, 2020. As a result of these analyses, we recorded impairments of our Cheddar’s Scratch Kitchen^®trademark and the related goodwill from acquiring that brand. We cannot accurately predict the amount and timing of any further impairments of these or other assets. Should the value of goodwill or other intangible assets become impaired, there could be an adverse effect on our financial condition and results of operations.

Changes in tax laws or treaties and unanticipated tax liabilities could adversely affect our financial results.

We are subject to income and other taxes in the United States and certain foreign jurisdictions. Our effective income tax rate and other taxes in the future could be adversely affected by a number of factors, including changes in the mix of earnings in countries with different statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws or other legislative changes, certain international tax treaties and the outcome of income tax audits. Although we believe our tax estimates are reasonable, the final determination of tax audits could be materially different from our historical income tax provisions and accruals. The results of a tax audit could have a material effect on our results of operations or cash flows in the period or periods for which that determination is made. In addition, our effective income tax rate and our results may be impacted by our ability to realize deferred tax benefits and by any increases or decreases of our valuation allowances applied to our existing deferred tax assets.

Failure of our internal controls over financial reporting and future changes in accounting standards may cause adverse unexpected operating results, affect our reported results of operations or otherwise harm our business and financial results.

Our management is responsible for establishing and maintaining effective internal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that we would prevent or detect a misstatement of our financial statements or fraud. Our growth and acquisition of other restaurant companies with procedures not identical to our own could place significant additional pressure on our system of internal control over financial reporting. Any failure to maintain an effective system of internal control over financial reporting could limit our ability to report our financial results accurately and timely or to detect and prevent fraud. A significant financial reporting failure or material weakness in

internal control over financial reporting could cause a loss of investor confidence and decline in the market price of our common stock, increase our costs, lead to litigation or result in negative publicity that could damage our reputation.

A change in accounting standards can have a significant effect on our reported results and may affect our reporting of transactions before the change is effective. New pronouncements and varying interpretations of pronouncements have occurred and may occur in the future. Changes to existing accounting rules or the application of current accounting practices may adversely affect our reported financial results. Additionally, our assumptions, estimates and judgments related to complex accounting matters could significantly affect our financial results. Generally accepted accounting principles and related accounting pronouncements, implementation guidelines and interpretations with regard to a wide range of matters that are relevant to our business, including but not limited to, revenue recognition, fair value of investments, impairment of long-lived assets, leases and related economic transactions, derivatives, pension and post-retirement benefits, intangibles, self-insurance, income taxes, property and equipment, unclaimed property laws and litigation, and stock-based compensation are highly complex and involve many subjective assumptions, estimates and judgments by us. Changes in these rules or their interpretation or changes in underlying assumptions, estimates or judgments by us could significantly change our reported or expected financial performance.

Item 1B. UNRESOLVED STAFF COMMENTS

None.


Item 2.	PROPERTIES

Restaurant Properties – Continuing Operations

As of May 31, 2020, we operated 1,804 restaurants, consisting of 868 Olive Garden, 522 LongHorn Steakhouse, 165 Cheddar’s Scratch Kitchen, 81 Yard House, 60 The Capital Grille, 44 Seasons 52, 41 Bahama Breeze and 23 Eddie V’s locations. Our company-owned restaurants are located in all 50 of the United States, Washington D.C. and Canada. Of these 1,804 company-owned restaurants, 74 were located on owned sites and 1,730 were located on leased sites. The leases are classified as follows:



Land-Only Leases (we own buildings and equipment)	864
Ground and Building Leases	658
Space/In-Line/Other Leases	208
Total	1,730

We also lease our restaurant support center which is located in Orlando, Florida.


Item 3.	LEGAL PROCEEDINGS

See the discussion of legal proceedings contained in the third paragraph of Note 15 of the Notes to Consolidated Financial Statements (Part II, Item 8 of this report).

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II


Item 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The principal United States market on which our common shares are traded is the New York Stock Exchange, where our shares are traded under the symbol DRI. As of June 30, 2020, there were approximately 9,350 holders of record of our common shares. The number of registered holders does not include holders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.

We have not sold any equity securities during the last fiscal year that were not registered under the Securities Act of 1933, as amended.

Since commencing our common share repurchase program in December 1995, we have repurchased a total of 196.2 million shares through May 31, 2020 under authorizations from our Board of Directors. The table below provides information concerning our repurchase of shares of our common stock during the quarter ended May 31, 2020:



(Dollars in millions, except per share data)	Total Number of Shares Purchased (1) (2)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (3)
February 24, 2020 through March 29, 2020	297,553	$	100.89	297,553	$	290.6
March 30, 2020 through April 26, 2020	—	$	—	—	$	290.6
April 27, 2020 through May 31, 2020	—	$	—	—	$	290.6
Total	297,553	$	100.89	297,553	$	290.6

(1)

All of the shares purchased during the quarter ended May 31, 2020 were purchased as part of our repurchase program on or before March 20, 2020. On September 18, 2019, our Board of Directors authorized a share repurchase program under which the Company may repurchase up to $500.0 million of its outstanding common stock. This repurchase program, which was announced publicly in a press release issued on September 19, 2019, does not have an expiration and replaced the previously existing share repurchase authorization.

(2)

The number of shares purchased includes shares withheld for taxes on vesting of restricted stock, shares delivered or deemed to be delivered to us on tender of stock in payment for the exercise price of options, and shares reacquired pursuant to tax withholding on option exercises. These shares are included as part of our repurchase program and deplete the repurchase authority granted by our Board. The number of shares repurchased excludes shares we reacquired pursuant to forfeiture of restricted stock.


(3)	Repurchases are subject to prevailing market prices, may be made in open market or private transactions, and may occur or be discontinued at any time. There can be no assurance that we will repurchase any additional shares.

Comparison of Five-Year Total Return



	Indexed Returns
Company/Index	May 2015		May 2016		May 2017		May 2018		May 2019		May 2020
Darden Restaurants, Inc.	$	100.00	$	118.68	$	159.79	$	164.27	$	230.74	$	151.00
S&P 500 Stock Index	$	100.00	$	101.81	$	119.65	$	137.42	$	145.60	$	160.05
S&P Composite 1500 Restaurant Sub-Index	$	100.00	$	110.10	$	135.76	$	141.75	$	178.95	$	178.74

The annual changes for the five-year period shown in the graph on this page are based on the assumption that $100 had been invested in Darden Restaurants, Inc. common stock, the S&P 500 Stock Index and the S&P Composite 1500 Restaurant Sub-Index on May 29, 2015, and that all dividends were reinvested. The cumulative dollar returns shown on the graph represent the value that such investments would have had for each period indicated. On November 9, 2015, we completed the spin-off of Four Corners Property Trust, Inc. (Four Corners) with the pro rata distribution of one share of Four Corners common stock for every three shares of Darden common stock to Darden shareholders. We reflect the effect of the spin-off of Four Corners in the cumulative total return of our common stock as a reinvested dividend.


Item 6.	SELECTED FINANCIAL DATA



	Fiscal Year Ended
(Dollars in millions, except per share data)	May 31, 2020 (2)			May 26, 2019			May 27, 2018			May 28, 2017			May 29, 2016
Operating Results (1) Sales	$	7,806.9		$	8,510.4		$	8,080.1		$	7,170.2		$	6,933.5
Costs and expenses:
Food and beverage	2,240.8			2,412.5			2,303.1			2,070.3			2,039.7
Restaurant labor	2,682.6			2,771.1			2,614.5			2,265.3			2,189.2
Restaurant expenses	1,475.1			1,477.8			1,417.1			1,265.2			1,163.5
Marketing expenses	238.0			255.3			252.3			239.7			238.0
General and administrative	376.4			405.5			409.8			387.7			384.9
Depreciation and amortization	355.9			336.7			313.1			272.9			290.2
Impairments and disposal of assets, net	221.0			19.0			3.4			(8.4		)	5.8
Goodwill impairment	169.2			—			—			—			—
Total operating costs and expenses	$	7,759.0		$	7,677.9		$	7,313.3		$	6,492.7		$	6,311.3
Operating income	47.9			832.5			766.8			677.5			622.2
Interest, net	57.3			50.2			161.1			40.2			172.5
Other (income) expense, net	151.6			—			—			—			—
Earnings (loss) before income taxes	(161.0		)	782.3			605.7			637.3			449.7
Income tax expense (benefit)	(111.8		)	63.7			1.9			154.8			90.0
Earnings (loss) from continuing operations	$	(49.2	)	$	718.6		$	603.8		$	482.5		$	359.7
Earnings (loss) from discontinued operations, net of tax expense (benefit) of $(0.9), $(1.8), $(4.8), $(4.2) and $3.4	(3.2		)	(5.2		)	(7.8		)	(3.4		)	15.3
Net earnings (loss)	$	(52.4	)	$	713.4		$	596.0		$	479.1		$	375.0
Basic net earnings per share:
Earnings (loss) from continuing operations	$	(0.40	)	$	5.82		$	4.87		$	3.88		$	2.82
Earnings (loss) from discontinued operations	$	(0.03	)	$	(0.04	)	$	(0.06	)	$	(0.03	)	$	0.12
Net earnings (loss)	$	(0.43	)	$	5.78		$	4.81		$	3.85		$	2.94
Diluted net earnings per share:
Earnings (loss) from continuing operations	$	(0.40	)	$	5.73		$	4.79		$	3.83		$	2.78
Earnings (loss) from discontinued operations	$	(0.03	)	$	(0.04	)	$	(0.06	)	$	(0.03	)	$	0.12
Net earnings (loss)	$	(0.43	)	$	5.69		$	4.73		$	3.80		$	2.90
Average number of common shares outstanding:
Basic	122.7			123.5			124.0			124.3			127.4
Diluted	122.7			125.4			126.0			126.0			129.3
Financial Position
Total assets	$	9,946.1		$	5,892.8		$	5,469.6		$	5,292.3		$	4,419.4
Land, buildings and equipment, net	$	2,756.9		$	2,552.6		$	2,429.8		$	2,272.3		$	2,041.6
Working capital (deficit)	$	(691.4	)	$	(581.5	)	$	(830.9	)	$	(701.3	)	$	(530.0	)
Long-term debt, less current portion	$	928.8		$	927.7		$	926.5		$	936.6		$	440.0
Stockholders’ equity	$	2,331.2		$	2,392.6		$	2,194.8		$	2,101.7		$	1,952.0
Stockholders’ equity per outstanding share	$	17.95		$	19.44		$	17.77		$	16.76		$	15.47


Item 6.	SELECTED FINANCIAL DATA (continued)



	Fiscal Year Ended
(Dollars in millions, except per share data)	May 31, 2020 (2)		May 26, 2019		May 27, 2018		May 28, 2017		May 29, 2016
Other Statistics
Cash flows from operations (1)	$	717.4	$	1,267.6	$	1,019.8	$	916.3	$	820.4
Capital expenditures (1)	$	459.9	$	452.0	$	396.0	$	293.0	$	228.3
Dividends paid	$	322.3	$	370.8	$	313.5	$	279.1	$	268.2
Dividends paid per share	$	2.64	$	3.00	$	2.52	$	2.24	$	2.10
Number of employees (3)	177,895		184,514		180,656		178,729		150,942
Number of restaurants (1)	1,804		1,785		1,746		1,695		1,536


(1)	Consistent with our consolidated financial statements, information has been presented on a continuing operations basis. Accordingly, all discontinued operations have been excluded.


(2)	Fiscal year 2020 consisted of 53 weeks, while all other fiscal years consisted of 52 weeks.


(3)	Fiscal year 2020 includes approximately 95,000 employees on furlough due to the COVID-19 pandemic.


Item 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis below for Darden Restaurants, Inc. (Darden, the Company, we, us or our) should be read in conjunction with our consolidated financial statements and related financial statement notes included in Part II of this report under the caption “Item 8 - Financial Statements and Supplementary Data.” We operate on a 52/53-week fiscal year, which ends on the last Sunday in May. Fiscal 2020, which ended May 31, 2020, consisted of 53 weeks and fiscal 2019, which ended May 26, 2019, consisted of 52 weeks.

OVERVIEW OF OPERATIONS

Our business operates in the full-service dining segment of the restaurant industry. At May 31, 2020, we operated 1,804 restaurants through subsidiaries in the United States and Canada under the Olive Garden^®, LongHorn Steakhouse^®, Cheddar’s Scratch Kitchen^®, Yard House^®, The Capital Grille^®, Seasons 52^®, Bahama Breeze^®and Eddie V’s Prime Seafood^® trademarks. We own and operate all of our restaurants in the United States and Canada, except for 3 joint venture restaurants managed by us and 30 franchised restaurants. We also have 32 franchised restaurants in operation located in Latin America and the Middle East. All intercompany balances and transactions have been eliminated in consolidation.

COVID-19 Pandemic

In March 2020, the COVID-19 outbreak was declared a national public health emergency resulting in a significant reduction in guest traffic at our restaurants due to changes in consumer behavior as public health officials encouraged social distancing and state and local governments mandated restrictions including suspension of dine-in operations, reduced restaurant seating capacity, table spacing requirements, bar closures and additional physical barriers. Through the first three quarters of fiscal 2020, our financial results were strong as sales from continuing operations for the first nine months of fiscal 2020 were $6.54 billion, an increase of 4.1 percent over the prior year period. The COVID-19 pandemic negatively impacted this strong performance, and for most of the fourth quarter of fiscal 2020, we operated with all of our dining rooms closed and served our guests in a To Go only or To Go and delivery format. Our sales for the fourth quarter of fiscal 2020 declined 43.0 percent from the fourth quarter of fiscal 2019. As we continue to navigate through the pandemic, we have taken significant steps to adapt our business to allow us to continue to serve guests, support our team members and secure our liquidity position to provide financial flexibility, including:


•	Modifying our business operations in order to continue serving guests at our restaurants as safely and effectively as possible, including, initially transitioning all restaurant locations to a To Go only or To Go and delivery model;


•	Reducing or eliminating fixed costs in our restaurants and restaurant support center as well as eliminating or delaying most nonessential capital spending;


•	Furloughing a substantial number of hourly restaurant employees as a result of the closure of our dining rooms and reduction in sales;


•	Protecting our team members’ safety and wellbeing, including sourcing additional sanitation supplies and personal protective equipment, implementing paid sick leave for all hourly restaurant team members, providing a $75.0 million emergency pay program and covering $4.1 million of health and welfare insurance premiums for furloughed team members;


•	Suspending the quarterly cash dividend, with the intention of reviewing our dividend policy as developments warrant;


•	Fully drawing on our $750.0 million Revolving Credit Agreement, which was subsequently repaid in May 2020;


•	Securing a $270.0 million term loan;


•	Raising $505.1 million in net proceeds from a follow-on equity offering;


•	Suspending our share repurchase activity; and


•	Implementing a careful, phased reopening of our dining rooms where permitted by local regulations.

The impact on our operating results as well as the operational and financial measures we have implemented in response to the COVID-19 pandemic have been included throughout this document. As a result of the economic impact of the COVID-19 pandemic, during the fourth quarter of fiscal 2020, we recorded non-cash impairment charges of $390.0 million related to a portion of our goodwill, other indefinite-lived intangible assets, and other assets. See Note 1 and Note 3 of the Notes to Consolidated Financial Statements (Part II, Item 8 of this report) for additional information. Additionally, on March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (CARES Act) was signed into law in the United States. The provisions of the CARES Act provide for, among other items, refundable employee retention tax credits for which we intend to claim $39.2 million related to our emergency pay program mentioned above. See Note 12 of the Notes to Consolidated Financial Statements (Part II, Item 8 of this report) for additional information.

In late April 2020, state and local governments began to allow us to open dining rooms at limited capacities, along with other operating restrictions, and as of the date of filing this report, 89.0 percent of our restaurants were able to open their dining

rooms to some extent. While increasing our in-restaurant dining capacity is subject to the ordinances in the jurisdictions we operate, we are focused on increasing capacity where possible, continuing to provide a safe environment for our team members and guests, and maintaining many of the efficiencies established over these past few months. For most of the fourth quarter of fiscal 2020, our cash flows from operations were negative, but by the end of the quarter, with the increasing dining room capacity, we were back to near break-even cash flow levels. Although we expect our restaurants’ dining room capacity to increase as public health conditions improve and restrictions are eased, it is possible additional outbreaks could require us to reduce our capacity or further suspend our in-restaurant dining operations.

We believe that capable operators of strong, multi-unit brands have the opportunity to increase their share of the restaurant industry’s full-service segment. Generally, the restaurant industry is considered to be comprised of three segments: quick service, fast casual, and full service. All of our restaurants fall within the full-service segment, which is highly fragmented and includes many independent operators and small chains. We believe we have strong brands and that the breadth and depth of our experience and expertise sets us apart in the full-service segment of the restaurant industry. This collective capability is the product of investments over many years in areas that are critical to success in our business, including restaurant operations excellence, brand management excellence, supply chain, talent management and information technology, among other things.

Although the fourth quarter of fiscal 2020 required us to focus on adapting our business to account for the impacts of COVID-19, our long-term operating philosophy remains focused on strengthening the core operational fundamentals of the business by providing an outstanding guest experience rooted in culinary innovation, attentive service, engaging atmosphere, and integrated marketing. The Darden support structure enables our brands to achieve their ultimate potential through: (1) driving advantages in supply chain and general and administrative support; (2) applying insights collected from our significant guest and transactional databases to enhance guest relationships and identify new opportunities to drive sales growth; (3) relentlessly driving operating efficiencies and continuous improvement, operating with a sense of urgency and inspiring a performance-driven culture; and (4) our commitment to rigorous strategic planning.

We seek to increase profits by leveraging our fixed and semi-fixed costs with sales from new restaurants and increased guest traffic and sales at existing restaurants. To evaluate our operations and assess our financial performance, we monitor a number of operating measures, with a special focus on two key factors:


•	Same-restaurant sales – which is a year-over-year 52-week comparison of each period’s sales volumes for restaurants open at least 16 months; and


•	Segment profit – which is restaurant sales, less food and beverage costs, restaurant labor costs, restaurant expenses and marketing expenses (sometimes referred to as restaurant-level earnings).

Increasing same-restaurant sales can improve segment profit because these incremental sales provide better leverage of our fixed and semi-fixed restaurant-level costs. A restaurant brand can generate same-restaurant sales increases through increases in guest traffic, increases in the average guest check, or a combination of the two. The average guest check can be impacted by menu price changes and by the mix of menu items sold. For each restaurant brand, we gather daily sales data and regularly analyze the guest traffic counts and the mix of menu items sold to aid in developing menu pricing, product offerings and promotional strategies. We focus on balancing our pricing and product offerings with other initiatives to produce sustainable same-restaurant sales growth. We compute same-restaurant sales using restaurants open at least 16 months because this period is generally required for new restaurant sales levels to normalize. Sales at newly opened restaurants generally do not make a significant contribution to profitability in their initial months of operation due to operating or integration inefficiencies. Our sales and expenses can be impacted significantly by the number and timing of new restaurant openings and closings, and relocations and remodeling of existing restaurants. Pre-opening expenses each period reflect the costs associated with opening new restaurants in current and future periods.

Fiscal 2020 Financial Highlights

Our sales from continuing operations were $7.81 billion in fiscal 2020 compared to $8.51 billion in fiscal 2019. The 8.3 percent decrease in sales from continuing operations was primarily driven by negative combined Darden same-restaurant sales of 11.0 percent partially offset by revenue from the addition of 19 net new company-owned restaurants. The decrease in sales was driven by the impact of COVID-19 on our fourth quarter results in fiscal 2020 which declined 43.0 percent from the fourth quarter of fiscal 2019.

Net loss from continuing operations for fiscal 2020 was $49.2 million ($0.40 per diluted share) compared with net earnings from continuing operations for fiscal 2019 of $718.6 million ($5.73 per diluted share). Our results from continuing operations for fiscal 2020 decreased compared to fiscal 2019 primarily due to the economic impacts of COVID-19 which had a material adverse effect on the fourth quarter of fiscal 2020.

Our net loss from discontinued operations was $3.2 million ($0.03 per diluted share) for fiscal 2020, compared with a net loss from discontinued operations of $5.2 million ($0.04 per diluted share) for fiscal 2019. When combined with results from

continuing operations, our diluted net loss per share was $0.43 for fiscal 2020 and diluted net earnings per share was $5.69 for fiscal 2019.

Outlook

While it is our normal practice to provide an annual financial outlook, given the level of volatility and uncertainty surrounding the future impact of the COVID-19 outbreak, measures taken to control its spread, the broader U.S. economy and any specific impact on our financial results, we are providing only a limited outlook for fiscal 2021.

In fiscal 2021, we expect to open 35-40 net new restaurants and we expect capital expenditures incurred to build new restaurants, remodel and maintain existing restaurants and technology initiatives to be between $250.0 million and $300.0 million.

RESULTS OF OPERATIONS FOR FISCAL 2020 AND 2019

To facilitate review of our results of operations, the following table sets forth our financial results for the periods indicated. All information is derived from the consolidated statements of earnings for the fiscal years ended May 31, 2020 and May 26, 2019:



	Fiscal Year Ended						Percent Change
(in millions)	May 31, 2020			May 26, 2019			2020 vs 2019
Sales	$	7,806.9		$	8,510.4		(8.3	)%
Costs and expenses:
Food and beverage	2,240.8			2,412.5			(7.1	)%
Restaurant labor	2,682.6			2,771.1			(3.2	)%
Restaurant expenses	1,475.1			1,477.8			(0.2	)%
Marketing expenses	238.0			255.3			(6.8	)%
General and administrative expenses	376.4			405.5			(7.2	)%
Depreciation and amortization	355.9			336.7			5.7	%
Impairments and disposal of assets, net	221.0			19.0			NM
Goodwill impairment	169.2			—			NM
Total operating costs and expenses	$	7,759.0		$	7,677.9		1.1	%
Operating income	47.9			832.5			(94.2	)%
Interest, net	57.3			50.2			14.1	%
Other (income) expense, net	151.6			—			NM
Earnings (loss) before income taxes	(161.0		)	782.3			NM
Income tax expense (benefit) (1)	(111.8		)	63.7			NM
Earnings (loss) from continuing operations	$	(49.2	)	$	718.6		NM
Losses from discontinued operations, net of tax	(3.2		)	(5.2		)	NM
Net earnings (loss)	$	(52.4	)	$	713.4		NM

(1) Effective tax rate	69.4		%	8.1		%
NM- Percentage change not considered meaningful.

The following table details the number of company-owned restaurants currently reported in continuing operations, compared with the number open at the end of fiscal 2019:



	May 31, 2020	May 26, 2019
Olive Garden	868	866
LongHorn Steakhouse	522	514
Cheddar’s Scratch Kitchen (1)	165	161
Yard House	81	79
The Capital Grille (2)