Smokey Bones could be as big as top Darden chains

By Nichola Groom

CHICAGO (Reuters) - Darden Restaurants Inc.'s (DRI.N: Quote, Profile, Research, Stock Buzz) Smokey Bones business still has the potential to one day be as big as the company's flagship Red Lobster and Olive Garden chains, Chairman and Chief Executive Clarence Otis said on Tuesday.

Otis said he would be comfortable with restoring Smokey Bones' recent growth levels of about 30 to 35 restaurants a year once the barbecue-style chain is able to broaden its appeal and increase the frequency of customer visits.

"Smokey Bones has the opportunity to be as big as (Red Lobster and Olive Garden)," Otis said at the Reuters Food Summit in Chicago.

"If we can get the breadth of appeal where we need to be in the next couple of years ... we'd be comfortable with restarting (that growth pace)," Otis said.

In December, Darden said it would slow expansion of Smokey Bones in fiscal 2007 after sales at restaurants open at least 16 months fell 8.5 percent for the second quarter ended in November.

Otis said it would take about 12 to 18 months for Smokey Bones' menu to be where the company wants it to be, with slightly less emphasis on barbecue and more focus on all-American fare like hamburgers.

"What we'd like is to have more (customer) frequency, so we want it to be more than a barbecue restaurant," Otis said.

Darden operates about 115 Smokey Bones restaurants, compared with roughly 580 Olive Gardens and 680 Red Lobsters.

But while Smokey Bones is being groomed to become a much larger chain, Otis said he was comfortable operating smaller businesses such as Bahama Breeze.

That chain's ultimate size potential, Otis said, is about 100 to 150 restaurants.

"We are comfortable with businesses that might be smaller but still have significant scale," Otis said.

He added that the company's smallest chain, the four-unit, health-focused Seasons 52, would soon be opening two new locations in the Atlanta area -- the first such restaurants outside Darden's home state of Florida.

Seasons 52's menu features low-calorie dishes and is targeted at higher-income consumers than Darden's other chains, Otis said.

Darden shares closed down $1.13, or 2.7 percent, at $40.14 on the New York Stock Exchange on Tuesday.

(Additional reporting by Alexandria Sage)