Item 1. BUSINESS

Introduction

Darden Restaurants, Inc. is a full-service restaurant company, and as of May 30, 2021, we owned and operated 1,834 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. As of May 30, 2021, we also had 57 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 30, 2021:

Number of restaurants						Olive Garden						LongHorn Steakhouse						Cheddar’s Scratch Kitchen						Yard House (1)						The Capital Grille (2)						Seasons 52						Bahama Breeze						Eddie V’s						Total
Owned and operated:
United States						867						533						170						81						63						44						42						26						1,826
Canada						8						—						—						—						—						—						—						—						8
Total						875						533						170						81						63						44						42						26						1,834
Franchised:
United States (3)						9						18						5						—						—						—						1						—						33
Latin America						23						—						—						—						1						—						—						—						24
Total						32						18						5						—						1						—						1						—						57

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

(2)Includes three company-owned The Capital Burger restaurants.

(3)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 2021 ended May 30, 2021 and consisted of 52 weeks, fiscal 2020 ended May 31, 2020 and consisted of 53 weeks, and fiscal 2019 ended May 26, 2019 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

For much of fiscal 2021, the COVID-19 pandemic resulted in a significant reduction in guest traffic at our restaurants due to changes in consumer behavior as public health officials encouraged social distancing and required personal protective equipment 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. Beginning in late March 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. In late April 2020, state and local governments began to allow us to open dining rooms at limited capacities, along with other operating restrictions.

As a result, we began fiscal 2021 with significant limitations on our operations, which over the course of the fiscal year varied widely from time to time, state to state and city to city. During November 2020, rising case rates resulted in certain jurisdictions implementing restrictions that again reduced dining room capacity or mandated the re-closure of dining rooms. Once COVID-19 vaccines were approved and moved into wider distribution in the United States in early 2021, public health conditions improved and almost all of the COVID-19 restrictions on businesses have eased. As of the date of this report, all of our restaurants were able to open their dining rooms to some extent and few capacity restrictions or other COVID-19 restrictions remained in place in the United States. However, it is possible additional outbreaks could require us to again reduce our capacity or limit or suspend our in-restaurant dining operations.

As we navigated through the pandemic, we took significant steps to adapt our business model to allow us to continue to serve guests and support our team members, including investing in our team members through enhanced pay and benefits, streamlining our restaurant processes, simplifying our menus, and accelerating the rollout of technology to all of our brands to enhance the off-premise and in-restaurant guest experience. As our dining rooms have returned to full or close-to-full capacity, we are focused on continuing to provide a safe environment for our team members and guests, and maintaining many of the operating efficiencies established during fiscal 2021.

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 $10.00 to $20.00, 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 2021, the average check per person (defined as total sales divided by number of entrées sold) was approximately $20.00, with alcoholic beverages accounting for 4.7 percent of Olive Garden’s sales. Olive Garden 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.

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 and burgers.

Most dinner menu entrée prices range from $11.50 to $31.50, and most lunch menu entrée prices range from $8.00 to $12.00. The price of most entrées includes a side and/or salad and as much freshly baked bread as a guest desires. During fiscal 2021, the average check per person was approximately $23.00, with alcoholic beverages accounting for 7.9 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 primarily 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 $8.00 to $19.00. During fiscal 2021, the average check per person was approximately $16.00, with alcoholic beverages accounting for 8.1 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 $9.50 to $43.00. During fiscal 2021, the average check per person was approximately $32.00, with alcoholic beverages accounting for 33.8 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 2021, the average check per person was approximately $85.50, with alcoholic beverages accounting for 26.7 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 2021, 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 $8.00 to $24.00. During fiscal 2021, the average check per person was approximately $31.00, with alcoholic beverages accounting for 23.3 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 $35.00 to $102.00. During fiscal 2021, the average check per person was approximately $101.00, with alcoholic beverages accounting for 28.3 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 over the last five years 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 (1)						Seasons 52						Bahama Breeze						Eddie V’s						Total Restaurants						Total Sales (in millions)
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
2021						875						533						170						81						63						44						42						26						1,834						$7,196.1

(1)Includes The Capital Burger restaurants as follows: one in fiscal 2018, one in fiscal 2019, two in fiscal 2020, and three in fiscal 2021.

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 throughout fiscal 2021 we continued to adapt our business model to 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 driven 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 2021, we added 30 net new company-owned restaurants in the United States. Our fiscal 2021 actual restaurant openings and closings, fiscal 2022 projected openings, and approximate capital investment, square footage and dining capacity, by brand, are shown below:

			Actual - Fiscal 2021												Projected - Fiscal 2022						Pro-Forma New Restaurants
			Restaurant Openings												Restaurant Closings						New Restaurant Openings						Capital Investment Range (1) (in millions)												Square Feet (2)						Dining Seats (3)
Olive Garden			8												1						11-13						$3.5			-			$4.5						7,700						250
LongHorn Steakhouse			12												1						12-14						$2.6			-			$4.0						5,660						184
Cheddar’s Scratch Kitchen			6												1						3-5						$3.5			-			$4.7						8,000						260
Yard House			2												2						3-4						$6.5			-			$8.0						11,000						360
The Capital Grille (4)			3												—						2-3						$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			3												—						1-2						$7.5			-			$8.5						10,000						320
Totals			36												6						35 - 40

(1)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.

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

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

(4)Fiscal 2021 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 2022 will depend on many factors, including our ability to recruit and train restaurant management and hourly personnel, locate appropriate sites, negotiate acceptable purchase or lease terms, obtain necessary local governmental permits, and complete construction.

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 at the end of fiscal 2021. Over the course of fiscal 2021, as the COVID-19 pandemic impacted our business, the staffing levels of each our restaurants changed frequently, as our dining rooms operated under a range of capacity limitations that also varied from time to time, from state to state and city to city. As our restaurant operations continued to evolve in response to the pandemic, we have evolved our operational structure and made adjustments to restaurant staffing 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 35 to 200 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 eleven restaurants. Each director of operations reports to a Senior Vice President of Operations who is responsible for between 80 and 120 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, Seasons 52 and Eddie V’s restaurant is led by a managing partner. Each has four to ten managers. Each Yard House, The Capital Grille, 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 an eight to twelve-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.

Third party auditors inspect each restaurant regularly throughout the year to assess food safety and sanitation practices. Our total quality team verifies the application of preventative controls through on-site support visits ensuring an effective and robust food safety system. Total quality managers provide support to operations staff with education and training in food safety and sanitation. The team also serves 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, throughout fiscal 2021, 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 guest and team member wellness, maintain clean restaurants, practice social distancing and wear protective equipment. As the pandemic recedes in the United States, many of the additional COVID-19 protocols have been relaxed or removed as of the date of this report. Nevertheless, we are remaining vigilant and may reinstate any of the additional safety or health and wellness precautions if public health conditions worsen in any of our service areas or future government regulations require us to do so.

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, throughout fiscal 2021, we took several 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. 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 for slow-moving items during capacity and dining room restrictions.

• 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 advertising, on both traditional and streaming television, supplemented with additional targeted digital media investments. 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 for much of fiscal 2021. 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 increase frequency of guest visits while maintaining overall profitability. 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 2021, 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.

Human Capital

Darden prioritizes our team members through our People Strategy that includes four strategic imperatives:

• Hire - Attract and select diverse team members that reflect our values and are committed to our results-oriented culture;

• Train - Teach our team members to perform in today’s environment and develop the skills to meet tomorrow’s needs;

• Reward - Invest in compelling programs that recognize team members when goals are achieved and further motivate our culture of winning; and

• Retain - We keep our team members engaged and motivated, ready to deliver results and grow their careers.

We closely track and assess a variety of metrics that help us to evaluate our performance of each of these imperatives.

Hire. We are committed to attracting, retaining, engaging and developing a workforce that mirrors the diversity of our guests. We track a variety of workforce statistics to help us understand the gender, racial and ethnic diversity of our team members, including the following:

Key Team Member Statistics as of the end of fiscal 2021

Total team members (hourly and salaried)			156,883
Total number of hourly team members			147,426
Percent of hourly team members – female			58%
Percent of hourly team members – members of racial or ethnic minority groups			52%
Total number of new hires of hourly team members during fiscal 2021			120,962
Percent of hourly new hires – female			57%
Percent of hourly new hires – members of racial or ethnic minority groups			52%

In addition to the gender, racial and ethnic diversity of our workforce, our team members are also very diverse in age; we employ members of five generations of the United States population: Traditionalists, Baby Boomers, Generation X, Millennials and Centennials. We provide our EEO-1 report and additional details about our inclusion and diversity programs on our website at www.darden.com.

Train. We succeed because of our people, and with our success come rewards, recognition and great opportunities for our team members. We invest in our team members’ 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. 65% of the participants in our restaurant Manager In Training program in fiscal 2021 were internal promotions and 100% of the new General Managers or Managing Partners during fiscal 2021 were internal promotions.

Reward. 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. We offer our team members flexible work schedules and competitive pay and benefits, including paid sick leave and access to free counseling through our Work Life Assistance program for team members and their family. In March of 2021, we announced that every hourly restaurant team member company-wide would earn a minimum hourly wage of at least $10 per hour, inclusive of tip income, starting immediately, and we committed to increase that minimum wage to $11 per hour in January 2022 and $12 per hour in January 2023. We also announced approximately $17 million in one-time bonuses that were paid to our hourly restaurant team members to reward them for their hard work and dedication to serving our guests throughout the COVID-19 pandemic. During fiscal 2021, we provided nearly $24 million in supplemental pay programs to provide support to hourly team members impacted by closures of dining rooms due to the COVID-19 pandemic and paid time off to receive their COVID-19 vaccines. In addition, to reward our restaurant management teams, during fiscal 2021, we paid quarterly bonuses at above-target levels regardless of performance during those quarters. For our restaurant management teams other than general managers or managing partners, we also announced $6.5 million in one-time bonuses to reward their contributions to our success in navigating the pandemic. None of our team members are covered by a collective bargaining agreement. We consider our team member relations to be good.

Consistent with our core values of respect, 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 approximately $1.4 million annually.

Retain. 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. 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.

Despite impacts of COVID-19 on our business and our workforce, Darden’s consolidated turnover rate for hourly team members during fiscal 2021, was 95.4%, one of the lowest rates in the restaurant industry. Each of our brands experienced a turnover rate during fiscal 2021 that was lower than the most recent relevant casual dining or fine dining turnover rate for their industry as reported in The People ReportTM by Black Box IntelligenceTM. Darden’s consolidated restaurant management turnover rate of 18.8% was also significantly lower than the industry benchmark and an improvement over fiscal 2020. Our executive leadership (vice president and above) has an average of over 16 years of experience with Darden. The restaurant general managers and managing partners average 13 years with us.

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 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 periodically perform third-party cybersecurity audits following the standard set by the National Institute of Standards and Technology. We also conduct third-party security reviews of our network, processes 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.

All Darden brands share a secure, robust digital platform with online ordering and other guest-facing capabilities. We also have deployed mobile applications with online ordering and other features for all of our casual dining brands and for most of our specialty restaurant brands. We successfully leveraged these digital capabilities over the last year to address changing guest needs. We will continue to invest in these platforms and applications to enhance the guest experience.

We maintain a robust system of data protection and cybersecurity resources, technology and processes. We regularly evaluate new and emerging risks and ever-changing legal and compliance requirements. We make strategic investments to address these risks and compliance requirements to keep Company, guest and team member data secure. We monitor risks of sensitive information compromise at our business partners where relevant and reevaluate the risks at these partners periodically. We also perform annual and ongoing cybersecurity awareness training for our management and restaurant support center team members. In addition, we 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 multi-year 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, risk 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 30, 2021, we operated 1,834 restaurants through subsidiaries in the United States and Canada. We own all of those locations, except for 2 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 30, 2021, franchisees operated 33 franchised restaurants in the United States and 24 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,

• 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 have historically fluctuated seasonally. Typically, our average sales per restaurant are highest in the winter and spring, followed by the summer, and lowest in the fall. However, throughout fiscal 2021, a variety of factors, including the impacts of COVID-19 on our business, government actions taken to respond to COVID-19 and to stimulate the United States’ recovery from COVID-19, and changing consumer preferences caused fluctuations in our sales volumes that were different than our typical seasonality. Additionally, holidays, changes in the economy, severe weather and similar conditions may impact sales volumes seasonally in some operating regions. Because of the historical seasonality of our business and these other factors, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.

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 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 most of fiscal 2021. 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. By the end of fiscal 2021, very few COVID-19-specific operating restrictions remained in place in the United States, but we continue to monitor the COVID-19 pandemic and it is possible certain regulations could be reimposed in the future if the United States or portions thereof experience additional outbreaks.

During fiscal 2021, 9.8 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. As a result of the impact of COVID-19 pandemic on restaurants, many states have modified their regulations to permit To Go sales of alcoholic beverages, and in some locations we now offer 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 2021, 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. As business interruptions from the COVID-19 pandemic have receded during fiscal 2021, we enhanced our focus on our climate strategy, restaurant sustainability metrics and Darden’s Animal Welfare Council. We will continue to adapt our sustainability approach in the current economic environment with development or enhancement of 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 and over the last decade we have realized a 20 percent reduction in energy use per restaurant and a 25 percent reduction in water usage on average per restaurant. In fiscal 2020, we experienced reductions in energy and water usage directly related to COVID-19 impacts to the business, and we do not expect these results to continue year-over-year. In addition to our energy and water footprint at the restaurants, we have also seen a continuous reduction in our carbon footprint. Since 2008, we have reduced our average greenhouse gas emissions per restaurant by 32 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 31, 2020						May 26, 2019						May 27, 2018(2)
Average Per Restaurant (1) (2)						424						444						460
Total - Scope 1 and 2 (2)						774,200						783,940						766,302

(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)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. To implement this Policy, we established an Animal Welfare Council consisting of leading academics and thought leaders with expertise in the care of animals in food supply chains. The Council advises and supports the Company on our efforts to advance strategy and implementation of an outcomes-based approach to animal welfare, from supplier collaborations to reporting improvements. During COVID-19 interruptions, it was necessary to temporarily suspend Council meetings, but we virtually reconvened the Council in early 2021 to resume this important work.

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 (the Foundation) works to bring this spirit of service to life through its philanthropic support of charitable organizations across the country and support for the volunteer involvement of our team members. The Foundation does this by focusing its philanthropic efforts on programs that enhance the communities where 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 2021, the Foundation awarded approximately $4.1 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 unprecedented events of the year 2020 reinforced the importance of our long-term partnership with Feeding America. The need for food has increased due to the COVID-19 pandemic and food insecurity in communities of color is disproportionately high. In fiscal 2021, the Darden Foundation awarded two grants totaling $2.5 million to help fund 15 refrigerated box trucks to increase access to nutritious food and address transportation needs at food banks that are under-resourced and serve a high percentage of people of color. In addition to enhancing mobile food pantry programs, the Foundation’s contributions support 191 food banks across the country and help provide meals for people facing hunger. The most recent donation marks a total of $12.3 million that the Foundation and Darden have contributed to the Feeding America network since 2010.

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 2021, Darden contributed approximately 5.7 million pounds of food, the equivalent of more than 4.7 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.

In fiscal 2021, as part of Darden’s commitment to inclusion and diversity, the Foundation donated $500,000 to Boys & Girls of America to support the creation, development, and implementation of programming that will help youth better understand diversity and combat racial discrimination. The new Youth for Unity curriculum will provide meaningful, action-oriented solutions to address social injustice and racial inequity and help foster the next generation of leaders, problem-solvers and advocates for change.

The Foundation’s funding 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 fiscal 2021 contribution of $200,000 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.

We are also a proud member of the American Red Cross’ Disaster Responder 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 2021, the Foundation provided $250,000 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.