Business

How Clarence Otis Jr’s unique business model doubled the value of this $8 billion restaurant chain

BY Preta Peace Namasaba June 18, 2024 1:09 PM EDT

With over 1,900 locations, you have likely eaten or ordered food from one of Darden Restaurants’ many brands. The multi-brand restaurant operator owns fine dining restaurant chains, Ruth’s Chris Steak House, Eddie V’s and The Capital Grille; and casual dining restaurant chains Olive Garden Italian Restaurant, LongHorn Steakhouse, Bahama Breeze, Seasons 52, Yard House and Cheddar’s Scratch Kitchen. Darden is the world’s largest full-service restaurant company, employing more than 190,000 people and generating $11 billion in annual revenue.

All this success was made possible by the unique and transformative business model of Clarence Otis Jr. The corporate veteran took over the company’s leadership during bleak economic times and doubled its share prices. His life and career trajectory are a study of excellence.

“You cannot be a prisoner of the circumstances you were born into. You must realize that the entire world is your playing field, not just your neighborhood. Unless the odds are 100 percent negative, then someone is making it. Even if it’s 70 percent against you, there are 30 percent who have done well. You have to assume that is you,” Otis said about beating the odds.

A young Otis never imagined he would one day lead a Fortune 500 company. He grew up in the Watts community of Los Angeles with parents who could not pursue education beyond the eighth grade due to financial circumstances. His parents had clear expectations about school and grades. Otis’ father who worked as a janitor believed in achievement and expected excellence in all his children’s endeavors. By the ninth grade, Otis had read nearly all novels and biographies in the Watts public library.

During the 1965 riots, Otis was often stopped and questioned by the police due to the color of his skin. Their landlord had his store burned down and the National Guard was deployed to the area. The end of the instability marked a new era for the neighborhood with increased federal funding and community volunteers and educators coming into the community. During high school, Otis excelled both academically and in football. His guidance counselor recommended a scholarship at Williams College and he got accepted into the highly selective liberal arts institution. Otis majored in economics and political science, graduating with a prize in political science writing.

After earning his law degree from Stanford, Otis worked as a corporate law associate at a couple of law firms. He joined Wall Street as a merger and acquisitions attorney at Kidder, Peabody & Company. He served as the vice president of the public finance division at First Boston Corporation, as managing director of Giebert Municipal Capital, and as a vice president and later managing director of the securities division at Chemical Bank. Otis turned around the bank’s struggling public finance division and led funding of $2.6 billion for tax-exempt pollution-control projects.

In 1995, Otis joined Darden Restaurants as a treasurer. He joined the company amidst a spinoff from its parent company, General Mills. He correctly predicted that casual dining would experience speedy growth in the coming years. Instead of franchising restaurants to independent, Otis preferred owning them and financed the acquisition of new restaurants across the country. He swiftly ascended the corporate ladder at Darden, becoming senior vice president of finance and later chief financial officer.

Otis was appointed as Darden of CEO in 2004 during economic downtime. He avoided mass layoffs and extreme price cutting at a time when companies across all industries were implementing major job cuts. Otis was intent on ensuring that the company not only responded to the recession but did so in a way that would not hurt the brand. His strategy included combined active portfolio management, disciplined brand building, and rigorous operational execution, among others.

Although his only experience in the food industry was as a waiter in college, Otis achieved strong operating and financial results at Darden. While rival restaurant chains halted expansion plans or began closing locations, Otis continued to expand the company’s reach. He revitalized Darden’s Red Lobster and bought other restaurant chains such as LongHorn Steakhouse, The Capital Grille, and, Eddie V’s Prime Seafood, among others.

Otis resisted offering high discounts to bring in diners even at the height of the worst recession in decades. His alternative strategy involved modifying the business to make it accessible to guests with lower purchasing power. Darden became innovative with its menu and developed exciting promotional offers to keep the balance sheet profitable.

During Otis’ tenure, Darden became the first full-service restaurant company to feature on the list of Fortune magazine’s 100 Best Places to Work under Otis’ leadership. The company achieved this distinction for four consecutive years. Darden became the largest publicly traded casual dining restaurant company in the world based on market share and revenues. Otis’ unique strategy saw the company’s share prices double and had shareholders smiling on the way to the bank. He resigned from Darden in 2014.

“It’s less and less about getting the work done and more and more about building the team — getting the right people in place who have the talent and capability to get the work done and letting them do it,” Otis said about his winning business formula.