Ladies and gentlemen, thank you for standing by. Welcome to the fourth quarter earnings release conference call. (Operator Instructions) I would now like to turn the conference over to your host, Mr. Matthew Stroud. Please go ahead.

Thank you, Greg. Good morning, everybody. With me today are Clarence Otis, Darden's Chairman and CEO; Drew Madsen, Darden's President and Chief Operating Officer; and Brad Richmond, Darden's Chief Financial Officer. We welcome those of you joining us by telephone or the Internet. During the course of this conference call, Darden Restaurants officers and employees may make forward-looking statements concerning the company’s expectations, goals, or objectives. These forward-looking statements could address future economic performance, restaurant openings, various financial parameters or similar matters. By their nature, forward-looking statements involve risks and uncertainties that could cause actual results to materially differ from those anticipated in the statements. These risks and uncertainties include the impact of intense competition, changing economic or business conditions, the price and availability of food, ingredients and utilities, labor and insurance costs, increased advertising and marketing costs, higher than anticipated costs to open or close restaurants, litigation, unfavorable publicity, a lack of suitable locations, government regulations, a failure to achieve objectives, weather conditions, risks associated with our plans to continue to improve financial performance at Bahama Breeze to support new restaurant growth, the closure and disposition of certain Smokey Bones restaurants and the anticipated sale of the remaining Smokey Bones restaurants, and other factors and uncertainties discussed in the company’s SEC filings. Because of these numerous variables, you are cautioned against placing undue reliance on any forward-looking statement made by or on behalf of the company. A copy of our press release announcing our earnings, the Form 8-K used to furnish the release with the Securities and Exchange Commission, and any other financial and statistical information about the period covered in the conference call, including any information required by Regulation G, is available under the heading investor relations at darden.com. We plan to release same-restaurant sales results for fiscal…

Thank you, Matthew and good morning. As Matthew just said, we reported a 13% annual diluted EPS growth from continuing operations, with EPS of $2.53. I thought it would be helpful to reconcile this back to our May earnings guidance. In May, we gave earnings guidance of 11% to 12% annual diluted EPS growth from continuing operations. At that time, we were not including the fiscal year P&L impact of the closed Bahama Breeze restaurants in discontinued operations. That impact equates to approximately $0.05. In yesterday’s release, we included this amount in discontinued operations. In addition, we recently completed a workers’ compensation reconciliation dating back to pre-spin-off years when Darden was a part of General Mills. This reconciliation resulted in a $0.03 unanticipated diluted net EPS reduction in the fourth quarter that was not included in our May guidance. If you adjust for these two items, subtract the $0.05 for Bahama Breeze and add back $0.03 for workers’ compensation reconciliation, the adjusted diluted EPS would be $2.51, which represents a 12% diluted EPS growth in continuing operations, in line with our May guidance. Now, Darden's total sales from continuing operations increased 3.2% in the fourth quarter to $1.46 billion, driven by same-restaurant sales growth at Olive Garden and our operation of 23 more restaurants than in the fourth quarter of the prior year. As a reference, industry same-restaurant sales as measured by Knapp-Track and excluding Darden were down approximately 1.4% for the quarter. Olive Garden same-restaurant sales though were up 3.5% for the quarter -- its 51st consecutive quarter of same-restaurant sales growth and its total sales increased 8.2%. Red Lobster had a same-restaurant sales decrease of 2.2% for the quarter and a total sales decline of 1.8%, as they lapped a strong quarter last year. As you may recall,…

Thank you, Brad. I’ll share a few thoughts about the casual dining industry first and then summarize the strategic focus for each of our businesses in fiscal 2008. Overall, we believe we are well-positioned to outperform the industry and deliver another solid year of performance. From an industry perspective, we expect the casual dining environment over the near-term to be similar to what we’ve experienced most recently. In particular, sales growth will most likely continue at fiscal 2007 levels, somewhat below historical norms, and cost pressure will remain somewhat above what we experienced last year. Importantly, our fiscal 2008 plan addresses both dynamics. More specifically, given this background, there are four key considerations that have helped shape our thinking for fiscal 2008. First, since consumers have become more discerning regarding where they decide to eat, brands with broad appeal and strong value like Olive Garden and Red Lobster will have the best chance to outperform the industry. Second, when guests visit our restaurants, it is more important than ever that we consistently deliver a great guest experience. Third, giving our guests a new reason to choose our restaurants, typically in the form of compelling new food promotions that represent a solid value, will continue to be important. And finally, we will take full advantage of the cost management opportunities that our scale and strong operating infrastructure provides, especially in our supply chain. This will allow us to minimize the amount of pricing we need to take to protect our unit level margins while still maintaining broad consumer appeal. Now let’s talk about the specific priorities at each of our operating companies. Olive Garden has broad appeal, strong guest loyalty, industry leading value and a proven business model. They outperformed the casual dining chain benchmark for same-restaurant sales growth by more…

Thank you, Drew. In fiscal 2008, we expect combined same-restaurant sales growth for Red Lobster and Olive Garden to be between 2% and 4%. As Drew mentioned, Red Lobster, which had a challenging prior year comparison in the fourth quarter, is off to a solid start in June, trending above this range. Of course, we will be both above and below this 2% to 4% range month to month, depending on promotional calendars, holiday shifts, and changes in consumer sentiment, which as you know has been volatile for much of the past 12 to 18 months. The new restaurant plans that Drew outlined mean that we expect a net new restaurant increase of approximately 40 restaurants, putting total sales growth for the year in the range of 5% to 7%. We expect capital spending to be slightly higher than it was in fiscal 2007 at approximately $400 million. We are spending more on new units, relocations, and remodel testing than the prior year. Looking at operating profit margins from continuing operations, we anticipate margin improvements of approximately 20 basis points on an annual basis compared to fiscal 2007. This expansion will primarily come from selling, general and administrative expenses as we leverage more of our fixed costs with sales growth. We anticipate that food and beverage expense as a percent of sales will be unchanged from the prior year. Cost savings initiatives and favorable sales mix changes due to Olive Garden's expansion will be offset by increased costs of various commodities. We anticipate an inflationary environment in fiscal 2008 due to the production of ethanol and other bio fuels and the downstream impacts on feed derived from corn and soybeans. However, we have contracted a high percentage of our fiscal 2008 usage in anticipation of these costs impacts as follows:…

Thanks, Brad. I think you can see that with the recent restaurant closings and our decision to sell Smokey Bones, our accounting does get a little complicated. But stepping back from that, I would tell you we feel good about our results for the year. We feel good about the strength of our business, which is in a very, very strong position from a competitive perspective. I think everyone who follows casual dining knows that this was not an easy year. Many very strong companies with long track records of success had to make some tough choices, and certainly in deciding to sell Smokey Bones, we had to make a tough choice as well. But we continue to have strong industry-leading performance. That’s certainly reflected in our fiscal year 12% diluted net earnings per share growth after the adoption of FAS-123R, and after all the adjustments that Brad detailed previously. And then that was 16% on an apples-to-apples basis really when you exclude the impact of FAS-123R. We are just as excited though by the fact that even as we successfully navigated the challenging environment and put up those kind of financial results, we made progress building a long-term strength of each of our brands. As we’ve said before, we have a proven approach to the business. That approach is anchored in combining strong brand management with great operations and guided by that approach, we’re confident that we are working on the right things at all of our brands -- things that are going to drive continued, current period success while better positioning us to capture what we think is a very attractive long-term opportunity in casual dining. Ultimately, what really drives our ability to create sustainable leadership level value for our shareholders is having great people, and so I’m proud of our results but I’m even prouder of the outstanding people in our restaurants, in our restaurant support center who have delivered those results. We’ve got what I believe are at every level of our organization the strongest leadership teams in casual dining and investing in their continued growth, their continued development is a big part of our 2008 plan and it’s critical really to any success that we’re going to have. I’d conclude by just reiterating that we think we’re well-positioned entering 2008. We’re excited about our financial plan for the year. We’re excited about what we’ll accomplish strategically this year to make the company even stronger, and now we’re prepared to take your questions. Thank you.

(Operator Instructions) Your first question comes from the line of John Glass from CIBC. Please go ahead.

Thanks. Good morning. Given your discussion of the cost environment right now, what do you think of price -- what is a reasonable pricing level you need to keep restaurant, protect restaurant margins? I presume that is the goal, is to keep the restaurant level margins flat in ’08 versus ’07?

What I would say, we don’t talk specifically about pricing just due really to competition and not wanting to disclose that. When we talk about that 2% to 4% same-restaurant sales level and we said before that really -- and that’s a normalized level and we expect that again in ’08. In general, what we’re looking there for is about a point of traffic and the balance would be some combination of pricing and mix change. So that’s generally about as far as we’d go for competitive reasons. More specifically about this year, we’re not prepared really to get into our pricing strategy.

That’s helpful. And then, Brad, if you could just clarify something when you talked about the difference in how you looked at the annual earnings versus the prior period, can you talk about what actually hit in the fourth quarter? In other words, was the $0.05 a benefit from Bahama Breeze and the $0.03 both in the fourth quarter, or was one stretched across the whole year and one just hit in the fourth quarter?

Both of those occurred in the fourth quarter, and that’s relative to the guidance that we set out before.

So just to clarify, did you feel like this quarter was in line with what you previously expected or was it better, worse? I think there was a difference between what you reported versus what street expectations were, but I’m not sure street expectations had all the facts.

There were a lot of moving pieces and that’s why I tried to take a moment there and detail that out. We believe it was right smack in the middle of our range or just slightly above it.

Okay, that’s helpful. Thanks.

Your next question comes from the line of Steven Kron from Goldman Sachs. Please go ahead.

Thanks. Good morning, guys. A couple of questions, if I might. First, Clarence, I was wondering if you could just give us a little bit of an update on your current thinking as it relates to strategic acquisitions in light of some continued pressure in the category and the continued inflationary cost environment. Is there anything that we should be thinking about as far as any change in timeline or thought process?

I don’t think much has changed in our thinking. We want to be in a position to be able to be opportunistic if something that really is attractive and can drive value for our shareholders becomes available. So we do manage our capital structure with that point of view and we’ve talked in the past about the fact that we do feel there’s room to take our leverage level up and still maintain the ability to be opportunistic and so we’re going to be doing some of that through this year. But that’s about as much as we have control over, is really being prepared in case something develops that makes some sense.

Secondly, you guys talk about strong cost management and in your prepared remarks, there was a couple of points that were made as far as whether supply chain efficiencies or just other ways to try to control costs. I was wondering if you could just, in light of the current cost environment, in light of your expectation of continued margin gains, some of which will come from sales leverage, but are there specific things that you could point to to help us understand a little bit better what types of cost efficiency programs are currently in place here?

Sure and I will start it and then ask Drew and Brad to weigh in but we’ve had a pretty strong focus on cost management for several years now, just to make sure that we’re able to have a pricing strategy that make sense, that protects our top line. So we’ve had significant upward pressure the last several years coming from a number of different lines -- utilities, food costs, labor, all of those things have been there. One of the things that’s helped the last couple of years has been a real strong focus on running restaurants that are even safer and cleaner, and so loss prevention has been important. We’ve seen our workers’ comp incidents, our public liability, our guest incidents when it comes to accidents go down. We’ve also, when we do have accidents, we focus on managing the claims process in an effective way and so the costs of each of those claims has also come down. So significant dollars saved in the workers’ compensation area the last couple of years offsetting some of the pressure, and there are a host of other things. Drew, Brad, you may highlight some of the bigger ones.

Sure. There’s three broad buckets that we think about when we are thinking about this disciplined cost management. One is our supply chain that we’ve already mentioned. We think it’s competitively superior and we think our ability to understand the markets and place our contracts accordingly put us in a favorable position and Brad went through where we stand with shrimp and a lot of the other higher priced proteins, and we feel very good about that. The second big bucket is investments we make in information technology. I talked about meal pacing system, rolling that out, iKitchen is another initiative that we are in the process of rolling out that really helps us automate ordering inside our restaurants A, to make it easier for our restaurant managers and B, to make sure we’re capturing the accurate and negotiated price more consistently and we see cost savings there. Third is more an organizational discipline, if you will, for us each year to step back from our business, look at how we’re running it and what costs have gotten into the business that may not be adding value today that we can take out without in any way impacting the guest experience or the employee experience for people who work in our restaurants. So beyond food and the supply chain, beyond technology initiatives, we continuously have a focus to reduce waste in restaurants, to have labor productivity that continuously improves each year. Clarence mentioned workers compensation already, so it’s more an ongoing discipline with very aggressive targets in each area that cascade throughout the organization.

I think the only thing that I would touch on that Clarence and Drew haven’t touched on is our past investments in direct labor and the management of that, particularly as the wage rates increase there. The more sharing of those programs and additional investments in that of our scale make those very worthwhile to do, very good returns without effecting the guest experience but also helping protect our margins as well.

Thanks a lot.

Your next question comes from the line of Jeff Omohundro from Wachovia. Please go ahead.

This is actually Jason Belcher for Jeff. Wondering first if you could give us an idea of what the ongoing earnings dilution would have been for just the Smokey Bones brand at Q4 if it were not all moved to discontinued operations?

Just one second here. We’re looking for that answer.

While you’re looking, I’ll go on with my follow-up; I was wondering too if you could provide a little more detail on the timing of the ’08 store development plans throughout the four quarters.

Olive Garden is obviously where we are opening the bulk of our restaurants and it’s pretty balanced quarter by quarter. It may be slightly more in the second-half than the first-half, but not dramatically.

Okay, great.

In the fourth quarter, just from operations for Smokey Bones would have been roughly the $0.04 range.

Okay, that’s helpful. Thanks a lot.

Your next question comes from the line of Jeff Bernstein from Lehman Brothers. Please go ahead.

Thanks. Just a follow-up on the popular topic of acquisition versus I guess peers’ focus more on brand disposition. Clearly your brands have been more resilient than most but obviously not immune to the broader casual dining pressures. I’m just wondering what metrics give you comfort, I guess Clarence, that industry trends ultimately improve, making an acquisition the best option at this point? And then as a follow-up, I’m just wondering if you guys have given from a high level perspective any thought to the alternative of perhaps focusing on your two core brands, perhaps lowering long-term growth expectations and more of a focus of returning capital to shareholders, similar to your brethren in quick service? Thanks.

I would say that the thing that we look at when we talk about the industry is really the top line, and so we have had a deceleration in growth in casual dining from what was 4%, 4.5% to the last 12 months, it’s more like 2.5%. But that said, that’s still very solid growth given all of the pressures that consumers have been under and so I think it speaks to the category and its strength and the fact that it really is part of the fabric of people’s lives. So we think that ultimately, that’s the bottom line when it comes to the category. So growing at 2.5% in a difficult environment given all of those pressures we think is good solid evidence that this is a strong category. I think in terms of how we think about creating value, we think that we create value by building this business, taking advantage of that industry opportunity and to the extent that we think we can’t build a business, we can’t leverage all of these restaurant support assets that we’ve got, all of the fixed and semi-fixed assets we’ve got, all of the leadership expertise that we have, then we will return cash to shareholders, which I don’t -- I think that’s how we think about it but we do think that we’ve got a tremendous amount of expertise, an incredible infrastructure and platform to leverage to grow and capture the industry growth opportunity. So that’s how we think about it. Capturing that growth opportunity from our perspective includes not just really running our existing businesses better and continuing to get more volume across that base of restaurants. It’s an important part though, and so if you look at Olive Garden I think Drew mentioned or Brad may have…

Clarence, you mentioned leverage and I know you said returning cash to shareholders would follow obviously your primary focus on building value through new units in the platform but in the prepared remarks, I know it talked about repo in ’08 would be more than in ’07, and I know that your increased leverage got a lot of attention on your last conference call. I’m just wondering in terms of now that it seems like you are willing to increase that ratio of the leverage, the timing of potential repo or whether you would just do an open market or perhaps something more in lines of a tender or an accelerated share repurchase? I’m just wondering your thoughts with this increased leverage opportunity.

Good question and I think it really does speak to the strength of our brands that we’re able to build the business and still have free cash flow increasing to return to investors and on top of that, we are taking the leverage level up. We talked about a new range that is 55% to 65% on an adjusted debt-to-capital basis. We’ve been at roughly 50%. We would be moving toward that range, so getting up to at least 55% through the course of this year. Our practice has been to do that with a continuous bid in the marketplace and so the dollar average our way there, we think that’s a much more effective way to do it than an accelerated share repurchase. I don’t know that we’d get a whole lot of lasting benefit from an accelerated share repurchase. I think we pay a little bit more for the shares. So we would expect to continue to do that. As Brad said, share repurchase in ’07 I believe was nearly $400 million and so it is going to be higher than that in ’08, but it will be paced through the year.

Thank you.

Your next question comes from the line of Glen Petraglia from Citigroup. Please go ahead.

In terms of Red Lobster and if I read into your unit growth openings planned for fiscal 2008 of 40 units, the intimation is that there’s I guess virtually no unit growth at Red Lobster. If I go back to your January presentations, you suggested maybe four to 10 units in both ’08 and ’09. I’m curious; maybe I’m over-thinking this, but have you scaled back your thoughts in terms of how many units you should be opening in ’08 at Red Lobster. I’m curious to know if so, what’s driven that decision.

We’re opening about the same number of restaurants at Red Lobster that we thought we would but in combination with relocations and closings, the net new units --

Got it. And then earlier, you mentioned that you are going to try to tightly manage the costs at the restaurant level to limit the amount of pricing that you need to take. Obviously that’s a prudent strategy but I’m curious -- do you feel that in this current environment that the pricing opportunity may be less than it may have been let’s call it 12 months ago?

I think that’s fair and that’s why we are so focused on taking costs out of the business that doesn’t add value and why we’re so focused on providing a consistently great guest experience every time in every restaurant.

Thanks.

Your next question comes from the line of Mark Wiltamuth from Morgan Stanley. Please go ahead.

Good morning. Clarence, there’s been some commentary from some of the peers out there that some of the weakness in the industry has been centered on real estate markets where housing prices have tumbled. Have you seen any of that? If you could really comment on how the Florida market looks versus the rest of the country.

I would say Florida and California are pretty weak. I don’t know that it’s the real estate prices. I think it is more about the nature of the mortgages. People took on a lot of mortgage in California and Florida. There are more -- I don’t want to say exotic mortgages but there are more floating rate mortgages. There are more lower down payment mortgages because the housing prices are so high that I think people are responding to that. But we’ve certainly seen both states weaker than the rest of the country.

Thank you.

That’s 15%, 16% of the population of the whole country in those two states.

What can you really point to that will really make you feel like the comps are going to get better in the second-half of the year? Is there anything out there you can really address?

We would expect that interest rates will stabilize and so they will not continue to increase since we won’t see the upward adjustments putting pressure on people’s discretionary income that we’ve seen over the last 12 to 18 months. I think that’s part of it. When it comes to energy prices, that’s anyone’s guess but our expectation is that while there might be volatility, it will be around the levels that we’re at today. And so some of it is a deceleration in those cost pressures.

Thank you.

Your next question comes from the line of John Ivankoe from J.P. Morgan. Please go ahead.

Thanks. A question on the CapEx; can you walk us through of that $400 million, how much is new units, how much is just your standard maintenance and how much is associated with Red Lobster and if there’s any kind of one-time-ish corporate spending that’s in that number?

In the broadest sense, new units is by far and away the large portion of that as we look at ’08.

How many gross new units are you opening?

That’s a great question, John, because we did talk about net and on a gross basis, it’s probably about 54, 55 and 40 on a net basis.

Okay. If you use 40, you can’t really get there but I guess if you use 55, you can.

Because that obviously includes relocations and some rebuilds.

And back to Drew’s answer on Red Lobster, they actually have nine new openings planned for ’08, though all those are relocations so the net growth doesn’t show up. But in rough terms, new units in terms of relocations, rebuilds is approximately half of that number. About I’d say 35%, 40% of that is what you would call just replacement maintenance CapEx, and then we have about the remainder of that is really testing of some new remodels as we look out to the future and being prepared for that.

Two follow-ups, same question; I think we talked about Red Lobster remodels before, fairly inexpensive, just over $100,000. Am I remembering that correctly in terms of just some small types of interior touch points and what have you? Or might you be considering something larger?

I think at this point, John, it’s hard to say. We are thinking about something a little bit more substantial but Drew I think mentioned the first step was really getting a new restaurant prototype that we were comfortable with because that’s going to be the basis for the remodels. We got that in ’07. Now we’ve got to test a variety of different options when it comes to remodel and they’ll stretch across a lot of price points, so it’s pretty early now when we have none of those in the marketplace to comment on what they might cost.

Finally on a corporate basis, I think you are moving soon. Is that correct?

We are.

Is any part of that in the ’08 budget for CapEx?

There is some. I think what Brad didn’t pull out, there is technology in there as well and so a lot of these technology investments we’re making but there is also some for the move of the headquarters, although we’re still two years away but Brad, you may want to comment on that.

As Clarence mentioned, the technology piece of that is going to be in the -- a little bit less than the prior year but still that $20 million to $25 million and that would be in the, when I was grouping it before, in the maintenance CapEx, if you will. On the new RSC Campus, as Clarence mentioned that’s two years out so there’s -- I don’t have the exact number on hand but it’s probably around the same amount as the technology number.

Okay, very good. That’s helpful. Thanks.

Your next question comes from the line of Joseph Buckley from Bear Stearns. Please go ahead.

Thank you. Can you tell us where you are now using your definition of adjusted debt to capital?

We’re just over the 50% mark. I think about 51% is where we came out when we ended the fiscal year.

And then a question on meal pacing, I think you mentioned it for both Olive Garden and Red Lobster. Could you go into a little bit of detail what it is, how far rolled out it is right now, and what the desired effects are?

Meal pacing for us is something that helps coordinate the flow of an order through the kitchen so that everything comes up in as sequenced a manner as possible and the food gets to the guest as hot as possible. What we’ve seen in testing at both Olive Garden and at Red Lobster is an increase in throughput, so there’s some guest count benefit, and also an increase in guest satisfaction. So it is in the process of being introduced already at Olive Garden and we should complete that, as I said, some time in our second quarter. We’re further ahead at Olive Garden. Red Lobster has just finished their testing and is beginning implementation now but should have it finished by the end of our fiscal year.

Last question, you mentioned Red Lobster being off to a great start with the grilled promotion. It’s a pretty high check promotion, I believe. I guess I’m curious of the game plan for fiscal ’08 in terms of value or possibly driving higher check through Red Lobster.

I’ll start just with our general thoughts, Joe, and then Drew can get more specific if he wants to. I think what we believe when it comes to a promotional calendar on an annual basis is that it needs to be balanced when you are talking about price points. So it needs to have value, it needs to have something in the middle that pretty much approximates what your core menu looks like from a price point and margin perspective and then there are times of the year, any year, almost any environment, where people are in a mood to spend somewhat more than they might be at other times in the year and you need to be responsive to that promotionally. That’s really been the goal with Red Lobster is to get that balance. We were out of balance if you go back several years and probably had too much discounted price promotional part of our total promotional calendar.

Maybe to amplify it a little bit, the current promotion that we’re seeing, the dynamics of it, fit pretty well with what Clarence outlined earlier for what we would expect to see in same-restaurant sales growth. So if you get a percent in guest count growth and 2% or 3% in check growth, that’s about what we’re seeing in combination with this current promotion. So it isn’t giving us any value concerns at this point.

Thank you.

Your next question comes from the line of Rachael Rothman from Merrill Lynch. Please go ahead.

Good morning. Speaking about modeling out your G&A going forward, given the disposition of Smokey Bones and the closures at Bahama Breeze, how should we think about your opportunity to scale your G&A?

Clearly as we continue to grow and complete the sale of Smokey Bones we would expect to see some more leveraging in our G&A as we move forward. Again, that’s a highly leverage-able line for us. We’ve also invested over time and continue to invest in there to drive some of our enterprise strategic initiatives. So I’d look for more leveraging there in future years as well.

Do you have a sense for what portion of the G&A you attributed to Smokey Bones or Bahama Breeze, or is that not how you guys look at it?

On Smokey Bones, we really wouldn’t go into that much detail on our G&A but obviously there’s a portion of our G&A that still exists to support that operation until the time of the sale.

And that piece is in discontinued operations, so I think we’ve moved some of that down already.

Okay, fair enough. Would it -- I guess the way I’m thinking about it, obviously you guys have been doing extensive work on the concept and so obviously that probably took a lot of management time, attention, et cetera. So maybe if you focus back on your stable or less growth-oriented brands, maybe that would give you an opportunity to leverage that line item a bit.

I think that’s fair. I think that’s a fair way to think about it. That’s how we think about it.

Okay, perfect. And then if I could just follow up on the CapEx at Red Lobster. Can you guys talk a little bit about the prototype that you unveiled at the January analyst meeting, is that similar to what you guys are going to be going with? Have you had opportunities to value engineer that prototype and maybe what some of the feedback or guest feedback and return hurtles that you are looking for are?

The design is what you saw at the analyst day. The Red Lobster team, after having opened two and operating them for a while, has had the opportunity to value engineer them a bit, reduce the investment by a few hundred thousand dollars and add more seats and maintain guest satisfaction. So going forward, the new prototypes that they will open will have the same look and feel but will be optimized.

Do you have a particular return hurtle that you are shooting for?

Absolutely. We really have a return hurtle for Red Lobster and Olive Garden. It’s pretty similar and it’s about a point-and-a-half of what we calculate to be our cost of capital.

Perfect. Thank you so much.

Your next question comes from the line of Michael Smith from Oppenheimer. Please go ahead.

Good morning. Most of my questions have been asked and answered but I thought I would take advantage of this to see whether you have experienced any new trends in the construction cost of new units or remodeled units. Are they still going up at the same pace they have been for the past couple of years or have they stabilized somewhat?

Construction costs are not going up at the same pace, so they have stabilized. They have not come down as much as we’d like to see them come down but they’ve stabilized. I think the bigger challenge on the new restaurant side is really land costs or lease costs, which we’re not seeing any mortgage busts on the commercial side.

The other question I had was concerning the promotion of Red Lobster. You might have covered this in your prepared remarks but you did indicate that it was going to be a price point I think commercials that you were going to be using all year long. Was that correct?

Not at all. For Red Lobster, what we talked about is making sure we have promotions that have more compelling product news in them more consistently across the year and product news that is less about quantity and more contributes to culinary expertise. So that’s really what we were getting at. The Olive Garden commercial that’s in promotion, that’s on the air now has a price point in it but for Red Lobster, the real emphasis is making sure we consistently have more proven compelling product news that also builds a perception of culinary expertise.

Thank you.

At this time, there are no further questions.

Thank you, Greg. We’ll wrap it up right there. We appreciate you all joining us on the call this morning. If there’s any follow-up questions that you’d like to ask, please let us know. Give us a call here in Orlando. Everybody have a great summer. We look forward to talking to you again in September.

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