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4 Restaurants That Could Join Sbarro in Bankruptcy

These mid-tier restaurants could be too far underwater in the foreseeable future

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Darden Restaurants (DRI)

Restaurants-DRI-stock-sbarro-bankruptcyGranted, on the surface, Darden Restaurants (DRI) looks like its strong enough to salvage. Although income hasn’t grown much since 2011, at least the top line has steadily increased since 2010. In fact, the restaurant chain has been profitable — even if only marginally — every quarter fore the past several years.

So what’s the red flag waving over Darden? In simplest terms, the vultures are starting to circle.

You know your goose is cooked when you start getting unsolicited ideas from hedge fund managers explaining their idea to “fix” your restaurants. And, when the phrases “unlock hidden value” and “convert your real estate into a REIT” are part of that conversation, it’s time to put your hand on your wallet.

One way or another, shareholders are apt to be on the losing side of that deal, even if such a deal avoids a bankruptcy that wouldn’t materialize for years. The alarming part is that the company’s best idea to shore up the struggling business is to sell its Red Lobster restaurants. But even that doesn’t solve the bigger-picture problem.

But the problem doesn’t stop at Darden…

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