A Chain's Plummeting Value: $164M in 2008 to $8M Today

Romano's Macaroni Grill

There's no shortage of investors feeling that Darden Restaurants (DRI) gave up on Red Lobster too soon last year, unloading the iconic seafood chain in a $2.1 billion deal. That may sound like a lot of money, but activists argued that it was a fire sale.

Investors agreed, cleaning out Darden's board in favor of the activists with plans to shore up Darden's Olive Garden and other remaining concepts a couple of months later.

The market will always wonder if Darden threw in the towel before giving Red Lobster a few shots at turning things around, and with the economy showing signs of life, it's easy to see why more than a few investors feel that way. However, maybe they'll change their tune after considering the sad saga of Romano's Macaroni Grill.

And Called It Macaroni

Shares of Ignite Restaurants (IRG) plunged 17 percent last week after the parent company behind Joe's Crab Shack and Brick House Tavern + Tap posted disappointing quarterly results. However, the real jaw-dropping moment for Ignite came earlier in the week when it announced that it would be selling the 153-unit Romano's Macaroni Grill for a mere $8 million. That breaks down to a little more than $50,000 per location, but the real travesty is how much the casual Italian chain has deteriorated as it gets handed down.

Chili's Grill & Bar parent Brinker International (EAT) watched over Macaroni Grill for years, but it decided to diversify so it could focus on its higher-volume Italian concept, Maggiano's Little Italy. It found a willing buyer in Golden Gate Capital, the same company that would eventually go on to acquire Red Lobster.

Golden Gate was originally going to pay $131.5 million for an 80 percent stake that valued Macaroni Grill at a cool $164 million. This was during the summer of 2008 just as the global financial crisis was at its worst. Golden Gate was able to take advantage of the economic storm, talking down the price of the transaction to the point where it valued the chain at just $110 million.

It seemed like a shrewd buy at the time, but by 2013 it was willing to sell Macaroni Grill to Ignite for just $55 million. That was half the price that it had originally paid for the restaurant. Now we're seeing Ignite handing it off to Redrock Partners for just $8 million.

It was a humbling two years for Ignite. There were 210 Macaroni Grill units open at the time of its $55 million purchase, but the push to close down underperforming locations took its toll. The count was down to 179 restaurants by the end of 2013, sliding to just 153 when this year began.

Rock Lobster

Ignite was never able to turn Macaroni Grill around. Comparable-restaurant sales tumbled 6.5 percent in 2013, falling another 4.5 percent in 2014. Put another way, the average restaurant was making 11 percent less in sales than it was two years earlier when Ignite took the wheel.

Red Lobster also suffered a nasty streak of comparable-restaurant sales declines before Red Lobster found a willing buyer last summer. A turnaround is always possible. The improving economy should be beneficial to most operators. However, it also wouldn't be a surprise if, just like Macaroni Grill, we see Red Lobster being handed down at lower and lower price points. Darden did the right thing. Now it just needs to make sure that it can focus on getting things right at Olive Garden.

Motley Fool analyst Rick Munarriz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. Check out our free report onone great stock to buy for 2015 and beyond.