Americans Are Eating Out Less. LongHorn Is Winning. Here’s What It Means for NNN Investors.

The Squeeze at the Dinner Table

The American restaurant customer is doing math before dinner. In KPMG’s Summer 2026 Consumer Pulse survey of 1,544 U.S. consumers, 93% reported a higher cost of living over the past year and 67% said they are eating at home more often than dining out. Among those cooking at home more, 76% named budget as the main reason. Those who still eat out are trading down: 25% said they are visiting quick-service and fast-food restaurants more often, pulling spending away from casual and fine dining.

That is a hostile environment for any chain whose business model is a family sitting down for a full-service dinner. It is also the environment every casual dining landlord is underwriting right now, because a restaurant lease is only as durable as the restaurant’s appetite to keep paying rent on that building.

So the interesting question is not whether consumers are pulling back. They are. The question is who they are still spending on, and what that tells a real estate investor about which buildings to own.

Same Parent, Same Credit, Very Different Quarter

Darden Restaurants (NYSE: DRI) reported its fiscal 2027 first quarter on September 24, 2026, covering the thirteen weeks that ended August 30, 2026. Total sales rose 5.1% to $3.2 billion, and every segment posted positive same-restaurant sales. But the brand-level numbers tell two different stories.

Sources: Darden fiscal 2027 first quarter release (September 24, 2026) and Darden Form 10-K for fiscal 2026 (filed July 24, 2026). Growth rates and margins calculated by InvestmentGrade.com from reported figures.

LongHorn grew sales almost five times faster than Olive Garden, expanded its margin while Olive Garden’s slipped, and added 29 restaurants against Olive Garden’s 20. This was not a one-quarter blip either. For the full fiscal year that ended May 31, 2026, LongHorn’s same-restaurant sales rose 7.2% against Olive Garden’s 4.0%, and LongHorn’s average restaurant volume climbed from $5.2 million to $5.6 million.

Here is the part that surprises people: a steak dinner is not a budget meal. LongHorn’s check is higher than Olive Garden’s. Consumers are not simply chasing the cheapest option. They are deciding which nights out feel worth the money, and in this cycle a mid-priced steakhouse is clearing that bar more convincingly than an Italian chain with unlimited breadsticks.

Olive Garden is still the bigger, higher-margin business, and 1% growth in this environment is not a failure. But the divergence matters, because both brands hand their landlords the exact same credit.

Why a Landlord Should Care About a Steakhouse’s Same-Store Sales

Darden’s publicly issued debt carries a Moody’s Baa2, S&P BBB and Fitch BBB rating, as stated in its fiscal 2026 annual report. Darden says it manages its balance sheet to keep an investment-grade rating. For an NNN investor, that means the tenant credit behind a LongHorn lease and an Olive Garden lease is, for practical purposes, the same company. If you want the full explanation of what the BBB line means, our investment grade guide covers the rating scale in depth.

If the credit is identical, why would unit performance matter? Three reasons.

1. Renewal odds. Credit tells you whether rent gets paid during the primary term. It tells you very little about whether the tenant renews at year 10 or year 15. That decision is made restaurant by restaurant, and it follows sales. A strong-volume LongHorn with rising comps is far more likely to exercise options than a flat unit.
2. Rent coverage. The lower rent is as a share of restaurant sales, the safer the location. Using system averages, a newly built LongHorn priced at $3.4 million and a 5.25% cap rate produces roughly $178,500 of annual rent, about 3.2% of LongHorn’s $5.6 million average volume. That is a comfortable ratio. Individual restaurants vary widely, so ask whether the lease requires sales reporting.
3. Productivity per square foot. LongHorn’s current prototype is about 5,800 square feet with 180 seats. Olive Garden’s is about 7,700 square feet with 250 seats. On those prototypes, LongHorn produces roughly $965 of annual sales per square foot against roughly $755 for Olive Garden. A smaller, more productive box is easier to re-lease if a tenant ever leaves.

What the Market Is Paying Right Now

InvestmentGrade.com tracks net lease listings through broker partnerships across the U.S. As of September 26, 2026, this is the active Darden inventory we see.

The headline medians match. The story is underneath them. Split the same inventory by building age and structure and a pattern appears.

Source: InvestmentGrade.com tracked listings, active as of September 26, 2026. Asking cap rates, not closed sales. Small samples; treat as directional.

That is exactly what you would expect if the market understands the divergence. A brand-new building with a fresh 10-year lease trades mostly on credit and term, and Darden’s credit is Darden’s credit. A seasoned building trades on the question every landlord eventually faces: will this restaurant still be here, and paying more, in ten years? On that question, buyers are currently giving LongHorn the benefit of the doubt.

Two caveats. First, these are asking prices, and the older Olive Garden sample includes some 1980s and 1990s buildings that deserve a wider cap rate on age alone. Second, the widest Olive Garden asks (6.40% and 6.50%) sit on older assets and a ground lease with limited disclosed term. Read the lease, not the median.

The New-Build Wave Is a Ground Lease Wave

If you are shopping new LongHorns, you will notice that most are ground leases. That is by design. In its fiscal 2026 annual report, Darden states that its new-restaurant capital budgets for Olive Garden, LongHorn, Cheddar’s and Chuy’s are based on land-only leases, meaning Darden builds and owns the restaurant building and the investor owns the land.

Source: Darden Form 10-K for fiscal 2026, Item 2, Properties.

Darden plans 26 to 30 new LongHorns and 22 to 26 new Olive Gardens in fiscal 2027, after opening 27 and 22 respectively in fiscal 2026. Many of those sites will reach the investment market as newly built ground leases, which is why ground leases dominate the LongHorn inventory today.

Ground leases are excellent assets. The tenant has invested millions in a building sitting on your land, which strongly motivates it to stay. But they behave differently from fee simple ownership in ways every buyer should understand:

• Depreciation. Land is not depreciable. A ground lease buyer owns little or nothing that generates depreciation or benefits from a cost segregation study. If your 1031 goal includes tax shelter from depreciation, a fee simple property may serve you better even at a similar cap rate.
• Reversion. What happens to the building at the end of the lease depends entirely on the lease language. Some leases give the landlord the improvements; some require the tenant to remove them. Read that clause before you price the residual.
• Financing. Lenders underwrite ground leases well when the tenant is investment grade, but loan terms and proceeds can differ from a fee simple deal. Get lender feedback before you commit.
• Term. The new-build LongHorn and Olive Garden leases we track show roughly 10 years of remaining primary term, not the 15 to 20 years many investors assume. Confirm the term, the rent increases and the option periods.

The Treasury Test

Every NNN yield should be compared with the risk-free rate. The 10-year U.S. Treasury closed at 5.17% on September 25, 2026.

A new LongHorn ground lease priced near the Treasury yield is not necessarily overpriced. The buyer is paying for scheduled rent increases, land that tends to appreciate, and the chance to own a site Darden chose after a detailed market study. But the current yield premium over a government bond is thin. Buyers should know that going in, and should compare it against seasoned inventory where the spread is wider.

The same credit is also available in the bond market. Darden funded its acquisitions of Cheddar’s, Ruth’s Chris and Chuy’s with senior notes, and as of May 31, 2026 it had unsecured notes outstanding maturing in 2027, 2029, 2033, 2035, 2037 and 2048, with coupons ranging from 3.85% to 6.80%. A bondholder gets liquidity and seniority. An NNN owner gets real estate, rent growth and, in a fee simple deal, depreciation and 1031 eligibility. We break down that trade-off in investment grade bonds vs. NNN real estate.

The Darden Brands You Cannot Buy

Darden runs nine active brands, but NNN investors can realistically buy three of them. Among the 2,218 Darden restaurants open at the end of the latest quarter were 112 Chuy’s, 95 Yard Houses, 83 Ruth’s Chris Steak Houses, 75 Capital Grilles, 44 Seasons 52s and 32 Eddie V’s. We currently track zero of them for sale.

There are structural reasons. Darden’s annual report says new Yard House, Ruth’s Chris, Capital Grille, Seasons 52 and Eddie V’s restaurants are budgeted on ground-and-building leases, and many of these brands operate in multi-tenant and mixed-use settings, so fewer freestanding single-tenant buildings come up for sale. Chuy’s joined Darden in October 2024, so its legacy leases may still name a pre-acquisition entity rather than Darden. For any acquired-brand lease, confirm exactly who signed the lease and whether Darden stands behind it. The logo on the building is not the credit on the lease.

When one of these does come to market, scarcity tends to set the price. If you want to be the first call, tell us.

How to Choose Between a LongHorn and an Olive Garden

• If you want the tightest credit story and a brand-new building, a new-build ground lease from either brand gives you essentially the same pricing. Choose on location, rent increases and lease term.
• If you want more yield, look at seasoned inventory, and weigh brand momentum. Today’s data suggests the market pays up for seasoned LongHorns because of their sales trend.
• If depreciation matters to your 1031 plan, favor fee simple over ground lease, even if it costs you a few basis points.
• If you are comparing against weaker credits, Darden trades well inside non-investment-grade casual dining. See our Chili’s and Outback Steakhouse profiles for the comparison.
• Always verify the guarantor, remaining term, rent increases, option periods, reversion clause and any sales reporting requirement.

If You Already Own an Older Olive Garden

Olive Garden is a strong brand with an investment-grade parent, and nothing in one quarter changes that. But if you own a seasoned Olive Garden, particularly an older building with a shorter remaining term, this is a good moment to know what it is worth. Buyers currently price older Olive Gardens wider than comparable LongHorns, and investment-grade casual dining inventory remains limited. Whether the right move is to hold, extend, refinance or sell depends on your lease and your goals. A current valuation makes that decision easier.

Related Research

• LongHorn Steakhouse Credit Rating and NNN Cap Rate
• Olive Garden Credit Rating and NNN Cap Rate
• Investment Grade Tenant Credit Ratings Index
• NNN Cap Rates 2026 by Tenant Credit Quality
• Best Investment Grade NNN Tenants for a 1031 Exchange
• Investment Grade Bonds vs. NNN Real Estate

Sources and methodology. Consumer data: KPMG Consumer Pulse, Summer 2026 (1,544 U.S. respondents, fielded February 27 to March 18, 2026). Operating results: Darden fiscal 2027 first quarter release (September 24, 2026). Credit ratings, debt, properties, unit economics and opening plans: Darden Form 10-K for fiscal 2026 (filed July 24, 2026). Treasury yield: U.S. Department of the Treasury daily par yield curve, September 25, 2026. Listing data: InvestmentGrade.com tracked listings, active as of September 26, 2026; asking cap rates, not closed transactions. Sales per square foot uses current prototype sizes and is an estimate. InvestmentGrade.com is not a credit rating agency. This article is for information only and is not investment, tax or legal advice. Updated quarterly after Darden reports earnings.