The parent of the Del Frisco’s and Sullivan’s steakhouse chains revealed on Friday that it is considering the acquisition of other restaurant brands to keep the company growing.
The ideal candidate would be a small to emerging brand in the upscale casual or fine-dining market, said Norm Abdallah, CEO of Del Frisco’s Restaurant Group.
“We do not have anything definitive to announce today, but want to share our thinking,” Abdallah told financial analysts during the company’s quarterly call with Wall Street.
He noted that the company has both the balance sheet and the infrastructure to support acquisitions. DFRG has about $40 million in long-term debt, or about the same as the company’s earnings before interest, taxes, depreciation and amortization, or EBITDA. Abdallah said he’d be comfortable bumping up the debt to two times EBITDA.
Del Frisco’s is already investing in a larger support center, Abdallah added. The Dallas-based company has secured the 31,000-square-foot former headquarters of Cheddar's, the casual chain that was acquired by Darden Restaurants. The facility “contains a large test kitchen making it ideally suited to house our growing company,” Abdallah said.
He stressed that the company is not forgoing expansion of its current brands, which include Del Frisco’s Double Eagle and Del Frisco’s Grille. DFRG plans to open five to seven restaurants next year, an acceleration from the 2017 pace.
“Our development plans for 2018 equate to at least 10% in unit growth, making us among the fastest-growing companies within the upscale dining industry,” Abdallah said.
The company will also strive to improve its balance sheet by selling its company-run Sullivan’s steakhouses to franchisees, starting sometime next year. The concept will be tweaked in 2019 to operate more efficiently, Abdallah revealed.
That process has already begun with the elimination of lunch service at some Sullivan’s units.
Same-store sales at DFRG’s three concepts slipped 4% in the third quarter, led by the 7.7% drop at Sullivan’s.
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