Both Del Frisco’s steakhouse concepts have terrific check averages and are showing double-digit revenue growth. Why introduce a more-casual concept now?
February 23, 2012
Bob Krummert
If you already operate two chains where system-wide check averages are robust and both revenue and comp store sales show double-digit growth, do you really need another concept? Numbers don’t get much better than they are at the Del Frisco’s Restaurant Group these days, but this outfit thinks it can do even better—and take itself public along the way.
The company’s new growth vehicle is Del Frisco’s Grille, a casual spinoff of the company’s flagship Del Frisco’s Double Eagle Steak House brand. It’s meant to be an expansion vehicle “due to its smaller size, lower build-out cost and more diverse menu,” company honchos say.
It’s telling that even a company doing as well in the upper end of the steakhouse segment as this one is sees a need to offer customers something more accessible. The check average at Del Frisco’s Double Eagle Steak House is $98, and it’s $58 at sister concept Sullivan’s Steakhouse. Overall revenue is growing at 16 percent annually, with comparable store sales increasing 11 percent.
Yet Del Frisco’s is downshifting into casual dining despite these stellar results. Here’s how the company positions its casual vehicle, the Del Frisco Grille.
“The Grille’s menu is designed to have broad appeal and features Del Frisco’s prime aged steaks and top selling signature menu items. The Grille also offers an assortment of upscale, price-approachable entrees, including flatbread pizzas, sandwiches and salads alongside a broad selection of the same quality wines offered at Del Frisco’s. We believe the ambiance of the concept appeals to a wide range of guests seeking a less formal atmosphere for dining occasions.”
The Wichita, KS-based company opened two Grille units last year, in New York City and Dallas. It expects annual unit sales to come in between $4 million and $6 million, with check averages falling in the $45-$55 range.
That last number definitely pushes the upper limit for casual dining. It’s interesting to note that the company chose to brand its new concept with the Del Frisco’s name, which is synonymous with pricey dining. That $98 average check produces an average volume of $12 million at the nine Del Frisco Double Eagle Steak House units.
The company also operates 20 Sullivan’s Steakhouse restaurants, where more moderate pricing and smaller footprints produce the $58 check average that translates to an average unit volume of $4.2 million. Del Frisco’s could have made a few adjustments to the Sullivan’s menu and positioning to hit a lower price point, but it chose to leverage the Del Frisco’s brand name instead.
Two additional Grille units will open this year in Phoenix and Washington, DC, and the parent company has its eyes on the hotel market here and abroad. “We believe the Grille is particularly attractive to upscale hotels outside the United States—both large and boutique—seeking an anchor restaurant tenant,” it says.
It’s a good story for a company that has been privately owned and now wants to go public. Throw in current companywide EBITDA margins of 23.6 percent and this one’s ready to go. Del Frisco’s filed initial paperwork with the Securities and Exchange Commission in late January to start the process. It hopes to raise $100 million from the initial public offering.
Other growth will come from its flagship concept. Last week, Del Frisco’s announced plans to open a 23,000-square-foot Del Frisco’s Double Eagle Steak House in downtown Chicago.
We don’t know if you should buy this stock when it becomes publicly traded. But Del Frisco’s, which relies largely on business entertainment and business travelers, managed to steer itself nicely through the recent recession and its lingering aftermath, a period when other upscale steakhouse chains often struggled. It says a lot about the future of the steakhouse segment that, with better times here, this well-managed company sees casual dining as the key area of growth.
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