Dallas-based Brinker International Inc. plans to buy 116 Chili's Grill & Bar restaurants from franchisee ERJ Dining, according to a regulatory document filed Wednesday afternoon.
The parent of Chili’s did not disclose the value of the deal, only stating that the restaurants generate revenue of about $300 million a year. Most of the casual-dining restaurants are in the Midwest. EJR is based in Louisville, Ky., and has been a Chili’s franchisee for 14 years.
The transaction, funded by an existing line of credit, is expected to close in the first quarter of 2020, Brinker said.
"This acquisition is a compelling opportunity to further invest in our brand, broaden our scale and create growth in earnings and cash flow," said Joe Taylor, Brinker’s chief financial officer, in a statement. "We appreciate the relationship we developed with ERJ over the years and view these well-established restaurants as a solid foundation for further growth in these markets."
Other restaurant brands have been buying back franchised units. In December, for example, Applebee’s, a division of Glendale, Calif.-based Dine Brands, took a step back into restaurant ownership with the purchase of 69 locations from Raleigh, N.C.-based franchisee Apple Gold Group.
For the third quarter ended March 27, Brinker’s net income was up 6.2% to $49.8 million, or $1.31 a share, from $46.9 million, or $1.02 a share, in the prior-year period. Revenues increased 3.3% to $839.3 million from $812.5 million in the same quarter last year. Same-store sales at Chili's company-owned restaurants increased 2.9% in the quarter. Same-store sales at U.S. franchised restaurant sales increased 2%.
For the recent Nation's Restaurant News Top 200 census, ERJ reported U.S. sales of $325 million for the fiscal year ended in December 2018 from 123 franchised Chili's locations. Those fiscal-year 2018 sales were up 3.2% from $315 million in 2017, when EJR ended the year with 125 Chili's restaurants.
Brinker, the parent of Chili’s and Maggiano's Little Italy, has about 1,700 restaurants.
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