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Brinker completes acquisition of 116 Chili’s

Restaurants purchased from 14-year franchisee, ERJ Dining

Brinker International Inc. has completed the earlier-announced acquisition of 116 Chili's Grill & Bar restaurants from its 14-year franchisee, ERJ Dining, the casual-dining company said Thursday.

The Dallas-based company said most of the restaurants are in the Midwest and generate about $300 million in annual revenue. ERJ Dining is based in Louisville, Ky. The deal, which the company had said would be funded by an existing line of credit, was announced in July.

"This acquisition reinforces our strategy to invest in our brand while generating additional earnings and cash flow for shareholders," said Joe Taylor, Brinker’s chief financial officer, in a statement. "Our strong operational infrastructure brings additional support and investment for the solid group of operators joining the Chili's corporate family as part of this transaction."

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.

In a fourth-quarter earnings call in August, Wyman Roberts, Brinker CEO, said company-owned units help make a restaurant brand more nimble.

"Speed is important in this day and age,” Roberts said. “and I think … we're able to move more quickly when we have a large restaurant base that are company-owned. So, there's strategic reasons that we like the company-owned model as a predominant model for us.”

About 24% of the Chili’s system, or 298 units, was franchised at the end of Brinker’s most recent fiscal year on June 26, and this deal reduced that to about 15%, the company said in year-end federal filings. Over the past year, Brinker had purchased three Chili’s previously owned and operated by franchisees. The company also started franchising its Maggiano’s Little Italy brand in the most recent year.

For the fourth quarter ended June 26, Brinker reported net income of $46.7 million, or $1.22 a share, up from $43.8 million, or $1.01 a share, in the same period last year. Revenue rose to $804.8 million, up from $791.4 million in the prior-year quarter.

Chili's company-owned same-store sales increase by 1.5% and its franchised stores saw an increase of 0.9%. Maggiano's company-owned comparable restaurant sales decreased by 0.2% in the fourth quarter.

As of June 26, Brinker had 1,665 casual-dining restaurants, including 1,612 Chili’s and 53 Maggiano’s.

Contact Ron Ruggless at [email protected]

Follow him on Twitter: @RonRuggless

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