Del Frisco’s Restaurant Group Inc., which recently shed its Sullivan’s Steakhouse and is working on integrating the acquired Barcelona Wine Bar and Bartaco brands, expects its new restaurant portfolio to give it clout in choice real estate locations.
“Our combined organization now has significantly more leverage with developers and landlords than ever before,” said Norman Abdallah, Del Frisco’s CEO, in an analyst conference call Monday.
“This is because we not only bring to the negotiating table distinctly positioned growth brands with industry-leading yield economics, but also the respect that Del Frisco’s name has in the marketplace,” Abdallah said.
Del Frisco’s in June acquired Norwalk, Conn.-based Barteca Restaurant Group, parent to Barcelona and Bartaco, for $325 million. The company sold its 14-unit Sullivan’s chain to Romano’s Macaroni Grill for about $32 million in September.
Abdallah said the company expects to see savings from general and administrative costs when Barcelona and Bartaco, which the company is considering its “emerging brands,” when back-end support systems are integrated in the middle of 2019.
“These savings are now likely to be at the high-end of our $3 million to $5 million range with significant run-rate savings beginning in the second half of 2019,” he said.
Del Frisco’s executives said they were moderating prior-ownership’s plans for growth for the Barcelona and Bartaco brands for next year, with capital expenditures expected to be $50 million to $60 million. The company plans to open three to four Barcelonas and six to seven Bartacos in 2019 and two Double Eagles in the year. The company has no plans to open any Grilles in 2019 or 2020.
The company has closed underperforming Bartaco restaurants in Asheville, N.C, and Homewood, Ala., and it plans to close the Chicago Double Eagle in January. The Chicago Double Eagle, which opened in November 2012, was underperforming, with same-store sales down 9 percent in the third quarter, said Neil Thomson, Del Frisco’s chief financial officer. Sales at that restaurant had fallen below $7 million a year, and that triggered a lease option, he said.
“We have since exercised that right to go dark under the lease,” Thomson said, “and we’d expect to close the restaurants in early 2019 as we are now working with the landlord on terms of our exit. Consequently, we also took an impairment charge of $2.1 million in the quarter.”
For the third quarter ended Sept. 25, Del Frisco’s net loss, with special charges, widened to $67.1 million, or a loss of $2.43 a share, from $1.8 million, or 8 cents a share, in the same period a year ago. Revenues increased 73.7 percent to $105.3 million from $60.6 million in the prior-year quarter.
Total comparable restaurant sales decreased 1.9 percent. By brand, same-store sales in the quarter were down 2.4 percent at Del Frisco’s Double Eagle, down 7 percent at Bartaco, down 0.4 percent at Del Frisco’s Grille and up 2.5 percent at Barcelona.
Sales at a Bartaco unit in Port Chester, N.Y., were still recovering from a Hepatitis A exposure between Aug. 22 and Oct. 23, 2017, Del Frisco’s executives said. Westchester County health officials learned on Oct. 25, 2017, that an employee had been infected with Hepatitis A. Four Bartaco patrons were diagnosed with the infection, and the Westchester Department of Health eventually provided preventative treatment to more than 1,700 people. Del Frisco’s executives said sales at that unit and a nearby New York restaurant were negatively affected.
Del Frisco’s on Aug. 6 closed on an underwritten public offering of 12.9 million shares at $8 a share for proceeds of $97.8 million.
Del Frisco's Restaurant Group has 69 restaurants across 16 states and Washington, D.C.
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Clarification Nov. 14: This story was edited to clarify details of the Hepatitis A diagnoses in Westchester County, N.Y.