Del Frisco’s Restaurant Group Inc. continues to wrestle with options for its 14-unit Sullivan’s Steakhouse brand, again considering a potential sale after launching an effort at franchising last year, executives said.
Executives at the Irving, Texas-based upscale-dining company, which has been discussing a sale of its third steakhouse brand for the past two years, said its board had authorized management to look at a potential sale.
“While Sullivan’s Steakhouse has many compelling attributes,” said Norman Abdallah, Del Frisco’s CEO, said in its fourth-quarter earnings call last week, “we believe that Del Frisco’s Double Eagle Steakhouse and Del Frisco’s Grille provide us with far greater opportunities for expansion.”
“We therefore think it is appropriate to consider strategic options for Sullivan’s Steakhouse but of course cannot provide any assurance that this process will lead to any specific course of action,” Abdallah said.
Neil Thompson, Del Frisco’s chief financial officer, said the company in the fourth quarter closed Sullivan’s units in Seattle, Wash., and Houston and in January closed the location in Austin, Texas, at a site that is redeveloping. Thompson said the company has secured a site for new construction in Austin, but it plans to close another Sullivan’s this year.
In the fourth quarter, the company also stopped lunch service at several of the Sullivan’s units, which contributed to a decline in same-store sales of 10.8 percent at the division for the quarter ended Dec. 26. Same-store sales at the Del Frisco’s Double Eagle Steakhouse rose 1.2 percent in the quarter and at Del Frisco’s Grille they increased 0.9 percent.
The Sullivan’s decline, Thompson said, consisted of a 15.5 percent decrease in traffic and a 4.7 increase in average check. The traffic decline, he added, was “in part due to the elimination of lunch at seven select Sullivan's locations beginning in the second quarter of 2017.”
If the company were to sell Sullivan's, Thompson said, Del Frisco’s anticipates a savings of $500,000 at the corporate level and in capital expenditures, as one Sullivan’s remodeling is planned.
While it considers strategic options for Sullivan’s, Abdallah told analysts that the company had put it had put the franchising program announced last year on hold, returning “all the materials and agreements for Sullivan's.”
Del Frisco’s is “really looking at a parallel path” for the brand, he added, be it “a sale or the asset-light approach that we've talked on previous calls.”
As for marketing of its brands, Abdallah said the company invested heavily in digital platforms in the fourth quarter.
“Our approach in Q4 and on a go-forward basis is 70 percent digital,” he said, adding that was “an appropriate balance to getting the right message to the right people at the right time, driving visitation and increasing our relevance on social media.”
For the fourth quarter ended Dec. 26, Del Frisco’s swung to a loss of $15.1 million, or 73 cents a share, from a profit of $7.1 million, or 30 cents a share, in the prior-year period. Revenues increased 2.3 percent to $121.9 million from $119.2 million in the same quarter last year.
The company today announced the opening of a new Del Frisco’s Grille at University Station in Westwood, Mass. On Thursday, Del Frisco’s announced two planned restaurant openings this year: a Del Frisco’s Double Eagle Steakhouse at Westfield Century City in Los Angeles and a Del Frisco’s Grille in the arts and entertainment district of Fort Lauderdale, Fla.
Del Frisco's Restaurant Group, which went public in 2012, has 53 restaurants in 23 states and Washington, D.C.
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