Del Frisco’s Restaurant Group Inc. will slow planned unit growth for the coming year after reporting a loss in the third quarter ended Sept. 8, executives said Tuesday.
Southlake, Texas-based Del Frisco’s reported a loss Tuesday of $1 million, or 4 cents a share, in the third quarter, compared with a profit of $1.8 million, or 8 cents a share, in the same period last year. Quarterly revenue increased 10.8 percent, to $68.6 million, from $61.9 million in the prior-year period.
Same-store sales in the quarter fell 3.5 percent at Del Frisco’s Grille and 1.4 percent at Del Frisco’s Double Eagle Steak House. Same-store sales rose 1.2 percent at Sullivan’s Steakhouse.
Amid the same-store sales decline, the company has decided to slow growth plans.
“We will be limiting development next year to the relocation of our North Dallas Del Frisco's Double Eagle restaurant to Uptown Dallas, and two to three additional Del Frisco's Grille restaurants,” Del Frisco’s CEO Mark S. Mednansky said in a statement.
“This will allow us to devote greater effort toward refining and improving operations at all of our existing restaurants as we continue to fine-tune our site selection process,” Mednansky added. “After this transitional period, we anticipate resuming our 10-percent new unit growth plans in 2017 and beyond."
In a call with equities analysts after the earnings release, Mednansky further explained the slowing of growth plans and how it related to the company’s site selections, especially for the Grille concept.
“We have been working on our site selection process, honing it and ensuring we learn everything,” Mednansky said, noting that the more casual Grille is only three years old. “Now, with more than 20 units, we really do have visibility into what works and what doesn’t work as well.”
However, he said the company wanted to slow growth “to really work on evolving the brand to what our guests need. … We’re not planning to grow at the 15 percent clip as we did in the last two years.”
He hinted that the brand still expects double-digit growth in fiscal 2017 and 2018, especially with what he called a “deep bench” on the culinary and front-of-house teams.]]
Mednansky said the decrease in Double Eagle sales were linked to guest count declines partially related to “ongoing energy-related issues in Texas and to a lesser extent Colorado, which together comprise a third of the brand’s comparable restaurant base.”
Most the decline was in the private dining business in those regions, said Tom Pennison, Del Frisco’s chief financial officer.
At the 20-unit Grille concept, Mednansky said the 11 restaurants in the same-store-sales base improved from the second quarter, when they declined 6.3 percent.
The company is looking to close or move two of the Grille restaurants, he said, explaining, “We continue to make progress in negotiations to exit two of our under-performing assets.”
Del Frisco's Restaurant Group has 51 restaurants in 22 states and Washington, D.C. Its brands include Del Frisco's Double Eagle Steak House, Sullivan's Steakhouse and Del Frisco's Grille.