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Del Frisco’s developing smaller Grille prototype

Del Frisco’s developing smaller Grille prototype

Company slows unit growth after fourth-quarter sales decline

Del Frisco’s Restaurant Group Inc. is developing a smaller, “more efficient prototype” of its Del Frisco’s Grille concept after announcing in January that it would slow development this year in the wake of declining fourth-quarter same-store sales, executives said Tuesday.

The Southlake, Texas-based company has been working to hone real estate selection and create a Grille prototype “that can be site-adapted,” Del Frisco’s CEO Mark Mednansky said.
“This prototype will be more scalable, more efficient and a more cost-effective growth vehicle for us,” Mednansky said in a fourth-quarter earnings call with analysts. It will also reduce the capital investment in Grille units, improve kitchen efficiency and heighten labor productivity.

“Our goal is to lower average spend per restaurant by approximately $1 million and lower our footprint by 800 [square feet] to 1,000 square feet,” he said. 

The prototype will cover between 6,500 square feet and 7,400 square feet, he added. The first smaller prototype is targeted to open in 2017.

“Reducing the footprint will have minimal effect on our seating capacity, as we will be taking out space from the back of the house from a more efficient kitchen design and less wine storage,” Mednansky explained.

“This lower square footage requirement will also increase the availability of great prime real estate,” he said. 

In November, the company closed a two-year-old Del Frisco’s Grille unit in Palm Beach, Fla. In December, it closed a second Grille in Phoenix.

The company is slowing its development this year to just two or three new Grille units and one Del Frisco’s Double Eagle relocation in the Dallas market, Mednansky said, amid same-store sales declines in the fourth quarter.

Fourth-quarter same-store sales fell at each of its three brands, declining 1.6 percent at Del Frisco’s Double Eagle Steak House, 1.8 percent at Sullivan’s Steakhouse and 4.5 percent at Del Frisco’s Grille.

Del Frisco’s net income for the fourth quarter ended Dec. 29 rose 43.6 percent, to $7.9 million, or 34 cents a share, from $5.5 million, or 23 cents a share, in the same period last year. Revenue increased 7.8 percent, to $114.1 million, from $105.8 million in the same quarter last year.

The company faces an activist investor in Fidelity National Financial Inc., which is also a controlling shareholder at American Blue Ribbon Holdings. Fidelity has increased its stake in Del Frisco’s to more than 10 percent.

“We look forward to conversations with them,” Mednansky said during the call with analysts.

Del Frisco's Restaurant Group has 50 restaurants in 23 states and Washington, D.C.

Contact Ron Ruggless at [email protected].
Follow him on Twitter: @RonRuggless

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