Del Frisco’s Restaurant Group Inc. will open at least two restaurants this year under a smaller Del Frisco’s Grille prototype, and expects them to be more efficient and to offer flexibility in locations, executives said Thursday.
In a fiscal year that Mark Mednansky, Del Frisco’s CEO, called a “transitional period,” the company will open two new Grilles in Tennessee under the new prototype, which reduces the footprint to between 6,500 square feet and 7,200 square feet. One will open in mid-October in Nashville, Tenn., and the second before the end of the year in Brentwood, Tenn.
“Our current portfolio of Grilles average about 8,400 square feet,” Mednansky said. “Our two Grilles in Nashville will be below 8,000 square feet, and then beginning in 2017 we intend to reduce the Grille's footprint by approximately 1,500 square feet to create a more scalable, more efficient, more cost-effective growth vehicle.”
The Southlake, Texas-based company, which also operates the Del Frisco’s Double Eagle Steak House and Sullivan’s Steakhouse brands, had announced the smaller Grille prototype earlier this year. But Mednansky said the openings, one of which is earlier than expected, would offer the company opportunities to test the effectiveness of the new format.
“We're going to use the proximity of these two locations and use their synergies in areas of managerial oversight, training and publicity,” he said.
“This Grille of future will enable us to better manage labor cost by improving productivity and mitigating the impact of future minimum wage increases while improving the pacing in both our dining room and back of the house — and we're going to do this with fewer labor hours,” Mednansky added.
The prototype will also expand the brand’s real estate options, he said.
The smaller Grille will include a reduced kitchen footprint, Mednansky said, which should increase efficiency and reduce labor costs. In addition, he said the smaller model should lower the cost of the build-out.
“We are focused on driving traffic by positioning the Grille as an everyday, affordable, upscale dining and drinking destination,” he said. “This was best exemplified during the quarter by our comp-based lunch business, which increased by 6.2 percent.”
The Grille’s same-store sales in the quarter, however, declined 2 percent, including a 1.7-percent decrease in average check and a 0.3-percent dip in customer counts.
“We are now utilizing this increased lunch traffic to induce the same guests to our more accretive dinner business,” Mednansky said. “We firmly believe that our growing base of lunch guests will return for dinner in other locations once they have experienced the Grille's approachable and energetic environment.”
The company is also retargeting its happy hour offerings at a test in four Grille units with some discounted drinks and menu items like lobster corn dogs, flatbreads and cheesesteak rolls.
“What we're excited about is not only the energy and excitement and guests that it brings in during happy hour, but our guests are staying past the 6:30 p.m. stop time of happy hour, which helps create energy, fun and excitement for the rest of our guests that evening,” he said.
Del Frisco’s net income for the third quarter ended June 14 rose 19.7 percent, to $4.4 million, or 19 cents a share, from $3.7 million, or 16 cents a share, the previous year. Revenue rose 8.3 percent, to $79.9 million, from $73.8 million the previous year.
Systemwide same-store sales decreased 0.7 percent in the quarter. At Del Frisco’s Double Eagle Steak House, a 1.9-percent same-store sales decline included a 0.7-percent decrease in average check and a 1.2-percent decrease in customer counts. However, Sullivan’s Steakhouse had an increase in same-store sales of 2.9 percent, including a 1.1-percent increase in average check and a 1.8-percent increase in customer counts.
Del Frisco's Restaurant Group has 51 restaurants in 23 states and Washington, D.C.