After registering downbeat comparable sales and profit at the beginning of the fiscal year, steakhouse restaurant chain Del Frisco’s Restaurant Group (DFRG) is entering the second quarter with a better capital allocation program, with the immediate highlight being the acquisition of multi-ethnic restaurant chain Barteca.
Del Frisco’s expects to overcome the seasonal and fiscal volatilities, the primary causes of its unimpressive performance in the first quarter, by incorporating Barteca’s ‘highly-complementary’ business model and popular brands.
Today, Del Frisco’s agreed to acquire Barteca for $325 million, taking forward its strategy of bringing the popular cuisines to more customers and expanding market share. The companies intend to close the all-cash transaction in the second quarter. Barteca owns Barcelona Wine Bar, a chain of Spanish restaurants, and street food chain Bartaco.
On completion of the transaction, Jeff Carcara will continue to head Barteca as CEO, reporting to Del Frisco’s CEO Norman Abdallah. Del Frisco’s board of directors has given the green signal for the deal. The company, which has been pursuing growth-oriented expansion for quite some time, bets on Barteca’s growing restaurant footprint across the country.
Post-acquisition, the Del Frisco’s leadership is planning to push the expansion program further and achieve a 10-12% unit growth in the coming years. The long-term target is to open 50-100 Barcelona restaurants and 200-300 Bartaco outlets.
The idea is to use the synergies effectively to spruce up the brands, including the popular ones like Del Frisco’s Grill, Del Frisco’s Double Eagle and Sullivan’s Steak House, while hastening the unit growth of Barteca restaurants. The companies also expect to benefit from their common concept of offering an upscale menu with wine as a main component.
Jeff Carcara will continue to head Barteca as CEO, reporting to Del Frisco’s CEO Norman Abdallah
“Barcelona Wine Bar and Bartaco have attractive growth stories with strong and consistent sales trends, compelling unit economics, and exciting development expansion potential, and we believe these brands will also provide us with mutually beneficial value creation opportunities,” said Abdullah.
Today, Del Frisco’s also announced its first quarter earnings that fell sharply year-over-year both on reported and adjusted basis, hurt mainly by a 4% decline in same-store sales. The slump was broad-based, with all the brands registering negative sales. Meanwhile, total revenues moved up 6.5%, helped by seasonal factors. Shares of Del Frisco’s tanked 11.5% at 10:45 AM ET today.
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