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Del Frisco’s Restaurant Group Inc (DFRG): A Solid Small-Cap Stock

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Since coming public in 2012, shares of Del Frisco’s Restaurant Group Inc (NASDAQ:DFRG) are up more than 50%.


Del Frisco’s operates three distinct but similar restaurant concepts: Del Frisco’s Restaurant Group Inc (NASDAQ:DFRG) Double Eagle Steakhouse, Del Frisco’s Grille, and Sullivan’s Steakhouse. To better understand Del Frisco’s as a whole, let’s take a closer look at each of Del Frisco’s three concepts:

Del Frisco’s Double Eagle Steakhouse

One of the premier fine dining steakhouses in the U.S. featuring prime beef and award winning wine selections, Del Frisco’s Restaurant Group Inc (NASDAQ:DFRG)’s Double Eagle Steakhouse has 10 locations across eight states. Average check is $100. First quarter revenue increased by $4 million or 14.1% to $32.3 million. Same-store-sales increased by 1.9% (13th consecutive quarterly increase) .

Del Frisco’s Restaurant Group Inc (NASDAQ:DFRG)’s Double Eagle Steakhouse is Del Frisco’s highest-end offering. So far, this brand appears to be doing exceptionally well.

Del Frisco’s Grille

Classic American grill featuring the same steaks as Del Frisco’s Restaurant Group Inc (NASDAQ:DFRG)’s Double Eagle Steakhouse but also a variety of less expensive entrees. Del Frisco’s Grille currently has six locations and average check is $53. Three of the six Del Frisco’s Grille’s opened in 2012. First quarter revenue increased 90% to $7.6 million.

The Del Frisco’s Grille concept is the fastest growing part of Del Frisco’s. However, it also makes up the smallest part of Del Frisco’s total revenues.

Sullivan’s Steakhouse

Vibrant energetic steakhouse featuring fine steaks and a broad offering of seafood. Sullivan’s has 18 locations across 15 states. Average check at Sullivan’s is $59. First quarter revenue decreased $0.7 million to $19.9 million. These results were due in part to a 4% decrease in same store sales.

Certainly, Sullivan’s is the weakest part of Del Frisco’s. On the Q1 conference call, a question was asked about the weakness at Sullivan’s. CEO Mark Mednansky responded:

So, during the – especially the beginning of the quarter, we think that the middleclass and upper-middleclass guests were as you know affected by the tax increases…They are still coming in. They still want to dine but perhaps they weren’t ordering extra appetizer or cocktail or more pricy bottle of wine. With that being said, we have always positioned Sullivan’s as more of value play within a white table cloth Steak House segment. But sometimes we didn’t do a very good job of marketing that. So, that’s something that’s on Jeff Carcara’s bucket list right now. He is getting the appreciation and getting the recognition for the true value that the Sullivan’s brand does display. So, there is a few initiatives that we started at the very end of the quarter that will proceed in the second quarter that we’re excited about.

Whether Del Frisco’s will be able to turn around the problems at Sullivan’s remains to be seen. It should be noted that despite being Del Frisco’s largest segment in terms of units (19), Sullivan’s as a percentage of total revenue is actually smaller than Del Frisco’s Double Eagle Steakhouse. That being said, Sullivan’s still accounts for a high percentage of Del Frisco’s total revenues and therefore must be a focus for investors.

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