Del Frisco’s Expands With $325M Acquisition
- May 09, 2018
Del Frisco’s Restaurant Group Inc. has agreed to acquire Barteca Restaurant Group for $325 million in cash.
Barteca comprises two concepts, Barcelona Wine Bar and bartaco, and combined have 31 restaurants operating across 10 states and Washington D.C.
DFRG revealed in its third quarter 2017 conference call that it was open to acquiring restaurant concepts that complement its existing restaurant portfolio. Their thought process was that they would consider smaller or emerging brands that have proven they have earned the right to grow and share DFRG’s vision of celebrating life in restaurants through great food, great wine and superior hospitality.
“The combination of Del Frisco’s and Barteca does just that—it creates a leading portfolio of highly differentiated, experiential restaurant brands,” Norman Abdallah, Del Frisco’s Restaurant Group’s CEO, told Commercial Property Executive. “Barcelona and bartaco share DFRG’s cultural values and are experiential brands, highly complementary to the company’s existing brands, Del Frisco’s Double Eagle and Grille. One of many ways to measure this is that none of these concepts offer delivery—guests have to sit down in the restaurants to get the full experience.”
He added that the company will benefit from the multi-brand strategy that DFRG already has in place with dedicated management teams and resources for individual concepts with best-in-class shared services and Barteca will provide more diversification and balance to DFRG’s portfolio.
“This includes a hedge for a market downturn with lower average checks, the opposite seasonality to DFRG’s existing brands with peak seasonality in the summer months, a less beef centric menu which makes the company’s supply chain less susceptible to swings in beef commodities and a smaller footprint for individual locations, which provides greater flexibility to DFRG’s real estate strategy,” Abdallah said.
Firing on All Cylinders
Barteca has put up strong numbers. The restaurant count has grown at a 22 percent CAGR while revenues have grown at a 32 percent CAGR since 2013 through the end of last year. Same-store sales on a system-wide basis have risen between 5 percent and 7 percent in each year since 2014.
In terms of profitability, restaurant-level EBTIDA has grown at a 30 percent CAGR and margin has ranged between 26 percent and 27 percent, while adjusted EBITDA has grown even more dramatically at a 34 percent CAGR with a corresponding margin between 14 percent and 16 percent.
“The organizational structure that DFRG has established should enable the company to effectively integrate Barteca and realize synergies, whilst continuing DFRG’s existing strategic focus to accelerate Double Eagle growth and continue to implement the company’s consumer and financial model strategy for the Grille,” Abdallah said. “DFRG intends to rely on third-party assistance to help with the integration of Barteca, which the company estimates will take 12 to 18 months. In the meantime, the Barteca team can continue to operate on a self-sufficient basis.”
In January, Del Frisco’s agreed to a 10-year, 7,000-square-foot lease at 300 Colorado, a 309,000-square-foot office tower in downtown Austin, which is slated for delivery in December 2020.
Barteca’s current footprint is mostly on the Eastern seaboard, but does include two restaurants in Colorado. Ahead, the brands’ expansion comprises 30 approved sites, 20 signed leases and 15 locations under construction or in the pre-construction phase. In this phase the brands will enter the Midwest and Texas for the first time.
Image courtesy of Del Frisco’s Restaurant Group