Del Frisco’s Restaurant Group is exploring strategic alternatives for its Sullivan’s Steakhouse brand, a process that could include a potential sale, executives said in the company’s fourth-quarter review. Chief executive officer Norman Abdallah said the board’s decision came down to where the company’s priorities lie heading into fiscal 2018.
“While Sullivan’s Steakhouse has many compelling attributes, we believe that Del Frisco’s Double Eagle Steakhouse and Del Frisco’s Grille provide us with far greater opportunities for expansion,” Abdallah said in a statement.
Sullivan’s comparable same-store sales plummeted 10.8 percent in the fourth quarter, year-over-year, driven down mainly by a 15.5 percent decrease in customer counts, countered somewhat by a 4.7 percent increase in average check. Sales also took a hit when select locations eliminated lunch starting in the second quarter. Abdallah said in a conference call that Sullivan’s sales also suffered from less value-oriented messaging. The company launched a new menu in Q4, which included a new bone-in section alongside enhanced cocktails.
"These menu enhancements resulted in improvement in average check, but were not sufficient to offset the traffic declines noted earlier," he said.
Del Frisco’s shuttered two Sullivan’s in the quarter, including units in Seattle and Houston. An Austin, Texas, location closed in Q1 as well, with another expected to shut down sometime this year. Sullivan's was founded in 1996. Del Frisco's was created in 1981 and became public in 2012.
The 15-unit brand has locations in Indianapolis; Wilmington, Delaware; King of Prussia, Pennsylvania; Tucson, Arizona; Omaha, Nebraska; Baltimore; Leawood, Kansas; Chicago; Naperville and Lincolnshire, Illinois; Baton Rouge, Louisiana; Raleigh and Charlotte, North Carolina; Palm Desert, California; and Anchorage, Alaska.
Del Frisco’s said it has retained Piper Jaffray as its financial adviser to lead the process.
Abdallah said the company couldn’t provide any assurance that the strategic review would lead to any specific course of action, but appeared ready to shift focus to its other brands.
"We have now reached the conclusion in consultation with our noard, to consider strategic options for Sullivan's Steakhouse including a potential sale of the brand. We are not going to provide any assurance that this review will lead to any specific course of action, but wanted you to be aware of our mindset and where our priorities lie in major portfolio, which is primarily focused on developing the Del Frisco's Double Eagle and to a lesser extent in the near-term Del Frisco's Grille," he said.
On that note, Del Frisco’s Double Eagle Steakhouse saw 1.2 percent comparable same-store sales growth in Q4 versus the prior-year period, and Del Frisco’s Grill reported 0.9 percent growth. Average check was up 2.6 percent at Del Frisco’s Double Eagle and 1.7 percent at Del Frisco’s Grille. Customer counts fell 1.4 percent and 0.8 percent, respectively.
The company expects to open five to seven new restaurants in 2018, including four Double Eagles (Atlanta and Boston in Q3 and San Diego and Century City, California, in Q4), and three Del Frisco’s (Westwood, Massachusetts, in Q1 and Philadelphia and Fort Lauderdale, Florida, in Q4). Four Del Frisco’s Grilles are expected to close as well.
Del Frisco’s enhanced Double Eagle’s menu with a new dry-aged section in Q4, and a simply prepared fish platform. Private dining also was a boon, with 5.4 percent growth in December.
For fiscal 2017, comps decreased 0.1 percent at Double Eagle and 1.9 percent at Del Frisco’s Grille, year-over-year. They dropped 6.3 percent at Sullivan’s, comprised of a 7 percent decrease in customer counts.