Del Frisco's: Private dining to boost holiday bookings

Reflecting general improvements in consumer sentiment, Del Frisco's Restaurant Group Inc., with three higher-end concepts, is anticipating strong holiday private-dining bookings, executives said in an earnings call with analysts Tuesday.

The Southlake, Texas-based operator of the Double Eagle Steak House, Sullivan’s Steakhouse and Del Frisco’s Grille brands on Tuesday posted a net loss of $2.4 million, or 12 cents per share, on sales of $47.9 million in the third quarter, which ended Sept. 4 and included expenses from the company’s initial public offering on Aug. 1. That compared to a net loss of $1.8 million, or 10 cents per share, on sales of $41.3 million in the third quarter 2011.

Executives expressed confidence in upcoming November-December holiday bookings. “We feel pretty confident in our December to this point compared with last year,” said Mark Mednansky, chief executive of Del Frisco’s. Between 60 and 70 percent of private dining reservations come in mid-November to Dec. 1, he added.

The company intends to ramp up private dining, which represents about 14 percent of current sales. “We’ve hired a corporate-wide private dining salesperson for the first time in this company’s history to spearhead this effort,” Mednansky said. Private dining provides higher check averages per guest and higher margins compared to regular dining guests, he said.

The higher-end concepts had seen softness in sales in the post-third quarter September period, Mednansky said, but added: “We’re encouraged in that we’ve seen some acceleration in moving out of September.”

Thomas J. Pennison Jr., chief financial officer, said the company expects to end the fiscal year with a 3.5-percent to 4-percent increase in total same-store sales. For the third quarter, it reported a combined-store same-store sales increase of 3.5 percent, which included a 5.3 percent increase at Del Frisco's Double Eagle and a 1.4 percent bump at Sullivan's. Same-store sales in third quarter 2011 had increased 11.9 percent.

Two promotions helped sales in the third quarter, including the “Power Couple” promotion at Del Frisco’s that featured a steak and lobster dinner for two for $99, and a summer three-course dinner for two at Sullivan’s for $79. It was the second year for both promotions, Mednansky said, and they ran about a week longer than in 2011. Pennison said the 2012 version saw a 30-percent increase in the use of the value promotions.

As of Sept. 4, Del Frisco's Restaurant Group owned and operated 32 restaurants across 18 states, including nine Del Frisco's, 19 Sullivan's and four Del Frisco's Grilles. During the third quarter, the company opened one Del Frisco's Grille in Washington, D.C., and closed one Sullivan's in Dallas.

This past weekend, the company opened a fifth Del Frisco’s Grille in Atlanta, and the company plans to debut four to five more of that concept in 2013. It currently has units in Dallas; New York City; Phoenix, Ariz.; and Washington, D.C.

“It’s a great back-fill in markets where we already have a Double Eagle or Sullivan’s,” Mednansky said of the Del Frisco's Grille Concept, adding that it also serves as a “scout” concept to see if one of the two higher end brands might work in a market.

“We’re learning a lot with the Grille,” Mednansky added. “I’d say the Atlanta décor package is closer to a true prototype for future growth. … The bar is a huge component of the Grille, and the bar is perfectly situated in this location.”

The remaining unit DFRG will open this year is a Double Eagle Steak House in Chicago, which will occupy 24,000 square feet and include a 46-foot-tall wine tower, Mednansky said.

“In our estimation, our three concepts together target a much broader customer base than just fine dining,” he said, “and therefore provide us with much more white-space opportunity” for growth.

Contact Ron Ruggless at ronald.ruggless@penton.com.
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