Diversified Restaurant Holdings Increases Q1 Revenue 13%

May 12, 2014 Industry News
Industry News

Diversified Restaurant Holdings, Inc., the creator, developer, and operator of Bagger Dave's Burger Tavern and one of the largest franchisees for Buffalo Wild Wings announced results for its first quarter ended March 30, 2014.

First quarter revenue of $30.5 million was up $3.4 million, or 12.5 percent, from the first quarter of 2014. Sales growth was primarily driven by the addition of 10 new restaurants since last year's first quarter, which included seven Bagger Dave's and three BWWs.

Comparable-store sales increased 1.2 percent on a consolidated basis for the first quarter of 2014. There were 36 comparable restaurants for the period, which included 29 BWW and 7 Bagger Dave's. Increased menu pricing and the extra day from the Easter holiday, which fell in last year's first quarter, offset negative traffic from severe weather in more than 80 percent of the Company's locations.

"We performed well in the quarter, despite the bad winter that heavily impacted our region," says Michael Ansley, president and CEO of DRH. "More importantly, we remain on track to continue our momentum by opening 11 new locations and execute on our strategic plan in 2014."

At the end of the first quarter, the Company had 54 restaurants, comprised of 18 Bagger Dave's and 36 BWW. This was an increase of 22.7 percent from 44 restaurants at the end of the prior-year first quarter. DRH expects to end the year with 65 restaurants.

Net income in the first quarter of 2014 was $0.4 million, compared with $0.2 million in the same period of the prior year.

"We continue to stay ahead of the curve and further differentiate Bagger Dave's,” Ansley says. “We have recently done so with our new menu introduction, which has been well received by customers, as was our new Fresh Rewards Loyalty Program. We are excited to begin opening our newly designed Bagger Dave's, creating a more upbeat and entertaining environment, evolving our brand even further."

For 2014, DRH reiterated its plans:

  • Open 11 new locations in 2014. Eight restaurants will be the company's original Bagger Dave's concept, while the remaining three will be BWW. 
  • Revenue for fiscal year 2014 is expected to be in the range of $125 million to $130 million. This will represent an increase of approximately 15-20 percent over 2013. 

First Quarter 2014 Operating Results

Food, beverage, and packaging costs as a percentage of revenue declined to 28.6 percent compared with 31.7 percent in the first quarter of 2013. The 310 basis point improvement was due to lower bone-in chicken wing pricing. Average cost per pound for bone-in chicken wings was $1.33 in first quarter of 2014 compared with $2.10 in the first quarter 2013.

Compensation costs increased by $1 million, or 13.4 percent, to $8 million. The increase was driven by additional staffing required for the 10 new restaurants. As a percentage of revenue, compensation costs were 26.2 percent compared with 26 percent in the same quarter last year.

Occupancy costs were up $0.2 million, or 8 percent, to $1.7 million in the quarter mostly as a result of the additional restaurants. Nonetheless, occupancy costs as a percentage of sales decreased 30 basis points to 5.4 percent in the quarter.

Other operating costs increased by $1 million, or 18.3 percent, to $6.3 million with the additional restaurants. Other operating costs as a percentage of sales increased to 20.6 percent when compared with 19.6 percent in the first quarter of 2013. Utility costs were higher with the colder than average temperatures in the Midwest during the first quarter of 2014.

General and administrative (G&A) expenses increased by $0.6 million, or 38.6 percent, to $2.1 million in the quarter. G&A expenses as a percentage of sales were up to 6.9 percent in the 2014 first quarter from 5.6 percent in the prior-year period due to increased marketing and advertising expense consistent with the company's increase in sales and favorable timing of expenses in the first quarter 2013.

Pre-opening costs decreased by $0.1 million, or 8.2 percent, to $0.5 million in first quarter 2014 from $0.6 million in first quarter 2013. The difference in pre-opening costs was primarily due to the timing of new restaurant development. Pre-opening costs as a percentage of sales decreased to 1.8 percent in first quarter 2014 from 2.2 percent in first quarter 2013.

News and information presented in this release has not been corroborated by FSR, Food News Media, or Journalistic, Inc.