Del Frisco’s Sells Sullivan’s for $32M to Romano’s Macaroni Grill
In February, just five months after declaring bankruptcy, Romano’s Macaroni Grill attempted to buy Bravo Brio. The operator of BRAVO! Cucina Italian and BRIO Tuscan Grille rejected the acquisition proposal and moved forward with its previously announced $100 million deal with Switzerland-based Spice Private Equity Ltd. Post sale, American restaurateur Bradley D. Blum and Brazilian-based investment firm GP Investments, Ltd. announced the formation of the new restaurant company, FoodFirst Global Restaurants, Inc.
About eight months later, Romano’s finally has its deal.
Del Frisco’s Restaurant Group announced September 18 that it’s signed a definitive agreement to sell Sullivan’s Steakhouse to Romano’s Macaroni Grill for gross proceeds of about $32 million. The net proceeds, it added, would be used to reduce the company’s outstanding indebtedness. The deal is expected to close on or before September 30.
The deal fits for both companies. Romano’s, even after the failed Bravo Brio deal, told FSR in July that it had a four-pronged strategy to reinvigorate the Italian chain. One step was to acquire other chains to spike revenue, according to CEO Nishant Machado. He said at the time that Romano’s would pursue a brand “that will have high consumer awareness, attractive outside opportunities from an operating standpoint, and a sound real-estate portfolio." (The other three strategies were strengthening the brand, building a new platform, and eliminating burdensome leases).
“The acquisition of Sullivan's Steakhouse is precisely aligned with our strategic plan and vision,” he said in a September 18 statement. “We are focused on brands that provide guests with true hospitality and a unique experience, which the Sullivan's Steakhouse concept and team embodies. The brand complements our existing restaurant portfolio of 85 company-owned Macaroni Grill restaurants in 22 states, plus 23 franchise locations in the U.S. and seven other countries. Under our stewardship, we look forward to taking Sullivan’s Steakhouse to new heights.”
Meanwhile, Del Frisco’s first revealed in March that it was looking at strategic alternatives for the 14-unit steakhouse chain, which has locations across 12 states. “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,” Chief executive officer Norman Abdallah said after the company’s fourth-quarter fiscal 2017 earnings. In the quarter, Sullivan’s comparable same-store sales plummeted 10.8 percent year-over-year, driven down mainly by a 15.5 percent decrease in customer counts.
This past quarter, the second of fiscal 2018, Sullivan’s reported comps declines of 6 percent with an 11.1 drop in customer counts. The company said then it had “received several bids from interested parties to purchase the concept.”
Scott Smith, who had served as president of Sullivan’s Steakhouse since January 2017, will remain with Del Frisco’s and assume similar responsibilities for the Del Frisco’s Double Eagle Steakhouse concept. Ray Risley, who previously held that same position, “resigned to pursue other interests,” the company said.
“The sale of Sullivan’s Steakhouse enhances our financial condition while enabling us to sharpen our focus on opportunities with the highest potential for strong returns. These include executing our ‘Emerging Brands’ integration and expanding our core concepts of Del Frisco’s Double Eagle Steakhouse, Barcelona Wine Bar and bartaco. We wish our colleagues at Sullivan’s Steakhouse all the best under their new ownership,” Abdallah said.
“We are pleased that Scott will remain with Del Frisco’s as our new Double Eagle president,” he added. “Scott has not only served as the president or CEO of several upscale fine dining concepts but also has significant international experience that will add value as we consider licensing opportunities for our flagship brand outside of the U.S. We also wish Ray all the best as he embarks on the next chapter of his career.”
Del Frisco’s purchased Barteca Restaurant Group, the operator of bartaco and Barcelona Wine Bar, for $325 million in May.
Del Frisco’s shuttered two Sullivan’s in Q4 of fiscal 2017, including units in Seattle and Houston. An Austin, Texas, location closed that Q1 as well, with another \ shut down in fiscal 2018. Sullivan's was founded in 1996.
Sales took a hit when select locations eliminated lunch starting last year. Abdallah said in an earlier 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.
In October 2017, Romano’s Macaroni Grill declared bankruptcy and went into chapter 11. But fueled by the $13.5 million that restructuring and turnaround-owner Mac Acquisitions raised to fund the revival, it extricated itself from chapter 11 just four months later. Philip Romano launched Romano’s Macaroni Grill in 1988 in Leon Springs, Texas, leading to Brinker International acquiring its franchise rights in 1989. It expanded to 230 outlets before being dealt to Golden Gate Capital in 2008. Of late it has slimmed down and now has 85 company-owned locations in 22 states, plus 21 franchise locations in the U.S. and seven other countries.