Executives of Texas Land & Cattle and Lone Star Steakhouse have bought the brands from private-equity firm Lone Star Funds and plan to continue repositioning the two concepts, the companies said Monday.
Plano, Texas-based Day Star Restaurant Group, owned by Scott Smith, chairman and chief executive, and Tim Dungan, president and chief financial officer, bought the 105 units on Dec. 24 from the Dallas-based Lone Star. Terms of the deal were not disclosed.
Lone Star Funds had acquired Lone Star Steakhouse in an August 2006 going-private deal along with Del Frisco’s Double Eagle and Sullivan’s steakhouse brands, which were spun off in an initial public offering in 2012. As of December 2013, Lone Star had sold off its stake in Southlake, Texas-based Del Frisco Restaurant Group.
Smith, who with Dungan joined Texas Land & Cattle and Lone Star in February 2013, said Monday that the new owners believe the steakhouse segment has strength.
“Steaks, to me, are a personal treat,” he said. “People will always go out for a steak if they want to treat themselves, if they want to go out and celebrate or if they want a good meal. We’re beef eaters in America.”
Smith said Day Star plans to take the 27-unit Texas Land & Cattle from a casual to a casual-plus brand over the next year. “It’s easy to say,” he added, “but hard to do. You have change the mindset of your team members and managers and get them to understand that you have to change the beliefs and behaviors to get there. … We believe you can have food as good as in a fine-dining restaurant at just a little bit above a casual-dining price.”
Texas Land & Cattle introduced a new menu in September and will roll out further revisions in a second phase toward the end of the first quarter, Smith said.
The 78-unit Lone Star Steakhouse, Smith said, is a “value-plus brand,” and he identified competitors like Texas Roadhouse, Cheddar’s Casual Café and Chuy’s Mexican in the price range of $13.50 and $15.50.
“When we came in, we were doing a lot of discounting, especially at Lone Star,” Smith said. “When we did the research, people told us, ‘Give us value everyday. You don’t have to discount.’”
The company is currently testing new menus in 14 restaurants with 25 items under $10. “We’ve actually lowered the cost of our steaks a couple of dollars to get back into that ‘value-plus’ menu,” Smith said. Steaks at Lone Store now range from $10.99 to $18.99, he said, a move that aims to increase frequency of visits.
The new management team expects to make other changes to the two brands, Smith said.
“Lone Star Funds gave us the latitude to pursue a plan that has already begun paying dividends,” Dungan said in a statement. “Scott and I are convinced that we are on the right path that will ultimately make both brands stars in their categories.”
According to NRN Top 200 research, Lone Star Steakhouse ended its December 2012 fiscal year with 83 units and annual sales or $179 million, a decline from fiscal 2011, during which it had 106 units and $196 million in sales. Lone Star Steakhouse has units in 29 states.
At its apparent height in 1999, Lone Star Steakhouse had more than 300 units in the United States and through a joint venture in Australia, according to Securities and Exchange Commission filings.
NRN’s Top 200 research found Texas Land & Cattle ended fiscal 2012 with 26 units and an estimated $63.7 million in sales compared to fiscal 2011’s 26 units and $62.8 million in annual sales. Texas Land & Cattle has units in Arkansas, Missouri, New Mexico and North Carolina.
Alan Liddle, Nation’s Restaurant News’ managing editor/special reports, contributed to this report.