Franchisee acquires 18 Buffalo Wild Wings unitsFranchisee acquires 18 Buffalo Wild Wings units

Diversified Restaurant Holdings Inc., or DRH, will continue to look for “opportunistic” growth after completing the $54 million acquisition of 18 Buffalo Wild Wings restaurants in the St. Louis area last week.

In a statement, DRH president and CEO Michael Ansley described the St. Louis restaurants as “highly successful and very profitable.”

David Burke, chief financial officer of Southfield, Mich.-based DRH, said the deal brings the number of Buffalo Wild Wings restaurants operated by the franchisee to 60. DRH now owns the brand’s entire St. Louis market, and officials said there is an opportunity to open more restaurants there over time.

DRH was able to acquire the 18 restaurants after franchisor Buffalo Wild Wings Inc. waived its right of first refusal. The franchisor said in June that it would buy 41 franchised units in Texas, New Mexico and Hawaii for $160 million.

Burke said Buffalo Wild Wings also exercised its rights earlier this year by acquiring another nine franchised units in Idaho that DRH had been in negotiations to purchase. DRH may look to add more, Burke said.

The acquisition of the 18 units in St. Louis was financed with a $120 million term loan, an unfunded $30 million development line of credit and an unfunded $5 million revolver led by the company’s senior lender Citizens Bank.

DRH updated its outlook for the year, projecting revenue of $168 million to $174 million, compared with earlier projections of $148 million to $153 million.

“As our updated annual guidance suggests, these restaurants are immediately accretive to earnings, and together with our existing portfolio and scheduled new restaurant openings, should enable us to generate between $19.5 million to $21 million in adjusted earnings before interest, taxes, depreciation and amortization this year,”Ansley said. “This represents a 29.1-percent to 39.1-percent increase compared to fiscal year 2014 adjusted EBITDA of $15.1 million.”

This year, DRH plans to open three new Buffalo Wild Wings restaurants.

The publicly traded company also owns and operates 26 Bagger Dave’s Burger Tavern restaurants, a full-service burger concept with restaurants in Michigan and Indiana. Burke said five or six Bagger Dave’s locations are also expected to open in 2015.

DRH expects to end the year with 93 or 94 restaurants, including 30 to 31 Bagger Dave’s units and 63 Buffalo Wild Wings locations.

Contact Lisa Jennings at [email protected].
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