Del Frisco's Restaurant Group, Inc. (DFRG) owns and operates 35 upscale steakhouses under the brands Del Frisco Double Eagle, Sullivans and Del Frisco's Grille. We believe the company's operating culture is best in class, its restaurants are unique and have great brand awareness, and have strong economics. There are 10 Double Eagles in marquee locations that dominate their markets as high end business destinations. We think that, over time, this division will more than double as the company meticulously adds best in class large units in major cities.
The company began development of its Grille concept last year and has now built seven stores, all of which are successful and have exceeded expectations. These restaurants have a broader menu, are packed at both lunch and dinner, and are working in both urban and suburban locations. This will be the primary growth vehicle and we believe that there easily can be 50 of these in time. We think the company can grow earnings at between 20-25% per year for the foreseeable future. However it trades at only a high teens multiple because current sales are soft in the Sullivans' units which matters less to the overall business as the other concepts grow. We believe the multiple should expand along with the earnings growth.
From Ron Baron's Baron Funds third quarter 2013 report.
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