Brinker International, Inc. EAT announced that it has acquired 103 franchised Chili’s Grill and Bar restaurants from Pepper Dining Holding Corp. for $106.5 million. The purchase price was funded by the company’s existing credit facility. The units are expected to be accretive to earnings in fiscal 2016.
Brinker remains steadfast in its goal to drive traffic and revenues through a range of sales-building initiatives such as menu innovation, better food presentation, kitchen system optimization and introduction of better service platform. The company will carry out renovation work at the acquired restaurants and intends to execute the brand's new loyalty program.
Meanwhile, the deal is ideal for this Dallas, TX based company’s capital allocation strategy. Any capital needs of the acquired restaurants will be funded by the revenues generated from the restaurants and therefore share repurchases will not be affected.
Unlike most of its peers, Brinker International is focused on company-owned restaurants, which allows it to have full control over operations and also keep the profits. The strong growth witnessed at these franchised units made them a lucrative acquisition target. Hence, the deal is a positive in an industry that depends largely on franchising.
A couple of other chains like Red Robin Gourmet Burgers Inc. RRGB and Buffalo Wild Wings, Inc. BWLD are also working on these lines and generate revenues from acquisition of restaurants.
Brinker International presently has a Zacks Rank #3 (Hold). Restaurant Brands International Inc. QSR is a better-ranked stock in the restaurant industry, sporting a Zacks Rank# 1 (Strong Buy).
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