Don't Miss Out on These Specialty Diners
Mark is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The trend in the restaurant industry is toward fast, casual specialty diners with great food and a great atmosphere. Restaurants that serve beer, pizza, hamburgers and wings represent the flavors of America that diners keep coming back for. These restaurants have developed their own unique concept and have tremendous growth potential.
A restaurant and a brewhouse together
BJ's Restaurants (NASDAQ: BJRI) is a chain of casual-dining restaurants that offers quality food and handcrafted beer. The menu contains approximately 100 items that include its famous deep-dish pizza and its own line of micro-brews. The company owns and operates 132 locations in 15 states and does not franchise.
In the first quarter of this year, revenue grew 13% to $188.6 million. Comparable- restaurant sales were up 0.4% for the quarter. Total revenue for last year was almost $730 million, which is almost double the company's revenue in 2008 of $374 million. Profits have tripled in that time from $10 million in 2008 to $31 million last year. As the company looks to expand, pre-opening costs for a new location average $500,000. With over $40 million in cash and no debt, the company is certainly in a great position to finance an expansion.
Going forward, the growth for BJ's Restaurants is in increasing its exposure via advertising and continued store expansion. The company expects to open 17 new locations this year. It seeks to open new restaurants via a clustering strategy where it can leverage its brand and increase customer awareness. This strategy makes sense as the company will get more bang for the buck with its advertising dollars. BJ's ultimate goal is to grow to 425 restaurants, which would triple the number of locations. The growth is in expansion and that will drive the top and bottom lines.
Red Robin Gourmet Burgers (NASDAQ: RRGB) specializes in gourmet burgers, but also offers a full menu of salads, appetizers and entrees. The company operates 474 Red Robin locations, including 336 company-owned locations.
In the first quarter of this year, same-store sales increased for the 11th consecutive quarter. Comparable sales grew 2.2% for the quarter. Revenue for the full year came in at $984 million and the company ended the year with approximately $17.4 million in cash and $99.5 million in debt.
Red Robin forecasts same-store sales to increase 2.5% to 3% for the rest of 2013. The company plans on opening 20 new stores this year and remodeling another 20.
Where I see great growth potential for the company is in its recently launched smaller footprint. The new restaurants will be about 4,000 square feet and will give the company greater flexibility in site selection and lower construction costs. This new layout will get Red Robin into more markets and with its popular menu, help drive results to the top and bottom lines.
Buffalo Wild Wings (NASDAQ: BWLD) is best known for its Buffalo wings. At the end of last year, the company owned and operated 381 locations and franchised an additional 510 locations in North America. Each location also televises sporting events and offers a full bar.
In the first quarter of this year, revenue grew 21%. Same-store sales in company-owned locations grew 1.4%. In April, same-store sales grew 5.2%. The company opened 20 new locations in the quarter. The company has no debt and a $100 million unsecured line of credit for future investments.
Going forward, Buffalo Wild Wings will benefit from lower chicken-wing costs. Last year's average cost per pound was $1.90. Year-to-date, the average cost is $1.75. For a company that primarily sells wings and doesn't discount, this goes straight to the bottom line. The company will further benefit as it has changed how it sells wings. Wings will now be sold in portion sizes. By making this change, the company is likely to see 40 to 50 basis points in cost savings.
The company is also expanding its draft beer offerings. In the first quarter, beer and alcohol sales made up 22% of revenue. Buffalo Wild Wings has partnered with the Craft Brew Alliance to launch a new craft beer. This will target the increased demand for specialty brews. Each location is looking to expand its draft beer selection from 24 to 30 brands. By having a vested stake in its own beer, Buffalo Wild Wings can push its brand at its locations and drive sales.
I like all three companies, but my favorite would be BJ's Restaurants. The company remains relatively unknown and there's plenty of room for growth with its concept. The stock is unchanged in the past year and has risen 12% year-to-date. Revenue and profits are growing and the company has no debt and $40 million in cash.
Overall, the casual restaurant continues to be popular with diners. These restaurants have the ability to expand and generate revenue. Their concepts and menu offerings are tailored to their core customers. I see continued growth ahead for all three companies in the long run.
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Mark Yagalla has no position in any stocks mentioned. The Motley Fool recommends BJ's Restaurants, Buffalo Wild Wings, and Red Robin Gourmet Burgers. The Motley Fool owns shares of BJ's Restaurants and Buffalo Wild Wings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!