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Acquisition  of  Del  Frisco’s  Restaurant  Group

David  Fisher
Agenda
01 Industry  Analysis
Industry  Definition,  Industry  History,  Industry  Trends,  Analyst  
Reports,  P orter’s  Five  Forces  Analysis,  Competition,  Risk  Factors  
(short-­term,  long-­term),  Industry  Outlook

02 Company  Analysis
Company  B ackground,  Organizational  S tructure,  Management  
Team,  Mergers  &  A cquisitions,  Corporate  B usiness  Model,  
Historical  Financial  Analysis  (Balance  S heet,  Income  S tatement,  
Cash  Flow  S tatement),  A nalyst  Reports

03 LBO  Analysis
Strength  o f  L BO,  Growth  Model  S trategy,  Capital  S tructure,  Control  
Premium,  P rojections  Assumptions,  P rojections,  Comparables,  
LBO  Model,  A djusted  P resent  Value  (APV)  Model,  L iquidation  
Modell,  Return  Analysis  (ROI,  MOI)

04 Potential  Investment  Bid


Price  A nalysis  (Floor,  Max,  Target),  E xit  Opportunities,  E xit  Multiple  
Analysis
Industry  Analysis
Del  Frisco’s  Restaurant   Group
Fine  Dining  History

Fine  Dining  Boom


Restaurant  Division Modern  e mphasis  to  
Chain  Restaurants sustainability,  a wareness  
Economic  b oom  results  
Modern  Restaurants Olive  Garden,   in  h igher  income  for   between  h ealth  a nd  nutrition.  
Applebee’s  a nd  9 9  o ther   families,  specialty  stores   Customers  b egin  to  p ay  
Shift  in  families  h eaded  
chain  restaurants  stored   and  fine  d ining  b egins  to   premium  for  fresher  
by  two  working  p arents,   were  created  in  a  five   support  h igher  income   ingredients,  n on-­GMO,  e tc.
shifting  consumer   year  span.  Consumer  
patterns  to  increase  in   levels
loyalty  b egins  to  d evelop
the  n umber  o f  p eople  
eating  o ut

1991 1996 2005 2015 2019

Mealey, Lorri. “A History of the Rise of the Modern Day Restaurant.” The
Balance Small Business, The Balance, 13 Dec. 2018
Restaurant  Industry  Segmentation
Chain   Mom  &  Pop  
Fine  Dining
Restaurants Shops

Industry  Definition:  Fine  Dining


Caters  to  a n  u pscale  clientele  a nd  p rovides  the  h ighest  
quality  o f  food  with  a  formal  a tmosphere,  sit  d own  
restaurant,  a nd  fancier  menu  than  a  typical  restaurant

Fine  Dining  Revenue  Growth:


10  Y R  CAGR:  7 .8%
20  Y R  CAGR:  11.7%
10  Y R  P remium  S teakhouse  CAGR:  4 .1%

Restaurant  Industry  S tore  Growth  (1995-­2015)


Fine  Dining  CAGR:  8 .2%
Chain  Restaurant  CAGR:    3.99%
Mom  &  P op  S hops  CAGR:  -­5.34% 1995 2005 2015

$148.91B $416.2B $745.61B

“Restaurant Industry: Total Sales U.S. 1970-2017 | Statistic.” Statista,


Hyland, Rachel. "Premium Steak Restaurants in the US." IBISWorld, 2019. Accessed February 02, 2019.
Industry  Composition
Geographic  Focus  (2018)
Industry  Composition   by   Types  o f  Fine  
Revenue Dining  Restaurants Independent  – 13% Region Weight  of  Stores

9.70% Northeast 35.8%


Non-­Chain or  franchised,  
typically  1-­5  stores,  regional   Southeast 8.6%
9.50%
and  small  brand  recognition  
Midwest 4.2%
6.70% Southwest 39.3%
West 12.1%
6.60% Chain  – 42%
62.20%
5.30%
Types  of  Fine  Dining  (2016)
Directly owned  and  operated  
by  owners,  typically  1-­5  stores   Fine Dining  Type Weight
with  large  brand  recognition
Classic  Steakhouse 24.1%
Darden  Resturants  Inc.
Ruth's  Hospitality  Group  Inc.
Brazilian Steakhouse 18.9%

We  Create  Quality  Professional  


Texas  d e  B razil  Churrascaria  S teakhouse
Franchised  – 45% Steak  and  Seafood 19.5%

PPT  Presentation
Flemming's  
P rime  S teakhouse  a nd  Wine  B ar
Stores licensed  by  parent  
French Cuisine 12.4%
Morton's  The  S teak  House company,  typically  larger  in   Spanish   Cuisine 7.7%
Other  Fine  Dining store  count  with  recognizable  
brand Italian   Cuisine 8.3%
Other 9.1%

Hyland, Rachel. "Premium Steak Restaurants in the US." IBISWorld, 2019. Accessed February 02, 2019.
Supply  Chain
Buy  Goods  a nd  S ervices
Organization  sources  a  variety  o f  vendors  b ased  o n  
1 Plan  for  P urchases
Organization  d ecides  what  p roducts  should  they  

2
geographical  location  a nd  p roduct  type.  S ince  fine   offer  to  customers,  h ow  much  a re  they  selling,  what  
dining  contains  the  h ighest  q uality  p roducts,  g oods   price  would  they  p ay,  a nd  where  it  is  coming  from.
are  rather  d ifficult  to  find  a nd  h ave  limited  q uantities     Key  Factors:  P rice,  Time
Key  Factors:  Relationship,  B rand

Waste
Restaurants  e fficiency  is  b uilt  o n  creating  minimal   3 Delivery  &  Consumption
Suppliers  d eliver  g oods  to  restaurant.  Food  

4
spoilage  a nd  waste  in  p roducts.  Unfortunately,  e ach   undergoes  a  series  o f  p rocesses  d epending  o n  the  
year  6 3  million  tons  o f  food  is  wasted  in  US,   product  a nd  store,  a nd  is  e ventually  sold  a nd  
11.4MM  d edicated  to  restaurants,  b ut  o nly  .8MM   consumed  b y  customer
tons  b y  fine  d ining.    

Purchase  Analysis
Organization  reviews  the  p revious  p urchase  o f   5 Recycling  &  Donations
Oftentimes,  restaurants  turn  surplus  that  is  turning  

6
goods  a nd  services,  d etermining  if  g oods  were  fairly   or  will  turn  in  the  n ear  future  a nd  a  n on-­selling  item  
priced,  freshness  o f  g oods,  customer  satisfaction  o f   and  d onate  to  food  shelters  a nd  soup  kitchens.  
product,  e tc.   Other  times,  vegetables  a nd  u sed  o il  a re  recycled  
and  a re  u sed  a s  fuel

Jennings, Lisa. “What Restaurants Can Do to Reduce Food Waste.” Restaurant Hospitality, 8 Feb. 2018,
Porter’s  Five  Forces  Analysis

Barriers  to  E ntry:  Low Buyer  P ower:  High Substitutes:  High

01 Brand  value  o f  incumbent  firms  increasing,  


growing  saturation  h as  made  it  more  
difficult  for  startups  to  maintain  p rofitability.  
High  cost  o f  capital  – complex  supply  chain  
03 Demand  is  d etermined  b y  d isposable  
income  a nd  value  o f  e xperience  
provided  b y  firms,  industry  h ighly  
vulnerable  to  e conomic  d ownturns,  low  
05 Premium  food  is  a  luxury  p roduct  a nd  h igh  
susceptible  to  substitution  for  casual,  fast-­
food,  a nd  h ome  d ining  e xperiences  a t  a  
much  cheaper  p ricepoint
construction customer  loyalty  p resence
Conclusion:  Medium-­High
Competition:  Medium Supplier  P ower:  High

02 04
Market  h as  tremendous  p ush  a nd  p ull  
Rivalry  likely  to  increase  a s  the  n umber  o f   Suppliers  h ave  more  p ower  o ver  
factors  that  d irectly  e ffect  the  p erformance  
new  e nterprises  is  p rojected  to  g row  b y  a n   smaller  chains,  p remium  restaurants  
of  the  industry.  Difficulty  managing  supply  
annualized  rate  of  3.3%.  Concentration  low,   face  challenges  a s  n ecessity  o f   chain  a nd  substitutions  makes  industry  
top  4  p layers  p osses  u nder  3 5%  market   rare/quality  ingredients  is  d ifficult  a nd  
difficult.
share controlled  b y  few
Hyland, Rachel. "Premium Steak Restaurants in the US." IBISWorld, 2019. Accessed February 02, 2019.
Industry  Trends
Organizational  Structure
Key  Trends Standard  Cost-­Structure
Owner Increasing  Organizational  Costs
Due  to  the  complexity  a nd  formal  n ature  o f  
fine  d ining,  job  specialization  h as  increased  
Investors labor  costs  b y  in  p ast  five  years  b y  1 9.7% Food  Costs
Labor  Costs
Commercial  L easing  Difficulties
Building  o wners  h ave  further  created   Overhead  Costs
General  
Manager harsher  criteria  for  tenants,  making  store   Upkeep
expansion  d ifficult  a s  7 9%  o f  stores  a re  
Executive  
leased  (Five  Year  Growth:  3 .1%)
Maitre D
Chef Ethnic  Inspired  Cuisine
Increasing  sophistication  a nd  knowledge  o f  
Head   restaurant-­goers,  chefs  must  e xpand  with  
Pasty   Chef Captain
Bartender more  g lobal  flavors  increasing  costs  (2.1%   Public  Restaurant  EV/EBITDA  
CAGR) Multiples  (2013-­2018)
Pastry  
Waiter Bartender Vegetable-­Centric  Cuisine
Cooks
Increase  in  vegan  a nd  vegetarian  d iets   8.7
Cocktail  
(2.3%  CAGR),  focus  o n  e xotic  p lant-­based   9.63
Assistant  
Line   Cooks Busperson Waiter dishes  o r  vegetable-­centric  menu
Chef
9.68
Environmental  S ustainability
Bar  Back Initiative  a nd  focus  o n  e nergy  a nd  water   9.93
conservation  a s  well  a s  food  waste  
reduction   10.24

“Restaurant Valuation Multiples: Global Trends and Forecasts.” Aaron Allen & Associates, Global Restaurant Consultants, 18 Feb. 2019
Industry  Trends
Change  in  Consumers Key  Trends
Change  in  Clientele
Increasing  Pricing  on  Fine  
Category 1990’s 2010’s
Emergence  o f  youth  super  wealth  a s  well  as   Dining
Men 61% 47% changes  in  d isposable  income  d isbursement   8
yields  a  younger  clientele,  p rimary  b etween  
Women 39% 53%
18-­34.  Trend  a lso  indicates  that  o lder   6
generations  will  n o  longer  h ave  the  income  

Price
Under 18 1.2% 3.1%
to  g o  a s  frequently  to  fine  d ining,  resulting  in   4
Age 18-­34 15.3% 33.9% change  o f  p reference  to  more  casual  d ining
2
Age  3 5-­44 28.7% 31.2% Increasing  Operational  Difficulty 0
Age  4 5-­54 23.5% 9.3% Two  o f  the  most  p rominent  factors  in  
determining  the  success  o f  a  fine  d ining  
Age  5 5-­64 19.0% 6.7% restaurant  is  the  cost  o f  its  steaks  a nd  
average  food  p rice,  b oth  o f  which  h ave   Steak  Median  P rice  (Per  L b.)
Age  6 5+ 12.3% 4.4% almost  d oubled  in  a n  e ight  year  span Average  Food  Item

Technology Cultural Customers


Increasing  n ecessity  o f  a ll-­in-­ Seeking  to  improve  e mployee   Moving  towards  more  
one  restaurant  management   conditions  to  reduce  p ersonal   socially/envirornmentally
platforms turnover conscious  p ractices
Everett, Holly. "2019 Restaurant Industry Trends: Shaping the Future of Food." Restaurant Insider. February 15, 2019. Accessed May 01, 2019
Fine  Dining  Risks  
EVERCHANGING   CUSTOMER   EXPECTATIONS,  
COMPLEXITY   OF  SUPPLY   CHAIN  AND  PRICE  
SENSITIVY   RESULT   IN  HIGH  FAILURE
R  =  .8827
Restaurants  a re  considered  to  o riginate  in  three  stages:  E arly  S tage  (0-­3),  
Growth  S tage  (4-­10),  Maturity  S tage  (10+).  E arly  stage  restaurants  fail  d ue  
to  p oor  management,  supply  chain  issues,  a nd  failure  to  a djust  to  p rice  
sensitivity.  Growth  S tage  o rganizations  tend  to  succeed  d ue  to  b rand  
recognition  a nd  a n  e stablished  customer  b asis,  b ut  a lso  fail  d ue  to  issues  in  
expansion  e fforts  including  supply  chain  a nd  increasing  o verhead.  Maturity  
stage  fails  d ue  to  minimal  changes  d uring  e conomic  trends  a nd  a  n on-­
upkeep  o f  industry  trends

Failed   Fine  Dining   (MM)


6
DJIA  P rice Fine  Dining  S ales  Revenue  ($MM) 5
4
3
PROSPERITY   OF  FINE  DINING   DEPENDENT   2
ON  DISPOSABLE   INCOME   AND  GDP  GROWTH 1
DJIA  a nd  Fining  Dining  Revenue  h ave  a n  e xtremely  strong  correlation.  A s   0
the  financial  markets  p rosper,  more  d isposable  income  is  readily  a vailable   2012 2013 2014 2015 2016 2017 2018
towards  luxury  items.  When  e conomic  d ownturns  o ccur,  the  immediate  
Early-­Stage Growth-­Stage Maturity  S tage
adjustment  in  e xpenditures  is  the  removal  o f  luxury  g oods.

Hyland, Rachel. "Premium Steak Restaurants in the US." IBISWorld, 2019. Accessed February 02, 2019.
Industry  Outlook
The  Decline  of  Capital  Spending Historical Projections
• Capital   Spending  will   continue  to  fall   as  2018  h ad  the  most  fine  
dining  mergers   (87),   more  than  the  p revious   five  years  combined   40

Players  ( MM)
(73).  With   larger   orders,  economies   of  scale  for  expensive  
35
products  allows   capital  spending  to  b e  further  stabilized
30
25
2015201620172018201920202021202220232024

The  Rapid Growth  in  F oot  Traffic Industry  P layers


40

Industry  Revenue  
• Economists predict  financial   markets   short  and  long-­term   success.  
Greater  disposable  income   will   allow  fine  dining  to  flourish 30
• Fine  dining's  exponential  spending  increase   (3x  since   2015)  o n  

(BB)
social   media  will   further  spread  branding  a wareness   and  g enerate   20
strong  returns   (2015  yielded  a  9.2%  conversion  rate)
10
0
2015201620172018201920202021202220232024
Overall Financial  Projections  (Five-­Year)
• Revenue  Growth  Rate   – 2.6% Revenue  for  the  fine  d ining  industry  h as  reaching  its  climax,  b ut  
• Industry  is   saturated, entering ‘long-­term   slow-­growth   phase’  o f   will  still  grow  a s  the  e conomy  h as  still  shown  signs  o f  p romise.  
maturity Additionally,  a nalysts  h ave  p redicted  this  to  b e  the  consolidation  
• EBITDA   Growth – 1.7% era  within  this  industry,  a s  ~20%  o f  firms  will  e ither  close  o r  b e  
• Advancements  in  Management  Information   Systems   will   allow   subject  to  M&A  b y  2 024
computerization   and  a utomation  to  advance  margins   slightly

Hyland, Rachel. "Premium Steak Restaurants in the US." IBISWorld, 2019. Accessed February 02, 2019.
Company  Analysis
Del  Frisco’s  Restaurant   Group
History  of  Del  Frisco’s
Expansion  to  New  
IPO  &  Minor  Expansion
Announces  o ffer  p rice  
Markets
Purchase  o f  B arteca
on  IPO  o f  $ 13  raising  
Minor  Expansion  Efforts Restaurant  Group,  
$75.4MM.  Opens  one  of  
Launches  three  n ew  stores  in   owner  o f  B arcelona  Win  
he  largest  steakhouses  
new  Texas  regions.  Revamping   Bar  a nd  B artaco for  
in  Chicago.  Change  in  
of  o riginal  restaurant  o n  B elt   $325MM.  Gained  3 1  
Chief  Operating  Officer.  
Line  Road locations  in  1 0  states

‘81 ‘90 ‘94 ’02 ‘17 ‘18

Foundation Introduction  of   Awards  of  Prosperity


Developed  with  focus   Winery   to  Supply   Named  1 00  B est  
on  u nforgettable   Chain Steakhouses  in  America  
experiences,  g enuine   2016  b y  Open  Table.  
Group  a cquires  well  
hospitality,  coupled  with   Leads  to  a ddition  o f  6  
renowned  S ommeliers  
the  h ighest  q uality  food   new  stores  a nd  2 1%  
and  a ward-­winning   to  h elp  g row  the  wine  
increased  foot  traffic
menu  a nd  d ining  
beverage  p rograms.  
experience
First  location  in  Irving,  
Texas. McNeal, Joseph. “'Dee' Lincoln Leaving Del Frisco's Double Eagle Steak House.” Dallas News, 19 Apr. 2010
Organizational   Structure
Executive  Leadership
Relatively  New  Management
President,  Chief   Norman  
Executive  Officer,   Abdallah
(2016) With  a ll  e xecutive  members  joining  b etween  2 016  a nd  2 018,  management  
Director
could  face  p otential  challenges.  A lthough  management  d oes  h ave  
experience  in  restaurant  g rowth  (Median  E xperience:  1 4.2  years),  o nly  two  
Executive Level   Neil William   Mia   executives  came  from  a  fine  d ining  b ackground  (Neil  Thomson,  Norman  
Thomson   Martens   Meachem
(CFO,  CDO,  CMO) (2017) (2017) (2018) Abdallah).  One  o f  g reatest  challenges  was  the  sale  o f  S ullivan’s  in  
September  2 018,  a  p opular  steakhouse.  S cott  S mith,  who  was  responsible  
for  the  majority  o f  the  e xpansion  e fforts  for  Del  Frisco’s  Restaurant  Group  
Vice  President,   Thomas   Brandon  
Dritsas   Coleman   left  when  the  a cquisition  took  p lace.
Brand  President (2018) (2017)

Board  of  Directors Board  of  Directors  Inexperience


Similar  to  e xecutive  leadership,  the  b oard  o f  d irectors  h as  p otential  issues,  
Independent Chairman   Ian   Carter   as  a lmost  a ll  h ave  b een  instated  within  the  p ast  five  years.  The  b oard  h as  
of  t he  Board (2015) provided  minimal  p ushback  o n  the  o rganization,  a nd  to  d ate,  h as  supported  
the  e xecutive  team  o n  e very  strategic  a nd  e xpansion  e ffort  d ecision  since  its  
David   Barr  
Pauline   Richard   William   Joseph   inception.  However,  b oard  o f  d irector  members  seem  to  u ndergo  change  
Independent  Directors (2012)
Brown   Davis   Lamar   Reece  
every  ~6  years,  majority  d ue  to  p oor  management  changes  a nd  p oor  a bility  
(2017) (2012) (2013) (2019)
to  challenge  e xecutive  management  team.

Financials, Nasdaq. “DFRG Organizational Structure.” NASDAQ.com


Organizational   Structure
Company  Structure
Del  Frisco’s  
Parent  Company Restaurant  
Group,  Inc.  
(DRFG)

Original  Restaurants, Del Frisco’s   Del  Frisco's  


Double  Eagle  
Barteca
Restaurant  
Acquisions Grille
Steakhouse Group

Acquired  Restaurants Barcelona  Wine  


Bar
Bartaco

Diversity  of  Brands


Del  Frisco's  Double  E agle   Barcelona  Wine  B ar Bartaco Del  Frisco’s  Grille
Steakhouse
• Premier  steakhouse concept  in  the   • Spanish  tapas  b ar  o ffering  simple   • Health food  concept  with  cuisine   • Appeals  to  a  wide  range  o f  
United  S tates,  d efined  b y  h igh   and  e legant  small  p lates with   coming  from  a  b road  range  p laces   customers  seeking  fine  d ining  with  
quality  steak  menu  a nd  e xtensive   seasonal specialties  from  S pain   in  Mediterranean,  A sia  a nd   a  less  formal  a tmosphere  -­ top  
wine  list  complemented  b y  a   and  Mediterranean Beyond  with  a  rustic  b each  shack   selling  signature  menu  items  a nd  
“Swarming  S ervice” • Wine  p rogram  o ffers  wines  from   design a  b road  selection  o f  the  same  
• 16  restaurants in  e leven  states   Spain  to  S outh  A merica,  including   • 18  locations  in  ten  states quality  wines
and  District  o f  Columbia over  4 0  wines  b y  the  g lass • Typical  restaurant  size:  ~4500  sq.   • 24  L ocations  in  e leven  states  a nd  
• Size  range  11,000  – 24,000 sq.  ft.,   • 15  locations  in  seven  states  a nd   feet District  o f  Columbia
seat  ~350  p eople District  o f  Columbia • Average  Check:  $ 23 • Average  Check:  $ 51
• Average  Check: $123 • Typical  restaurant  size:  ~4500  sq.  
ft.
• Average  Check: $34
Business  Model
Infographic  Style
Site  a nd  S election   Restaurant  Operations  a nd  
Overview Geographic  Diversity
Development Management

Management Choices Sight  Selection Operational  Structure


• Partners  with   third  parties   to   • Possesses   strict   operational  
• Utilize  proprietary  recipes  and   standard  in  all  aspects  of  business
source  cities   against  clear  
quality  food  presentation  to   𝑥 𝑥
𝑥 criteria   pertaining  to  specific   • High  level   of  quality  control
deliver  a  premium  dining   𝑥 𝑥
𝑥 𝑥 brand • Use   third  parties  to  appraise  
experience 𝑥 𝑥
• Conducts  comprehensive   distributors/suppliers   based  o n  
𝑥 𝑥
• Geographically  choose   𝑥
customer   demographic  studies food  safety  standards  and  risk-­
locations  with  a  high  net   𝑥 • Analyzes  business   dynamics   based  p reventive   controls
worth,  low  poverty  rate   𝑥 and  u nit  economics   of  area   • Two   Main   Beef  S uppliers,   less  than  
(>10%),  and  a  large   under-­consideration ten  o verall   for  foods/drinks/supplies  
• Board  and  senior   management   (30+  year  relationship)
population  (<50,000  people)
visits   and  gives  final  
• Acquisition  of  Barteca appraisal/approval  of  location Restaurant  Structure
designed  to  diversity   Geographic Expansion  Efforts
customer  base Mathematical  Criteria • Fine  dining  industry   median  
• Currently, only  e leven  states  h ave   number  of  employees   18,  DFRG  
• Seasonal  changes in  their   been  e ntered
• Medium   Income  Minimum   of   median  28
menu  to  allow  slight  margin   • At  o ne  p oint,  they were  in  fourteen   $75K,  ideally   100K  median • Focus  on  job  specialization   (Ex.  
increases states,  b ut  three  failed  d ue  to  h igher   sommelier)   to  charge  premium
that  e xpected  costs • Minimum   Food  Traffic  of  6K  
• Minimal  ownership  of  stores, • Potential  further expansion  within   people,  3 0K  vehicles • Regional  directors   to  oversee  
focus  on  leasing  in  longer-­ Texas  a nd  California  Regions,  minor   • Daytime   Population  Minimum   of   restaurants,  must   have  5 +  years   of  
expansion  p otential  in  Florida 67K,  Ideally   100K+ experience  in  running  DFRG  
term  capacity  (10+  years) restaurants  prior   to  holding  p osition
Relations, Investor. “10-K.” Investor Relations, Del Frisco's Restaurant Group, Inc.
SWOT  Analysis

Strength Weakness

• Strong  Distribution  Network • Organization  structure  too  large  a nd  inefficient,  


• Strong  B rand  P ortfolio unnecessary  CAPEX
• Success  Track  Record  o f  integrating  complimentary   • Limited  success  o utside  core  b usiness
firms  through  mergers  a nd  a cquisitions • High  a ttrition  rate  – Employee  training  a nd  
• Strong  Returns  o n  Capital  E xpenditures development  costs  2 7%  h igher  than  fine  d ining  
• Product  Innovation  through  menu  changes  to   competitors
charge  p remium  p ricing • Financial  P lanning  Issues    -­ Current  Ratio  (1.5  vs.  
2.8  Industry  A verage)

SWOT
Threat
Opportunity
• Economic  d ownturn  could  instantly  h urt  the  o verall  
• Economic  u ptick  a nd  increase  in  consumer  spending,   performance
financial  markets  p rojected  to  g row  a nd  create  further   • Consolidation  o f  local  d istributors  a nd  meat  supply  
wealth  in  midwest and  southeast organizations  creates  d ifficulty  in  n egotiating  with  
• New  h ealth  conscious  consumers  a nd  a wareness  o f   suppliers
nutrition  a lign  with  Del  Frisco’s  p latform • Highly  seasonal  p roducts,  introduction  o f  e xpanded  
• Decreasing  cost  o f  transportation  (-­3.28%  CAGR  since   product  line  could  h ave  p oor  customer  satisfaction  
2015)  can  lead  to  b etter  COGS  a nd  h igher  margins

Relations, Investor. “10-K.” Investor Relations, Del Frisco's Restaurant Group, Inc.
Historical  Financial  Performance
INCOME  STATEMENT 2014 2015 2016 2017 2018
Sales  &  Cost  of  Goods  Sold
Sales 220,893 252,629 273,884 293,827 378,216
• Growth   in  sales  due  to  expansion  of  locations
Cost  of  Goods  Sold 163,807 188,926 205,337 225,137 295,875
• Surprisingly   grew  even  through  a  major   segment  of  the  b usiness   was  sold
Gross  Profit 57,086 63,703 68,547 68,690 82,341
SG&A 30,655 36,380 33,485 63,013 83,230 EBITDA
EBITDA 36,376 40,148 49,965 23,272 -­889 • Drastic   changes  in  EBITDA   due  to  losing   most  profitable  segment.  However,  
management  projections   due  to  drastic  expansion  in  customer   base  will  
supposedly  allow   this  negative  to  be  an  a nomaly

Liquidity  Ratios
Ratio 2018 2017 2016 2015
• Current   Ratio  is   drastically   improving,   meaning  that  assets  are  improving   faster  
Current  Ratio 1.54 1.41 1.10 1.28 than  liabilities
• More   efficient  operations,  smaller   accounts  payable  a nd  other  major   liabilities
Quick Ratio 2.50 2.44 1.69 2.38 • Considered  slightly   low,   a  'strong'  Current   ratio  is   usually  considered  to  be  
two
Cash  Ratio 10.00 11.11 3.45 9.09
Profitability  Ratios
Gross  Margin 22% 23% 25% 24%
• Gross   margin,   operating  margin   remaining   relatively   constant  as  expansion  
efforts  take  place
Operating  Margin 6% 4% 7% 7%
• Profitability   margin   drastic   growth  (5x   growth),  as  inefficient  business  
Profit Margin 20% 4% 6% 5% segments  were   sold/underwent  organizational  and  o perational  changes

Relations, Investor. “10-K.” Investor Relations, Del Frisco's Restaurant Group, Inc.
Historical  Financial  Performance
BALANCE SHEET 2015 2016 2017 2018
Cash  and  Cash  Equivalents $5,176 $14,622 $4,553 $8,535
Assets Short-­Term  Investments $0 $0 $0 $0
Net  Receivables $7,739 $7,624 $5,108 $9,636
• Drastic  growth  in  inventory  due  to  the   Inventory $17,308 $16,400 $15,539 $22,461
increase  in  restaurant  concentration Other  Current  Assets $6,774 $8,034 $11,803 $17,327
Total  Current  Assets $36,997 $46,680 $37,003 $57,959
• Other  Current  Assets  growth  accompanied  by  
the  purchase  of  locations  rather  than  the   Fixed  Assets $183,191 $195,992 $210,384 $287,803
leasing  of  locations Goodwill $75,365 $75,365 $43,928 $156,131
Intangible   Assets $36,865 $37,409 $20,284 $206,573
Liabilities Other  Assets $282 $282 $543 $4,010
Deferred  Asset   Charges $13,955 $15,054 $16,327 $13,556
• 2018  was  the  first  time  period  where  the   Total  Assets $346,655 $370,782 $328,469 $726,032
company  took  on  short-­term  debt,  drastic  
Accounts   Payable $24,572 $22,681 $24,357 $58,000
increase  in  long  term  debt Short-­Term  Debt $0 $0 $0 $4,814
• Large  increase  in  accounts  payable  due  to  the   Other  Current  Liabilities $22,815 $28,395 $27,474 $26,843
large  purchase  orders  in  order  to  achieve   Total  Current  Liabilities $47,387 $51,076 $51,831 $89,657
economies  of  scale  pricing
Long-­Term  Debt $4,500 $0 $24,477 $332,564
Other  Liabilities $2,100 $2,242 $10,582 $1,828
Stockholder's   Equity Deferred  Liability  Charges $64,969 $71,098 $52,492 $88,401
Total  Liabilities $118,956 $124,416 $139,382 $512,450
• Surprisingly  for  a  restaurant  organization,  it  
hedges  itself  through  the  economic  downturns   Common  Stocks $24 $24 $24 $37
by  investing  in  treasury  stock,  which  has  been   Capital  Surplus $137,601 $143,325 $147,503 $248,618
producing  negative  returns Retained   Earnings $103,074 $120,840 $109,383 $33,379
Treasury  Stock -­$13,000 -­$17,823 -­$67,823 -­$67,823
• Capital Surplus  has  been  extremely  strong   Other  Equity $0 $0 $0 -­$629
between  2017  and  2018 Total  Equity $227,699 $246,366 $189,087 $213,582
Relations, Investor. “10-K.” Investor Relations, Del Frisco's Restaurant Group, Inc.
Historical  Financial  Performance
Key  Findings
STATEMENT OF  CASH  FLOW 2015 2016 2017 2018
• Net  Income  has  had  tremendous   Net  Income $15,998 $17,766 -­$11,457 -­$76,303
fluctuations  due  the  changes  in   Depreciation $16,118 $17,727 $22,347 $24,552
Net  Income  Adjustments $9,670 $5,268 $26,334 $44,472
subsidiaries  through  acquisition Accounts   Receivable $5,760 $2,692 $8,065 $10,845
• Depreciation  has  significantly  increased   Changes   in  Inventories
Other  Operating   Activities
-­$716
-­$3,161
$908
$810
-­$1,629
$61
-­$4,605
-­$1,963
due  to  the  amount  of  stores  and   Liabilities $2,199 $4,644 -­$5,656 $14,204
operating  equipment Net  Cash  Flow-­Operating $45,868 $49,815 $38,024 $11,168

• Large sale  block  of  shares  in  2018,   Capital  Expenditures -­$46,150 -­$36,698 -­$39,426 -­$85,838
brings  up  potential  questions  as  to  how   Other  Investing   Activities -­$380 $2,530 $15,497 -­$296,647
much  faith  management  has  in  the   Net  Cash  Flows-­Investing -­$46,530 -­$34,168 -­$23,929 -­$382,485

organization Sale  and   Purchase   of  Stock -­$2,182 -­$1,616 -­$48,458 $97,263


• Capital  Expenditures  drastically   Net  Borrowings
Other  Financing   Activities
$4,500
$0
-­$4,500
-­$85
$24,477
-­$183
$299,676
-­$180
increased  due  to  the  growing  number of   Net  Cash  Flows-­Financing $2,318 -­$6,201 -­$24,164 $375,299
stores
Net  Cash  Flow $1,656 $9,446 -­$10,028 $4,016
• Net  Cash  F low  looks to  grow  in  the  
future  with  drastic  growth

Relations, Investor. “10-K.” Investor Relations, Del Frisco's Restaurant Group, Inc.
Analyst  Reports
Price  Analysis  vs.  Predictions  (May  1st Value)
ANALYST   REPORT   60.00  
You  can  Resize  without   DFRG
RANKINGS
losing  quality 50.00   Zacks
RANK SITE
You  can  Change  Fill   40.00   Reuters
Color  & Morningstar
#1
Line  Color Zacks 30.00  
NASDAQ
20.00  
#2 Reuters Yahoo  Finance
10.00  
#3 Morningstar Seeking  A lpha
-­ Market  Watch
#4 NASDAQ 2013 2014 2015 2016 2017 2018 2019 2020

#5 Yahoo  Finance
DRFG  vs.  Analyst   Eight   of  ten  firms  see  
#6 Seeking  Alpha Median DFRG  as   Recent  Acquisition   of  
FREE  
#7 Market  Watch 30.00  
undervalued  
between   1.07x  -­
Barteca hurt  short-­
term  public  returns
2.78x
PPT  
#8 The  Street
20.00  

10.00  
TEMPLATES
#9 Wall   Street  Journal

Geographical
expansion   and   Brand  potential  
award  recognition   diluted   by  drastically  
#10
www.allppt.com FinViz consistent  with  stock   different   subsidiaries
DFRG Analyst  Report  Median growth

Relations, Investor. “10-K.” Investor Relations, Del Frisco's Restaurant Group, Inc.
LBO  Analysis
Del  Frisco’s  Restaurant   Group
Private  Equity  Firm
Sun  Capital  Partners  Inc.  
2018  Highlights

$600MM  
• Focused  on  identifying   • Bar  Louie 4  Acquisitions Capital  
History

Previous Relevant   Transactions


companies’   untapped   • Award  willing   upscale  
potential   and  leveraging   restaurant  and  bar Invested
its deep   operational   and   • Fazoli’s
financial   resources  to  
• Premium Italian  
transform  results restaurant  focused  on  
• Since  1995, Sun  Capital   traditional   and   1.8B  Realized  
has  invested  in  more  than  
360  companies   world  
innovative   Italian   food   11  Exits Gross  
offerings
wide,  investing   over  
• Restaurants Unlimited
Proceeds
$50BB
• Award-­winning  
• Strong  Flexibility   &   restaurants  including   a  
Efficiency
• Acquisitions   consistently  
Steakhouse,   Seafood  
Grill,  and  Upbeat  
$1.5B  
close  in  30  days  or  less European-­inspired   Financings  
• Recognized   for  seller   cuisine
friendly  contract  terms Completed

Sc-Gsadmin, Albert. “About Us | Sun Capital Partners.” Sun Capital Partners, Inc. | Private Equity Firm, Sun Capital Partners Inc.
2019  Projection  Year  
(Acquisition  Year)

Management   Projections  vs.  


Sun  Capital   Projections
600000

• Sun  Capital  Partners   • Management  Price  

Stock Performance
Store Growth
500000

400000
Assumptions Projections
• Calculated   revenue   • Low:  +5.2%
300000 per  store  for  2018 • Median:  +24%
200000
• Used  ratio  to   • High:  +35.2%
determine  2019   • Price  not  indicative  
100000 revenue  based  on   of  the  strong  brand  
number  of   name,  hurt  by  recent  
0 projected  stores  
2015 2016 2017 2018 2019 2020 acquisition   multiple  
added   pricing
Management  S ales  P rojections
Sun  Capital  P artners  S ales  P rojections

Hillway, Brian. “DFRG.” CNNMoney, Cable News Network


Growth  Strategy
Growth  of  DFRG LBO  Growth  Return  Methodologies

•Economies  of  s cale  t hrough  better  pricing  on  

Geographical   Cost  
Expansion  of  
Current  
Other  
Expansion  
Increase   goods,  expansion  of  s tores,  lean  management  
organizational  s tructure  of  s tores
Expansion Reduction
Portfolio Methodologies EBITDA •Introduce take-­out,  be  available  on  GrubHub,  
OpenTable,  more  s ocial  media  f ocus
•Franchising  options,  receive  f ranchise  f ees

Diversifying  
Create   'Hub'   within   Simplification  of   restaurant   portfolio   Ability  to  expand  
California  and  West   organizational   with  other  food   multiple  by   •Simplification  of  organizational  s tructure
coast,  be  first  
steakhouse  group  
to  dominate  the  
structure,  combine  
and  empower  
employees  for  more  
genres,  but  also  
containing  similar  
product  items  
introduction  of  new  
products  (bottling  
sauces,  franchising  
Decrease   •Shrinkage  of  menu  t o  reduce  labor  c osts  
(currently  41%  v s.  35%  industry  avg.)
region responsibility (meats,  vegetables,  
etc.)
model  for  stores)
Costs •Structuring  more  f avorable  leases  for  longer  t erm,  
less  growth  per  y ear

Greater  
Turn   off  hours  of  

Growth  in  
concentration  of  
Better  management   Creating  synergies business  into   •Can  purchase  other  organizations  t o  become  a  
restaurants  in   of  inventory  and   with  the  current  
areas  with  poor   hosting  events,   restaurant  c onglomerate  with  diverse  f ood  genres
control  food  costs   portfolio  of  Sun   cooking  classes,  

Exit  
pricing  (Florida,   (Currently   5.6%  of   Capital  Partners   •Must  achieve  drastic  growth  in  s tore  c ount  and  
Northeast)   to   restaurant   training  
counterbalance  
food  is  wasted) investments sessions,  wine   geographic  c oncentration
tastings,  etc.      

Multiple
supplier  power •Introduction  of  c onsumer  products  t o  s ell  (Ex.  
steak  s auce)
Private  Equity  Firm
Typical  LBO  Transaction  Structure
Percent  of   Cost  of  
Offering Leading  Parameters Likely  Sources
Transaction Capital

• Commercial  Banks
• 5-­7 Year  Payback
• Credit  companies
Senior Debt 50-­60% 7-­10% • 2-­3x  EBITDA
• Insurance  Companies
• 2x  Interest  Coverage

• Public  Market
Mezzanine   • 7-­10  Year  Payback
20-­30% 10-­20% • Insurance  Companies
Financing • 1-­2x EBITDA
• LBO/Mezzanine  Funds

• Management
• LBO Funds
Equity 20-­30% 25-­40% • 4-­6  Year  Exit  Strategy
• Subordinated  debt  holders
• Investment  Banks

Ivashina, Victoria, et al. “Note on LBO Capital Structure.” Note on LBO Capital Structure - Module Note - Harvard Business School
Sun  Capital  Partners  Stucture
Senior  Debt Mezzanine  Financing Equity

• Typical  Investors • Typical  Investors • Typical  Investors


• Arrow  Financial  Corporation • Greyrock Capital  Group • Management  (7-­12%  of  Equity)
• Bank  of  America • Banyan  Investment  Partners • LBO  Fund
• BB&T • Prism  Capital • CIBC  (Financing if  Needed)
• BBVA  Compass • NewSpring Capital • Percent of  Transaction
• AIG • Percent  of  Transaction • 15-­40%
• Nationwide • 10-­37.5% • Cost  of  Capital
• Assurant • Cost  of  Capital • Median  31.2%
• Fairfax  Financial • Median  14.83% • Strategy
• Percent  of  Transaction • Parameters • Median  7.2  Year  Holding  Period
• 40-­45% • 1.5X+ EBITDA • Return  Focus:  2.3X  – 3.5X
• Median Transaction:  726MM
• Cost  of  Capital
• Median  9.7%
• Parameters
• 6-­10  Year  Payback
• 1.5  – 2X  EBITDA
• 2.2X+  Interest  Coverage

Sc-Gsadmin, Albert. “About Us | Sun Capital Partners.” Sun Capital Partners, Inc. | Private Equity Firm, Sun Capital Partners Inc.
Sun  Capital  Partners  Transactions
Percent  of   Cost  of  
Firm Multiple Offering Parameters Partners
Transaction Capital

Senior Debt 45% 8.3% 2.5X+  EBITDA BBVA  Compass

14.28X   Mezzanine  
Bar Louie 35.3% 12.16% 1.5X+ EBITDA New Spring  Capital
EBITDA Financing
15  Year  Projected   Sun Capital  Partners,  
Equity 29.7% 35%
Hold Management,  CIBC
7.51X 8  Year  Projected   Sun  Capital Partners,  
Fazioli’s Equity 100% 31%
EBITDA Hold Management

Restaurants   9.30X   10  Year  Projected   Sun  Capital  Partners,  


Equity 100% 36%
Unlimited EBITDA Hold Management

Sc-Gsadmin, Albert. “About Us | Sun Capital Partners.” Sun Capital Partners, Inc. | Private Equity Firm, Sun Capital Partners Inc.
Exit  Strategy  Options
Fine  Dining   Exit  Strategies
Initial  Public   100.00%
Private  Sale Offering Liquidation
90.00%

80.00%

70.00%
Commonly  exited   Not  commonly  exited   Rare  occurrence   to  exit  
through   this  platform   through   this  platform   through   this  platform  
(79%  of  transactions) (18%) (3%) 60.00%

50.00%

Last  resort  for  exit   40.00%


95%  of  transactions   exit   strategy,   as  many  of  the  
at  the  same  multiple  they   Typically  exit  at  1.6X   portfolio   investments  
were  originally   EBITDA have   minimal  divestible   30.00%
purchased   for high  value   liquidity  and  
value
20.00%

10.00%
Many  of  their  IPO's  were  
Mission  is  to  grow   well  branded   products   Company   Return:  
EBITDA  not   grow   with  high  success  (Ex.   ~4.61% 0.00%
expansion   multiple
Boston   Market) 2013 2014 2015 2016 2017 2018 2019
Private  S ale Initial  P ublic  Offering
Liquidation Chapter  9

Sc-Gsadmin, Albert. “About Us | Sun Capital Partners.” Sun Capital Partners, Inc. | Private Equity Firm, Sun Capital Partners Inc.
LBO  Candidate  Valuation
Steady  and  P redictable  Cash   Flow Divestible   Assets
• Cash flow  inconsistent   within  past   five  years  due   to  acquisition   of  Barteca and   sale  of   • Majority of  assets   comprise  of  land,  cooking   equipment,   wine,  and  the   high-­quality   food.  
Sullivan’s  Steakhouse Besides   real  estate   and  machinery,   most  assets  have   low  transactional   movement   and   narrow  
• Prior  to  these acquisitions,   cash  flow  was  consistently   positive   for  24+  years scope   of  assets

Clean  Balance  Sheet  with   Little  Debt Strong  Management  Team


• Balance   sheet   has   recently  accrued   of  short-­term  debt   and  a  drastic  increase   in  long   term  debt   • Organizational   structure   has  many  layers  of  expertise,   but  all  major  executive   leadership  
(10x+) members  have   been   added   in  2016   or  later
• However,  due   to  the  nature   of  an   LBO,  in  the  case  where   we  are  acquiring   and   restructuring   • Board   of  directors  also  relatively  new
the  entire   organization,   this  issue  has  little  importance • 83%  of  non-­executive   leadership   members  (regional  directors,   store  managers),   have   been  
•Value   of  organization   does   not  change   regardless   of  the  amount   of  debt with  the  firm  for  10+  years
Strong,  Defensible  market   position Viable  Exit  Strategy
• Ranked   #43   in  overall  fine  dining   revenue • Current  poor  stock  performance   makes  IPO  future   strategy   potentially   difficult   as  users  have  
• 35+  year  heritage,   customer   retention   strong   (92%  vs.  74%  industry  average) not  seem  returns;;   stock  price  hit  a  peak   of  $28,   but  is  currently  trading   at  ~$6  a  share
• Diversity  of  restaurant   holdings   minimizes  risk  through   preference   changes • Acquisitions   of  restaurants   are  particularly  common,  either   between   restaurant   groups   or  
private  equity   firms  make  it  a  viable  option  
• Financial  markets  predict   an  increase   in  economic   surplus,  therefore   the  industry   will  continue  
to  grow Synergy  Opportunities
Limited   Working   Capital  Requirements • Due  to  the  familiarity  of  Sun  Capital  Partners   in  the  restaurant   industry,  potential   synergies  
with  their  current   portfolio   companies   of  Bar  Louie,   Fazioli's and   Restaurants   Unlimited  is  
• Restaurants   industry,  particularly   fine  dining  has   extremely  high  capital   requirements   due   to   possible   based   on  their  common  product   purchases
premium  supply  chain   products
• Increased   locations   within  same  regions   will  allow  economies   of  scale  to  occur  
• Expansion   of  locations    in  recent  era  has  yielded   high   capital  expenditures
Minimal   Future  Capital   Requirements Potential  for  Expense  Reduction
• Del  Frisco's  Restaurant   Group's  focus  is  to  expand   on  locations   as  their  primary  growth  tool,   • “Hub Growth”  within  regions   will  allow  economies   of  scale  to  support   better   prices
therefore   future   capital   requirements   will  rise • Alternative   suppliers   through   Sun   Capital  Partners   relationships   could   provide  benefits
• Location   choice  focused   on  creating   hubs  and   sectors  within  states   to  allow  supply   chain   • Reduction   of  restaurant   organizational   structure   (Ex.  removal  of  assistant   managers,   combine  
expansion   and   economies   of  scale  focus  to  aid  in  cheaper   pricing roles  of  waiter  and   bus  person,   etc.)
LBO  Candidate  Valuation
LBO  Candidate Weight Score  (1 Worst,  10  Best) Weighted  Score
Steady  and  Predictable   Cash  
22.5% 5 1.125
Flow
Clean   Balance  Sheet   with  Little  
0.00% 4 -­
Debt
Strong,  Defensible   market  
15% 7 1.05
position
Limited   Working   Capital  
3.75% 4 0.15
Requirements
Minimal   Future  Capital  
8.75% 4 0.35  
Requirements
Divestible  Assets 5% 4 0.2  
Strong  Management   Team 10% 4 0.4
Viable   Exit  Strategy   15% 7 1.05  
Synergy  Opportunities 10% 8 0.80  
Potential   for  Expense  
10% 8 0.80  
Reduction
(5.925/10)  
Total
[40.75%  Discount  Rate]
Multiple  Analysis
Valuation  Date:  5/2/19

DFRG  STOCK Buyer Seller


TV/
EBITDA
Note Include  (Y/N)
30
Catterton OSI  Restaurant   Transaction   11/06/2006  
9.81x Y
20 Partners   Corp Partners   LLC M&A:  Standard,   Outdated   Transaction

10 JAB  Holding  Co   Panera   Bread   Transaction:   07/19/19


18.10x N
Sarl Co M&A:  Poor, Different   Segment
0
5/5/14 5/5/15 5/5/16 5/5/17 5/5/18
Whole  Foods   Amazon.com   Transaction: 08/29/17
10.88x N
Enterprise   Value   2019 TEV/EBITDA Market  Inc Inc M&A:  Poor, Differences   in  Scale/Segment
(Market  Cap  +   EBITDA Multiple
Debt  – Cash)
Transaction: 04/13/00
Koninklijke   Ahold  
329,065.32 32,937 9.99 US  Foods   Inc. 12.40x M&A:  Poor,  Outdated   Transaction,   Differences  in   N
Delhaize  NV
Scale/Segment

Transaction: 05/28/99
The  Kroger  Co Fred  Meyer  Inc. 13.49x M&A:  Poor,  Outdated   Transaction,   Differences  in   N
Scale/Segment

Albertson’s   LLC Safeway   Inc. 5.00x Transaction: 01/30/15


N
M&A:  Poor,  Differences   in  Scale/Segment

Median  Transaction   EBITDA  Multiple 9.81X

Financials, Nasdaq. “DFRG Stock Performance.” NASDAQ.com


Acquisition  of  DFRG
Multiples Value Capital Percent Of   Cost  of  
Transaction Partners
Structure  Item Transaction Capital
Bar  Louie’s  Transaction 14.28X
Bar  Louie’s 45% 8.3% BBVA
Fazioli’s Transaction 7.51X Sun  Capital   Sun  Capital  
Typical   42.5% 9.7% Management,   Sun  
Restaurants Unlimited 9.3X Senior   Debt Transaction Capital   Partners
Commercial   Banks,  
Typical  LBO  
2018  PE Buyout  Multiple 11.6X 55% 8.75% Credit  Companies,  
Transaction
Insurance  Company
Precedent Transaction   Senior   Debt  Average 47.5% 8.92% BBVA
9.81X
Multiple
Capital Percent Of   Cost  of  
Transaction Partners
Average  Acquisition Structure  Item Transaction Capital
9.81X
Multiple Bar  Louie’s 35.3% 12.16% New  Spring  Capital
Sun  Capital   Sun  Capital  
LBO  Candidate   Valuation   Mezzanine Typical   23.75% 14.83% Management,   Sun  
-­40.75% Financing Transaction Capital   Partners
(Premium/Discount)
Typical  LBO   Public   Market,  
25% 15%
Adj. Acquisition  EBITDA   Transaction Mezzanine Funds
5.81X
Multiple Mezzanine  Financing   Average 28.02% 14% New  Spring  Capital
Acquisition  of  DFRG
Multiples Value

Bar  Louie’s  Transaction 14.28X Cost  


Capital
Percent Of   of  
Structure   Transaction Partners
Transaction Capita
Fazioli’s Transaction 7.51X Item
l

Restaurants Unlimited 9.3X Sun  Capital   Partners,  


Bar  Louie’s 29.7% 35%
Management,  

2018  PE Buyout  Multiple 11.6X Sun  Capital   Partners,  


Fazioli’s 100% 31%
Management,  
Precedent Transaction   Restaurants   Sun  Capital   Partners,  
9.81X 100% 36%
Multiple Equity Unlimited Management,  
Sun  Capital  
Sun  Capital   Partners,  
Average  Acquisition Typical   27.5% 31.2%
9.81X Management,  
Multiple Transaction
Typical  LBO   Sun  Capital   Partners,  
25% 32.5%
LBO  Candidate   Valuation   Transaction Management,  
-­40.75%
(Premium/Discount) Sun  Capital   Partners,  
Equity  Average 56.44% 33.14
Management
Adj. Acquisition  EBITDA  
5.81X
Multiple
Acquisition  of  DRFG
Line Item Value LBO  
LBO   Structure   Adjusted Weighted  
Structure   Fine   Capital   Cost  of   Investment
EBITDA   Item Dining   Structure Capital
91,693 Average
(000’s)

Senior  Debt 47.5% 36.00% 8.92% $193MM


Acquisition  
5.81X
Multiple Mezzanine  
28.02% 21.23% 14% $114M
Financing
Acquisition  
532.74M Sun Capital  
Price
56.44% 33.27% 33.14% $178MM
Partners
Rounded  
Management 9.5% $50MM
Acquisition   535M
Price Total 131.96% 100% 535MM
LBO  Model  Assumptions
•Purchase  multiple  is  determined  by  t he  median  precedent  t ransactions  f rom  Sun  Capital  
Acquisition  Price Partners  and  t he  industry  multiple  itself,  t hen  being  discounted  by  t he  ' quality'  or  s trength  f or  
an  LBO  Candidate

•Assumed  t o  f ollow  prior  Sun  Capital  Partners  t ransaction  s tructure  and  rates  from  previous  
Capital  Structure acquisitions  and  f unds
•Management  also  provides  a  good  portion  of  investment  t o  align  incentives

•As  opposed  t o  a  s tandard  private  equity  f irm  holding period  of  f ive  y ears,  Sun  Capital  Partners  
Holding  Period has  a  median  holding  of  7.92  y ears,  t hus,  8  y ears  was  used  in  t he  f inancial  model  

•Firm  would  be  exiting  v ia  private  s ale,  as  t his  is  not  only  t he  most  popular  exit  s trategy,  and  
Exit since  t he  c ompany  has  already  I PO'd before,  private  s ale  is  best  option

Financial  Statement   •Financials  f or  2019  were  projected  as  a  ratio  of  2018's  restaurants  t o  t he  new  number  of  s tores  
by  t he  end  of  2019
Assumptions •Same  methodology  of  f inancial  ratio  applied  t o  all  y ears  -­ more  s tores,  more  revenue,  greater  
ability  t o  c ontrol  COGS,  etc.  

•Capital  Expenditures  grew  with  accordance  t o  t he  number  of  s tores


Debt  Repayment •Net  Working  Capital  (%  of  s ales  method)  t aken  by  management  assumptions  in  10-­K
Scenario’s
Most  Likely Best  Case Worst  Case APV

• Management  projections   • Management  projections   • Management  projections   • Net  present  v alue  of  a  
will  be  met,  as   will  be  outperformed,   will  be  a  complete  miss,   projected finances,  
management  projections   and  geographical   making  geographical   growth  in  EBITDA,  
historically  have  been   expansion  will  go   expansion  efforts   returns,  etc.
extremely  accurate  to   greater  than  expected extremely  difficult • Dependent   on  each  
the  overall  firm   • A  potential  acquisition   • No  potential  acquisitions   scenario  and  success  of  
performance could  aid  the  overall   will  occur business  model  growth  
• Synergies  will  be   progress  of  the  firm  to   • Due  to  the  difficulty  of   strategy,  thus  a  s cenario  
created  between  DFRG   continue  s ynergy   expansion,  financial   was  created  for  most  
and  the  other  portfolio   benefits  and  create  a   benefits  (synergies)  will   likely,  best  c ase  and  
companies  in  Sun   larger   brand not  occur,  making   worst  c ase
Capital • Firm  will  introduce  new   EBITDA  have  a  minimal  
• Firm  will  leave  at  the   products  s uch  as  s elling   growth
same  multiple sauces,  c reate  a  large   • Firm  will  be  lucky  to  
franchising  platform,  etc. leave  at  the  s ame  
• Firm  will  have  a  slight   multiple  it  was  acquired  
uptick  in  multiple for
Most  Likely
Business  Unit  Assumptions
Assumptions Value Reasoning

• Out of  the  1 3  stores  e xpanded  in  2 019,  9  o f  them  a re  b eing  p urchased  a nd  n ot  leased.  Management  p rojects  
Depreciation  Growth 12.5%
these  to  b e  b etween  1 0-­20%  d epending  o n  the  location
• Stores grew  from  7 3  to  8 6,  showing  a n  1 8%  g rowth.  With  a n  inspired  management  team  a nd  the  o perational  
Store  Growth 18% expertise  o f  S un  P ower  Capital,  we  b elieve  the  g rowth  in  stores  trend  will  o ccur  throughout  the  transaction

• With  the  e xpansion  o f  stores,  Capital Expenditures  h as  a  d irect  g rowth  relation.  However,  with  e very  n ew  store,  
Capital Expenditure  S ynergy  
75% especially  in  DFRG’s  case  where  they  a re  creating  ‘Hubs,’  o r  regions  with  many  stores  to  h elp  reduce  costs,  a  
Adj.
synergy  will  a llow  these  costs  to  b e  stabilized
• With  a  lean management  strategy,  the  current  stores  will  a lready  see  a  d ramatic  d ecrease  in  costs,  reducing  
SG&A Expenditure  S ynergy   number  o f  e mployees  p er  store  from  a  median  o f  2 8  to  1 9.  This  is  a ccompanied  b y  the  consolidation  o f  b usboys  
80%
Adj. and  waiters,  b artenders  with  sommeliers,  removal  o f  a ssistant  manager

• Biggest  issue  o f  DFRG  is  the  h igh  COGS  with  relation  to  its high  q uality  p roducts  a nd  low  q uantity  p urchases.  With  
the  common  p roducts  b etween  DFRG  a nd  the  o ther  investments  b y  S un  Capital,  the  q uantity  will  b e  much  h igher,  
COGS  E xpenditure Synergy  
90% allow  the  p rice  p oint  to  fall  significantly
Adj. • Additionally,  a  b etter  inventory  system  a nd  control  food  cost  management  style  will  minimize  waste

• This  E BITDA growth  is  b ased  o n  the  e xpansion  o f  stores  a nd  the  large  synergies  created.  This  n umber  is  a lso  
EBITDA  Growth 5% supported  b y  the  a nalyst  reports,  which  suggests  that  if  g rowth  was  constant,  E BITDA  g rows  b etween  2 .5-­10%
Most  Likely
Business  Units
Historical Projected
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Del  Frisco
Number   of  Stores 14 16 21 26 31 37 44 52 62 74 88
Growth 14% 31% 24% 19% 19% 19% 18% 19% 19% 19%

Sales $176,713   $182,957   $240,131   $297,305   $354,479   $423,088   $503,132   $594,610   $708,958   $846,176   $1,006,264  
Growth 4% 31% 24% 19% 19% 19% 18% 19% 19% 19%

Cost  of  Goods  Sold $52,944   $54,559   $64,448   $71,813   $77,061   $82,779   $88,595   $94,233   $101,120   $108,622   $116,255  
%  of   Revenues 30% 30% 27% 24% 22% 20% 18% 16% 14% 13% 12%

Gross  Profit $123,769   $128,398   $175,683   $225,492   $277,418   $340,309   $414,536   $500,377   $607,839   $737,554   $890,008  
Margin 70% 70% 73% 76% 78% 80% 82% 84% 86% 87% 88%

SG&A $76,860   $86,557   $113,606   $112,524   $107,331   $102,483   $97,498   $92,180   $87,925   $83,954   $79,870  
%  of   Revenues 43% 47% 47% 38% 30% 24% 19% 16% 12% 10% 8%

EBITDA $46,909   $41,841   $54,916   $71,391   $89,376   $112,009   $139,859   $173,553   $217,275   $272,295   $340,000  
Margin 27% 23% 23% 24% 25% 26% 28% 29% 31% 32% 34%

Depreciation $10,503   $13,786   $15,509   $17,448   $19,628   $22,082   $24,842   $27,948   $31,441   $35,371  
%  of   Revenue 0% 6% 6% 5% 5% 5% 4% 4% 4% 4% 4%
Most  Likely
Business  Units
Historical Projected
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Del  Grill
Number   of  Stores 21 24 28 32 38 45 54 64 76 90 107
Growth 14% 17% 14% 19% 18% 20% 19% 19% 18% 19%

Sales $117,114   $120,989   $141,154   $161,319   $191,566   $226,854   $272,225   $322,637   $383,132   $453,709   $539,409  
Growth 3% 17% 14% 19% 18% 20% 19% 19% 18% 19%

Cost  of  Goods  Sold $30,673   $33,071   $34,725   $35,717   $38,172   $40,684   $43,938   $46,867   $50,090   $53,385   $57,122  
%  of   Revenues 26% 27% 25% 22% 20% 18% 16% 15% 13% 12% 11%

Gross  Profit $86,441   $87,918   $106,429   $125,602   $153,394   $186,171   $228,287   $275,770   $333,042   $400,324   $482,287  
Margin 74% 73% 75% 78% 80% 82% 84% 85% 87% 88% 89%

SG&A $70,978   $73,167   $85,362   $78,045   $74,143   $70,240   $67,431   $63,934   $60,738   $57,541   $54,728  
%  of   Revenues 61% 60% 60% 48% 39% 31% 25% 20% 16% 13% 10%

EBITDA $15,463   $14,751   $17,210   $20,651   $25,750   $32,018   $40,342   $50,204   $62,598   $77,836   $97,165  
Margin 13% 12% 12% 13% 13% 14% 15% 16% 16% 17% 18%

Depreciation $8,307   $9,691   $10,903   $12,266   $13,799   $15,524   $17,464   $19,647   $22,103   $24,866  
%  of   Revenue 7% 7% 7% 6% 6% 6% 5% 5% 5% 5%
Most  Likely
Business  Units
Historical Projected
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Barcelona
Number   of  Stores 15 18 21 25 30 36 43 51 61 72
Growth 20% 17% 19% 20% 20% 19% 19% 20% 18%

Sales $34,084   $40,901   $47,718   $56,807   $68,168   $81,802   $97,707   $115,886   $138,608   $163,603  
Growth 20% 17% 19% 20% 20% 19% 19% 20% 18%

Cost  of  Goods  Sold $9,123   $9,853   $10,345   $11,084   $11,971   $12,929   $13,899   $14,836   $15,970   $16,965  
%  of   Revenues 27% 24% 22% 20% 18% 16% 14% 13% 12% 10%

Gross  Profit $24,961   $31,048   $37,372   $45,722   $56,197   $68,873   $83,809   $101,050   $122,638   $146,638  
Margin 73% 76% 78% 80% 82% 84% 86% 87% 88% 90%

SG&A $17,336   $20,803   $19,416   $18,492   $17,752   $17,042   $16,285   $15,451   $14,785   $13,961  
%  of   Revenues 51% 51% 41% 33% 26% 21% 17% 13% 11% 9%

EBITDA $7,625   $9,150   $11,209   $14,011   $17,654   $22,244   $27,897   $34,742   $43,632   $54,075  
Margin 22% 22% 23% 25% 26% 27% 29% 30% 31% 33%

Depreciation $3,227   $3,872   $4,356   $4,901   $5,513   $6,203   $6,978   $7,850   $8,831   $9,935  
%  of   Revenue 9% 9% 9% 9% 8% 8% 7% 7% 6% 6%
Most  Likely
Business  Units
Historical Projected
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Bartaco
Number   of  Stores 18 19 20 24 29 35 42 50 59 70
Growth 6% 5% 20% 21% 21% 20% 19% 18% 19%

Sales $40,186   $42,419   $44,651   $53,581   $64,744   $78,139   $93,767   $111,628   $131,721   $156,279  
Growth 6% 5% 20% 21% 21% 20% 19% 18% 19%

Cost  of  Goods  Sold $9,232   $8,770   $8,309   $8,974   $9,759   $10,600   $11,448   $12,266   $13,026   $13,909  
%  of   Revenues 23% 21% 19% 17% 15% 14% 12% 11% 10% 9%

Gross  Profit $30,954   $33,648   $36,342   $44,608   $54,985   $67,539   $82,319   $99,362   $118,695   $142,370  
Margin 77% 79% 81% 83% 85% 86% 88% 89% 90% 91%

SG&A $21,085   $22,256   $18,742   $17,993   $17,393   $16,793   $16,121   $15,354   $14,494   $13,757  
%  of   Revenues 52% 52% 42% 34% 27% 21% 17% 14% 11% 9%

EBITDA $9,869   $10,417   $11,514   $14,507   $18,406   $23,325   $29,390   $36,737   $45,517   $56,704  
Margin 25% 25% 26% 27% 28% 30% 31% 33% 35% 36%

Depreciation $3,706   $3,912   $4,401   $4,951   $5,570   $6,266   $7,049   $7,931   $8,922   $10,037  
%  of   Revenue 9% 9% 10% 9% 9% 8% 8% 7% 7% 6%
Most  Likely
LBO  Model
Historical Projections
INCOME  STATEMENT 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Sales $220,893   $252,629   $273,884   $293,827   $378,216   $464,604   $550,993   $656,433   $782,855   $935,298   $1,108,722   $1,319,604   $1,570,214   $1,865,555  
Growth 14.4% 8.4% 7.3% 28.7% 22.8% 18.6% 19.1% 19.3% 19.5% 18.5% 19.0% 19.0% 18.8%

Cost  of  Goods  Sold $66,824   $72,260   $76,319   $83,617   $105,985   $117,796   $126,184   $135,291   $145,192   $156,063   $166,447   $178,311   $191,004   $204,251  
%  of  revenues 30.3% 28.6% 27.9% 28.5% 28.0% 25.4% 22.9% 20.6% 18.5% 16.7% 15.0% 13.5% 12.2% 10.9%

Gross  Profit $154,069   $180,369   $197,565   $210,210   $272,231   $346,809   $424,808   $521,142   $637,663   $779,235   $942,275   $1,141,293   $1,379,210   $1,661,303  
Margin 69.7% 71.4% 72.1% 71.5% 72.0% 74.6% 77.1% 79.4% 81.5% 83.3% 85.0% 86.5% 87.8% 89.1%

SG&A $137,583   $165,871   $177,406   $222,128   $294,833   $242,027   $228,727   $217,958   $207,869   $198,764   $188,520   $179,468   $170,774   $162,316  
%  of  Revenues 62.3% 65.7% 64.8% 75.6% 78.0% 52.1% 41.5% 33.2% 26.6% 21.3% 17.0% 13.6% 10.9% 8.7%

EBITDA 45,120   47,291   51,918   62,372   74,086   91,693   114,765   143,644   180,087   225,771   281,044   351,352   439,279   547,944  
Margin 20.4% 18.7% 19.0% 21.2% 19.6% 19.7% 20.8% 21.9% 23.0% 24.1% 25.3% 26.6% 28.0% 29.4%

Depreciation 9,945 12,825 14,903 17,595 21,713 26,672 30,007 33,757 37,977 42,724 48,065 54,073 60,832 68,436
Management  fee 6,688 6,688 6,688 6,688 6,688 6,688 6,688 6,688
Interest  Expense
Senior  Subordinated 17,216 12,382 11,113 10,413 10,227 9,304 7,067 3,072
Jr.  Sub 15,960 15,960 15,960 15,960 15,960 15,960 15,960 15,960
Total  Interest  Expense 33,176 28,342 27,073 26,373 26,187 25,264 23,027 19,032
Pre-­tax  income 44,896 74,858 108,349 149,986 200,105 265,328 348,733 453,788
Taxes 45.0% 20,203 33,686 48,757 67,494 90,047 119,398 156,930 204,205
Net  Income 24,693 41,172 59,592 82,492 110,058 145,930 191,803 249,583

Capital  Expenditures 47,481 46,150 36,698 39,426 85,838 75,843 87,308 104,064 124,348 149,041 177,261 210,773 250,459 297,199

CASH  FLOW  STATEMENT


Net  Income 24,693 41,172 59,592 82,492 110,058 145,930 191,803 249,583
Plus:  Depreciation  and  Amortization 30,007 33,757 37,977 42,724 48,065 54,073 60,832 68,436
Plus:  (incr)  decr  in  Wkg.  Cap. 86,797 43,366 34,620 25,915 29,482 35,850 42,604 50,208
Less:  Capital  Expenditures -­87,308 -­104,064 -­124,348 -­149,041 -­177,261 -­210,773 -­250,459 -­297,199
Less:
Cash  Flow  Available  for  Debt  Reduction 54,189 14,231 7,842 2,091 10,343 25,079 44,780 71,028
Most  Likely
LBO  Model
Net  Working  Capital -­31,698 55,099 98,465 133,085 159,001 188,483 224,333 266,936 317,144
%  of  sales -­6.8% 10.0% 15.0% 17.0% 17.0% 17.0% 17.0% 17.0% 17.0%

Debt:
Senior  Subordinated 193,000 138,811 124,581 116,739 114,647 104,304 79,225 34,445 0
Jr.  Sub 114,000 114,000 114,000 114,000 114,000 114,000 114,000 114,000 77,417
Total  Debt 307,000 251,901 238,581 230,739 228,647 218,304 193,225 148,445 77,417
Interest  Rates:
Senior  Subordinated 8.92% 8.92% 8.92% 8.92% 8.92% 8.92% 8.92% 8.92%
Jr.  Sub 14.0% 14.0% 14.0% 14.0% 14.0% 14.0% 14.0% 14.0%

SELECTED  CREDIT  STATISTICS


EBITDA  /  Senior  Interest 6.7   11.6   16.2   21.7   27.5   37.8  -­ -­
EBITDA  /  Total  Interest 3.5   5.1   6.7   8.6   10.7   13.9   19.1  -­
EBITDA-­CapEx  /  Senior  Interest 1.6   3.2   5.0   7.4   10.1   15.1  -­ -­
EBITDA-­CapEx  /  Total  Interest 0.8   1.4   2.1   2.9   4.0   5.6   8.2  -­

Senior  Debt  /  EBITDA 1.2   0.9   0.6   0.5   0.4   0.2   0.1   0.0  
Total  Debt  /  EBITDA 2.2   1.7   1.3   1.0   0.8   0.5   0.3   0.1  

RETURNS  ANALYSIS Exit  Multiple


Investor Ownership %  of  $Ownership OptionsOwnership EBITDA 547,944 547,944 547,944
Total  Ent.  
5.81   6 7
Sponsor 178,000 78.1% 78.1% 74.2% Value
Mezz/Sub  Debt  Lender 0.0% 0.0% Less:  Net  Debt 77,417 77,417 77,417
Management 50,000 21.9% 21.9% 5.0% 25.8% Equity  Value 3,106,135 3,210,245 3,758,188
Total  Equity 228,000 100.0% 100.0% 5.0% 100.0%
Most  Likely
LBO  Model

At 5.81 x Mult.   Of
Equity   Returns 2020 2021 2022 2023 2024 2025 2026 2027 IRR   Investment
Sponsor -­178,000 0 0 0 0 0 0 2,303,717 44.2% 12.9  X
Management -­50,000 0 0 0 0 0 0 802,418 48.7% 16.0  X

At 6.00 x Mult.   Of
Equity   Returns 2020 2021 2022 2023 2024 2025 2026 2027 IRR   Investment
Sponsor -­178,000 0 0 0 0 0 0 2,380,932 44.8% 13.4  X
Management -­50,000 0 0 0 0 0 0 829,313 49.4% 16.6  X

At 7.00 x Mult.   Of
Equity   Returns 2020 2021 2022 2023 2024 2025 2026 2027 IRR   Investment
Sponsor -­178,000 0 0 0 0 0 0 2,787,323 48.1% 15.7  X
Management -­50,000 0 0 0 0 0 0 970,865 52.8% 19.4  X
Most  Likely
APV  Model
APV  Method
Debt
Assumptions: Sr  
Terminal  Perpetuity  Growth: 4.0%Assumed  perpetual  growth Jr
Cost  of  Capital: Total  
Pre-­tax  cost  of  debt 10.8%Weighted  Average  from  Jr  and  Sr  Debt
After-­tax  cost  of  debt 6.5%Assume  40%  fed  &  state  tax
Unlevered  cost  of  equity 13.2%Risk  free  rate  +  assumed  8%  market  premium  for  equity
Levered  cost  of  equity 25.0%Assumed  minimum  LBO  hurdle
Assumed  LT  Debt/Total  Capitalization 50.0%
Target  Wtd  Avg  Cost  of  Capital 15.7%

Projected  Years  Ending  December  31,


Free  Cash  Flow 2020 2021 2022 2023 2024 2025 2026 2027
EBITDA 114,765 143,644 180,087 225,771 281,044 351,352 439,279 547,944
Less:  Depr  &  Amort -­30,007 -­33,757 -­37,977 -­42,724 -­48,065 -­54,073 -­60,832 -­68,436
EBIT 84,759 109,887 142,110 183,047 232,979 297,279 378,447 479,508
Taxes  (40%) -­33,903 -­43,955 -­56,844 -­73,219 -­93,192 -­118,912 -­151,379 -­191,803
After  Tax  EBIT 50,855 65,932 85,266 109,828 139,788 178,368 227,068 287,705
Plus:  Depr  &  Amort 30,007 33,757 37,977 42,724 48,065 54,073 60,832 68,436
Less:  Capex -­87,308 -­104,064 -­124,348 -­149,041 -­177,261 -­210,773 -­250,459 -­297,199
Plus/Minus  Ch  in  NWC 86,797 43,366 34,620 25,915 29,482 35,850 42,604 50,208
Free  Cash  Flow  (Unlevered,  After  Tax) 80,351 38,991 33,515 29,427 40,073 57,517 80,045 109,149

NPV  of  FCF  @  Unlevered  Cost  of  Equity $265,415  

Terminal  Value 0 0 0 0 0 0 0 1,233,859


Implied  Multiple  of  EBITDA 2.3
NPV  of  TV  @  Unlevered  Cost  of  Equity $457,609  

Value  of  Tax  Shield


Interest  Expense 33,176 28,342 27,073 26,373 26,187 25,264 23,027 19,032
Tax  shield 13,270 11,337 10,829 10,549 10,475 10,106 9,211 7,613
NPV  @  Pre-­tax  cost  of  d ebt $55,738  

Total  APV $778,762   NPV  of  FCF  +  NPV  of  TV  +  NPV  of  Tax  Shield
Best  Case
Business  Unit  Assumptions
Assumptions Value Reasoning

• Out of  the  1 3  stores  e xpanded  in  2 019,  9  o f  them  a re  b eing  p urchased  a nd  n ot  leased.  Management  p rojects  these  to  
Depreciation  Growth 15%
be  b etween  1 0-­20%  d epending  o n  the  location,  more  stores  will  continue  to  b e  b ought  to  h elp  d iversify  a ssets
• Stores grew  from  7 3  to  8 6,  showing  a n  1 8%  g rowth.  With  a n  inspired  management  team  a nd  the  o perational  e xpertise  
Store  Growth 20% of  S un  P ower  Capital,  we  b elieve  the  g rowth  in  stores  trend  will  o ccur  throughout  the  transaction,  a nd  in  this  case  
actually  e xceed  management  e xpectations  a s  the  g eographical  e xpansion  b ecomes  a  h it  in  California
• With  the  e xpansion  o f  stores,  Capital Expenditures  h as  a  d irect  g rowth  relation.  However,  with  e very  n ew  store,  
Capital Expenditure  S ynergy   especially  in  DFRG’s  case  where  they  a re  creating  ‘Hubs,’  o r  regions  with  many  stores  to  h elp  reduce  costs,  a  synergy  
70%
Adj. will  allow  these  costs  to  b e  stabilized.  The  large  store  g rowth  will  a llow  o verhead  to  b e  spread,  a nd  managers  to  take  
hold  o f  multiple  stores,  making  costs  e ven  further  d ecline
• With  a  lean management  strategy,  the  current  stores  will  a lready  see  a  d ramatic  d ecrease  in  costs,  reducing  n umber  o f  
SG&A Expenditure  S ynergy   employees  p er  store  from  a  median  o f  2 8  to  1 9.  This  is  a ccompanied  b y  the  consolidation  o f  b usboys  a nd  waiters,  
75%
Adj. bartenders  with  sommeliers,  removal  o f  a ssistant  manager.  A dditionally,  the  lean  management  with  managers  h olding  
titles  for  multiple  restaurants  a llows  costs  to  d ecline
• Biggest  issue  o f  DFRG  is  the  h igh  COGS  with  relation  to  its high  q uality  p roducts  a nd  low  q uantity  p urchases.  With  the  
COGS  E xpenditure Synergy   common  p roducts  b etween  DFRG  a nd  the  o ther  investments  b y  S un  Capital,  the  q uantity  will  b e  much  h igher,  a llow  the  
85%
Adj. price  p oint  to  fall  significantly.  In  this  case,  d ue  to  the  e xpansion  o f  stores,  the  q uantity  to  p urchase  will  b e  e xtremely  
high  a llow  p rice  b reaks  to  o ccur
• This  E BITDA growth  is  b ased  o n  the  e xpansion  o f  stores  a nd  the  large  synergies  created
• Turn  o ff-­peak  h ours  into  p rofitability  including  renting  the  space  for  p rivate  e vents,  cooking  classes,  wine  tastings
EBITDA  Growth 12.5% • Firm  will  begin  to  d iversify  b y  selling  some  o f  its  o wn  p roducts  (steak  sauces,  e tc.),  a lso  u se  social  media  more  a nd  d o  
take  o ut  to  increase  margins  
• Firm  could  p otentially  a cquire  o ther  p layers to  create  synergies,  b ut  d iversify  food  p ortfolio  to  increase  multiple
Best  Case
Business  Units
Historical Projected
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Del  Frisco
Number   of  Stores 14 16 21 26 32 39 47 57 69 83 100
Growth 14% 31% 24% 23% 22% 21% 21% 21% 20% 20%

Sales $176,713   $182,957   $240,131   $297,305   $365,914   $445,958   $537,436   $651,784   $789,002   $949,089   $1,143,481  
Growth 4% 31% 24% 23% 22% 21% 21% 21% 20% 20%

Cost  of  Goods  Sold $52,944   $54,559   $60,867   $64,056   $67,012   $69,420   $71,111   $73,305   $75,427   $77,122   $78,980  
%  of   Revenues 30% 30% 25% 22% 18% 16% 13% 11% 10% 8% 7%

Gross  Profit $123,769   $128,398   $179,264   $233,249   $298,902   $376,537   $466,325   $578,479   $713,575   $871,968   $1,064,501  
Margin 70% 70% 75% 78% 82% 84% 87% 89% 90% 92% 93%

SG&A $76,860   $86,557   $113,606   $105,491   $97,377   $89,008   $80,450   $73,175   $66,435   $59,936   $54,159  
%  of   Revenues 43% 47% 47% 35% 27% 20% 15% 11% 8% 6% 5%

EBITDA $46,909   $41,841   $54,916   $76,491   $105,910   $145,213   $196,875   $268,608   $365,802   $495,026   $670,969  
Margin 27% 23% 23% 26% 29% 33% 37% 41% 46% 52% 59%

Depreciation $10,503   $13,786   $15,854   $18,232   $20,966   $24,111   $27,728   $31,887   $36,670   $42,171  
%  of   Revenue 0% 6% 6% 5% 5% 5% 4% 4% 4% 4% 4%
Best  Case
Business  Units
Historical Projected
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Del  Grill
Number   of  Stores 21 24 28 32 39 47 57 69 83 100 120
Growth 14% 17% 14% 22% 21% 21% 21% 20% 20% 20%

Sales $117,114   $120,989   $141,154   $161,319   $196,607   $236,937   $287,349   $347,843   $418,420   $504,121   $604,945  
Growth 3% 17% 14% 22% 21% 21% 21% 20% 20% 20%

Cost  of  Goods  Sold $30,673   $33,071   $32,795   $31,858   $33,003   $33,807   $34,850   $35,859   $36,665   $37,548   $38,299  
%  of   Revenues 26% 27% 23% 20% 17% 14% 12% 10% 9% 7% 6%

Gross  Profit $86,441   $87,918   $108,358   $129,460   $163,604   $203,130   $252,499   $311,984   $381,756   $466,573   $566,646  
Margin 74% 73% 77% 80% 83% 86% 88% 90% 91% 93% 94%

SG&A $70,978   $73,167   $85,362   $73,167   $66,879   $60,449   $54,982   $49,918   $45,035   $40,694   $36,625  
%  of   Revenues 61% 60% 60% 45% 34% 26% 19% 14% 11% 8% 6%

EBITDA $15,463   $14,751   $17,210   $22,127   $30,338   $41,131   $56,117   $76,423   $103,420   $140,177   $189,239  
Margin 13% 12% 12% 14% 15% 17% 20% 22% 25% 28% 31%

Depreciation $8,307   $9,691   $11,145   $12,817   $14,739   $16,950   $19,493   $22,417   $25,779   $29,646  
%  of   Revenue 7% 7% 7% 7% 6% 6% 6% 5% 5% 5%
Best  Case
Business  Units
Historical Projected
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Barcelona
Number   of  Stores 15 18 21 26 32 39 47 57 69 83
Growth 20% 17% 24% 23% 22% 21% 21% 21% 20%

Sales $34,084   $40,901   $47,718   $59,079   $72,713   $88,618   $106,797   $129,519   $156,786   $188,598  
Growth 20% 17% 24% 23% 22% 21% 21% 21% 20%

Cost  of  Goods  Sold $9,123   $9,305   $9,228   $9,711   $10,159   $10,525   $10,781   $11,114   $11,435   $11,692  
%  of   Revenues 27% 23% 19% 16% 14% 12% 10% 9% 7% 6%

Gross  Profit $24,961   $31,595   $38,490   $49,368   $62,553   $78,094   $96,016   $118,406   $145,351   $176,906  
Margin 73% 77% 81% 84% 86% 88% 90% 91% 93% 94%

SG&A $17,336   $20,803   $18,203   $16,903   $15,602   $14,262   $12,890   $11,725   $10,645   $9,603  
%  of   Revenues 51% 51% 38% 29% 21% 16% 12% 9% 7% 5%

EBITDA $7,625   $9,150   $12,009   $16,727   $23,161   $31,756   $43,054   $58,741   $79,995   $108,255  
Margin 22% 22% 25% 28% 32% 36% 40% 45% 51% 57%

Depreciation $3,227   $3,872   $4,453   $5,121   $5,889   $6,773   $7,789   $8,957   $10,300   $11,845  
%  of   Revenue 9% 9% 9% 9% 8% 8% 7% 7% 7% 6%
Best  Case
Business  Units
Historical Projected
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Bartaco
Number   of  Stores 18 19 20 24 29 35 42 51 62 75
Growth 6% 5% 20% 21% 21% 20% 21% 22% 21%

Sales $40,186   $42,419   $44,651   $53,581   $64,744   $78,139   $93,767   $113,860   $138,418   $167,442  
Growth 6% 5% 20% 21% 21% 20% 21% 22% 21%

Cost  of  Goods  Sold $9,232   $8,283   $7,411   $7,559   $7,764   $7,965   $8,124   $8,385   $8,665   $8,910  
%  of   Revenues 23% 20% 17% 14% 12% 10% 9% 7% 6% 5%

Gross  Profit $30,954   $34,135   $37,240   $46,022   $56,980   $70,174   $85,643   $105,475   $129,753   $158,532  
Margin 77% 80% 83% 86% 88% 90% 91% 93% 94% 95%

SG&A $21,085   $22,256   $17,571   $15,814   $14,331   $12,972   $11,675   $10,633   $9,694   $8,795  
%  of   Revenues 52% 52% 39% 30% 22% 17% 12% 9% 7% 5%

EBITDA $9,869   $10,417   $12,336   $16,654   $22,639   $30,738   $41,497   $56,687   $77,528   $105,507  
Margin 25% 25% 28% 31% 35% 39% 44% 50% 56% 63%

Depreciation $3,706   $3,912   $4,499   $5,173   $5,949   $6,842   $7,868   $9,048   $10,406   $11,967  
%  of   Revenue 9% 9% 10% 10% 9% 9% 8% 8% 8% 7%
Best  Case
LBO  Model
Historical Projections
INCOME  STATEMENT 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Sales $220,893   $252,629   $273,884   $293,827   $378,216   $464,604   $550,993   $675,181   $820,351   $991,543   $1,200,192   $1,450,802   $1,748,415   $2,104,466  
Growth 14.4% 8.4% 7.3% 28.7% 22.8% 18.6% 22.5% 21.5% 20.9% 21.0% 20.9% 20.5% 20.4%

Cost  of  Goods  Sold $66,824   $72,260   $76,319   $83,617   $105,985   $111,251   $112,553   $117,286   $121,151   $124,451   $128,070   $131,591   $134,770   $137,881  
%  of  revenues 30.3% 28.6% 27.9% 28.5% 28.0% 23.9% 20.4% 17.4% 14.8% 12.6% 10.7% 9.1% 7.7% 6.6%

Gross  Profit $154,069   $180,369   $197,565   $210,210   $272,231   $353,353   $438,439   $557,895   $699,200   $867,092   $1,072,122   $1,319,211   $1,613,645   $1,966,585  
Margin 69.7% 71.4% 72.1% 71.5% 72.0% 76.1% 79.6% 82.6% 85.2% 87.4% 89.3% 90.9% 92.3% 93.4%

SG&A $137,583   $165,871   $177,406   $222,128   $294,833   $242,027   $214,432   $196,972   $179,390   $162,666   $147,659   $133,827   $120,970   $109,183  
%  of  Revenues 62.3% 65.7% 64.8% 75.6% 78.0% 52.1% 38.9% 29.2% 21.9% 16.4% 12.3% 9.2% 6.9% 5.2%

EBITDA 45,120   47,291   51,918   62,372   74,086   91,693   122,963   169,629   232,143   315,486   429,581   584,650   792,727   1,073,970  
Margin 20.4% 18.7% 19.0% 21.2% 19.6% 19.7% 22.3% 25.1% 28.3% 31.8% 35.8% 40.3% 45.3% 51.0%

Depreciation 9,945 12,825 14,903 17,595 21,713 26,672 30,673 35,274 40,565 46,650 53,648 61,695 70,949 81,592
Management  fee 6,688 6,688 6,688 6,688 6,688 6,688 6,688 6,688
Interest  Expense
Senior  Subordinated 17,216 11,434 8,133 4,013 0 0 0 0
Jr.  Sub 15,960 15,960 15,960 15,960 13,517 0 0 0
Total  Interest  Expense 33,176 27,394 24,093 19,973 13,517 0 0 0
Pre-­tax  income 52,426 100,273 160,797 242,175 355,729 516,267 715,090 985,691
Taxes 45.0% 23,592 45,123 72,359 108,979 160,078 232,320 321,791 443,561
Net  Income 28,834 55,150 88,439 133,196 195,651 283,947 393,300 542,130

Capital  Expenditures 47,481 46,150 36,698 39,426 85,838 70,787 81,487 99,596 120,996 146,513 176,967 214,007 258,455 311,133
Best  Case
LBO  Model
CASH  FLOW  STATEMENT
Net  Income 28,834 55,150 88,439 133,196 195,651 283,947 393,300 542,130
Plus:  Depreciation  and  Amortization 30,673 35,274 40,565 46,650 53,648 61,695 70,949 81,592
Plus:  (incr)  decr  in  Wkg.  Cap. 86,797 46,178 38,182 29,103 35,470 42,604 50,594 60,529
Less:  Capital  Expenditures -­81,487 -­99,596 -­120,996 -­146,513 -­176,967 -­214,007 -­258,455 -­311,133
Less:
Cash  Flow  Available  for  Debt  Reduction 64,818 37,007 46,190 62,437 107,802 174,239 256,388 373,117

Net  Working  Capital -­31,698 55,099 101,277 139,460 168,562 204,033 246,636 297,231 357,759
%  of  sales -­6.8% 10.0% 15.0% 17.0% 17.0% 17.0% 17.0% 17.0% 17.0%

Debt:
Senior  Subordinated 193,000 128,182 91,175 44,985 0 0 0 0 0
Jr.  Sub 114,000 114,000 114,000 114,000 96,548 0 0 0 0
Total  Debt 307,000 251,901 205,175 158,985 96,548 0 0 0 0
Interest  Rates:
Senior  Subordinated 8.92% 8.92% 8.92% 8.92% 8.92% 8.92% 8.92% 8.92%
Jr.  Sub 14.0% 14.0% 14.0% 14.0% 14.0% 14.0% 14.0% 14.0%

SELECTED  CREDIT  STATISTICS


EBITDA  /  Senior  Interest 7.1   14.8   28.5   78.6  -­ -­ -­ -­
EBITDA  /  Total  Interest 3.7   6.2   9.6   15.8   31.8  -­ -­ -­
EBITDA-­CapEx  /  Senior  Interest 2.4   6.1   13.7   42.1  -­ -­ -­ -­
EBITDA-­CapEx  /  Total  Interest 1.3   2.6   4.6   8.5   18.7  -­ -­ -­

Senior  Debt  /  EBITDA 1.0   0.5   0.2   0.0   0.0   0.0   0.0   0.0  
Total  Debt  /  EBITDA 2.0   1.2   0.7   0.3   0.0   0.0   0.0   0.0  

RETURNS  ANALYSIS Exit  Multiple


Investor Ownership %  of  $Ownership OptionsOwnership EBITDA 1,073,970 1,073,970 1,073,970
Total  Ent.  
5.81   6 7
Sponsor 178,000 78.1% 78.1% 74.2% Value
Mezz/Sub  Debt  Lender 0.0% 0.0% Less:  Net  Debt 0 0 0
Management 50,000 21.9% 21.9% 5.0% 25.8% Equity  Value 6,239,766 6,443,820 7,517,790
Total  Equity 228,000 100.0% 100.0% 5.0% 100.0%
Best  Case
LBO  Model

At 5.81 x Mult.   Of
Equity   Returns 2020 2021 2022 2023 2024 2025 2026 2027 IRR   Investment
Sponsor -­178,000 0 0 0 0 0 0 4,627,826 59.3% 26.0  X
Management -­50,000 0 0 0 0 0 0 1,611,940 64.2% 32.2  X

At 6.00 x Mult.   Of
Equity   Returns 2020 2021 2022 2023 2024 2025 2026 2027 IRR   Investment
Sponsor -­178,000 0 0 0 0 0 0 4,779,167 60.0% 26.8  X
Management -­50,000 0 0 0 0 0 0 1,664,654 65.0% 33.3  X

At 7.00 x Mult.   Of
Equity   Returns 2020 2021 2022 2023 2024 2025 2026 2027 IRR   Investment
Sponsor -­178,000 0 0 0 0 0 0 5,575,694 63.6% 31.3  X
Management -­50,000 0 0 0 0 0 0 1,942,096 68.7% 38.8  X
Best  Case
APV  Model
APV  Method
Debt
Assumptions: Sr  
Terminal  Perpetuity  Growth: 4.0%Assumed  perpetual  growth Jr
Cost  of  Capital: Total  
Pre-­tax  cost  of  debt 10.8%Weighted  Average  from  Jr  and  Sr  Debt
After-­tax  cost  of  debt 6.5%Assume  40%  fed  &  state  tax
Unlevered  cost  of  equity 13.2%Risk  free  rate  +  assumed  8%  market  premium  for  equity
Levered  cost  of  equity 25.0%Assumed  minimum  LBO  hurdle
Assumed  LT  Debt/Total  Capitalization 50.0%
Target  Wtd  Avg  Cost  of  Capital 15.7%

Projected  Years  Ending  December  31,


Free  Cash  Flow 2020 2021 2022 2023 2024 2025 2026 2027
EBITDA 122,963 169,629 232,143 315,486 429,581 584,650 792,727 1,073,970
Less:  Depr  &  Amort -­30,673 -­35,274 -­40,565 -­46,650 -­53,648 -­61,695 -­70,949 -­81,592
EBIT 92,289 134,354 191,578 268,836 375,933 522,955 721,778 992,378
Taxes  (40%) -­36,916 -­53,742 -­76,631 -­107,534 -­150,373 -­209,182 -­288,711 -­396,951
After  Tax  EBIT 55,374 80,613 114,947 161,301 225,560 313,773 433,067 595,427
Plus:  Depr  &  Amort 30,673 35,274 40,565 46,650 53,648 61,695 70,949 81,592
Less:  Capex -­81,487 -­99,596 -­120,996 -­146,513 -­176,967 -­214,007 -­258,455 -­311,133
Plus/Minus  Ch  in  NWC 86,797 46,178 38,182 29,103 35,470 42,604 50,594 60,529
Free  Cash  Flow  (Unlevered,  After  Tax) 91,357 62,469 72,698 90,542 137,711 204,065 296,155 426,414

NPV  of  FCF  @  Unlevered  Cost  of  Equity $688,260  

Terminal  Value 0 0 0 0 0 0 0 4,820,332


Implied  Multiple  of  EBITDA 4.5
NPV  of  TV  @  Unlevered  Cost  of  Equity $1,787,745  

Value  of  Tax  Shield


Interest  Expense 33,176 27,394 24,093 19,973 13,517 0 0 0
Tax  shield 13,270 10,958 9,637 7,989 5,407 0 0 0
NPV  @  Pre-­tax  cost  of  d ebt $36,520  

Total  APV $2,512,525   NPV  of  FCF  +  NPV  of  TV  +  NPV  of  Tax  Shield
Worst  Case
Business  Unit  Assumptions
Assumptions Value Reasoning
• Due  to  the  minimal expansion,  d epreciation  g rowth  o nly  minutely  increases
Depreciation  Growth 5%
• Stores  a lso  continued  to  b e  rented  versus  b eing  p urchased  d ue  to  the  limited  cash
• Growth  o f  stores  minimal, as  the  costs  to  e xpand  b ecome  h igher  than  e xpected
Store  Growth 5%
• Stores  o nly  marginally  increase  in  their  locations,  creating  a  ‘hub’  o nly  in  Texas
• Capital  e xpenditures become  a  ratio  o f  the  increase  in  the  a mount  o f  the  stores.  Unfortunately,  d ue  to  the  minimal  
Capital Expenditure  S ynergy  
95% store  e xpansion,  the  capital  e xpenditure  g ains  a re  minimal
Adj.
• Lean  Management  structure  d oes  n ot  seem  to  work,  inefficiencies  o ccur
• The  e mployee’s  d o  n ot  seem  to  take  o n  the  idea  o f  d oing  multiple  job roles,  a nd  thus,  the  firm  must  g o  b ack  to  the  
SG&A Expenditure  S ynergy  
100% highly  specialized  o rganizational  structure
Adj.
• New  management  team  d oes not  seem  to  h ave  the  e xpertize  to  h ave  the  firm  g row
• Since  there is  o nly  minute  e xpansion  into  Texas,  there  is  a  slight  e conomies  o f  scale  increase  o n  p urchasing  goods
COGS  E xpenditure Synergy   • Firm  does  create  synergies  with  the  S un  Capital  P artners  p ortfolio  companies,  a nd  a s  a  result,  the  COGS  
95%
Adj. becomes  the  same  a s  h istorical  d ata
Worst  Case
Business  Units
Historical Projected
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Del  Frisco
Number   of  Stores 14 16 21 26 28 30 32 34 36 38 40
Growth 14% 31% 24% 8% 7% 7% 6% 6% 6% 5%

Sales $176,713   $182,957   $240,131   $297,305   $320,175   $343,044   $365,914   $388,784   $411,653   $434,523   $457,393  
Growth 4% 31% 24% 8% 7% 7% 6% 6% 6% 5%

Cost  of  Goods  Sold $52,944   $54,559   $68,028   $80,014   $81,861   $83,322   $84,433   $85,225   $85,726   $85,964   $85,964  
%  of   Revenues 30% 30% 28% 27% 26% 24% 23% 22% 21% 20% 19%

Gross  Profit $123,769   $128,398   $172,103   $217,291   $238,314   $259,722   $281,481   $303,559   $325,927   $348,558   $371,428  
Margin 70% 70% 72% 73% 74% 76% 77% 78% 79% 80% 81%

SG&A $76,860   $86,557   $113,606   $140,655   $151,475   $162,294   $173,114   $183,934   $194,753   $205,573   $216,393  
%  of   Revenues 43% 47% 47% 47% 47% 47% 47% 47% 47% 47% 47%

EBITDA $46,909   $41,841   $54,916   $67,992   $73,222   $78,452   $83,682   $88,912   $94,142   $99,372   $104,603  
Margin 27% 23% 23% 23% 23% 23% 23% 23% 23% 23% 23%

Depreciation $10,503   $13,786   $14,475   $15,199   $15,959   $16,757   $17,594   $18,474   $19,398   $20,368  
%  of   Revenue 0% 6% 6% 5% 5% 5% 5% 5% 4% 4% 4%
Worst  Case
Business  Units
Historical Projected
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Del  Grill
Number   of  Stores 21 24 28 32 34 36 38 40 42 45 48
Growth 14% 17% 14% 6% 6% 6% 5% 5% 7% 7%

Sales $117,114   $120,989   $141,154   $161,319   $171,401   $181,484   $191,566   $201,648   $211,731   $226,854   $241,978  
Growth 3% 17% 14% 6% 6% 6% 5% 5% 7% 7%

Cost  of  Goods  Sold $30,673   $33,071   $36,654   $39,795   $40,169   $40,405   $40,517   $40,517   $40,416   $41,137   $41,686  
%  of   Revenues 26% 27% 26% 25% 23% 22% 21% 20% 19% 18% 17%

Gross  Profit $86,441   $87,918   $104,500   $121,523   $131,233   $141,079   $151,049   $161,131   $171,315   $185,717   $200,292  
Margin 74% 73% 74% 75% 77% 78% 79% 80% 81% 82% 83%

SG&A $70,978   $73,167   $85,362   $97,556   $103,653   $109,751   $115,848   $121,945   $128,042   $137,188   $146,334  
%  of   Revenues 61% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60%

EBITDA $15,463   $14,751   $17,210   $19,668   $20,897   $22,127   $23,356   $24,585   $25,814   $27,658   $29,502  
Margin 13% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12%

Depreciation $8,307   $9,691   $10,176   $10,685   $11,219   $11,780   $12,369   $12,987   $13,637   $14,319  
%  of   Revenue 7% 7% 6% 6% 6% 6% 6% 6% 6% 6%
Worst  Case
Business  Units
Historical Projected
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Barcelona
Number   of  Stores 15 18 21 23 25 27 29 31 33 35
Growth 20% 17% 10% 9% 8% 7% 7% 6% 6%

Sales $34,084   $40,901   $47,718   $52,262   $56,807   $61,351   $65,896   $70,440   $74,985   $79,529  
Growth 20% 17% 10% 9% 8% 7% 7% 6% 6%

Cost  of  Goods  Sold $9,123   $10,400   $11,527   $11,993   $12,385   $12,707   $12,965   $13,167   $13,315   $13,416  
%  of   Revenues 27% 25% 24% 23% 22% 21% 20% 19% 18% 17%

Gross  Profit $24,961   $30,501   $36,191   $40,269   $44,422   $48,645   $52,930   $57,274   $61,670   $66,113  
Margin 73% 75% 76% 77% 78% 79% 80% 81% 82% 83%

SG&A $17,336   $20,803   $24,270   $26,582   $28,893   $31,205   $33,516   $35,828   $38,139   $40,451  
%  of   Revenues 51% 51% 51% 51% 51% 51% 51% 51% 51% 51%

EBITDA $7,625   $9,150   $10,675   $11,692   $12,708   $13,725   $14,742   $15,758   $16,775   $17,792  
Margin 22% 22% 22% 22% 22% 22% 22% 22% 22% 22%

Depreciation $3,227   $3,872   $4,066   $4,269   $4,483   $4,707   $4,942   $5,189   $5,449   $5,721  
%  of   Revenue 9% 9% 9% 8% 8% 8% 7% 7% 7% 7%
Worst  Case
Business  Units
Historical Projected
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Bartaco
Number   of  Stores 18 19 20 21 23 25 27 29 31 33
Growth 6% 5% 5% 10% 9% 8% 7% 7% 6%

Sales $40,186   $42,419   $44,651   $46,884   $51,349   $55,814   $60,279   $64,744   $69,209   $73,674  
Growth 6% 5% 5% 10% 9% 8% 7% 7% 6%

Cost  of  Goods  Sold $9,232   $9,258   $9,258   $9,235   $9,608   $9,922   $10,180   $10,387   $10,548   $10,667  
%  of   Revenues 23% 22% 21% 20% 19% 18% 17% 16% 15% 14%

Gross  Profit $30,954   $33,161   $35,393   $37,649   $41,741   $45,892   $50,099   $54,357   $58,661   $63,007  
Margin 77% 78% 79% 80% 81% 82% 83% 84% 85% 86%

SG&A $21,085   $22,256   $23,428   $24,599   $26,942   $29,285   $31,628   $33,970   $36,313   $38,656  
%  of   Revenues 52% 52% 52% 52% 52% 52% 52% 52% 52% 52%

EBITDA $9,869   $10,417   $10,966   $11,514   $12,610   $13,707   $14,804   $15,900   $16,997   $18,093  
Margin 25% 25% 25% 25% 25% 25% 25% 25% 25% 25%

Depreciation $3,706   $3,912   $4,107   $4,313   $4,528   $4,755   $4,993   $5,242   $5,504   $5,780  
%  of   Revenue 9% 9% 9% 9% 9% 9% 8% 8% 8% 8%
Worst  Case
LBO  Model
Historical Projections
INCOME  STATEMENT 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Sales $220,893   $252,629   $273,884   $293,827   $378,216   $464,604   $550,993   $590,722   $632,683   $674,645   $716,607   $758,568   $805,571   $852,574  
Growth 14.4% 8.4% 7.3% 28.7% 22.8% 18.6% 7.2% 7.1% 6.6% 6.2% 5.9% 6.2% 5.8%

Cost  of  Goods  Sold $66,824   $72,260   $76,319   $83,617   $105,985   $124,340   $140,594   $143,257   $145,720   $147,579   $148,887   $149,696   $150,965   $151,734  
%  of  revenues 30.3% 28.6% 27.9% 28.5% 28.0% 26.8% 25.5% 24.3% 23.0% 21.9% 20.8% 19.7% 18.7% 17.8%

Gross  Profit $154,069   $180,369   $197,565   $210,210   $272,231   $340,264   $410,398   $447,464   $486,963   $527,066   $567,720   $608,873   $654,606   $700,840  
Margin 69.7% 71.4% 72.1% 71.5% 72.0% 73.2% 74.5% 75.7% 77.0% 78.1% 79.2% 80.3% 81.3% 82.2%

SG&A $137,583   $165,871   $177,406   $222,128   $294,833   $242,027   $285,909   $306,309   $327,880   $349,451   $371,022   $392,594   $417,213   $441,833  
%  of  Revenues 62.3% 65.7% 64.8% 75.6% 78.0% 52.1% 51.9% 51.9% 51.8% 51.8% 51.8% 51.8% 51.8% 51.8%

EBITDA 45,120   47,291   51,918   62,372   74,086   91,693   109,300   117,325   125,897   134,470   143,042   151,615   160,802   169,989  
Margin 20.4% 18.7% 19.0% 21.2% 19.6% 19.7% 19.8% 19.9% 19.9% 19.9% 20.0% 20.0% 20.0% 19.9%

Depreciation 9,945 12,825 14,903 17,595 21,713 26,672 28,006 29,406 30,877 32,421 34,042 35,744 37,531 39,407
Management  fee 6,688 6,688 6,688 6,688 6,688 6,688 6,688 6,688
Interest  Expense
Senior  Subordinated 17,216 14,807 14,807 14,807 14,807 14,807 14,807 14,807
Jr.  Sub 15,960 15,960 15,960 15,960 15,960 15,960 15,960 15,960
Total  Interest  Expense 33,176 30,767 30,767 30,767 30,767 30,767 30,767 30,767
Pre-­tax  income 41,431 50,463 57,566 64,594 71,546 78,417 85,817 93,127
Taxes 45.0% 18,644 22,709 25,905 29,068 32,196 35,287 38,617 41,907
Net  Income 22,787 27,755 31,661 35,527 39,350 43,129 47,199 51,220

Capital  Expenditures 47,481 46,150 36,698 39,426 85,838 96,068 110,590 118,409 127,346 136,283 145,219 154,156 164,209 174,263
Worst  Case
LBO  Model
CASH  FLOW  STATEMENT
Net  Income 22,787 27,755 31,661 35,527 39,350 43,129 47,199 51,220
Plus:  Depreciation  and  Amortization 28,006 29,406 30,877 32,421 34,042 35,744 37,531 39,407
Plus:  (incr)  decr  in  Wkg.  Cap. 86,797 33,509 18,948 7,133 7,133 7,133 7,990 7,990
Less:  Capital  Expenditures -­110,590 -­118,409 -­127,346 -­136,283 -­145,219 -­154,156 -­164,209 -­174,263
Less:
Cash  Flow  Available  for  Debt  Reduction 27,000 -­27,739 -­45,860 -­61,202 -­64,694 -­68,149 -­71,489 -­75,645

Net  Working  Capital -­31,698 55,099 88,608 107,556 114,690 121,823 128,957 136,947 144,938
%  of  sales -­6.8% 10.0% 15.0% 17.0% 17.0% 17.0% 17.0% 17.0% 17.0%

Debt:
Senior  Subordinated 193,000 166,000 166,000 166,000 166,000 166,000 166,000 166,000 166,000
Jr.  Sub 114,000 114,000 114,000 114,000 114,000 114,000 114,000 114,000 114,000
Total  Debt 307,000 251,901 280,000 280,000 280,000 280,000 280,000 280,000 280,000
Interest  Rates:
Senior  Subordinated 8.92% 8.92% 8.92% 8.92% 8.92% 8.92% 8.92% 8.92%
Jr.  Sub 14.0% 14.0% 14.0% 14.0% 14.0% 14.0% 14.0% 14.0%

SELECTED  CREDIT  STATISTICS


EBITDA  /  Senior  Interest 6.3   7.9   8.5   9.1   9.7   10.2   10.9  -­
EBITDA  /  Total  Interest 3.3   3.8   4.1   4.4   4.6   4.9   5.2   5.5  
EBITDA-­CapEx  /  Senior  Interest (0.1) (0.1) (0.1) (0.1) (0.1) (0.2) (0.2) -­
EBITDA-­CapEx  /  Total  Interest (0.0) (0.0) (0.0) (0.1) (0.1) (0.1) (0.1) (0.1)

Senior  Debt  /  EBITDA 1.5   1.4   1.3   1.2   1.2   1.1  -­ -­
Total  Debt  /  EBITDA 2.3   2.4   2.2   2.1   2.0   1.8   1.7  -­

RETURNS  ANALYSIS Exit  Multiple


Investor Ownership %  of  $Ownership OptionsOwnership EBITDA 169,989 169,989 169,989
Total  Ent.  
5.81   6 7
Sponsor 178,000 78.1% 78.1% 74.2% Value
Mezz/Sub  Debt  Lender 0.0% 0.0% Less:  Net  Debt 280,000 280,000 280,000
Management 50,000 21.9% 21.9% 5.0% 25.8% Equity  Value 707,638 739,936 909,926
Total  Equity 228,000 100.0% 100.0% 5.0% 100.0%
Worst  Case
LBO  Model

At 5.81 x Mult.   Of
Equity   Returns 2020 2021 2022 2023 2024 2025 2026 2027 IRR   Investment
Sponsor -­178,000 0 0 0 0 0 0 524,832 16.7% 2.9  X
Management -­50,000 0 0 0 0 0 0 182,807 20.3% 3.7  X

At 6.00 x Mult.   Of
Equity   Returns 2020 2021 2022 2023 2024 2025 2026 2027 IRR   Investment
Sponsor -­178,000 0 0 0 0 0 0 548,786 17.5% 3.1  X
Management -­50,000 0 0 0 0 0 0 191,150 21.1% 3.8  X

At 7.00 x Mult.   Of
Equity   Returns 2020 2021 2022 2023 2024 2025 2026 2027 IRR   Investment
Sponsor -­178,000 0 0 0 0 0 0 674,862 21.0% 3.8  X
Management -­50,000 0 0 0 0 0 0 235,064 24.7% 4.7  X
Worst  Case
APV  Model
APV  Method
Debt
Assumptions: Sr  
Terminal  Perpetuity  Growth: 4.0%Assumed  perpetual  growth Jr
Cost  of  Capital: Total  
Pre-­tax  cost  of  debt 10.8%Weighted  Average  from  Jr  and  Sr  Debt
After-­tax  cost  of  debt 6.5%Assume  40%  fed  &  state  tax
Unlevered  cost  of  equity 13.2%Risk  free  rate  +  assumed  8%  market  premium  for  equity
Levered  cost  of  equity 25.0%Assumed  minimum  LBO  hurdle
Assumed  LT  Debt/Total  Capitalization 50.0%
Target  Wtd  Avg  Cost  of  Capital 15.7%

Projected  Years  Ending  December  31,


Free  Cash  Flow 2020 2021 2022 2023 2024 2025 2026 2027
EBITDA 109,300 117,325 125,897 134,470 143,042 151,615 160,802 169,989
Less:  Depr  &  Amort -­28,006 -­29,406 -­30,877 -­32,421 -­34,042 -­35,744 -­37,531 -­39,407
EBIT 81,294 87,918 95,020 102,049 109,001 115,871 123,271 130,582
Taxes  (40%) -­32,518 -­35,167 -­38,008 -­40,820 -­43,600 -­46,348 -­49,309 -­52,233
After  Tax  EBIT 48,776 52,751 57,012 61,229 65,400 69,523 73,963 78,349
Plus:  Depr  &  Amort 28,006 29,406 30,877 32,421 34,042 35,744 37,531 39,407
Less:  Capex -­110,590 -­118,409 -­127,346 -­136,283 -­145,219 -­154,156 -­164,209 -­174,263
Plus/Minus  Ch  in  NWC 86,797 33,509 18,948 7,133 7,133 7,133 7,990 7,990
Free  Cash  Flow  (Unlevered,  After  Tax) 52,990 -­2,743 -­20,509 -­35,499 -­38,644 -­41,756 -­44,725 -­48,516

NPV  of  FCF  @  Unlevered  Cost  of  Equity $(68,492)

Terminal  Value 0 0 0 0 0 0 0 -­548,440


Implied  Multiple  of  EBITDA -­3.2
NPV  of  TV  @  Unlevered  Cost  of  Equity $(203,403)

Value  of  Tax  Shield


Interest  Expense 33,176 30,767 30,767 30,767 30,767 30,767 30,767 30,767
Tax  shield 13,270 12,307 12,307 12,307 12,307 12,307 12,307 12,307
NPV  @  Pre-­tax  cost  of  d ebt $64,642  

Total  APV $(207,253) NPV  of  FCF  +  NPV  of  TV  +  NPV  of  Tax  Shield
Liquidation   Model
Assumptions Most Best   Worst  
Year Median
• Firm  would  e xit  in  2 027 Likely Case Case
• Due  to  financial  h ardship,  there  would  b e  minimal  d isposable  income  for  
people  to  spend  o n  fine  d ining 2016 195,992 195,992 195,992 195,992
• DRFG  would  sell  the  firms  a ssets,  o r  the  b uildings  a nd  P P&E  to  receive  
the  returns  it  is  seeking 2017 153,316 153,316 153,316 153,316
• Firm  would  cease  to  e xist  a fter  a ll assets  a re  sold
• All  o f  these  locations  retain  value  a nd  that  they  a re  p urchased  versus   2018 287,803 287,803 287,803 287,803
being  leased
2019 427,150 427,150 427,150 427,150

Best  Case Most  Likely  Case Worst  Case 2020 519,710 516,218 451,581 516,218

• Firm  would   • The  firm  has   • The  firm  will   2021 701,091 619,721 467,192 619,721
blossom  till done  well   in   have  a  difficult  
2027,  but  due  to   growth,  but   time  to  exist,   2022 886,410 756,810 498,105 756,810
the  financial   financial   and  selling   its  
times  the  firm   hardship  has   assets  is  most   2023 903,917 919,274 515,219 903,917
would   need  to   made  the  firm   sure  way  of  
be  sold difficult   to   getting   capital   2024 955,129 1,204,719 567,192 955,129
• IRR:  777% operate  and  be   bac  from  the  
• MOI:  8.77X sustainable investment 2025 997,612 1,597,102 613,435 997,612
• IRR:  520% • IRR:  264%
• MOI:  6.2X • MOI:  3.64X 2026 1,100,014 1,680,180 687,748 1,100,014

2027 1,215,195 1,719,571 713,419 1,215,195


Liquidation   Model  Issues
Liquidating  a  firm  of  this  size  
Purchasing all  locations  will   Assets  may  not  be  as  
and  magnitude  does  not  
stricken  cash,  hurt  cash   valuable  as  market  value,  
provide  a  positive  image  on  
flows  and  minimize  the   there  is  a  discount  when   the  Private  Equity  firm  and  
overall  equity  growth  of  the   liquidating  so  returns  will  
will  make  it  difficult  to  secure  
firm probably  take  a  hit
deals  in  the  future

Senior  and  Mezzanine  debt   Liquidation  is  very  


would  be  able  to  get  their   uncommon  in  the  fine  dining  
capital  back  but  not  as   sector,  and  therefore  the  
quickly  as  when  they  like  it   expertise  is  minimal  and  may  
to,  and  the  risk  of  liquidation   run  into  operational  
could  stop  investments efficiency  issues
Potential  Investment  Bid
Del  Frisco’s  Restaurant   Group
Price  Analysis
IRR  Firm  (Management) MOI  Firm   (Management)

5.81X 6X 7X   5.81X 6X 7X  
Case Case
Multiple Multiple Multiple Multiple Multiple Multiple

Most   Most  
44.2% 44.8% 48.1% 12.9X 13.4X 15.7X
Likely   Likely  
(48.7%) (49.4%) (52.8%) (16.0X) (16.6X) (19.4X)
Case Case
Best   59.3% 60.0% 63.6%
Case (64.2%) (65.0%) (68.7%) Best   26.0X 26.8X 31.3X
Case (32.2X) (33.3X) (38.8X)
Worst   16.7% 17.5% 21.0%
Case (20.3%) (21.1%) (24.7%) Worst   2.9X 3.1X 3.8X
Case (3.7X) (3.8X) (4.7X)
40.07% 40.77% 44.23% 13.93X 14.43X 16.93X
Average Average
(44.4%) (45.22%) (48.73%) (17.3X) (17.9X) (20.97X)
Exit  Multiple  Analysis
Due  to  the  strength  of   Based  on  hitting   Firm  had  expansion,  but  

Most  Likely
Best  Case

Worst  Case
the  organization  hitting   management  projections   has  had  minimal  ability  
major  milestones   and  having  expansion   to  grow  in  terms  of  
including  location   geographically   with   EBITDA   due  to  their  
growth,  expanded   some  reduction  of  costs,   inability  to  reach  price  
product  line  and   trading  at  the  same   quotas  and  achieve  
decreasing  costs   multiple  is  most  likely long-­term  synergy  status
through  synergies,  the   Potential  Exit   Multiple Potential  Exit   Multiple
multiple  could  be  
• Minimum   of  purchase  multiple   • Firm  will  trade  at  the  same  
assumed  and  expanded (5.81X),  with  a  small  change   purchase  multiple   (5.81X),  as  
Potential  Exit   Multiple that  the  multiple   increases  to   the  firm  grew  in  revenue,  but  
6X,  as  the  holding   period   for   relatively   had  the  same  
• Minimum   of  purchase  multiple   the  firm  could  change  market   EBITDA   after  an  8  year  
(5.81X),  likely  to  increase   perceptions  and  buyout  rates holding   period  
~5%-­15%  to  between   6X  and  
7X  EBITDA
Pricing
Things  to  Consider
Price Floor Target Price • Control  Premium  has  not  been  taken  into  
account,  which  has  ranged   from  13.5%  to  
• Purchase  at  current   • Purchasing  at   35%  between   2015  and  2018  (Duff  &  
Phelps)
stock  price   standard  rates  -­ see  
• Analysis  does  not  include  other  
($220.04MM) analysis  ($535MM) acquisitions,  which  c ould  result  in  drastic  
changes  in  FCF  and  EBITDA
• Analysis  also  does  not  include  the  
potential  franchising  option,  which  
Auction  Price Max  Price solely  increases  FCF  while  not  
increasing  any  costs
• Trade  at  the  US  PE • Paying  2019   EBITDA   • Large   risk associated  with  DFRG  is  the  
relation  it  has  to  the  performance  of  the  
buyout  multiple  of   at  the  11.6X  multiple   financial  markets.  If  disposable  income  
11.6X  (335.25MM) ($682.31MM) decreases,  the  firm  c ould  take  a  drastic  
hit
• Vice  v ersa,  if  financial markets  boom,  
then  the  c ompany  c an  further  prosper
Projected  Pricing  Versus  Returns
LBO                                                                                                APV                                                                     Liquidation  
Most Best   Worst Most Best   Worst Most Best   Worst
Likely Case Case Likely Case Case Likely Case Case
Price  
220.04 220.04 335.25 220.04 220.04 335.25 220.04 220.04 335.25
Floor
Max  
682.31 682.31 682.31 682.31 682.31 682.31 682.31 682.31 682.31
Price
Target  
535 535 535 535 535 535 535 535 535
Price
Auction
335.25 220.04 682.31 335.25 220.04 682.31 335.25 220.04 682.31
Price

IRR 40.07% 63.6% 16.7% 41.51% 87.2% (4.96%) 520% 777% 264%

MOI 13.93X 31.3X 2.9X 15.16X 23.79X -­1.17X 6.2X 8.77X 3.64
Conclusion
Industry
• Considered  in  maturity  stage  b ut  g rowing
• Highly  competitive
• Based  o n  financial  market  trends

• Young  management  team  -­ enough  e xperience  q uestions

Company • Portfolio of  b usiness  n arrow  b ut  with  tremendous  p otential


• Geographical  e xpansion  a nd  reduction  o f  cost  make  it  p otentially  a ttractive  
candidate

• Returns  look  strong,  a lthough  h olding  p eriod  is  longer  than  u sual

LBO  Analysis • Financial  markets  risk  factor  n ot  a voidable  a nd  therefore  make  p otentially  d ifficult  
investment
• Sun  Capital  P artners  strategic  d ecisions  a nd  synergies  make  d eal  worth  while

Conclusion
• LBO  is  g ood  a t  the  right  p rice
• Operational  e xcellence  must  o ccur  in  o rder  for  strong  returns
• Unavoidable  risks  via  financial  markets  makes  investment  slightly  risk