Diversified Restaurant Holdings, Inc. (OTCBB: DFRH) ('DRH'), the owner/operator and soon to be franchisor of the unique, full service fast-casual restaurant and bar Bagger Dave's Legendary Burgers & Fries(R) and a leading franchisee for Buffalo Wild Wings, Inc. (NASDAQ: BWLD), announced today that it has exercised its option to acquire nine Buffalo Wild Wings(R) Grill & Bar locations in Michigan and Florida for $3.1 million. Previously, DRH managed the acquired restaurants for its affiliates. The Company received the right to exercise the purchase option as part of its initial public offering in August 2008. The purchase is being financed through a six-year promissory note from the sellers.
The acquired BWW Michigan stores are in Sterling Heights, Fenton, Novi, Clinton Township, Ferndale and Warren, while the Florida stores are in Brandon, Fish Hawk Ranch and Sarasota. The stores range in age from 4 years to 10 years. In the nine months ended September 30, 2009, these restaurants generated $18.3 million in revenue. Earnings before interest, taxes and depreciation (EBITDA) margin for the nine restaurants, excluding the management fee paid to DRH during the same period was approximately 15.9%. On a pro forma basis, DRH's nine-month revenue and EBITDA as of September 30, 2009 would have been $31.3 million and $3.2 million, respectively, compared with $14.3 million and $1.6 million, respectively, as previously reported. DRH uses non-GAAP EBITDA as a financial measure because management believes that it provides investors with information useful in understanding the Company's financial performance, its performance trends, and financial position. (See reconciliation of pro forma results to GAAP results in the attached table).
Michael Ansley, President and CEO of DRH commented, 'The acquisition of our affiliates' Buffalo Wild Wings locations allows us to fully realize the economic benefits associated with these nine strong BWW stores which we previously managed for a fee. In addition, with estimated 2009 revenue of $24.4 million, these stores will add significantly to our top line going forward. We are committed to our strategic plan for continued growth through the acquisition of additional market-leading BWW franchises outside of Michigan and the continued penetration of the Michigan and Florida markets under our Area Development Agreement with BWW. Our growth strategy also includes further development of the Bagger Dave's concept through both owned and franchised locations, with our third Bagger Dave's store scheduled to open in Novi, Michigan, this month.'
DRH currently owns and operates five Michigan BWW franchises in Flint, Grand Blanc, Petoskey, Port Huron and Troy, along with two Florida locations in North Port and Riverview.
DRH has an expansion plan and agreement with Buffalo Wild Wings International, Inc., to open 22 additional BWW locations by 2017 under which it recently announced plans for a new BWW location in Marquette, Michigan, scheduled to open in June 2010, with another location expected to open in Chesterfield, Michigan, later this year. With today's acquisition and the soon-to-be-opened Marquette and Chesterfield locations, DRH will own and operate a total of 18 BWW stores in Michigan and Florida. In addition to its BWW locations, DRH owns and operates two Bagger Dave's Legendary Burgers and Fries restaurants in Michigan with a third location scheduled to open later this month. Bagger Dave's is a unique restaurant concept developed by DRH.
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