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Diversified Restaurant Holdings: A 6-Point Inspection

William Bias profile picture
William Bias


  • Diversified Restaurant Holdings is too diversified.
  • Diversified Restaurant Holdings grew its top line at a respectable rate over the past five years.
  • Diversified Restaurant Holdings is loaded down with long-term debt.

It's important for long-term investors to develop a guide for doing their investment research. Over the years I have developed questions to guide me in my thinking when researching the publicly traded universe. Today, let's talk about Diversified Restaurant Holdings (NASDAQ: BAGR).

1.) What does the company do?

When you buy shares in a company you effectively become part owner of that company. Therefore, it's important for an investor to understand what a company sells. Diversified Restaurant Holdings is what I would like to call, a split personality company. The company owns and operates Bagger Dave's, which is an "ultra-casual restaurant and bar concept" that specializes in various and sundry burgers, beer, milkshakes and salads. In addition, it is also one of the largest franchisees of Buffalo Wild Wings (NASDAQ: BWLD). I prefer companies with a focus. I also don't like companies that franchise for other businesses. Franchisees get the short end of the stick and have to foot the overhead for the name brand company.

2.) What do the fundamentals look like?

Investors should also look for companies that grow revenue and free cash flow over the long-term, while retaining some of that cash for reinvestment back into the business and for economic hard times. Excellent revenue and free cash flow growth serve as catalysts for superior long-term gains. Diversified Restaurant Holdings has seen excellent top line growth, growing its revenue 225% (see chart below) over the past five years. Diversified Restaurant Holdings achieved this with a combination of opening new stores and expanding comparable sales.

BAGR Revenue (<a href=

BAGR Revenue (TTM) data by YCharts

However, the company has seen a steady decline in net income and free cash flow over the past five years (chart below). Operating expenses have outpaced the growth in revenue. In addition, the company has been taking on increasing amounts of long-term

This article was written by

William Bias profile picture
I have been analyzing stocks since 1992 and a freelance writer since 2012.

Analyst’s Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (3)

Mostly Small Caps profile picture
William. Thanks for the post / write-up. I just thought I would note that in the most recent quarter, BAGR had higher same store sales at its BWW units than the average franchisee and for BWLD's company owned restaurants (comparing the 7.2% growth BAGR reported vs. the numbers provided by Buffalo Wild Wings). AND ... in case you didn't notice, the Chicago Blackhawks are playing the Tampa Bay Lightning in the NHL Finals. BAGR has 11 BWW's in Florida including some in Tampa and 4 BWW's in Illinois in and around Chicago and 5 more in Indiana, also near Chicago. It's just a little tailwind for the company's current quarter, but I thought I'd mention it. Come summer, all BWW's will have tough comparisons as the FIFA Women's World Cup unfortunately will likely not bring out as many fans as last year's Men's World Cup. But for now ... enjoy the hockey finals, and if you are in Florida, Indiana, or Illinois please go and watch the next game at a BAGR owned BWW. Cheers.

p.s. The 11.2% same store sales growth at Bagger Dave's Burger Tavern last quarter was also quite impressive.
fire0nice228 profile picture
I like the article. I recently bought shares and I too am hoping that eventually they do something with the bwld side of the business to split them up. Maybe a split or spinoff once Bagr is more established. Bogey certainly are adding stores for the bagger brand and purchased and or remodeled some of their bwld stores so that I'm sure ate into cash and debt. I hope that strong bwld performance continues and they reap what they have sown.

I'll hold for log term to see if bagger saves catches on and becomes the next hot thing. If so I'll make good money. Roll of the dice.
William Bias profile picture
Thanks for reading.

This one is beyond my personal risk tolerance.


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