This is an English adaptation of a FoodBud historical article originally published on December 6, 2021.
In November 2021, Brazilian steakhouse chain Fogo de Chão was planning to return to the public markets with a proposed $100 million raise. The offer price and number of shares had not yet been determined.
Founded in Brazil in 1979, Fogo de Chão operates as a churrasco-style steakhouse brand built around open-flame grilling. At the time, it had 60 restaurants: 46 across 21 U.S. states and 14 in Brazil, Mexico and the Middle East. Of those, 53 were company-operated.
Fogo estimated room for 300 restaurants in the U.S. and 250 internationally. Its expansion plan targeted roughly 15% annual unit growth, with 8-10 new company-owned restaurants and 1-2 international franchised restaurants planned for 2022.
The company had previously been listed on Nasdaq before being acquired by Rhone Capital for $560 million in 2018. The prospectus cited in the article did not disclose Rhone Capital's ownership stake. After COVID-19 hit in 2020, Fogo laid off most employees, then reopened in May as business recovered strongly.
The article noted that several North American restaurant brands had already listed in 2021, including Dutch Bros, First Watch, Krispy Kreme, Sweetgreen and Portillo's, while Panera Brands and MOD Pizza had also announced IPO plans.
According to Fogo's prospectus, the company had been testing adjustments to its restaurant model. Six restaurants opened since 2019 had outperformed expectations.
Three restaurants opened in 2019 in Bethesda, Long Island and Irvine generated average weekly sales of $169,000 during the 39 weeks ended October 3, 2021. That compared with $85,000 and $148,000 for the same period in fiscal 2020 and fiscal 2019, respectively, with 2020 affected by COVID-19.
The new restaurants' annual unit volume was 33% above the prior estimate of $6.6 million, while average store size decreased by 14% to 9,100 square feet, or about 845 square meters. For the fiscal 2021 new-store model, average investment per restaurant was $3.5 million, with a target cost of $76 per square foot.
Other model priorities included:
The article compared Fogo with Chinese barbecue chain Muwu BBQ, which also uses a large-format store model. Muwu BBQ had surpassed 200 restaurants and generated around RMB 2 billion in annual revenue. It was also expanding its menu with items such as grilled fish and whole roasted lamb, while strengthening drinking occasions in-store to lift the beverage revenue mix.
Based on Fogo's $7.9 million AUV, the article estimated annual revenue could reach about $470 million, or roughly RMB 3 billion. Its longer-term target was 300 U.S. restaurants and 250 international restaurants over a 20-year timeframe.
Using the adjusted store model, the article estimated Fogo would need around 240 restaurants to reach RMB 10 billion in annual revenue, with valuation to be assessed after a formal listing.
For large-format barbecue brands such as Muwu BBQ, the article highlighted two expansion constraints: each property had to be negotiated one by one, limiting the ability to benefit from China's shopping mall expansion; and company-operated growth required a deep management pipeline.
The article also noted that Korean-style barbecue formats are closer to skewers-based barbecue but can better use shopping mall locations. It argued that hotpot and barbecue have opposite peak seasons, which explains why some operators were exploring hybrid models. One example was Xiexieguo, launched by the former CEO of Coucou, combining hotpot, barbecue and an in-store bar. The brand had already raised RMB 150 million from Sequoia Capital, though the article said its store model still appeared to be evolving.
Note: IPO, financing, valuation, expansion-target and forward-looking figures above are historical, from the December 6, 2021 source article.