Fogo de Chão to Go Public For Second Time

The 60-unit steakhouse believes it can reach at least 300 units in the next 20 years.

Photo Courtesy of Kristina Blokhin.

Brazilian steakhouse Fogo de Chão has filed paperwork to go public once again, three years after being taken private.


On Wednesday, the chain submitted documents to the SEC related to the proposed IPO of its stock. The number of shares and price range have not been revealed yet. Fogo plans to list itself on the New York Stock Exchange under ticker symbol "FOGO" and use proceeds from the IPO to pay off $344.2 million in outstanding debt.


Fogo has 60 locations systemwide, including 46 domestically across 21 states, Washington, D.C., and Puerto Rico. The company believes it has long-term potential to reach at least 300 restaurants in the U.S. over the next two decades. In 2022, the chain plans to open eight to 10 corporate stores and one to two international franchise restaurants. Beyond next year, Fogo wants to maintain an annual growth rate of at least 15 percent for company-owned units, while also continuing to expand its international franchise presence.


The steakhouse backed up this goal with the fact that 79 percent of its guests are within the Millennial and Generation X demographic, meaning there's opportunity for traffic growth for many years.


In addition to longevity, Fogo also noted restaurants are able to support high traffic volumes by leveraging a continuous service model that leads to fast table turns. Freshly grilled meats, served by gaucho chefs, are in constant circulation, so guests eat as soon as they arrive. Fogo averaged 129,000 guests per U.S. restaurant in 2019, capping six straight years of positive traffic growth. The number of visits turned negative in 2020 due to COVID, but positive flow has returned this year.


The service model resulted in an AUV of $7.9 million in the year ending October 3, and that's taking into account restaurant closures in Q4 2020 and Q1. Through the first three quarters of 2021, restaurant contribution margin was 30 percent and consolidated operating margin was 11 percent. In that same timespan, Fogo earned $296 million in revenue, $10 million in net income, and $54 million in adjusted EBITDA, compared to $251 million, $3 million, and $44 million during 2019, respectively.


Monthly U.S. same-store sales, compared to 2019, have been positive since March, with growth of 28 percent, 37 percent, and 39 percent in August, September, and October.

Fogo first went public in June 2015, with a value of roughly $545 million. In February 2018, private-equity firm Rhône Capital purchased the steakhouse for $560 million in an all-cash deal, finishing a “comprehensive strategic alternatives review process” taken by the restaurant's board of directors.


Under private ownership, the chain said it's enhanced unit economics, refined its real estate development criteria, built a new restaurant opening pipeline, strengthened same-store sales drivers, launched international franchising, and bolstered leadership capabilities.


"We believe that these enhancements, combined with Fogo’s enduring value drivers, together supported by an expanded development pipeline exhibiting these same characteristics, has robustly positioned our long-term sustainable growth algorithm domestically and abroad," the chain states in the filing.


Fogo is the seventh restaurant to use an IPO this year, following Krispy Kreme, Dutch Bros Coffee, Portillo's, First Watch, Sweetgreen, and Panera Brands.


Morgan Stanley, BofA Securities and Jefferies LLC are acting as lead book-running managers for the offering. Credit Suisse and Piper Sandler & Co. are also acting as lead book-running managers for the offering. Raymond James, Stephens Inc., and Truist Securities are acting as book-running managers for the proposed offering.


Source: 2021 FSR Magazine.

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