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This insanely profitable Brazilian steakhouse chain is about to take over America
(Reuters)A waiter cutting a slice of "Picanha" meat at the Fogo de Chao Brazilian steakhouse, where food is prepared in the traditional gaucho way, in Sao Paulo on April 15.
A Brazilian restaurant you've probably never heard of is about to take over the US.
Fogo de Chao's recently filed IPO reveals just how profitable the brand is and how it plans to win over American diners.
Fogo de Chao serves mostly Brazilian BBQ, called churrasco, in an all-you-can-eat barrage of more than a dozen different cuts of meat cooked on skewers and sliced at the table.
Menu items include six varieties of grilled beef plus lamb, chicken, pork, seafood, and a salad bar. Diners fork over $59.50 for unlimited food.
This business model helped Fogo de Chao post $262 million in revenue in 2014 from only 35 locations in the US and Brazil, according to the SEC filing. That is up 20% from a year earlier. Net income was $17.6 million in 2014, following a loss of $937,000 in 2013.
Each 8,500-square-foot location sees about $7 million in revenue per unit with a three-year average return on cash invested of 50% by the restaurant's third year of business, the company said in the filing.
The chain has opened 13 locations since 2010 and grown total sales by 11.4% in Brazil and 2.9% in the US in 2014, according to the filing. Revenue has also grown from $169 million to $262 million over that same timeframe. It has about $19 million in cash.
Combined food and labor costs account for only half of revenue, which Fogo de Chao claims is 750 basis points lower than the industry average. Another estimate placed those costs in about the 60% range.
Fogo de Chao is seeking to raise $75 million, according to reports, but that number is likely to change because the actual filing does not specify how much the restaurant is seeking.
Fogo de Chao first broke into the US in Dallas in 1988. Since then it has opened locations in several major cities and Puerto Rico. The restaurant has earned a legion of loyal fans for its three-story Midtown Manhattan flagship, which opened in 2013.
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Reviews for other locations around the country are equally fawning. Diners sing their praises over the meat cooked "gaucho style" over an open flame.
The eatery was bought in 2012 from its founders by Thomas H. Lee, a private-equity firm, in a deal valued at $426 million, according to The Street.
Founded in a small Brazilian town in 1979, the company plans to use the IPO proceeds to pay down debt and open as many as 100 additional outlets around the US, according to the filing. A new location is set to open this year in Mexico City.
Citing SEC rules regarding the mandatory cooling-off period after an IPO filing, a representative for the company declined comment when reached by Business Insider.
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