Dive Brief:
- Fogo de Chao plans to grow its system by 15% this year, with company-owned locations in the U.S. and international franchise restaurants. The expansion includes entering the New Jersey market, as well as stores in California, Florida, New York, Mexico and Brazil, with more to be announced, according to a press release emailed to Restaurant Dive.
- The new restaurants include experiential features like an open-air churrasco bar where customers can watch chefs butcher, prepare and grill different cuts of meats, as well as dry-aged meat lockers, cognac and wine displays, group and private dining options, to-go options and a butcher shop.
- These expansion plans follow the company’s declaration of its intent to go public again. The chain was previously taken private in 2018.
Dive Insight:
Despite the challenging environment for full-service concepts throughout the pandemic, Fogo de Chao maintained strong growth through 2021. Average unit volumes were $7.9 million for the year ending in Q3 2021, for example.
With a fledgling but strong off-premise business, as well as new dayparts and catering options, the company is positioned to grow at a double-digit clip. The company currently has over 60 locations systemwide, including 47 in the U.S. Fogo expects its momentum to continue, and plans to reach at least 300 restaurants in the U.S. in the next 20 years, behind a 15% annual growth rate for company-owned restaurants.
The steakhouse has some factors working in its favor to support these growth plans. Demand for beef is forecast to remain strong.
It’s also clear consumers have pent-up demand to dine out at higher-end restaurants, especially those that have an experiential element. According to the National Restaurant Association’s State of the Industry 2022 report, over 50% of adults are not eating at restaurants as often as they’d like. Despite higher menu prices, more consumers are searching for higher-priced restaurant than they were pre-pandemic, Yelp data shows.
In a statement, Fogo de Chao CEO Barry McGowan said, “Fogo is in a prime growth position to scale significantly in the years ahead as we target 15% annual growth through company-owned restaurants, plus an additional international franchise development strategy. Our unique dining experience has propelled Fogo’s expansion efforts and driven demand in new and existing markets.”
Fogo and its steakhouse peers face significant supply chain and inflationary pressures. In December, beef prices were up nearly 20% over December 2020. Simultaneously, the U.S. cattle herd has declined 2% from last year and continued COVID-19 cases at meat production facilities have further pressured supply, according to Bloomberg.
Despite a desire to eat out, many consumers remain anxious about dining out. As such, full-service restaurants have yet to fully recover, with orders down nearly 16% compared to pre-pandemic levels, according to The NPD Group.
