A Brazilian restaurant you have likely never heard of is about to take over the country.
Fogo de Chao’s recently-filed IPO reveals how insanely profitable the brand is. It also reveals the eatery’s plans to conquer America.
Fogo de Chao serves mostly churrasco — 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 $US59.50 for unlimited food.
This business model helps Fogo de Chao generate a staggering amount of revenue, including a year-on-year increase of $US43 million, despite having only 35 locations in the United States and Brazil, according to the SEC filing.
Each location sees about $US7 million in revenue per unit with cash-on-cash returns of 40%, the company claimed in the filing. Each restaurant basically pays for itself in under three years.
Since 2010, the chain has opened 13 locations and grown revenue from $US169 million to $US262 million, according to Nation’s Restaurant News (NRN). It has about $US19 million in cash.
This translates to $US41.4 million in operating revenue and a net income of $US17.6 million — again, from only 35 restaurants. Revenue was hit by $US17.6 million in debt payments on a total of $US243 million owed to creditors.
Total sales grew a staggering 11.4% in Brazil and 2.9% in the U.S. during 2014, the company said in the filing. Food and labour costs account for only half of revenue.
Fogo de Chao is seeking to raise $US75 million, according to reports, but that number is likely to change since the actual filing does not yet specify how much the restaurant is seeking.
Fogo de Chao first broke into the United States in Dallas, Texas in 1988. Since then, it has opened locations in several major cities and Puerto Rico. The restaurant has quickly earned a legion of loyal fans for it’s three-story midtown Manhattan flagship opened in 2013.
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 $US426 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 new locations around the U.S., according to NRN.
Citing SEC rules regarding the mandatory cooling off period following an IPO filing, a spokesperson for the company declined to comment when reached by Business Insider.
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