Fogo de Chão to-go offerings.
Fogo de Chão

Fogo de Chão's mantra of "What's Next," inspired it to innovate during COVID-19, not take away. And so it added options like wagyu and porterhouse steak.

Fogo de Chão Charts a ‘Journey Back to Joy’

During COVID-19 and everything that's followed, the experience-driven steakhouse never lost sight of its identity.

Fogo de Chão CEO Barry McGowan remembers when the world went quiet. He stepped out of the company’s Legacy West office, a bustling district in Plano, Texas, and into what felt like an evacuation zone. No music or people. “Nothing,” McGowan says.

Yet it was in this eerie, COVID-19 pause Fogo de Chão began plotting a way back. Lisa W. Miller & Associates released national research in April asking 1,000 Americans 18 and older what activities provided the most “joy” that were suddenly gone from their routines. No. 1? Dining out, at 81 percent. It also polled what people would “do first” once they could. Again, restaurants topped at 86 percent.

“It really inspired me because it was about what do we do,” McGowan says. “Our job in hospitality is to deliver joy.”

Fogo de Chão began calling its COVID blueprint “the joy axis,” rooted around what it could give guests amid pandemic conditions—not on what was stripped away.

By October, Fogo de Chão returned to 96 percent of 2019 sales, with 16 stores even posting better numbers, year-over-year. This despite the 55-unit system averaging 60 percent capacity. More recently, with infections spiking and mandates tightening, Fogo de Chão pushed 75 percent of regular business with just 25 percent capacity.

“That shows you the thesis paid off,” McGowan says. “People were going. People wanted to go somewhere where they could just enjoy themselves.”

Fogo de Chão achieved positive EBITDA for the entire third quarter, and October EBITDA beat the previous year.

Period 4

  • U.S. sales as percentage of prior year: 5 percent
  • Dine-in restaurants: 0
  • Weekly revenue: $300,000


  • U.S. sales as percentage of prior year: 9 percent
  • Dine-in restaurants: 11
  • Weekly revenue: $600,000


  • U.S. sales as percentage of prior year: 27 percent
  • Dine-in restaurants: 29
  • Weekly revenue: $1.6 million


  • U.S. sales as percentage of prior year: 48 percent
  • Dine-in restaurants: 29
  • Weekly revenue: $2.6 million


  • U.S. sales as percentage of prior year: 59 percent
  • Dine-in restaurants: 33
  • Weekly revenue: $3.7 million


  • U.S. sales as percentage of prior year: 78 percent
  • Dine-in restaurants: 36
  • Weekly revenue: $4.5 million


  • U.S. sales as percentage of prior year: 91 percent
  • Dine-in restaurants: 39
  • Weekly revenue: $5.05 million


  • U.S. sales as percentage of prior year: 73 percent
  • Dine-in restaurants: 26
  • Weekly revenue: $4.4 million

On the cover, Fogo de Chão does not feel a concept designed for pandemic times. The chain is known for its Southern Brazilian cooking technique, known as churrasco, where “gaucho chefs” carve meats tableside. There’s also its “Market Table” and “Feijoada Bar,” which for all intents and purposes, is a high-end buffet complete with imported charcuterie, soups, salads, and other seasonal rotations.

Yet where pundits saw setbacks, McGowan saw differentiators. “The fact is our guest demanded it,” he says of the Market Table. “… Everyone advised us you need to close [it]. That was all people thought. But when we listened to our guest, we opened it up, we set it up, and just put stanchions around and created protocol so everyone felt comfortable around it.”

Fogo de Chão brainstormed ways to make it happen; it didn’t throw in the towel and use COVID as an excuse. It added gloves and employees started to plate food at guests’ requests.

And this was a sign of things to come. All the while, the brand kept adding in labor. At 25 percent, it staffed 60–70 percent. By October, Fogo de Chão was running with full teams.

“We are overweight on labor,” McGowan says. “So we expected overweight on guest scores and to make sure we deliver hospitality, and that allowed us to capture revenue.”

Fogo de Chão

The Butchery sells take-home cuts of meat and also allows guests a chance to interact with in-house experts.

Fogo de Chão

The Next Level Lounge offers guests a place to kick back and buy a cigar, or grab a fancy cocktail. Or both.

What was important to note on the labor front, too, McGowan adds, is how and when guests started to visit during COVID changed. They began to self-select “shoulder periods” to avoid crowds. Peak hour stability of old was gone, and Fogo de Chão didn’t want to get caught undermanned.

"We knew we had to focus on the joy of our team members, our guests, and our community and we wrapped all that together with our team and said let’s focus on our journey back to joy," McGowan says.

Rewinding to life before coronavirus, there were several baselines that separated Fogo de Chão from traditional steakhouses.

Its customer base mixed 43 percent millennials, 31 percent Baby Boomers, and 36 percent Gen Z. Those figures averaged 33, 35, and 32 percent, respectively, among peers.

Fogo de Chão’s consumers are highly ethnic. They’re 42 percent female. The restaurant’s occasions split as 16 percent business, 33 percent date/spouse, 23 percent friends, and 26 percent family meal.

These have held and supported dine-in innovation. But what about life outside the four walls, where the COVID disruption has taken shape?

Fogo de Chão’s off-premises business was just 3–5 percent of sales in October, meaning the chain got to 96 percent of year-ago business without covering a massive swath with takeout and delivery. Its peer group has ranged, generally, from 40–60 percent in recent months. Fogo de Chão marched into the calendar with six consecutive years of positive traffic and has put that at the forefront. “It’s not taking labor away and driving labor costs out. It’s about driving hospitality in. Driving experience in. And that’s how you drive traffic,” McGowan says.

“We were focusing on delivering joy within our restaurant. And as you know, that’s more profitable,” he adds. "That allows me to employ more people. That allows us to connect emotionally to our consumers. All of that is just really where I would say the last 10 months have been.”

Fogo de Chão leaned into innovation instead of retraction. It introduced Porterhouse and Wagyu New York Strip. It turned parking lots into seating and brought out propane heaters. 

But off-premises gains haven’t been insignificant or glossed over. The company generated roughly $10 million in revenue from outside channels since COVID and saw mix rise as high as 8–10 percent (14–15 percent in some units) during the holidays as customers ordered family meals.

There are a series of new channels Fogo de Chão believes can propel $50 million in incremental annual revenue within three years.

  • Off-premises and technology
  • Butcher shop
  • Curbside to-go
  • Third-party delivery
  • Online ordering
  • Brand licensing

Fogo de Chão is now active with every third-party delivery aggregator after going 40 years without any off-premises business at all. It had nine locations in test before COVID, with no real timetable for expansion. Within nine days, however, the chain added to-go ordering and packaging, and created WhatsApp, YouTube, and live web videos to train operators. It sold alcohol out the door where possible, including Fogo de Chão’s Founders Trilogy Collection, which includes three wines and sells for $89. Guests began to dine-in and order these to-go. Internal, retail off-premises sales jumped.

Fogo de Chão then struck a licensing agreement to market different segments of its brand in grocery, from butcher meat to meal kits.

With catering—one of the pandemic’s deepest-cut offerings—McGowan viewed evolution through an experiential lens as well. Fogo de Chão served “a lot” of weddings during COVID, he says. Either by putting up tents in parking lots or bringing grills to location. There were more requests than grills, McGowan says. “So we’ll be investing in capital and portable grills for reach location over the next 24 months to continue to build that business,” he says.

Fogo de Chão

Fogo de Chão's take-home meat program has ample potential.

Fogo de Chão didn’t furlough any managers. This allowed the company to set them loose and create new sales channels, and “they’re creating revenue out of thin air,” McGowan says.

Fogo de Chão is getting into contract catering sales with offices and presenting happy hour or “indulgent packages” for weekends where it can deliver wine, wagyu, and cheese plates to parties.

The extension is important for another reason, McGowan explains. At 55 units, Fogo de Chão is hardly a large-scale brand. It appreciates awareness in the 42 percent range. A lot of steakhouse chains, especially in casual dining, reside in the high 90s.

What Fogo de Chão discovered is eight out of every 10 people it serves at a catered event have never visited the restaurant. “We’re still a small brand. We want to chase traffic to our restaurants. And we want to incrementally build off-premises so we engage consumers who haven’t tried us yet,” McGowan says.

Back in 2019, Fogo de Chão unveiled its “next level” design when it remolded a Jardins location in São Paulo, Brazil. Just last week, the company announced a lease agreement to debut an “all-new restaurant experience” in Coral Gables, Florida, slated to open by the end of 2021. In addition to the typical restaurant, it will feature “The Butchery” and “Next Level Lounge,” two destinations new to Fogo de Chão’s domestic operations.

The Butchery creates a spot to enjoy wine and charcuterie, and offers guests a chance to consult with Fogo de Chão butchers and gaucho chefs on cuts to take home. Bottles of wine, artisanal cheese, and other Brazilian-inspired menu items are available around the butcher’s table or for purchase to-go. The Next Level Lounge offers a laid-back option to grab a craft cocktail, complete with premium whiskey and bourbon options, and to purchase hand-rolled cigars.

“How do we drive experience and just have fun again? This is what our industry has to get back to,” McGowan says. “It’s not about 2,500 restaurants. It’s about one restaurant. One experience. And driving experience again.”

“The way we think of it is every guest that comes in has their own desire and we want to curate to their experience," he continues. "And everything we do around innovation, our brand, and everything we focus on, is what more we can do to enhance that experience.”

McGowan remains optimistic, despite the uneven and convoluted road ahead. He believes Fogo de Chão seized market share during these past months due to its dine-in promise and ability to help guests break from quarantine fog—something October’s sales reflect. Simply, it’s clear customers want to dine out, and will if they feel safe and are allowed to do so. “We focused on COVID protocol but we didn’t put that at the tip of the spear for the guests,” he says. “Because every guest that came out didn’t want to be reminded. They were living it. They were being bombarded by it. They just wanted to get away a little bit to feel normal.”

While nobody can realistically pinpoint a closure figure yet, there will be rationalization on the other side. And although it might be difficult to envision today, McGowan thinks the customer will emerge the true winner. Pre-coronavirus, restaurants became too growth obsessed, he says, concerned with throwing large figures at a dartboard packed to the edges. Now, restaurants are listening again. They had no choice.

Quick-service chains adjusted and accelerated convenience models already in demand pre-COVID. But years were squeezed into months. Things like drive-thru only models and virtual concepts are outlets customers clamored for. They needed that more than they needed another brick-and-mortar on the corner of Main Street.

And in regards to sit-down dining, the rush toward experiences is nothing new. Previous studies showed more than 3 in 4 millennials (78 percent) would choose to spend money on a desirable experience or event over buying something desirable, and 55 said they're spending more on events and live experiences than ever before.

If you couple that with Miller’s prediction for life after the virus, restaurants could emerge with finer-drawn lines between sectors. Customers who want convenience will have ample options and more accessibility. Meanwhile, restaurants working to put hospitality back into their businesses during lockdowns will greet a pent-up crowd hoping to reconnect and socialize.

And that’s where Fogo de Chão wants to reside. “That’s who we are and that’s where we’re going to keep innovating, designing forward on and continue delivering that experiential play,” he says.

One thing that won’t be a part of the future model, though, is virtual brands. “You think about these restaurants structurally that have been negative traffic for years. They sell chicken inside. Now they’re wrapping chicken up into virtual brand and selling it cheaper,” McGowan says. “So eventually you’re going to see, it’s going to trade-off eventually. This is why I love that the consumer is winning. It will work, but I think you’ve got to decide where you are and I get why brands are doing it. We’re not going to be virtual. We think we have the capability of doing it. But for us, we’re going to invest in experience coming to us, and if we’re going to deliver something to you, we want to be differentiated.”

“I understand it,” he adds. “There will be a play. And this is what I like. All this convenience will benefit the guest. But margin degradation, mix shift and traffic, will be the end prize of that.”

Fogo de Chão announced mid-January it signed five lease agreements to open new domestic locations—in White Plains, New York; Albuquerque, New Mexico; Burlington, Massachusetts; Coral Gables, Florida; and Oak Brook, Illinois. All are scheduled for 2020.

McGowan says Fogo de Chão’s goal is to achieve $1 billion enterprise value within two to three years. He believes the company has 25–35 years of whitespace ahead.

The brand said it will use cash post-breakeven to immediately return to 15–20 percent organic growth. At 60 percent of prior-year sales, the company generates positive corporate-level EBITDA. On average, restaurants produce positive EBITDAR at about 30 percent of sales and positive EBITDA at 50 percent.

Here’s a look at how the brand trended pre-pandemic:

Average-unit volume

  • Fogo de Chão: $7.8 million
  • Full-service average: $5.2 million

Food costs as percentage of revenue (Fogo’s doesn’t have a fixed menu, it’s a commodity buyer of meat and has butchered in-house for four decades)

  • Fogo de Chão: 27.5 percent
  • Full-service average: 27.3 percent

Labor costs as percentage of revenue (this has long been one of the concept’s differentiators with its gaucho-style service model. Fogo utilize labor across the back and front of the house, which leads to higher restaurant-contribution margins and ultimately strong cash-on-cash returns)

  • Fogo de Chão: 25.1 percent
  • Full-service average: 33 percent

Restaurant contribution margin

  • Fogo de Chão: 27.9 percent
  • Full-service average: 18.1 percent

Cash-on-cash returns

  • Fogo de Chão: 43 percent
  • Full-service average: 26.8 percent

Moving forward, McGowan doesn't think outsiders should underestimate restaurants and their ability to adjust. “Look, all of us in the industry have to focus on the journey beyond the pandemic. What I feel like is everything has accelerated in a healthy level. What I think people are missing, I think in the business world, is our industry is vibrant. Our industry will survive. And I think we are going through an exciting renaissance in a terrible time,” he says.

“To feel normal in a post-COVID world, is to dine out at restaurants.”