Fogo de Chão CEO Barry McGowan is a fan of Texas Roadhouse. As he sees it, there’s a brand that grew to 700 locations by understanding its consumer and the conviction it takes to serve them. Whether it’s a recession, labor crunch, or global crisis, the steakhouse chain doesn’t waver from the message. “They take care of their guests. They’re unapologetic about it,” McGowan says. “They’ll eat margin if they have to to keep their value and traffic high. That’s what our industry used to do.”
Comparing June 2019 to June 2023, traffic in the quick-service industry was down 18.4 percent, according to recent data from Revenue Management Solutions. It’s been a cliff dive since January 2022, when the recovery became less about pent-up demand and more about the cost needed to satisfy the rush. At that point, traffic was just 15.5 percent lower than pre-COVID days. And parallel to this decline, average check in counter service today is 40 percent higher than 2019.
Naturally, Fogo and Texas Roadhouse operate in different sandboxes than, say, McDonald’s—quick-service shed nearly half of its dine-in traffic over the past two years, per RMS. But that only illustrates further where McGowan believes Fogo can go.
“Our industry is just getting better,” he says. “It’s just reimagining itself to where the consumer wants us to be. But we can’t forget the fundamentals. We’re a people-driven business. We need human capital. A robot is not going to solve it. Technology helps, but the touchpoints, the emotional connection, the brand love, is still the most important.”
Texas Roadhouse is riding 12 years of positive traffic. Fogo is currently on Year No. 9 (not counting COVID). The brand’s traffic, from 2019 to 2022, climbed about 27 percent. And as of 2023, Fogo had only averaged 2.5 percent price during that three-year stretch. Peers in full service are closer to 10–12 percent—not quite as high as quick service, which, naturally, leapt from a lower floor.
Yet ever since the pandemic arrived, McGowan has focused on what Fogo could add versus what it needed to remove. Or, as he phrases it, “focused on joy, not fear.”
McGowan encountered research from author and consultant Lisa W. Miller in April 2020 that polled 1,000 Americans 18 and older. It asked simply, “what activities stripped from peoples’ lives provided the most ‘joy?’” No. 1 was dining out, at 81 percent. And when asked what they’d do first once they escaped lockdowns, restaurants again pulsed at 86 percent.
Fogo labeled the ensuing blueprint, “the joy axis,” and began to work toward becoming an industry outlier. If brands from fast food to casual dining were going to strip hospitality, Fogo would find new ways to infuse it back in. By October, the chain returned to 96 percent of 2019 sales, with 16 units posting better figures, year-over-year. This despite the system averaging 60 percent capacity. As mandates tightened and infections spiked in January 2021, Fogo generated 75 percent of regular business at 25 percent capacity.
“That shows you the thesis paid off,” McGowan said at the time. “People were going. People wanted to go somewhere where they could just enjoy themselves.”
Now, years removed from the depths, Fogo’s course hasn’t drifted. Hospitality industry-wide is still being conducted at extremes of the spectrum. McGowan doesn’t see this as a negative, however; the rules of engagement have merely changed. “I’m more excited than ever about our industry,” he says. “We’re going through a renaissance. I wish we’d focus more on that instead of all the obstacles. We’ve always dealt with labor costs, food costs, supply chains—that’s what we do. That’s not new. Is it going to go away? No. Is it challenging? Yes. Is it more challenging? Yes. So what are we doing about it so the guest doesn’t hear about it?”
“The guest,” McGowan continues, “just experiences what they want. That’s where the joy of our industry is. That’s the part that I love.”
“We can’t save labor,” McGowan says. “Everybody talks about how much labor they can save. Great. I’ll hire your labor because I need people to grow my business and grow my restaurants and to take great care of our guests. We’re not going to shortcut that.”
Fogo was preparing for an IPO as recently as May before Rhone Capital, which bought the brand in 2018 for $650 million, sold the company to Bain Capital Private Equity in August. Bain, a firm with prior holdings in Bloomin’ and Domino’s, announced it would keep existing management and provide support to scale the 1979-founded brand (Fogo’s domestic expansion began in 1997).
In Fogo’s May S-1 filing, the company shared it had 59 U.S. restaurants across 22 states, Washington, D.C. and Puerto Rico. And it was targeting 15 percent company-owned expansion. Broadly, Fogo lifted a long-term view from 300 to 600 domestic stores over the next 25 years, a number that stemmed from internal analysis and an in-depth study prepared by eSite. That ultimate number, including international, of which there are 16 venues, matures at roughly 850 total Fogos worldwide. In 2022, the brand entered into development agreements to open multiple franchise locations in Canada, Costa Rica, El Salvador, and the Philippines, and said it expects other countries to follow. Fogo opened nine company-owned restaurants and two international franchise restaurants last year and, as of May, had debuted four corporate units, with plans for seven to nine additional stores and three to five international franchises for the remainder of the calendar. There were just 31 stores in 2013.
- 2013: 31
- 2014: 34
- 2015: 41
- 2016: 45
- 2017: 50
- 2018: 52
- 2019: 57
- 2020: 55
- 2021: 62
- 2022: 71
- 2022: $546 million
- 2021: $431 million
- 2020: $205 million
- 2019: $350 million
- 2018: $332 million
- 2017: $314 million
U.S. same-store sales (year-over-year)
- 2022: 11.6 percent
- 2021: 116.1 percent
- 2020: –40.9 percent
- 2019: 2.7 percent
- 2018: 3.4 percent
- 2017: 0.6 percent
- 2022: 8 percent
- 2021: 104.5 percent
- 2020: –43 percent
- 2019: 0.6 percent
- 2018: 1.7 percent
- 2017: 0.3 percent
McGowan says there are a lot of factors raising Fogo’s ceiling. One is the fact that 19 restaurants opened since 2019, across various U.S. trade areas, exceeded Year 3 AUV targets of $6.6 million in the trailing 12 months by an average of 46 percent. Three stores that debuted in 2019 (Bethesda, Maryland; Irvine, California; and Long Island, New York), posted average weekly sales of $213,000 for the 52-week period ending April 2. They eclipsed average weekly sales implied by 67 percent. Five units that opened in 2021 (White Plains, New York; Albuquerque, New Mexico; Burlington, Massachusetts; Oak Brook, Illinois; and Huntington Station, New York) sailed the AUV assumption by 20 percent. And it’s only rising: The eight 2022 openings (Coral Gables, Florida; El Segundo, California; Fort Lauderdale, Florida; Pasadena, California; Friendswood, Texas; Queens, New York; Reston, Virginia; and Austin, Texas) beat $6.6 million by 32 percent. Three that came to market before April of this year (Paramus, New Jersey; National Harbor, Maryland; and Woodland Hills, California), generated weekly sales of $257,000, which annualized 103 percent past the AUV bar.
Additionally, the 19 locations are roughly 11 percent smaller on average than old Fogo builds—9,400 square feet versus 10,600.
Fogo’s U.S. AUVs have clocked in at $7.7 million, $4.4 million, $9.4 million, $10.2 million, $10.5 million, and $10.1 million in fiscal years 2019, 2020, 2021, and 2022, respectively.
Given targeted cash investments of $3.8 million to $4 million per restaurant with $776 of sales per square foot, Fogo feels it has a clear path to 40 percent cash-on-cash returns with new restaurant development. In 2022, domestic cash-on-cash returns were 57 percent after 58 percent the year prior.
McGowan says every good brand scales because its consumer base isn’t shrinking, and whitespace is vast. Both are true of Fogo. Even with the equity sale, growth will be disciplined, he says, with 90–95 percent of all openings taking place in existing markets. “We always have proven portability,” McGowan says. “Now, we’re just optimizing our brand.”
A unique factor, he adds, is Fogo will do it all with free cash flow. It’s growing organically and not outside its balance sheet.
But going back to the value proposition, McGowan resurfaces the Texas Roadhouse comp. One thing about Texas Roadhouse is that it openly preaches—you might as well hit rewind each quarter—about the need to pay for fully or overstaffed restaurants regardless of the margin line. It doesn’t cut quality or product or labor, and instead elects to drive traffic on top of traffic. Fogo presently sits about 146 percent staffed versus 2019.
Across the sector, as of August, following 32 consecutive months of employment gains, eating and drinking places were 32,400 jobs—or 0.3 percent—below February 2020 employment peaks.
On the last business day of July, there were nearly 1.1 million job openings in the combined restaurants and accommodations sector, according to BLS. Although that represented the 28th straight month with at least 1 million openings, it was well below record-high levels seen in 2021 and 2022, suggesting there’s a relative cooling in demand for employees despite postings still being above 2019’s average of 875,000 job openings each month. In July, employers in these fields hired 836,000 people—the lowest since January 2021 and far under pre-COVID averages of 954,000. What this potentially says, among other things, is a lot of restaurants appear to have found a way to operate with fewer people in the pandemic aftermath.
Given the response Fogo received during COVID, though, and where it wants to evolve, McGowan says, this is yet another topic it won’t follow the pack on.
“We’ve never had a staffing issue versus peers,” he says. “And we keep innovating and doing stuff, so I would say the connection, emotionally connection, social connection, is just building and getting stronger.”
McGowan credits the approach to “keeping focus beyond the pandemic.” The chain jumped to off-premises for the first time, like the rest of the dining landscape, but also took the best talent it could find and started to bring them into restaurants. It sought high-quality real estate and plotted its pipeline through a 2025 lens.
Fogo plans to approach a potential recession the same way. “We know there’s cyclical times,” he says, “but every decision we make is beyond the obstacle in front of us. And we’re really intently focused on the guests that are with us today and making sure that we’re serving them and executing. That takes staffing.”
“We can’t save labor,” McGowan adds. “Everybody talks about how much labor they can save. Great. I’ll hire your labor because I need people to grow my business and grow my restaurants and to take great care of our guests. We’re not going to shortcut that.”
If there’s one place Fogo and Texas Roadhouse diverge, it’s scale and frequency (Fogo is about half Texas Roadhouse on that latter metric). Fogo’s road to 600 lays ahead of the brand, as does its chance to court repeat diners. But McGowan is ready to get started. There’s been a good deal of discovery of late as Fogo accelerates. Its conversion to repeat visit within three months is up to 92 percent, McGowan says. Awareness for the brand in the U.S. is about 56 percent. In Brazil, where there are just eight stores, it’s 85 percent. For comparison, McGowan notes, Outback, with 130 units, is at 85–90 percent. “So the brand is growing and our biggest obstacle to trial and frequency is being convenient,” he says.
It’s not a bad problem to have. If you look back, 90 percent of new locations opened in existing trade areas. A decade ago, Fogo had two or more stores only in San Paolo, Brazil; Chicago; and Texas. Now, that’s up to 14. It’ll soon be 22. “We’re an international brand growing in America,” McGowan says.
Beginning in 2018, Fogo accelerated investments in marketing, social engagement, and advertising to drive trial and frequency. A curated loyalty program is in the works as well.
Fogo is also a good deal more flexible format-wise than many casual brands. New builds offer fresh experiences such as Bar Fogo and the chain’s Next Level Lounge. So there are prototypes to flex to markets and infill them.
The experience, however, is where Fogo continues to separate, McGowan says. It added—and continues to grow—all-day happy hour. The chain features brunch and lunch offerings, a $9 burger, and a $15 Gaucho Lunch that promises bottomless servings from its buffet-style Market Table. “For us, it’s about what more can we do to capture traffic, what more can we do to enhance the guest experience, and let’s keep building on that, one shift at a time,” he says.
The brand’s efforts in recent years to create all-day value, McGowan adds, created a PPA that’s approachable across the gamut. Same-store average guest check in Q1 was $68.48.
Menu price starters:
- Weekday lunch: $15
- Weekday dinner: $37
- Weekend Brazilian lunch: $34
- Group dining: $50
- Bar Fogo: $9
- Off-site catering: $22
- Takeout and delivery: $18
- The full Churrasco experience: $59
And how Fogo’s dining occasions split:
- Spouse/date: 19 percent
- Business meal: 19 percent
- Friends: 24 percent
- Family meal: 19 percent
- Celebration: 13 percent
Broadly, Fogo has nuanced levers to pull. It’s not a steakhouse, McGowan explains (the chain dropped Steak House from its name earlier in the year). It’s not a churrascaria, either. “We’re Fogo de Chão,” he says. Skewered meats are carved tableside and sliced to order. One price opens the entire experience.
Eighty-seven percent of the brand’s customer profile is millennial, Gen X, and Gen Z diner, based on a 2022 survey. Forty-seven percent are women.
“We focus on the culinary art form of churrasco,” McGowan says. “And all of that goes back to curating guest experiences in the moment where other restaurants can’t.”
This agility comes into play often for the brand. Lunch, dinner, happy hour, late night, smaller or larger groups, McGowan says, Fogo can accommodate all of them. If a bus shows up, not a problem. It’s a continuously prepared positioning that gives Fogo “immediacy of accommodating,” McGowan says, and one that’s curated to whatever guest need shows up, whether that’s a size debate or a dietary preference. The Market Table is gluten-free and stocked with plant-based items. “I think that’s where the capture rate has been really high,” McGowan says.
Although Fogo has been stateside for 26 years, it’s only transformed in the past five or so. That new look, unveiled in 2019 with a remodel of its Jardins location in San Paulo, features a dry-aged locker and a lounge area where guests can relax with a cocktail and purchase hand-rolled cigars. “It’s key to ease of use and the idea of accommodating and curating to every individual as a real core strength of the brand. No other restaurant can do it as we can,” McGowan says.
Fogo’s model is also responsible, in some ways, for its ability to hold fort on price. The brand butchers all its meat in-house and is focused heavily on procurement. McGowan offers an example: When costs are generally high, brands narrow their specification to an 8- to 10-pound loan to get that right size of protein. Fogo doesn’t need to. It can buy cuts 15 points or greater (or under 8 pounds) because it doesn’t have a menu. Fogo isn’t serving somebody a steak; it’s plating a slice of slow-roasted protein. Recently, lamb chops spiked on the commodity line, from $10–$11 per pound to $14. So Fogo introduced Lamb Picanha with a mint bark and sliced it thin. Guests were introduced to something novel. Yet, it cost Fogo only $5 per pound.
“But it’s flavor and something you can’t do at home,” McGowan says. “So that’s where we work really hard not to take things away from guests, not to charge more money.”
Fogo doesn’t get burdened with specs that force it to raise price to maintain menu favorites. Its value proposition is about guest-led choice. McGowan notes the makeshift and variety offers flexibility. The Market Table is another case. If asparagus quality declines and prices rise to reflect the shift in production, Fogo can just move on to something seasonable.
“We’re adaptable. We’re in the moment. We don’t absorb costs because we feel like if we do, we’ll have to take more price,” McGowan says. “We fight harder on keeping costs in line proactively so the guest gets the benefit.”
For instance, to expand its value proposition, Fogo introduced “added-value items” to The Full Churrasco Experience, such as Bone-in Ribeye, Porterhouse or NY Strip, and unveiled add-on “indulgent items,” like Wagyu and Dry-aged Tomahawk Ribeye, and center cut Cauliflower Steak. Additionally, it lunched new beverages, including Passion Fruit Mimosas, to appeal to our Bar Fogo brunch guests and raise check.
McGowan likes to focus on the bigger picture. Those human connections Fogo leaned into during COVID serve the brand still, he says. It’s the core reason to why people visit the brand.
You can look at Chick-fil-A and how it’s added hospitality to fast food. Or the ways in which fast casuals are evolving to justify price hikes.
“We’re not about opening units and labor costs,” McGowan says of restaurants. “We’re about so much more. Community matters. … I can tell you, when restaurants were closed, you saw how soulless communities were. We’re a very vital part of every community we’re in. Whether it’s a McDonald’s, Chick-fil-A, Shake Shack, Chipotle, or a Fogo, or Ruth’s Chris, we serve and create community around us, and that takes human capital to do.”