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.”