FOGO - Fogo de Chao

[awindenberger]

here is another write-up.  not from me....can't remember his name (included in write-up) and yes, I am that lazy....

 

Thank you for this link. The investor, Samir Patel, looks like someone I want to follow long term.

[theperksofbeinganINTJ]

that's not my FOGO writeup, silly.  That's my quarterly letter.  This (attached) is the summary of my take on FOGO.  If you're gonna repost my content without my permission, at least repost the right content... :)

 

Notably, Tony Laday (CFO) bought $10K worth of stock with his own money at the end of September.  I've met Tony in person and chatted with him on the phone a bunch, but have not interacted w/ the rest of the mgmt team and I don't have any strong feelings.  THL's intentions are probably more important than management at this point; as long as they don't massively screw up siting, the concept and economics pretty much do all the heavy lifting themselves.  That said, Larry Johnson (CEO) has clearly overseen a period of significant value creation since '07.  There is a nice interview here:

 

FWIW, some local market color - the submarkets in Dallas where they're dropping their next two boxes (Uptown on McKinney avenue, and Legacy in Frisco/Plano) are both pretty ideal spots IMO and are exactly where I'd put them (not that I'm any sort of expert - just saying that if you think about where a Fogo makes sense in Dallas in addition to Belt Line on Addison, it would be those two locations, and then somewhere in Fort Worth). 

 

If anyone who lives in another DMA and has local market knowledge thinks FOGO is making (or has made) a big boo-boo on location, I would be very interested to hear that.  The only real question mark not related to transitory macro factors is the Summerlin NV location - which I think should work out okay over time but appears to be a bit slow right now.  (Woodlands and Puerto Rico seem more macro related than siting mistakes, i.e. oil/Zika.)

 

If anyone has credible bearish arguments here, PLEASE email me.  I'm not interested in hearing about "there could be a recession / tax loss selling / the price could go down further" kind of stuff because those are pretty obvious and I'm not in the business of passing on extremely attractive investment opportunities because they could get more attractive.  However, I'm still looking for anyone who has actual fundamental arguments against FOGO that aren't just conjecture - i.e. not casual observations but actual coherent thoughts from somebody who's done work on them and the comp set.

 

Big thanks to glory and Travis for helping me stress-test this thesis.

2016-10-03_-_Askeladden_Capital_-_Long_FOGO.pdf

[theperksofbeinganINTJ]

Great write up Travis. Giving your background in foodservice I'm trying to have an open mind with this one.

 

My biggest concern is whether their competitive advantage holds in a pessimistic economic scenario. In their presentations their EBITDA margins look pretty next to the peer set they selected. If times are tough, I think FOGO's competitor set really becomes lower-end steakhouses such as Outback or Longhorn as consumers pull back spending. Per Factset, longhorn has an operating margin of ~17%.

 

Am I totally off base to think the high-end steakhouses would compete with lower-end? (is that like comparing chipotle to taco bell?)

 

ironically their huge labor arb actually makes them one of the most attractive restaurants to own if you're concerned about minimum wage and/or economic softness - there's this quote from David Zalman of Prosperity Bancshares on their Q1 call where he says something to the effect of "if we're hurt, everyone else will be under a bridge eating beans" (because Prosperity's credit quality is absurdly rock solid.)  That's sort of how I think about FOGO - the sort of environment that would wreck everyone else's margins would imply more modest contraction for FOGO because they have farther to fall.

 

I agree that some caution here is reasonable on both factors - i.e. current soft comps continuing into '17 as well as labor inflation - but I believe this is offset by conservatism elsewhere in my valuation (ex hard-capping US restaurant count at 75 and US revenue in 10 years at RUTH's current domestic revenue base) and FOGO's extremely favorable unit economics.  Even if cash on cash returns are only teens, and the SSFCF yield is only 8-9% rather than 10% (if you flow through really bad comps along with margin compression), that's still a fundamentally attractive investment with a decade-long runway for accretive reinvestment... so you can absorb a bunch of hits here and still earn an acceptable equity-like return.

[Foreign Tuffett]

 

If anyone has credible bearish arguments here, PLEASE email me.  I'm not interested in hearing about "there could be a recession / tax loss selling / the price could go down further" kind of stuff because those are pretty obvious and I'm not in the business of passing on extremely attractive investment opportunities because they could get more attractive.  However, I'm still looking for anyone who has actual fundamental arguments against FOGO that aren't just conjecture - i.e. not casual observations but actual coherent thoughts from somebody who's done work on them and the comp set.

 

Big thanks to glory and Travis for helping me stress-test this thesis.

 

To play devil's advocate:

 

One issue might be the potential size of the total addressable market for Brazilian steakhouses, and how quickly FOGO reaches the end of their its growth "runway." Many diners may view Brazilian steakhouses as "experience" type restaurants that, while enjoyable, are outside their comfort zone and thus only dined at on special occasions, etc. Think of the normal cadence of the American restaurant experience and how Brazilian steakhouses alter it (multiple servers, multiple entrees per guest, more interactions with servers, etc).

 

Given the unlimited quantities of meat served I would imagine all Brazilian steakhouses have fairly large average checks. This too limits the addressable market.

 

In a similar vein, there are two other sizable Brazilian steakhouse chains in the US: Texas De Brazil (42 locations) and Rodizio Grill (21 locations). Both already have locations in my home city of Nashville. My initial thought is that there may not be room for another Brazilian steakhouse in Nashville. Other cities may be similar.

 

 

[eclecticvalue]

Does the Brazil sentiment play into any effect? Since Brazil had a rough year with the Zika virus. The perception may be that Brazilian food wouldn't be the cuisine to eat.

[BTShine]

My experience is that Fogo is where my buddies go during restaurant week, where you can go in and eat unlimited meat for $35.  Normally it's $50.  The meat is fine, not great, but it seems like a steal because it's UNLIMITED!  The reality is no one wants to eat that much meat, and the wine is really expensive, so the place makes a killing. 

 

Restaurants aren't an ideal investment for me, but in the arena I'd say Fogo is a solid company with a decent moat for a  restaurant.

 

No idea on how the capital allocation is for this company, which is an important part of any investment. 

[theperksofbeinganINTJ]

1) capital allocation - pretty one-decision; they're going to deploy most cash flow into new boxes and debt repayment in the short term.  Longer term they seem to be interested in paying out a dividend with capital they don't need, or potentially a share buyback program.  But not really an issue in the next few years (particularly with THL on the Board).  This becomes more of an issue in the out years but by that point cash flow and growth will make shares' intrinsic value $20+ so let's not get too far ahead of ourselves here.

 

2) growth runway / Brazilian being gimmicky - I hear this one a lot and never quite "get" it - see my comments about sushi, galbi, other sorts of experiential food - I would actually make the argument in reverse; I love FOGO as a concept and would eat there all the time but as a major foodie, would never spend my own money at a prime steakhouse - there is literally nothing about those (or "New American" more broadly) that appeals to me; I'm not going to pay someone $70 to make something I can make myself.  I literally do not understand why anyone not on a corporate card would ever eat at a prime steakhouse when they could eat at some cool indie restaurant where they'd get to eat something they wouldn't be able to eat anywhere else.  (very millennial of me, I know.)

 

now clearly, using any one personal perspective overindexes to personal taste/bias; for example I don't understand why anyone would've stopped eating at CMG because of a small safety incident that is frankly less concerning than much of what goes on in the industry but isn't publicized (it's kind of the wild west out there.)  but continued terrible comps clearly suggest that I'm more forgiving than many.  On the other hand, with FOGO, thousands of Yelp reviews and strong AUVs across geographies (and strong cash on cash returns with all new restaurants opened in the past 10 years) seem to make it pretty clear that it's not just a "gimmick" - the original Addison location here in Dallas has been around for darn near 20 years and does something like $10MM AUV to my knowledge.  (And, I should note, the Addison location is literally right across the street from a Texas de Brazil, and within two blocks of at least another 3-4 high end / "prime" steakhouses - so it holds its own.) 

 

Obviously we like our meat in TX, but it's just hard for me to imagine that Fogo is anywhere near saturation.  I think the concept will actually get stronger over time as more people come to know about it... anecdotally I have many friends who live/have lived in major DMAs and have never even heard of, let alone tried, FOGO/Brazilian - and love it when they do.  Given how much competition RUTH has from local steakhouses (as well as chains like Morton's, etc), using where RUTH is today as the benchmark for where FOGO will be in 10 years seems pretty darn conservative.  So, yeah, there are going to be plenty of people who don't eat at a FOGO - just like there are plenty of people who don't eat at CMG or RUTH or any other successful concept - but as long as FOGO can carve out its own demographic, that's not really a concern.

 

At worst, at the current NOPAT/free cash flow yield, you really don't have to underwrite very much growth at all for the stock to be at least fairly valued... after absorbing another year of MSD negative comps, labor pressure, etc.  For the best-in-sector concept with best-in-sector economics, I'll take that all day long.

[dsboulanger]

This seems like a pretty compelling story in which you definitely aren't paying for significant growth at $11/share. I'm trying to wrap my head around why they are able to achieve 60% cash-on-cash returns compared to a median of 30% for the casual/specialty dining comp set cited on page 10 of their most recent investor presentation. Obviously that's a levered return, but why aren't Texas de Brazil or other independent operators opening Brazilian steakhouses in underpenetrated cities? Just trying to better understand that 60% number and if there are any barriers to entry or distinct brand value behind it, since the stock is ultimately undervalued today only if the growth in boxes is accretive.

[ratiman]

I was talking to a guy who owns some restaurants and he said that *food does not matter.* Location (locking in cheap rent) is critical. After that, all the profit is in drinks. That seems like the problem at FOGO. It attracts the all-you-can eat crowd. It might get some expense accounts but it seems positioned somewhere between Ruth's Chris and family restaurants like Outback. I don't know that's the best positioning if you're selling steaks and investing $3.5M per restaurant.

[DTEJD1997]

I was talking to a guy who owns some restaurants and he said that *food does not matter.* Location (locking in cheap rent) is critical. After that, all the profit is in drinks. That seems like the problem at FOGO. It attracts the all-you-can eat crowd. It might get some expense accounts but it seems positioned somewhere between Ruth's Chris and family restaurants like Outback. I don't know that's the best positioning if you're selling steaks and investing $3.5M per restaurant.

I have not been to a Ruth's Chris restaurant, so I can't speak to that...

 

I have been to Outback...and can definitively say that FOGO is nothing like Outback.  I also doubt that there is  overlap in customers.  These are two totally different markets.  I would guess that the average check (per person) at Outback is somewhere about $20.  It is probably at least double that at FOGO.

 

I very much doubt that FOGO is attracting the "all you can eat" rabble that patronize "The Sizzler" and "Old Country Buffet".  Once you go above $20 for a meal, that type of person starts to drop away real fast...FOGO is indeed "all you can eat"...but that is an incidental draw I think.  The real draw is the variety & quality of meats available.  Also the atmosphere is very plush & nice.

 

Outback is a more "everyday" restaurant.  FOGO is more special occaisons & events.

 

FOGO most definitely makes money on their food.  I also don't think they are skimping on rent. 

 

They clearly know what they are doing.  The economics of their units are superior to most other restaurants.

 

I don't think they have to worry about Outback.  I think they have to work about Texas de Brazil & the economy....

[ratiman]

You're right, it looks like FOGO is fancier than I thought, nothing like Outback (though they do both sell steaks). I've been to Ruth's Chris once and it was basically the fourth floor of an office building, so it was nothing too exciting.

 

Luckly Ruth's Chris is public and we can look at the numbers. Just quickly eyeballing it . . .

 

2015

 

RUTH:                      FOGO

 

PPE: $87            $136

Rev: $354            $271

Ratio: 4x              2x

 

 

Ruth's Chris is 2x more effective at converting invested dollars into revenues (not including the RUTH franchise revenues). Each FOGO restaurant costs $3.5M, that seems expensive. RUTH has 67 locations and PPE of $87, so about $1.3M per location. It's true that FOGO has better margins than RUTH but it is concerning that FOGO isn't better at turning investment into revenues and that it costs so much to start a restaurant vs. the competition. 

 

 

[glorysk87]

You're right, it looks like FOGO is fancier than I thought, nothing like Outback (though they do both sell steaks). I've been to Ruth's Chris once and it was basically the fourth floor of an office building, so it was nothing too exciting.

 

Luckly Ruth's Chris is public and we can look at the numbers. Just quickly eyeballing it . . .

 

2015

 

RUTH:                      FOGO

 

PPE: $87            $136

Rev: $354            $271

Ratio: 4x              2x

 

 

Ruth's Chris is 2x more effective at converting invested dollars into revenues (not including the RUTH franchise revenues). Each FOGO restaurant costs $3.5M, that seems expensive. RUTH has 67 locations and PPE of $87, so about $1.3M per location. It's true that FOGO has better margins than RUTH but it is concerning that FOGO isn't better at turning investment into revenues and that it costs so much to start a restaurant vs. the competition.

 

Taking the revenue generated per investment dollar and completely ignoring operating expenses or the margin profile of the units is completely meaningless.

[ratiman]

Except that FOGO is drowning in debt because it is a capital hog and RUTH has a pristine balance sheet and generates a ton of cash.

 

By the way and not referring to anyone in particular, criticizing a stock idea is not punching your baby in the face. It's just stock chatter.

[Travis Wiedower]

I'd argue FOGO's capital structure is better than RUTH's. Don't get me wrong, I like low debt businesses as much as the next investor, but debt (especially in the current low rate environment) for high cash flowing, stable businesses is perfectly fine.

 

To your previous comment about food not mattering: location is extremely important, but saying food doesn't matter is insane. Does the guy you know own bars that only serve small plates or something? That's the only explanation I can think of. I can't even imagine a restaurant owner saying something like that. Very few restaurants differentiate themselves through alcohol because they all serve the same liquors + some variety of wine and craft beer and every customer is happy. People go to restaurants and drink that alcohol because the food is good/unique.

[GregS]

You're right, it looks like FOGO is fancier than I thought, nothing like Outback (though they do both sell steaks). I've been to Ruth's Chris once and it was basically the fourth floor of an office building, so it was nothing too exciting.

 

Luckly Ruth's Chris is public and we can look at the numbers. Just quickly eyeballing it . . .

 

2015

 

RUTH:                      FOGO

 

PPE: $87            $136

Rev: $354            $271

Ratio: 4x              2x

 

 

Ruth's Chris is 2x more effective at converting invested dollars into revenues (not including the RUTH franchise revenues). Each FOGO restaurant costs $3.5M, that seems expensive. RUTH has 67 locations and PPE of $87, so about $1.3M per location. It's true that FOGO has better margins than RUTH but it is concerning that FOGO isn't better at turning investment into revenues and that it costs so much to start a restaurant vs. the competition.

 

You're using net PPE so your cost per location isn't accurate.

[ratiman]

I'd argue FOGO's capital structure is better than RUTH's. Don't get me wrong, I like low debt businesses as much as the next investor, but debt (especially in the current low rate environment) for high cash flowing, stable businesses is perfectly fine.

 

To your previous comment about food not mattering: location is extremely important, but saying food doesn't matter is insane. Does the guy you know own bars that only serve small plates or something? That's the only explanation I can think of. I can't even imagine a restaurant owner saying something like that. Very few restaurants differentiate themselves through alcohol because they all serve the same liquors + some variety of wine and craft beer and every customer is happy. People go to restaurants and drink that alcohol because the food is good/unique.

 

It's steak . . . how much differentiation can there be? You turn up the heat, add a little oil and salt, and turn it over. That's it. It's as basic as it gets. Ruth's Chris is Outback with a better wine list and higher rents.

 

It makes perfect sense that for many restaurants, the food doesn't matter. Does anyone think they can tell the difference between the food at the Capital Grill/Capitol Grill/Capital Grille? It's all the same thing. It's just a way to sell alcohol. Have you noticed that the waiter asks you if you want another drink, but not another entree? The entree is just the excuse to sell alcohol.

 

In fact the guy I talked to has started over 20 restaurants and he doesn't even like to open for lunch because he can't sell enough liquor at lunch.

 

GregS: you're right, that's net but it's probably not too far off. Maybe closer to $1.75M - $2M.

 

[ratiman]

The pdf posted above has this to say about FOGO capital efficiency:

 

"Fogo has best-in-class returns and depending on your assumptions, their cash-on-cash returns (defined as incremental

cash EBIT divided by total capital investment) should be in the high teens to low twenties under conservative

assumptions, and potentially much higher depending on how you treat G&A leverage over time."

 

Is high teens pre tax returns considered really juicy for a restaurant that is highly exposed to discretionary consumer spending? I would have to think that full-cycle ROI (including recession) is not as attractive. High teens is pretty close to the market average (ROE for the market right now is around 15%).

 

Let's assume that next year fixed capital is $150M and NOPAT is $30M. That's works out to 20% return on fixed capital, not bad (the working capital is close to zero so we can ignore it). That's a healthy return. That's the best case version.

 

I don't know much about restaurants so that's why I'm interested in looking at FOGO. At first I thought it costs too much to start a restaurant and it doesn't sell enough alcohol to really get the high margins it needs. But the returns right now are healthy, I've changed my opinion on that. Ruth's Chris returns are a little better on the company owned stores but not by much, FOGO is very competitive with RUTH on the company stores alone (backing out the franchises).

 

[theperksofbeinganINTJ]

don't have time to reply line by line but some high level thoughts.

 

1) ratiman - your comments on PP&E /NOPAT/etc - I understand what you're trying to do but you're missing a few steps.  RUTH restaurant base is much older and more depreciated relative to FOGO, and as glory pointed out, margin profile is very different as well.  Moreover RUTH is 2x the size of FOGO and has much less G&A lvg going forward relative to FOGO, not to mention much more limited growth opportunities.  I'm underwriting FOGO getting to, in a decade, less than where RUTH is, today, and doing so very conservatively.

 

2) Taking my model and then haircutting it is a little wonky; I've already made substantive haircuts from mgmt targets.  When you talk about my estimates of cash on cash returns and say "oh the RONIC isn't awesome", bear in mind I'm already trying to underwrite a realllllllly conservative scenario here.  I'm giving them no credit for TIs (i.e. adding $1mm cash capex dollars per store, or 20% boost relative to target), and then I'm haircutting incremental 4wall ebitda from $1.9MM to just over $1.6MM (or, 15% cut in 4w ebitda dollars), and then I'm not giving them full credit for G&A leverage, and using 50 bps higher marketing expenses than targeted on top of that.  And of course no JVs, which are free found money if they work out.  And I'm using an interest rate higher than they're actually paying.  And maintenance capex that includes the mpx of future remodel costs without assuming any collateral comp lift (which isn't really that conservative but is certainly not how many people model restaurants).  And after all that your RONIC (much more important than ROIC, for FOGO or any other company), is still substantively accretive.  I compared pre-tax/pre-tax because calculating the depreciation tax shield gets messy.  Someone more adventurous than me can run all that math.  My model obviously includes tax payments over time and you have to get all the way down to $5.5MM AUV / 15% store-level margins for it to not be accretive.  And again this assumes all of the above.  If you give them back credit for the TIs, then you have to assume boxes go below $5MM rev at 12% margins (that is 65% decremental four-wall margins from targeted, guys!!!  basically implies that all non-food costs are completely fixed, which is ... unlikely) to arrive at the current stock price.  I don't want to belabor the point but it's extremely challenging to model a scenario, absent a 2008-like recession happening tomorrow, that makes this stock worth less than $11 - and newsflash, if that sort of scenario happens, the rest of the market isn't exactly going to be roses and rainbows either.  (And I would point out that such a scenario wouldn't break FOGO - it would just push the numbers out to the right - hard to see permanent capital impairment here.)

 

3) I think everyone has a different palate.  I had a roommate in college who was perfectly happy eating microwaved burritos and ramen... and I'm an adventurous foodie, but I can't taste a difference between FOGO steak and prime steak (maybe a little but not worth the price delta.)  Regardless of what your personal food preferences are, I think it's important to abstract yourself from what *you* would eat and think about this in terms of various demographics.  i.e. all the entrees at BJRI/CAKE bore me to tears, and PBPB/PNRA are very yawn as well, but clearly there is a significant segment of the population that enjoys bland food with no sense of flair or flavor.  And just because that's not my thing doesn't mean it's not everyone's thing; I almost never eat fast food but despite my lack of personal patronage, the category continues to exist.  So, learn from Einhorn's mistakes on CMG way back when - look at it from the perspective of the target demo.  I think FOGO's solid yelp reviews + great AUVs in pretty much every statistically meaningful metropolitan area suggests that they have enough of a core demographic to be successful, and the continued success of tenured restaurants (like the original Addison location in my backyard) corroborates the idea that it's a "timeless" concept that has done well over 20 years of existence and didn't flame high then burn out.

 

4) A lot of the nitpicking around this or that assumption here is really besides the point.  As someone pointed out, at $11-ish, you're basically underwriting no growth to de minimis (LSD) growth depending what cost of capital assumptions you use.  So, the way I typically evaluate valuation is that a lot of questions are meaningful at certain times.  Whether RONIC is 13% or 17% or 25% matters when the stock is at $15 - 17.  At $11-12, it's much more directional in nature - can FOGO build new boxes?  Yes - okay, then will they be somewhat accretive?  Yes - then the stock is worth something more than it's trading for.

 

5) I thought I did a pretty good job of explaining how the gauchos/tableside plating/prix fixe menu cuts down a lot of the back of the house costs, which explains their structurally higher margins vs. the peer group.  As for "why hasn't someone else done this yet" I mean I don't know how to answer that because it's completely tautological - it's not a helpful question because it applies to any company ever - if pageranked search engines were so great why hadn't anyone built Google before Google?  If cloud CRM was such a good idea then why didn't Benioff's competitors do it before Salesforce?  Why does COBF need to exist when there's VIC and Seeking Alpha and so on?  Why didn't someone do Chipotle before Chipotle or Five Guys before Five Guys or Smashburger before Smashburger or Panera before Panera?  I think it's easy to get too cute and outsmart yourself.  Buying a business with great economics and a long growth runway at a great valuation generally tends to work out pretty well over the long term.  The THL stuff is the only wildcard but could just as easily be a big net positive as a potential negative - they want to see nice returns on this - and it's not like they have to harvest it tomorrow; 24 months is an eternity in the deal world and they've been around the block.  For heaven's sake if FRGI is attracting PE interest (as is rumored) at probably 8.5x+ EBITDA after their completely botched expansion into TX with Pollo Tropical and real questions about how much growth opp they have outside of FL going forward, then FOGO has to be worth at least 9 - 10x in a sale today... remember THL paid 9x in a much lower multiple environment (2012).  Who *wouldn't* want to own this asset? 

[theperksofbeinganINTJ]

6) Not that I try to predict quarters, but considering that the CFO bought shares in the open market during the last week of September, it would be rather surprising if they miss or guide down again this quarter... so I don't even feel like I have my usual value investor "risk" of "I'm probably not timing the bottom here."

 

Obviously who knows what happens with '17 comps but insider buying would suggest that, as of 2-3 weeks ago, things aren't getting worse and are probably getting better (at least internally if not in the macro.)

[theperksofbeinganINTJ]

I'd argue FOGO's capital structure is better than RUTH's. Don't get me wrong, I like low debt businesses as much as the next investor, but debt (especially in the current low rate environment) for high cash flowing, stable businesses is perfectly fine.

 

To your previous comment about food not mattering: location is extremely important, but saying food doesn't matter is insane. Does the guy you know own bars that only serve small plates or something? That's the only explanation I can think of. I can't even imagine a restaurant owner saying something like that. Very few restaurants differentiate themselves through alcohol because they all serve the same liquors + some variety of wine and craft beer and every customer is happy. People go to restaurants and drink that alcohol because the food is good/unique.

 

It's steak . . . how much differentiation can there be? You turn up the heat, add a little oil and salt, and turn it over. That's it. It's as basic as it gets. Ruth's Chris is Outback with a better wine list and higher rents.

 

It makes perfect sense that for many restaurants, the food doesn't matter. Does anyone think they can tell the difference between the food at the Capital Grill/Capitol Grill/Capital Grille? It's all the same thing. It's just a way to sell alcohol. Have you noticed that the waiter asks you if you want another drink, but not another entree? The entree is just the excuse to sell alcohol.

 

In fact the guy I talked to has started over 20 restaurants and he doesn't even like to open for lunch because he can't sell enough liquor at lunch.

 

GregS: you're right, that's net but it's probably not too far off. Maybe closer to $1.75M - $2M.

 

This is a bizarre exchange, by the way, in two ways -

 

a) "how much differentiation can there be" - the differentiation is that at FOGO, you get your choice of 10 cuts of meat including multiple kinds of steak, lamb, not to mention an unlimited salad bar with like 20 things on it which is so good that flipping vegetarians eat at FOGO just for the salad bar - I assure you that eating at FOGO is nothing like eating at either Outback or Ruth's...

 

b) Food doesn't matter?  Huh?  Where have you been for the entire foodie revolution?  For the Food Network?  For "better burgers" i.e. five guys and smash?  For Stephanie Danler's Sweetbitter selling for a 7 figure advance?  Food is certainly a thing that matters... maybe not in, like, blue-collar rural West Virginia.  (I don't know, I've never been there.)  But in any major metropolis, it's a capital-letters Important Thing to a lot of millennials/professionals.  In a specific category of restaurant (say, American bar and grill, like BJ's) then sure, the consumers have no taste buds and you can serve them drek and push alcohol sales and whatever I guess.  I am not an expert.  But FOGO's best in class margins are despite a substantially lower alcohol mix than peers - so not really sure what you're driving at here...

[whiterose]

"There's a Massive Restaurant Industry Bubble, and It's About to Burst"

https://www.thrillist.com/eat/nation/american-restaurant-industry-bubble-burst

 

It's an interesting read (two other storys were published before this one, links at the top) about independent restaurants and their struggle with rising costs etc.

[Travis Wiedower]

Increasing restaurant supply can hurt FOGO, but I don't think what that article is zeroing in on really affects FOGO. New restaurant owners want to own something cool (gourmet burgers, craft pizza, Michelin star absurdly expensive experience restaurants, etc) and a Brazilian steakhouse is not cool in that sense. But results have proven that cities can support 1-3 Brazilian restaurants and I doubt any of those cities will see five direct FOGO competitors suddenly pop up. Here's to hoping craft Brazilian steak doesn't become the next big thing... 

[DooDiligence]

Increasing restaurant supply can hurt FOGO, but I don't think what that article is zeroing in on really affects FOGO. New restaurant owners want to own something cool (gourmet burgers, craft pizza, Michelin star absurdly expensive experience restaurants, etc) and a Brazilian steakhouse is not cool in that sense. But results have proven that cities can support 1-3 Brazilian restaurants and I doubt any of those cities will see five direct FOGO competitors suddenly pop up. Here's to hoping craft Brazilian steak doesn't become the next big thing...

 

Strictly anecdotal :/

 

I worked in Brasil from 2010 to the end of 2015 & although I loved the place, food was NOT the reason.

 

I never ate at a Fogo but did visit a multi unit restaurant called Porcão (meh...)

 

There's an Outback in Niteroi (across the bay from Rio) & it was always packed & provided a great steak at a much better price.

 

We have a Rodizio (Brasilian steak house) in my town & it's an overpriced, meh...

 

I believe Fogo will do OK in places like Orlando (Brasilians love Disney) & other larger cities but as to becoming popular with Americans (naaaa...)

[awindenberger]

Increasing restaurant supply can hurt FOGO, but I don't think what that article is zeroing in on really affects FOGO. New restaurant owners want to own something cool (gourmet burgers, craft pizza, Michelin star absurdly expensive experience restaurants, etc) and a Brazilian steakhouse is not cool in that sense. But results have proven that cities can support 1-3 Brazilian restaurants and I doubt any of those cities will see five direct FOGO competitors suddenly pop up. Here's to hoping craft Brazilian steak doesn't become the next big thing...

 

Strictly anecdotal :/

 

I worked in Brasil from 2010 to the end of 2015 & although I loved the place, food was NOT the reason.

 

I never ate at a Fogo but did visit a multi unit restaurant called Porcão (meh...)

 

There's an Outback in Niteroi (across the bay from Rio) & it was always packed & provided a great steak at a much better price.

 

We have a Rodizio (Brasilian steak house) in my town & it's an overpriced, meh...

 

I believe Fogo will do OK in places like Orlando (Brasilians love Disney) & other larger cities but as to becoming popular with Americans (naaaa...)

 

Based on their revenues at their American stores, I think its safe to say its already popular.

[Sionnach]

Increasing restaurant supply can hurt FOGO, but I don't think what that article is zeroing in on really affects FOGO. New restaurant owners want to own something cool (gourmet burgers, craft pizza, Michelin star absurdly expensive experience restaurants, etc) and a Brazilian steakhouse is not cool in that sense. But results have proven that cities can support 1-3 Brazilian restaurants and I doubt any of those cities will see five direct FOGO competitors suddenly pop up. Here's to hoping craft Brazilian steak doesn't become the next big thing...

 

Strictly anecdotal :/

 

I worked in Brasil from 2010 to the end of 2015 & although I loved the place, food was NOT the reason.

 

I never ate at a Fogo but did visit a multi unit restaurant called Porcão (meh...)

 

There's an Outback in Niteroi (across the bay from Rio) & it was always packed & provided a great steak at a much better price.

 

We have a Rodizio (Brasilian steak house) in my town & it's an overpriced, meh...

 

I believe Fogo will do OK in places like Orlando (Brasilians love Disney) & other larger cities but as to becoming popular with Americans (naaaa...)

 

Based on their revenues at their American stores, I think its safe to say its already popular.

 

Yes-  I think both of these are misguided.

 

1. Clearly Brazilian steakhouses appeal to more than just Brazilians..... c'mon now

2. If you really believe FOGO only competes with other Brazilian restaurants/steakhouses, you need to rethink your thesis