{"id":6733,"date":"2015-12-09T22:18:24","date_gmt":"2015-12-10T03:18:24","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/gofogo\/"},"modified":"2015-12-09T22:22:17","modified_gmt":"2015-12-10T03:22:17","slug":"gofogo","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/gofogo\/","title":{"rendered":"#GOFOGO"},"content":{"rendered":"<p><iframe loading=\"lazy\" title=\"The Gaucho Way | Fogo de Ch\u00e3o + Expedition Brazil\" width=\"640\" height=\"360\" src=\"https:\/\/www.youtube.com\/embed\/XVSN1R4cPgY?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><\/p>\n<p><em>Media: \u00a0&#8220;The Gaucho Way&#8221;<\/em><\/p>\n<p>Founded in Porto Alegre, Brazil in 1979, Fogo de Chao (or \u201cthe Company\u201d) is a leading Brazilian steakhouse or churrascaria specializing in the centuries-old Southern Brazilian cooking technique of churrasco.\u00a0 The Company provides patrons with an authentic, engaging and unique dining experience\u2014mastering the art of serving an extensive tasting menu of 20 different cuts of meat and Brazilian side dishes in the traditional espeto corrido (Portuguese for \u201ccontinuous service\u201d) table-side serving style.<\/p>\n<p>In 1986, the Company expanded to Sao Paolo, and opened its first U.S.-based restaurant in 1997 in Addison, Texas (at the request of George Bush Sr.).\u00a0 Currently, the Company operates 10 restaurants in Brazil, 30 across the U.S., and 1 in Mexico City.\u00a0 On June 19, 2015, Fogo de Chao completed a widely successful IPO; the stock opened at $25.70, a 28.5% premium over the $20 per share offering price (compared to $16-$18 per share expected range). (1)<\/p>\n<p>The Company\u2019s successful performance is a testament to its ability to offer a valuable, authentic and differentiated dining experience and to leverage its operating model to drive sustainable growth and profitability.<\/p>\n<p><u>Authentic Dining Experience<\/u><\/p>\n<p>Thirty years since its establishment in Brazil, Fogo de Chao has remained true to its Brazilian roots, providing an authentic dining experience that is difficult to replicate.\u00a0 The key to the Company\u2019s authenticity, and ultimate success, is its people, and particularly its gaucho chefs.\u00a0 Given its reputation and restaurant footprint in Brazil, the Company is able to attract top talent in Brazil.\u00a0 In Brazil, top recruits are trained in the traditional cooking method of churrasco (fire roasted on skewers over an open flame to expose natural flavors) and serving method of espeto corrido (continuous service).\u00a0 After undergoing a rigorous training program, gaucho chefs are placed in U.S. restaurants.\u00a0 Through the gaucho chefs, the traditional Brazilian method of preparing and serving cuisine is preserved.<\/p>\n<p>The Brazilian churrascaria concept allows the Company to offer a constantly evolving tasting menu (no set printed menu) of cooked and seasoned meats including Brazilian style cuts of beef such as the fraldinha and the picanha, as well as other premium beef cuts, lamb, chicken, pork and seafood items. \u00a0The churrascaria concept also allows Fogo de Chao to better control volatile commodity costs by changing its product mix.\u00a0 For example, when beef prices rose by approximately 25% from 2011 to 2014, the Company introduced more non-beef items to its tasting menu to offset increased prices while maintaining the guest experience through product innovation.\u00a0 Ironically, the introduction of non-beef items has allowed the Company broaden its customer base.<\/p>\n<p>Furthermore, the churrascaria concept is a simple cooking technique when combined with table-side service allows for efficient kitchen and labor operations.\u00a0 Compared to traditional fine-dining peers, Fogo de Chao is able to operate with a space-efficient kitchen and maximize front-of-the-house dining square footage, resulting in higher sales per square feet and increased operating leverage.<\/p>\n<p><u>Differentiated Dining Experience<\/u><\/p>\n<p>Fogo de Chao offers authentic Brazilian cuisine in an upscale, elegant atmosphere where the gaucho chefs provide a truly memorable dining experience.\u00a0 As soon as the customer is seated, he or she has the option to start at the self-service Market Table, which features a variety of seasonal, on-trend salads and gourmet side dishes.\u00a0 Through the Market Table, the Company has been able to capitalize on health trends by offering gluten-free and vegan options and appeal to a wider base of customers.\u00a0 Given the self-service nature of the Market Table and minimal staffing and kitchen preparation, the Company has been able to reduce labor costs simultaneously.<\/p>\n<p>Then when the customer is ready for the entr\u00e9e, he or she is approached by friendly gaucho chefs who carve the selection of fire-roasted meats tableside according to each customer\u2019s preference (size, cut, and temperature).\u00a0 By constantly engaging and interacting with the customers, the gaucho chefs are able to learn customer preferences and provide customized dining experiences.\u00a0 The continuous service allows guests to control the pace of service and tasting menu selections, creating excitement, engagement, and overall high customer satisfaction.<\/p>\n<p>As mentioned above, the gaucho chefs butcher, prepare, and serve the food.\u00a0 The cross-functional role gaucho chefs play not only provides authentic cuisine and high customer service, but also significantly reduces labor costs.\u00a0 In 2014, Fogo de Chao generated restaurant contribution margins of 32.5%, compared to 20.4% for fine-dining peers.<\/p>\n<p><u>Industry Leading Returns and Growth Opportunity<\/u><\/p>\n<p>The Company\u2019s authentic and differentiated dining experience creates long-term value for customers and shareholders and is supported by the Company\u2019s performance.\u00a0 In 2014, the Company recorded 137,000 customers per restaurant, approximately 60% more customers than competitors.\u00a0 The same year, the Company recorded annual unit volume of approximately $8 million and contribution margin of 32.5%.\u00a0 Industry-leading volume and margins has generated an average year three cash-on-cash-return of 50%.\u00a0 Given the Company\u2019s track record of success, I believe Fogo de Chao is well positioned to capitalize on domestic and international growth opportunities and am very bullish about the Company\u2019s long-term prospects.<\/p>\n<p>&nbsp;<\/p>\n<hr \/>\n<p>Source: \u00a0Fogo de Chao S-1 Filing dated June 15, 2015.<\/p>\n<p>(1) \u00a0McGrath, Maggie. &#8220;Investors Devour Steak Chain Fogo de Chao: Stock Pops Nearly 30% in IPO.&#8221; Forbes. 19 June 2015. Web.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Authentic, Differentiated Dining Experience Delivers Long-term Shareholder Value<\/p>\n","protected":false},"author":1226,"featured_media":6747,"comment_status":"open","ping_status":"closed","template":"","categories":[],"class_list":["post-6733","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/the-tom-challenge-tom-winners-and-losers-assignment\/","yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>#GOFOGO - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/gofogo\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"#GOFOGO - 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