Chuy’s Holdings Inc., the casual-dining Mexican restaurant operator, debuted on the public market Tuesday, bucking a down market to close up 15.9 percent.
The 36-unit Austin, Texas-based company offered 5.8 million shares at $13 each, the top end of its forecasted price offering between $11 and $13 per share. The stock closed Tuesday at $15.06, boding well for upcoming restaurant public stock offerings, including Southlake, Texas-based Del Frisco’s Restaurant Group, which is scheduled to debut on the market Friday.
In comparison to Chuy’s first-day spike Tuesday, the Dow fell 0.8 percent and Nasdaq fell 0.9 percent. Wall Street darlings like Chipotle and McDonald’s were also hit hard by investors as the companies reported depressed sales and earnings news.
Proceeds from Chuy’s offering will be used to pay down debt and add new restaurants, Steve Hislop, chief executive of Chuy’s, said in an interview with Nation’s Restaurant News after the chain debuted on the Nasdaq market.
Restaurants take to Wall Street
With Wall Street headed into the doldrums of August, John A. Gordon, principal of Pacific Management Consulting Group, said companies wanting to go public try to squeeze in public offerings “before the usual summer Street slowdown.”
Gordon cited Bain Capital, in the news now as presumptive GOP presidential candidate Mitt Romney’s former company, as doing its IPOs in late July. “The real market slowdown now couldn't be anticipated 120 days ago,” Gordon said in an email, “so it’s all about the vacation break.”
Market-wide, five IPOs went up last week and eight are scheduled this week, including two restaurant companies — Chuy’s Holdings and Del Frisco’s Restaurant Group.
Del Frisco’s, which operates the Double Eagle Steak House brand as well as the Sullivan’s Steakhouse and the newer Del Frisco’s Grille, said it plans to sell 7 million shares at between $14 and $16 per share. Del Frisco’s plans to offer 4.3 million shares and parent company LSF5 Wagon Holdings LLC, which is owned by Lone Star Funds, will offer 2.7 million shares.
The company, which tried to go public in 2007 but withdrew its application in December 2008, again filed for an IPO of up to $100 million in January this year.
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Other public offerings in the wings are those from Outback Steakhouse parent OSI Restaurants of Tampa, Fla., which said in April that it will change its name to Bloomin’ Brands and seek a $345 million IPO. Cheddar’s Casual Café of Irving, Texas, which used a provision under the Jumpstart Our Business Startups Act to file confidentially for its IPO in May, is also on the blocks. Dallas-based Dave & Buster’s Entertainment Inc. filed for an IPO in 2011, but it has yet to come to market.
CKE Inc., which operates the Carl’s Jr. and Hardee’s burger chains, had filed for an initial public offering of up to $100 million in May and on Monday said it now expects to raise as much as $230 million. CKE was taken private by Apollo Management in a $700 million deal in 2010.
Shares in Ignite Restaurant Group of Houston, which owns the 127-unit Joe’s Crab Shack and the 16-unit Brick House Tavern + Tap, went public in a $83.8 million offering in May. The company’s stock lost more than 20 percent of its value last week when the company announced it would have to restate financial statements for 2009 to 2011, and the first quarter of 2012, because of accounting issues with fixed assets and depreciation expenses.
Chuy’s future as a public company
The casual-dining chain most recently opened a unit in Gainesville, Fla., and is looking to back fill markets in Texas and Oklahoma, as well to colonize new ones such as Atlanta, Birmingham, Ala., and Louisville, Ky.
Hislop said the company, founded in Austin in 1982, expects future units to follow the non-cookie-cutter approach. “We’re going to follow our motto of ‘If you’ve seen one Chuy’s, you’ve seen one Chuy’s,’” Hislop said.
Current units range from 7,000 to 12,000 square feet, and Hilsop said the lower end is likely to be the target for future development.
The chain's menu of burritos, enchiladas and fajitas produces a per person check average of $12.99, Hislop said, “which makes us very affordable.” The concept's emphasis on rock ‘n’ roll music and in-store Elvis altars also positions Chuy's differently than many Tex-Mex operations, Hislop said.