Fogo de Chao Inc. debuted Sunday lunch at its U.S. restaurants during the second quarter, and is expanding its strategy of building sales among large groups, executives said Tuesday.
Midway during the second quarter ended June 28, the Dallas-based Brazilian steakhouse chain began serving Sunday lunch, offering its churrascaria service from 11:30 am to 2 p.m. in most markets.
“Initial results are very promising, and trends thus far indicate guests are not trading a dining experience to Sunday lunch but that these are actual incremental visits,” Barry McGowan, Fogo de Chao president, said in an earnings call with analysts.
“Even in the early stages of the rollout, we are excited to see the daypart yielding solid profitability with higher [per person check averages] than the average weekday lunch,” he said.
More casual-dining chains are eyeing the midday weekend daypart. On Monday, Romano’s Macaroni Grill said it would introduce weekend brunch on Aug. 15, from 11 a.m. to 4 p.m., at its 141 locations.
In Fogo de Chao’s month and a half of offering Sunday lunch, it has found that the demographic skews more toward family groups than weekday lunch traffic.
“We’re seeing great signs,” McGowan said. “Traffic has outperformed our target.”
In addition, he said, the company is seeing more add-ons like dessert and a higher average check than at weekday lunch.
While it continues to analyze the Sunday lunch program, McGowan said Fogo de Chao is also expanding its strategy for large group sales, which began three years ago. The chain ramped it up in 2014, and began 2015 with about 60 percent of its U.S. restaurants staffed with a dedicated sales manager.
That number has grown to about 85 percent of units, McGowan said, and business from large groups has grown in “the low double digits.”
Group business also produces an average check about 20 percent higher than for typical customers, between $68 and $69 per person, McGowan said. The usual average check is about $59.
“Given the success of the roll [out], we anticipate full sales-manager coverage in all U.S. locations by the end of 2015,” McGowan said.
Other recent sales-building initiatives include a new add-on program, which features a $19 shrimp cocktail. Fogo de Chao said it sold 30,000 shrimp cocktails in first half of year.
“We’re excited about expanding this platform further,” McGowan said.
Fogo de Chao is also leveraging the bar business, where it has historically “under-indexed” sales compared with its peers, he added.
For its first quarter as a public company, Fogo de Chao reported Tuesday a 32.7-percent decrease in net income in the second quarter, reflecting foreign currency exchange rates and a strong sales comparison with the 2014 World Cup in Brazil, the company said.
Fogo de Chao reported second-quarter profit of $2.5 million, or 10 cents a share, a decrease from $3.7 million, or 16 cents a share, in the prior-year quarter. Revenue fell 0.5 percent, to $68.2 million, from $68.5 million in the same period last year.
Fogo de Chao opened its first restaurant in Brazil in 1979. It now operates 26 units in the United States, 10 locations in Brazil and one joint-venture restaurant in Mexico.
The company expects to increase its unit count by 10 percent or more per year. Nicole Miller Regan, an analyst with Piper Jaffray, said in a note Thursday that, “steady unit growth in the mid-teens positions the company favorably in relation to achieving the threshold for growth stock status.”
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