Habit Restaurants (HABT) is a high-growth, fast casual restaurant concept that specializes in preparing fresh, made-to-order char-grilled burgers and sandwiches headquartered in Irvine, CA.
Seven other companies are scheduled for the week of Nov. 17, 2014. The full IPO calendar is available at IPOpremium.
Manager, Joint-managers: Piper Jaffray, Baird, Wells Fargo Securities, Raymond James
Co-managers: Stephens, Stifel
HABT scheduled a $75 million IPO with a market capitalization of $379 million at a price range midpoint of $15 for Thursday, Nov. 20, 2014 on Nasdaq. SEC Documents
Overview
The Habit Burger Grill is a high-growth, fast casual restaurant concept that specializes in preparing fresh, made-to-order char-grilled burgers and sandwiches.
As of October 20, 2014 HABT had 99 restaurants in 10 markets in four states.
HABT believes it is in the early stages of its growth story and estimates, based on internal analysis, a total restaurant potential in the United States in excess of 2,000 locations.
Valuation
Glossary
|
Valuation Ratios |
Mrkt Cap (mm) |
Price /Sls |
Price /Erngs |
Price /BkVlue |
Price /TanBV |
% offered in IPO |
|
annualizing Sept 9 mos |
||||||
|
Habit Restaurants (HABT) |
$380 |
2.3 |
73.0 |
4.3 |
2.3 |
20% |
Summary
Positive plus
Rev +49%, Adj net income +50%
Total restaurants +36%
Comparable store sales growth +238% to 9.8%
Market potential 2000 units, currently 99 units
P/E of 73, price-to-sales of 2.3
Business
The Habit Burger Grill is a high-growth, fast casual restaurant concept that specializes in preparing fresh, made-to-order char-grilled burgers and sandwiches featuring USDA choice tri-tip steak, grilled chicken and sushi-grade albacore tuna cooked over an open flame.
In addition, HABT feature freshly prepared salads and an appealing selection of sides, shakes and malts.
The char-grilled preparation of HABT’s fresh burgers, topped with caramelized onions, melted cheese, crisp lettuce, ripe tomatoes and wrapped neatly in paper, has generated tremendous consumer response, resulting in its burger being named the “best tasting burger in America” in July 2014 in a comprehensive survey conducted by one of America’s leading consumer magazines.
Growth & growth plan
HABT expanded its restaurant base from 26 restaurants in three markets in California as of December 31, 2009 to 99 restaurants in 10 markets in four states as of October 20, 2014.
HABT opened 22 restaurants in 2013. From January 1, 2014 through October 20, 2014, opened 14 restaurants, and expects to open a total of 23 to 25 restaurants in 2014, as well as 26 to 28 company-owned restaurants in 2015.
HABT plans to balance growth between existing and new markets, with the majority of new restaurants expected to open in existing markets in 2014 and 2015.
In August 2014, HABT opened its first restaurant in the Eastern U.S. in New Jersey, and expects to continue to expand its presence in Eastern and Western markets in 2015.
HABT believes it is in the early stages of its growth story and estimates, based on internal analysis, a total restaurant potential in the United States in excess of 2,000 locations.
Differentiated customer experience
HABT believes its restaurant concept delivers a highly differentiated customer experience by combining the quality and hospitality that customers commonly associate with its full service and fast casual restaurant competitors with the convenience and value customers generally expect from traditional fast food restaurants. Four pillars form the foundation of HABT’s brand:
Quality. At the core of its differentiated model is a company-wide commitment to quality, beginning with its food.
Environment. HABT’s restaurants are enhanced with abundant natural light, hardwood, polished stone countertops and a spacious dining area featuring soft vinyl booths, high-top tables and community table seating. HABT’s open kitchen showcases its made-to-order preparation and exemplifies its commitment to freshness.
Hospitality. HABT seeks to exceed its customers’ expectations for service and believe its ability to consistently deliver genuine hospitality begins with HABT’s employees.
Value. HABT’s combination of high-quality food, welcoming environment and genuine hospitality, all delivered at a low price, strengthens the value proposition for its customers. For instance, the starting price for HABT’s original Charburger with cheese is $3.50, which is well below similar items on the menus of most competing fast casual restaurants.
The first Habit Burger Grill opened in Santa Barbara, California in 1969.
HABT’s restaurant concept has been, and continues to be, built around a distinctive and diverse menu, headlined by fresh, char-grilled burgers and sandwiches made-to-order over an open flame and topped with fresh ingredients.
HABT’s Chief Executive Officer, Russell W. Bendel, joined The Habit in 2008, and since then HABT has grown its brand on a disciplined basis designed to capitalize on its large market opportunity.
The Habit’s experienced management team includes Ira Fils, its Chief Financial Officer, Anthony Serritella, its Chief Operating Officer, Peter Whitwell, its Chief Quality Officer, Russell Friend, its Chief Development Officer, and Matthew Hood, its Chief Marketing Officer. HABT’s management team has an average tenure of over 28 years in the restaurant industry.
Collectively, the management team leverages industry experience from The Habit, as well as other leading brands such as The Cheesecake Factory, Mimi’s Café, Panda Express, Outback Steakhouse, Rubio’s Fresh Mexican Grill, Pei Wei Asian Diner, and BJ’s Restaurant and Brewhouse.
HABT’s highly experienced management team has created and refined its infrastructure to deliver replicable restaurant-level systems, processes and training procedures that can deliver a high-quality experience that is designed to consistently exceed its customers’ expectations.
Intellectual property
HABT owns a number of trademarks and service marks registered or pending with the U.S. Patent and Trademark Office. HABT has registered several marks with the PTO, including the following: The Habit; The Habit Burger Grill; Respect the Burger; and Custom Built! Quality Food Made to Order & Design. HABT also has certain trademarks registered or pending in certain foreign countries. In addition, HABT has registered the Internet domain name www.habitburger.com.
Competition
Based on a guest segmentation analysis performed in 2013, HABT believes its customers make their dining choices among a competitive set that includes large fast casual concepts such as Chipotle Mexican Grill, Panera Bread Company and Panda Express, along with burger-focused competitors that include In-N-Out Burger, Five Guys Burger and Fries and Smashburger, among others.
5% shareholders pre-IPO
Entities affiliated with KarpReilly, LLC, 70%
Dividends
No dividends are planned initially.
Use of proceeds
HABT expects to receive $66 million from its IPO and use it for the following (note, $30mm is to pay dividends)
to directly and indirectly purchase LLC Units from The Habit Restaurants, LLC. The Habit Restaurants, LLC will subsequently use such proceeds to repay all of the borrowings under its existing credit facility with California Bank & Trust (which was $11.1 million as of September 30, 2014), and to repay approximately $30 million to extinguish the Bridge Loan with California Bank & Trust in connection with the distribution to the members of The Habit Restaurants, LLC made immediately prior to the completion of this offering. The Habit Restaurants, LLC will use the remaining proceeds of approximately $24.8 million to continue to support its growth and for working capital and general corporate purposes.
