Habit Burger Raises $90M in Public Debut

0

habit burgerHabit Restaurants Inc. raised $90 million in its debut on the public market Thursday, with an opening day pop that more than doubled its share price.

After pricing its initial public offering of 5 million shares at $18 per share – well above the earlier projected range of $14 to $16 per share – the Irvine, Calif.-based parent to the Habit Burger Grill chain saw its share price open at $30, reach a high of $40.20 and close at $39.54.

That puts Habit in the elite company of restaurants that doubled in share price on opening day, including Chipotle Mexican Grill Inc., which in 2006 priced its IPO at $22 per share and rose to a high of $46.20 in its first day of trading.

Both Noodles & Company and Potbelly Corp. also recently doubled in share price in their market debuts, but both have seen prices moderate since.

Russ Bendel, Habit Restaurants’ chief executive, said the $90 million will go toward retiring debt and long-term expansion.

Though Habit Restaurants is now public, it is structured as a “controlled company,” in that management and existing shareholders retained their ownership, including private-equity firm KarpReilly LLC, which took a majority stake in 2007.

The 5 million shares issued to the public were new shares. “We’re not selling or going anywhere,” Bendel said.

Founded in 1969, the fast-casual Habit Burger Grill is the first of the better-burger players to go public. The concept offers investors many of the ingredients they are looking for in restaurant investments, including plenty of white space for future growth and strong unit-level performance.

Currently with 104 units in California, Utah, Arizona and New Jersey, Habit Burger will open 22 to 24 restaurants in 2014. Next year it plans to build 26 to 28 locations, including more corporate units in New Jersey, as well as moving into the Washington, D.C., area and Florida.

Franchising will also begin in 2015, with the first of such units scheduled to open in Las Vegas and Seattle, Bendel said.

However, the primary focus will remain on corporate restaurant growth.

The company has projected that Habit Burger could reach 2,000 units domestically.

Habit Burger has reported 42 quarters of same-store sales growth – nearly 11 years. For the July 1-ended second quarter, same-store sales rose 6.1 percent year to date, following a 3.6-percent increase for fiscal 2013.

Average unit volumes have increased from about $1.2 million in 2009 to $1.7 million as of September, an increase of almost 40 percent.

With an average check of about $7.44, Habit Burger falls on the low end of the typical fast-casual price spectrum of about $8 to $12 per person, offering a more value-focused positioning.

Though the burger landscape is crowded, Bendel said Habit Burger stands out with a differentiated menu that appeals to a broader demographic.

Almost half of Habit Burger’s guests are women, and non-burger items account for about 40 percent of sales, including a teriyaki-glazed, char-grilled Fresh Albacore Tuna sandwich and freshly made salads.