Another Restaurant Chain Is Going Public

By Jonathan Maze, August 8, 2011

The recent plunge in the stock market apparently isn't stopping one small restaurant chain from testing the public waters. Chuy's Holdings, owners of the 27-unit Texas-based casual Mexican concept Chuy's, filed a registration statement with the Securities and Exchange Commission late last week. It wants to raise $75 million.

Chuy's is the third restaurant chain to look toward the public markets in recent weeks, joining Joe's Crab Shack and Dave & Buster's. The notices follow the successful initial public offering of Dunkin' Brands, which saw its stock price go up nearly 50 percent on its first day of trading last month. There is a dearth of growth restaurant concepts in the public markets, and there's a belief among many that growing chains could get an extra-large growth premium as a result.

Then again, Chuy's is the smallest of these chains, and arguably the least ready to go public in an environment that favors larger companies—smaller companies get less notice from bigger trading houses, and Chuy's is little known outside of Texas. One possibility: the chain could be using the registration as a way of marketing itself to potential buyers. That's what Logan's Roadhouse did last year. It filed a registration statement in June and then sold itself to Kelso & Company.

Whatever the ultimate goal, Chuy's has some good performance metrics. The concept markets itself as a chain in which each location (but not its food) is different. Started in Austin in 1982, it has expanded aggressively since its sale to New York private equity firm Goode Partners in 2006.

Revenue over the past two years grew 83 percent, to $95 million. Same-store sales growth has been modest, however, though it picked up, to 6.7 percent, in the first quarter of this year. Earnings before interest, taxes, depreciation and amortization grew at the same rate. But the chain recently borrowed $67.5 million, largely to pay its private equity sponsor, Goode Partners, a dividend in May.

Jefferies and Baird are the companies underwriting the IPO. Assuming it happens, that is.