The fast casual segment is the fast growing segment in the restaurant industry. Sales from this segment are predicted to exceed $50 billion by 2018, according to Technomic. However, this competitive landscape has become crowded with “better burger” concepts. One of these burger joints driving the major growth in the industry is The Habit Burger Grill. Before the recent buzz starting in 2013 about The Habit planning an IPO event, Wall Street probably had no idea what a Habit burger was. But the brand is the first in the better burger category to go public and shares have more than doubled since their trading debut in mid October.
The Habit History
The Habit’s success did not happen overnight. The company was founded in 1969 in Santa Barbara, California, before the term “better burger” was known by the industry. In 2007, the private equity firm KarpReilly invested in the company which contributed to the brand’s growth. Then in 2013, there were rumblings in the media that Habit was planning an IPO event sometime in 2014.
The brand’s press momentum continued to build when this summer the brand was featured in national news headlines, such as “America’s Best Burger is From a Chain You’ve Probably Never Heard Of.” According to Consumer Reports, The Habit Burger Grill was named the best fast food burger in the nation. America’s best burger is also known as the Charburger, which is a 110% fresh ground beef char-grilled burger over an open flame.
From late 2009 to today, the brand has grown from 26 stores to over 100. The brand has stores located in four states, including California, Arizona, Utah and New Jersey and plans to expand to the cities of Seattle and Vegas in 2015. The average customer bill was $7.56 for the last year, according to Habit’s S-1. Their cheese Charburger starts at $3.50, making the brand’s price point on the lower end of these gourmet burger restaurants.
The Appeal for Investors
Habit’s shares jumped roughly 120% on the first day, finishing at $39.54. The Habit’s S-1 showed impressive financial data. The company has had same-stores growth for the last 42 consecutive quarters. $90 million will go towards expanding and retiring debt. This fast casual is the frontrunner in comparison to the recent IPO’s from El Pollo Loco and Zoe’s Kitchen, both with high debt loads. The Habit’s low debt means the brand has options– making it attractive to investors. The brand plans to open 26-28 new stores in 2015. Company officials have also projected that the brand could grow to more than 2,000 locations. Not to mention the stock has doubled with the last few weeks.
Why Consumers Love Habit
Even though The Habit may have America’s Best Burger, the brand prides themselves on being so much more than a burger joint. 40% of their sales are from non-burger items, including salads, tuna sandwiches, chicken clubs and others. This makes the menu appeal to a broader demographic. The brand also appeals to the more health- conscious and educated consumer by sourcing fresh ingredients locally.
How Habit Burger Integrates Technology
Like all fast-growing brands, The Habit Burger Grill uses advanced technologies to enhance operations. To increase their speed of service, the brand uses technologies such as the MICRO mTablet, this is a handheld POS terminal. The Habit servers bring the cash register directly to the restaurant guests inside the restaurant while in a long line and outside, by the drive-through.
So with the success of The Habit IPO, which better burger brand will be following suit? Both Shake Shack and Smashburger have alluded to an IPO in their future. How many of these gourmet burger joints will go public? Who do you think is next?