Tex-Mex restaurant chain Chuy's is a perfect fit for the
eclectic character of its hometown, Austin, Texas, where the
motto is "Keep Austin Weird." But that's not stopping it from
expanding its offbeat eateries beyond the state's borders.
From one colorful location in the heart of Austin in 1982 to
40 restaurants in eight states today, the recently publicChuy's
)is one of the fastest-growing companies in the casual dining
"The consumer broadly is voting that their food is exceptional
for the price point," said Bryan Elliott, senior restaurant
analyst at Raymond James. "Their sales per square foot are well
over $600 and full-service casual dining norms are below
Chuy's opened eight restaurants in 2012, equivalent to a unit
growth rate of 25%. The new locations were in Texas, Florida and
Kentucky. It plans to expand by another eight or nine this year
in five new regions, representing a growth rate of 23%.
Each restaurant is unique as indicated by the company's own
motto: "If you've seen one Chuy's, you've seen one Chuy's."
"The concept itself is a fairly traditional Tex-Mex from a
menu standpoint," said Will Slabaugh, equity research analyst at
Stephens. "Although there are a few notable exceptions -- and I
think this is what really sets the concept off from other Tex-Mex
concepts that guests have seen in the past -- it's really the
When you walk into a Chuy's, you'll notice an Elvis shrine,
vintage hubcaps nailed to the wall and ceiling, red fish hanging
from the ceiling, scrap metal palm trees and colorful handmade
floor and wall tiles. Rock music plays in the background. There's
a bigger bar and more alcohol sales as a percentage of overall
sales than most other restaurants in that category, noted
"It's a very inviting atmosphere, very open, and it's an
atmosphere that really translates across different demographics
and across different age groups as well," he added. "All those
things create energy in the restaurant and invite a different and
a more diverse crowd than most Tex-Mex concepts and casual dining
The menu consists of fresh, daily-made and high-quality food
with 46 out of 49 items on the menu priced at less than $10. The
average customer check is $13 with a 19% alcohol mix.
"As far as the menu goes, there are some traditional Tex-Mex
items on there, but they add on their own flair," said Slabaugh.
"They have their own sauces that are handmade daily and people
know that. All their chicken items, all their beef items are
always fresh. There are no freezers inside the restaurants. So
there is this inherent value proposition that these guys put
forth along with high food quality, and all that's been really
resonating in this environment."
The restaurants range in size from 5,300 to 12,500 square feet
and accommodate 225 to 400 customers. Each location gets an
average of 7,500 customers per week, or 400,000 per year.
The average revenue per restaurant has been $5 million per
year, which, according to analysts, is about double of most other
"Chuy's is operationally very efficient," said Slabaugh. "They
have very quick ticket times; you can get in and out for lunch in
30 minutes. In most sit-down restaurants, you're not able to do
"They've been putting out industry-leading, cash-on-cash
returns for years. A lot of returns north of 50%. That means you
get your money back in two years, vs. most casual diners that
typically get their money back in the range of four to six
Same-store sales growth has been very consistent and is
forecast to be in the low single-digits.
Chuy's carries almost no debt and generates sufficient cash
flow to finance its expansion internally without having to take
on any external funding.
"Their sales per square foot and cash flow per square foot are
among the best in casual dining," said Elliott. "Their investment
per square foot is about average and so their returns on
investment are superlative. That's partly why they can
self-finance 20% physical growth."
Sales growth has ranged between 28% and 48% in the past seven
quarters, while earnings per share jumped 175%, 50% and 150% in
the prior three quarters.
A risk would be going into a new market where their brand
wouldn't resonate. However, there has been no indication of that
so far, noted Slabaugh.
The company went public in July 2012, when private equity firm
Goode Partners divested about a third of their original 80%
ownership. A secondary offering at the end of January further
reduced their share to about 25%. The original founders still own
approximately 3% of the company and serve on its board.
"They (Goode Partners) historically have been very shrewd
investors," said Elliott. "They tend to buy small, early-stage
companies and lead them well. They clearly have done that here
with Chuy's and executed their strategy quite well."
Management has strong experience in the restaurant industry,
with CEO Steve Hislop having previously helped expand O'Charley's
Restaurants from 12 to 347 units before joining Chuy's in 2007.
CFO Jon Howe also has 22 years of experience in the restaurant
"If they continue to do what they've done like clockwork since
inception, long-term, the company has a chance to be a
substantially larger enterprise than it is now," said