Habit Restaurants Inc. Chief Executive Russ Bendel said the Irvine-based fast-casual burger chain plans to grow largely by units it owns and operates, not franchises, after its Nov. 20 initial public offering.
“We see our growth going forward that way,” he said.
He said Habit will add 26 to 28 company-owned locations next year, with just “one or two” from each of two previously signed master franchise agreements in Seattle and Las Vegas.
The company has tacked back and forth on franchising. It came out strongly for company-owned stores in September 2012, telling the Business Journal that with financial backing from Greenwich, Conn.-based KarpReilly—which controls 55% of the company after the offering—it could grow on its own nearly as fast as with other operators.
KarpReilly led a group that bought the chain in 2007.
Habit also said in 2012 that any franchise agreements would be with “a sophisticated existing restaurant operator who had infrastructure” in markets it had not entered.
Then it signed a deal in November 2013 to open a franchised location at the University of Southern California and said franchising was a bigger part of its growth plan.
Habit worked on its franchise offering documents that year and said it sought an 80%-20% split between company-owned and franchised restaurants, respectively. It suggested franchises would be a viable option in markets where other fast-casual competitors had footholds.
The November deal was followed this past May with an announcement that master franchises would open 15 Las Vegas-area sites and 25 in the Seattle market. No franchised locations have opened in those markets. Bendel said last week that locations should open in the two cities next year.
“They are in place, and we’re excited about them,” he said. “But our lion’s share will be squarely in company-owned” locations.
Habit operates 100 locations spread across California, Arizona, Utah and New Jersey. An average customer spends about $7.56 on a meal, Bendel said.
He said about three-quarters of the chain’s growth next year will be in the West, mainly in California, and that the rest will be in New Jersey and two new markets: Florida and Washington, D.C.
The company will be debt-free after its initial public offering, he said, with the remaining proceeds available for growth. The company has not reported its final tally on the IPO.
A company spokesperson said Habit would receive “in excess of $100 million” from the offering before costs and retiring its debt.
Shares priced at $18 for the IPO and rose to more than $39 the first day. It traded on Nov. 21 at a market cap of about $950 million.
