GEN Restaurant Group, the parent company of the GEN Korean BBQ House casual dining concept, became the latest restaurant company to look to the public equity markets for growth capital by filing registration statements for an initial public offering (IPO) last week. The move follows CAVA’s recent IPO registration statements (which we examined in greater detail last month) and Panera Brands’ plans to go public in the near future.
We reviewed GEN’s IPO registration filings this week, and some things immediately stood out compared to other restaurant company IPO filings. For starters, GEN participates in the casual dining category, which has faced greater pressure than other restaurant categories. Below, we’ve updated our visitation trends for the different restaurant categories and see that full-services restaurants have seen the steepest declines in year-over-year visitations versus the QSR, fast casual, and specialty coffee categories. With the exception of Fogo de Chao, most of the restaurant chains rumored to be exploring public offerings operate in the fast casual category.
More importantly, GEN is bucking the overall visitation trends across the restaurant category. Below, we’ve presented visit per location for GEN Korean BBQ on a quarterly basis going back to Q1 2019. During 2019, GEN averaged roughly 20% higher visits per location than its casual dining peers. However, the chain appeared to reach an inflection point coming out of the pandemic (starting around Q2 2021) and has outperformed the average visits per location for the casual dining category by almost 45% the past eight quarters.
Coincidentally, our visitation data squares nicely with the company’s trailing twelve month revenue per restaurant trends over the past 10 quarters. At present, the company is averaging roughly $5.6M in revenue per location, which would put the chain near the top of FSR’s Top 50 full-service chains ranked by average unit volume for 2022 (behind only STK, The Cheesecake Factory, North Italia, and Texas Roadhouse).
What’s driving this impressive visit per location growth? The company has been relatively conservative with its store openings the past few years, only opening four locations since the beginning of 2022 (below), so it’s not a situation where brand awareness increasing as the chain expands to new markets (although new locations in Las Vegas in June 2022 and New York City in December 2022 have certainly raised the profile of the brand).
We attribute the visit per location to a unique experience, something we’ve discussed already this year when looking at concepts like Kura Revolving Sushi Bar or “eatertainment” concepts. Broadly speaking, the success of experiential restaurant concepts is also tied to the shift of consumers moving away from physical goods toward services and experiences, which began around this time last year and has continued despite a more challenging macro backdrop. GEN Korean BBQ has distinguished itself from the crowded casual dining market through its unique concept featuring an interactive and communal dining experience where customers grill their own meat at the table. Much like CAVA, we believe GEN is likely benefitting from the evolution of consumer taste preferences due to the influence of social media, access to a wider variety of food options through third-party delivery services, greater spending power among minorities, heightened demand for better-for-you offerings, increased television programming devoted to food, and the globalization of restaurant concepts and sharing menu innovations across borders. In its IPO filing, GEN notes that its “unique culinary experience appeals to a vast segment of the population, particularly Millennials and Gen Z”. Our data supports this as well, with the collective trade area for GEN’s existing stores having a median age of roughly 34-35 years of age compared to the national average of 38.
From a growth perspective, the proceeds from GEN Korean BBQ's IPO are expected to fuel the company's expansion plans in both existing and untapped markets. The company noted that it expects to open 6-7 additional locations during the remainder of 2023 and cited new markets for expansion that included Georgia, Oregon, Utah and Virginia and Washington DC. Additionally, GEN Korean BBQ is targeting average net build-out costs of $3M (higher than most restaurant concepts due to the need for a ventilation system that simultaneously ventilate each table) and AUVs of approximately $5M for new restaurant units.
