Despite having grown from humble beginnings in 1982, Chuy’s Restaurant has advanced to attain a leading position in the restaurants industry (Figure 1). As at 2016, the restaurant had sixty nine stores making it a strong player in national and regional spheres. Indeed, Chuy’s is one of the restaurants that benefit from a healthy cash flow within the industry (Figure 2).In addition, the restaurant chain has plans to double its store base within the next five years thus making it a potential influence in the restaurant industry. The restaurant is largely concentrated within Texas in the United States with more than thirty stores in the state. Currently, the restaurant has its existence in states such as Florida, Virginia and Ohio among others.The company’s projections envision the restaurant joining Denver, Miami and South Florida in a market expansion strategy.

Figure 1:Chuy’s Restaurant

Figure 2: Chuy’s revenue growth in 2012 and 2013

Chuy’s is a market leader in terms of performance and is on the brink of attaining a national status with the expected expansion in all cities. The brand has maintained a positive sales growth in the past six years during which it has reported no negative quarter. The growth in sales is in contrast to the growth within the industry that has stagnated in recent years.Still, the company maintains an upper hand in terms of store-level financial metrics. In fact, annual sales among the company’s new stores average at more than $4.7 million. In comparison, other companies within the industry record lower volumes including P.F. Chang and Olive Garden. The margins for new locations opened in the last 18 months average at about 22.3% which is higher than the averages for restaurants such as Buffalo Wild Wings orTexas Roadhouse (Rizzo, 2014). In fact, the company’s sales and margin figures have been identified as one of the drivers of Chuy’s expansion.

Figure 3: Chuy’s trading volume

In addition to the leading role in the industry, the restaurant further provides leadership in terms of building the hotels. In fact, new restaurants costs an average of $2 million to build with revenue hitting the mark of $8 million in the third year. This figures are contrary to other restaurants that take up a huge part of their revenue in compensating the high cost of building new restaurants. Chuy’s restaurants have the advantage of attaining more than 30% cash on cash returns within the third year in an industry that hardly attains that figure.Further, the company has maintained an average annual store growth of over 25% in the past five years making it one of the most appealing in the industry (Pego, 2011).The restaurant has comfortably endured the recent slowdown in customer traffic to emerge a top contender for top slot in the restaurants industry.

Despite the seemingly positive statistics in the company’s performance in the industry, it faces numerous challenges in its operations. The industry has been hit by a slowdown in customer traffic thus limiting the prospects of growth in the short term. Indeed, analysts envision a fall in the US economy following the anticipated recession later in the year.Although the company had previously been immune to the restaurant recession witnessed in other companies, it faces challenges in maintaining its growth rates. The company has succumbed to falling customer traffic to report its first ever decline in more than six years. In the fourth quarter of 2016, Chuy’s reported revenues of $79.1 million against an estimate of $81.4 million; its first drop in as many years. Although the restaurant recorded an increase of 1.3% in average guest check, it suffered from a 2.4% drop in customer traffic.

References

Pego, D. (2011). “We’re Not Extinct. The Multicultural Southwest: A Reader, 102.

Rizzo, L. (2014). Apollo Snaps Up Chuck E. Cheese as PE Interest in Restaurants Heats Up. The Private Equity Analyst.