Burger chain The Habit Restaurants files for an $86 million IPO

The Habit Restaurants, which operates 98 fast casual burger restaurants predominantly in California, filed on Thursday with the SEC to raise up to $86 million in an initial public offering.

The Habit
Habit Restaurants has been owned by Greenwich, CT-based private equity firm KarpReilly since 2007, after which it hired a new CEO and CFO. It has gone from 26 stores in 2009 to 95 stores at the end of the 2Q14, and believes the US can support over 2,000 restaurants. Habit's comparable store sales growth was 6.1% in the first half of 2014, and it highlights 42 consecutive quarters of positive comp growth. Its average customer spend was $7.44 during the last twelve months, among the lowest in the fast casual segment. Food is split between lunch (53% LTM revenue) and dinner (47%) and its entrees consist of burgers (60% entree revenue), other sandwiches (27%) and salads (13%). Habit Restaurants opened its first Eastern US restaurant in August 2014 and plans to open its first franchised restaurants in 2015.

Recent financials
Revenue increased 44% to $79 million during the 26 weeks ended July 1, 2014, compared to the prior year period. Most of its growth came from sales at new restaurant, in addition to 4.5% more traffic and 1.6% higher spend in existing restaurants (6.1% comp growth). Adjusted EBITDA grew 45% to $10 million (12.6% margin), as most operating costs remained about in line with last year, including food and paper (33% of sales) and labor (30%). At the end of the quarter, it had $14 million of debt, which will be paid down with IPO proceeds.

2014 limited service IPOs
Two other limited service restaurants have had successful IPOs this year. El Pollo Loco (LOCO; average spend of $5.83), has gained 124% since its July IPO and Zoe's Kitchen (ZOES; $9.57) is up 128% since April. Like El Pollo, Habit has concentration risk in California (88% of stores) and is subject to increasing minimum wages in the state. All three restaurants focus their restaurant concepts around value, quick service and fresh ingredients.

The Irvine, CA-based company, which was founded in 1969 and booked $145 million in sales for the 12 months ended June 30, 2014, plans to list under the symbol HABT. The Habit Restaurants initially filed confidentially on September 4, 2014. Piper Jaffray, Baird, Wells Fargo Securities and Raymond James are the joint bookrunners on the deal. No pricing terms were disclosed and an exchange has not been selected.