Business model

We are one of the fastest growing multi-brand restaurant companies in Brazil in terms of sales and number of restaurants according to Euromonitor International, as a result of our commitment to seeking superior quality as a central part of our business model. Driven by this commitment to quality, since the opening of our first Madero restaurant in 2005 in the city of Curitiba, Brazil, we have grown to a portfolio of 262 multi-brand restaurants (including franchises) in 18 Brazilian states as of March 31, 2022, with a vertically integrated production, distribution and logistics platform.


Our Restaurants

We operate primarily company-owned restaurants under two core brands, Madero and Jeronimo, with multiple distinct concepts that include Madero Steak House and Madero Container under the Madero brand, and Jeronimo Burger and Jeronimo Track under the Jeronimo brand. Madero Steak House is our original full-service format, which offers a relaxed environment suitable for business and families and features a menu of steaks and a variety of Brazilian dishes, but it is best known for its burgers. We subsequently launched Madero Container, a fast-casual format offering a narrower menu focused on our chargrilled burgers. We believe that Madero Container was one of the first fast-casual restaurant concepts in Brazil and, as such, has played an integral role in establishing the fast-casual industry in the country. Jeronimo is a technology-centric, fast-casual concept focused on a younger demographic. It offers a value-oriented menu focused on flattop-cooked burgers, developed to ensure freshness and quality at delivery, and boasts a vibrant and colorful ambience – with unique street art commissioned to cover the walls of each restaurant. Jeronimo Burger includes restaurants in mall food courts as well as free-standing restaurants in malls. Jeronimo Track is a free-standing Jeronimo concept that also features a drive-thru.

The table below presents our key financial and operating indicators as of December 31, 2021, and for the periods indicated. The financial indicators below also refer to the fiscal year ended on December 31, 2019, since that was the last year of continuous operation with our restaurants operating at normal levels, before the impact of closures and reduced capacities determined by government decrees as a result of the COVID-19 pandemic, which occurred from March 2020 onwards. For more information on our 2020 financial figures, as well as the period ended September 30, 2021, see sections 3 and 10 of the Reference Form. There is no guarantee that our financial results will once again reach our 2019 levels, even with a possible end to the COVID-19 pandemic.

Brand / Segment Madero Jeronimo
Concept Madero
Jeronimo /
Jeronimo Track
Description Full-service Fast-casual Fast-casual
Number of restaurants (03/31/2022)¹ 89 78 87
Average restaurant size (03/31/2022)¹ 574 square meters / 168 seats 195 square meters / 84 seats 342 square meters / 95 seats
Formats Streets, malls and airports Average-size cities, highways, and complementary presence on large-size cities Streets, drive-thru, highways, subway stations, airports, malls and food courts
Menu Full menu Reduced menu
with chargrilled burger focus
Reduced menu
with flattop-grilled burger focus

¹Includes franchises; does not include eight other restaurants in our Others segment.

Brand / Segment Madero Jeronimo
Concept Madero Steak House Madero Container Jeronimo Burger / Jeronimo Track
Year 2019¹ 2021 2019¹ 2021 2019¹ 2021
Average Check R$59 R$64 R$42 R$49 R$27 R$29
Total net operating revenue per concept R$550.0 million R$531.0 million R$201.3 million R$255.7 million R$93.6 million R$288.1 million
% of consolidated total net operating revenue 61.9 46.3 22.6 22.3 10.5 25.1
Average Unit Volume (AUV) per concept R$11.0 million R$8.4 million R$4.6 million R$4.4 million R$5.3 million R$4.5 million
Average Unit Construction Cost per Concept2 R$7.1 million R$6.6 million R$4.0 million R$4.1 million R$4.3 million R$4.8 million
% Adjusted EBITDA Margin (company-wide)³ 30.6 20.0 30.6 20.0 30.6 20.0

¹Data for 2019 is reported as 2019 was the last year in which we had continuous operations, with our restaurants operating at normal levels and no impact from closures and reduced capacity orders by government decree due to the COVID-19 pandemic, which began on March 2020. For information regarding the year ended December 31, 2020, see sections 3 and 10 of the Reference Form, there is no guarantee that our financial results will return to the 2019 level, even with the eventual end of the pandemic.
²Average Unit Construction Cost is defined as average capital expenditures required to open a new restaurant plus pre-operating expenses, for the respective segment.
³Adjusted EBITDA consolidated margin of the Company in the period. The Adjusted EBITDA Ex-IFRS16 margin (that doesn’t consider the IFRS-16 effects), was 25.1% and 11.8% in 2019 and 2021, respectively. Lease expenses totalized R$48.9 million and R$94.4 million in 2019 and 2021, respectively.

Geographical distribution of our restaurant platform and Central Kitchen

Source: Company. As of March 31, 2022.

Source: Company.

Considers the restaurant count at the end of each period.

Over the last 16 years, Grupo Madero experienced strong growth in the number of our restaurants.


Our Central Kitchen and Vertically Integrated Platform

To help us achieve our goal of delivering the highest quality in all aspects of our business, we have invested over R$328.7 million from January 1, 2018 to December 31, 2021 to build our own vertically integrated production, distribution and logistics platform. The centerpiece of this platform is our Central Kitchen, with over 32,000 square meters, employing approximately 500 people, which produces and supplies virtually all the food consumed in our restaurants. This unique model provides a number of benefits both in terms of the restaurant experience for our guests and our financial performance, including:

– Promoting high consistency in our product offering, which minimizes variability in the guest experience;

– Allowing smaller and more efficient kitchens with fewer employees in our restaurants;

– Permitting faster menu innovation with less operational complexity; and

– Reducing our costs of goods sold and labor expenses, thereby driving higher levels of profitability relative to what is typical in company-owned restaurants in Brazil, which generally do not have centralized production and distribution.

Owning our supply chain enables us to more easily maintain the consistency of our exceptional quality standards for our food. For example, our burgers are made with our proprietary blend of beef, our bread is baked fresh daily to our specifications, our bacon and sausage are smoked in-house to ensure perfect flavor and our mayonnaise always follows Junior Durski’s grandmother’s homemade recipe. Additionally, our centralized distribution and logistics operations simplify restaurant openings, enabling us to stock our restaurants with fresh products and better maintain quality throughout the supply chain. Our high volumes across the system allowed us to automate more of our processes while maintaining a homemade quality to our food. We believe that this vertically integrated platform currently has the capacity to produce the primary products that we serve in our existing restaurants and in the new restaurants that we expect to build through 2026. Currently, capacity expansion investments beyond 2026 are in the early stages.


Our People

In order to enhance our ability to deliver consistently exceptional guest service, we provide more than 5,300 restaurant employees (out of a total of approximately 7,000 employees across Grupo Madero as of December 31, 2021) with an unique package of benefits. These benefits include, with no cost to the employees, housing close to the restaurants where they work, three daily meals prepared at the Central Kitchen under the supervision of a nutritionist, in addition to the medical coverage option and significant on-the-job training. Because of our comprehensive training program, we are able to hire from a broader pool of applicants who may have less prior experience and training. Our commitment to our employees has historically driven low turnover, of only 30.5% in 2019, during the pre-pandemic period. In the 12 months ended December 31, 2021, the restaurant employees turnover was 22.1%. In addition, the housing that we provide our employees within walking distance of their workplace allows us to optimize their shifts. This, in turn, allows us to employ fewer people in our restaurants, pay them higher salaries and reduce our training expenses. This program of benefits and the corresponding high level of employee retention also allow us to promote from within across all levels of the organization and consistently deliver high-quality guest service as we grow and staff our new restaurants.

When faced with the COVID-19 pandemic, we remained committed to our employees. Given reduced restaurant capacity and operating hours, we made the difficult decision to reduce a portion of our workforce as of April 1, 2020. Concurrently, we started a program called Tamo Junto (“Stand Together”), in which we identified over 800 high-performing employees that we intended to rehire when our restaurants began to reopen. Tamo Junto provided select affected employees with monthly relief payments to assist them, facilitated weekly video conferences with management, and provided hospitality training and foreign language courses. This program ended in October 2020, after we were able to rehire all participating employees who wished to return to the Company.


Our Technology

We have invested heavily in our restaurant-level technology to enable a more attractive and enjoyable guest experience. All transactions are recorded on tablets (carried by the staff) at Madero Steak House; most orders are placed through consumer-facing electronic kiosks at Madero Container; and all transactions at Jeronimo are run either through consumer-facing electronic kiosks or our mobile application. This consumer-facing technology facilitates quick and easy ordering, removes inefficiencies associated with a cashier and a manual point-of-sale system and reduces waste in the kitchen. When orders are placed either through a tablet, a kiosk, our application or online through a third-party delivery aggregator, they are relayed directly to the kitchen monitors. We have only one chef group-wide, Chef Junior, and his instructions are delivered through kitchen display systems, or KDSs, to guide employees at each stage of the preparation process, ensuring quality control and product consistency. Investments in technology have allowed us to efficiently reach our customers, in addition to our physical stores, and to expand the channels through which we operate.

Prior to the onset of the COVID-19 pandemic, delivery service was only available at a select number of our Jeronimo restaurants. With the temporary closure of dining rooms as a result of the COVID-19 pandemic, we accelerated the implementation of delivery service across our system of restaurants, and by the end of December 2021, all restaurants offered delivery service when deemed convenient. We simultaneously created and introduced a new Madero mobile app, leveraging the interface of our existing Jeronimo app, to quickly facilitate an efficient ordering and delivery process. Across formats, orders are placed either through our proprietary mobile apps or via third-party aggregators, and food is delivered by contracted courier services in order to maintain our high-quality standards consistently. These orders are also transferred directly to KDSs, integrating orders with our restaurant kitchens via electronic platforms.  Sales through our own apps accounted for about 19% of delivery revenue in 2021. In order to increase sales through this channel, in January 2022, we launched the new Grupo Madero app nationwide, wich includes our Madero, Jeronimo and Dundee brands, and is one of the first multi-brand marketplaces of a large network of restaurants with national coverage. In addition to being a more user-friendly solution with new functions and exclusive discounts, we believe that the app will be an excellent tool to improve our loyalty program, enabling the creation of an omnichannel CRM.

By streamlining our operations with technology, we increase capacity and throughput in peak dayparts, which is critical to ensuring that we can fulfill third-party delivery orders. The technology that connects the consumer to the kitchen differentiates our guest experience, which we believe has helped drive our restaurant-level profitability.

In 2021, we inaugurated the robotic chamber with Dematic technology for the storage of frozen and chilled products, with the objective of increasing the efficiency and traceability of our supply chain through the use of advanced technology. Complementing this process, we implemented the Neolog system for the management and planning of loads and routes in order to optimize our own logistics. In addition, at the beginning of 2021, we concluded the implementation of the ERP Protheus by Totvs, integrating the various management systems and enabling more effective data management and the optimization of decision-making processes.


Impact of the COVID-19 Pandemic

Since March 2020, the world has been facing the COVID-19 pandemic, which has had a relevant impact on the restaurant industry. We took immediate action in our restaurants and in the Central Kitchen, with the purpose to ensure the safety of our employees and customers, readjusting operations and instituting even stricter health safety rules. As a result of government-imposed mall closures, reduced hours of operation, and declines in traffic throughout the restaurant industry, sales declined significantly at the start of the pandemic. As a result, we developed a take-out and delivery platform covering practically all of our restaurants, a format that before the pandemic, was adopted in only a handful of restaurant units. With the gradual relaxation of restrictive measures from July 2020, sales gradually improved again compared to the beginning of the pandemic, with virtually all restaurants opened, operating at reduced capacity since then. At the end of February 2021, with the worsening of the second wave of the COVID-19 pandemic, restaurants were again subject to severe restrictions until the second half of April, when a gradual reopening process for some units began. Since then, we have seen continuous improvement in our revenues, even operating with reduced capacity in many markets, in addition to the consolidation of our take-out, delivery and drive-thru platforms.


Our Financial Results

Our commitment to quality in every aspect of our business has allowed us to realize strong revenue growth in the past three years, including rapid restaurant growth to meet consumer demand and strong margins at the restaurant and corporate levels.

Over the three-year period ended December 31, 2021, we grew from 138 restaurants in 15 states in Brazil to 258 restaurants in 18 states, corresponding to a compound annual growth rate, or CAGR, of 23.2%. As of March 31, 2022, we oned 262 restaurants. Total net operating revenue increased from R$729.8 million in 2018 to R$888.9 million in 2019, an increase of 21.8%. We recorded total net operating revenues of R$1.146 billion in 2021, a 16.2% CAGR over 2018 and the highest Group yearly revenue on record, despite adverse impacts from the COVID-19 pandemic. In the twelve-month period ended December 2021, despite restaurant closures, limited hours and social distancing, our net operating revenue totaled R$1.146 billion. Likewise, our Adjusted EBITDA ¹ increased from R$185.7 million in 2018 to R$271.7 million in 2019, an increase of 46.3%. In the twelve months period ended December 31, 2020, our Adjusted EBITDA ¹ fell to R$100.7 million, as it was heavily impacted by the COVID-19 pandemic, but rose to R$229.4 million in the twelve months ended December 31, 2021, despite restaurant closures between February and April 2021 in our principal markets. Our net (loss) income varied from a loss of R$109.2 million in 2018 to a loss of R$26.6 million in 2019, an improvement of 75.7%, and a loss of R$249.0 million in 2020. In the twelve months ended December 31, 2021, our net (loss) income totaled a R$121.4 million loss, an improvement of 51.3% compared to the previous year. In addition to the impact of the pandemic in 2020 and 2021, net income has historically been impacted by our aggressive growth strategy, which requires strong investments, in part financed by bank credit lines, which creates high cost-of-debt expenses, as these investments will generate results in future periods. With the Central Kitchen currently in place and our corporate infrastructure built out, we believe we are well-positioned to deliver strong, profitable growth.

Certain figures relating to our historical financial performance are shown below²:

Source: Company.

¹ To calculate Adjusted EBITDA (excl. IFRS16), we add to our Adjusted EBITDA amounts relating to the effects resulting from the application of IFRS 16, which comprise rental expenses relating to right of use assets, that totalized R$48.9 million, R$69.5 million and R$94.4 million in 2019, 2020 and 2021, respectively. To calculate Adjusted EBITDA, the Company assesses non-recurring items related to its operating activities and excludes their effects in its calculation of EBITDA. We calculate Adjusted EBITDA as EBITDA for the period, excluding: (i) loss or gain from the sale of fixed assets; (ii) pre-operating expenses; (iii) deferred income from government grants (relating to investment support subsidies (subvenções de investimento) granted by the municipal government of Ponta Grossa, Paraná); (iv) distributions to related parties; and (v) expenses relating to share-based compensation plans, and (vi) costs relating to our initial public offering and related expenses.
² Net operating revenue from the Others segment includes net operating revenues from the Central Kitchen plus royalty fees paid by franchisees.


Monthly Same-Store Sales Evolution per Concept (2020 and 2021 vs. 2019)

A widely-used financial operating metric in the industry is Same-Store Sales, which represents the change in period-over-period revenues for comparable restaurants, and is used by us as a managerial metric. We include a restaurant in our comparable restaurant base for purposes of calculating Same-Store Sales growth following the 12th full month of operations, thereby excluding sales from restaurants that have been operating for less than 12 months.

The chart above shows the change in Same-Store Sales for a given month compared to the corresponding month in the preceding year, except for 2021 Same-Store Sales information, which is compared to the corresponding month in 2019 (given that results for the 2020 year were heavily impacted by the COVID-19 pandemic, and therefore that year is not an appropriate basis of comparison for purposes of measuring Same-Store Sales performance).


Adjusted EBITDA

The Company reported Adjusted EBITDA of R$103.4 million in the fourth quarter of 2021, representing a 28.2% margin, close to pre-pandemic levels. In 2021, Adjusted EBITDA was R$229.4 million.

The gradual normalization of sales levels as well as the improvements on efficiency in the last periods, can be seen in the meaningful improvement in profitability in the fourth quarter of 2021, although current sales levels are still below pre-pandemic levels. The Company expects to see continued improvement in margins in future periods.

¹Adjusted EBITDA consolidated margin of the Company in the period. The Adjusted EBITDA Ex-IFRS16 margin (that doesn’t consider the IFRS-16 effects), was 25.1%, 2.9% and 11.8% in 2019, 2020 and 2021, respectively. Lease expenses totalized R$48.9 million, R$69.5 million and R$94.4 million in 2019, 2020 and 2021, respectively.