Competitive Strategies

We are proud of Grupo Madero’s ability to deliver a best-in-class restaurant experience and quality food, while driving strong sustainable revenue growth, and we remain focused on continuing this track record of success. We believe that we are well-positioned to capitalize on favorable industry trends and our unique competitive positioning by executing on a number of key strategic initiatives. Our plan to grow revenues and profit includes the following key components.

Continue to Grow Madero Restaurants Through Madero Steak House and Madero Container

Our Madero brand has grown from a single restaurant in 2005 to 170 restaurants across Brazil as of December 31, 2022. Our strong restaurant growth over this period demonstrates proven portability across different cities and states and mass appeal to different demographics. Despite our strong performance across geographic areas, Madero is still underpenetrated in a number of regions of Brazil. Despite our plans to prioritize expansion in regions aligned to the GDP distribution across Brazil, we believe that on the long term there is an important potential market within the regions North and Northeast. We believe there is significant whitespace opportunity for the Madero brand, with the potential to establish over 400 restaurants across both concepts over the next 10 – 15 years, based on management estimates.

Significantly Accelerate the Growth of Jeronimo

We have recently accelerated the expansion of our Jeronimo brand, rapidly growing our restaurant count for this brand from 1 in 2017 to 92 as of September 30, 2022. Our Jeronimo Burger concept offers a new, technology-centric fast-casual setting that addresses a broader target audience in Brazil, with a value-oriented price point. Our Jeronimo Track concept also offers convenient drive-thru locations. Usage of drive-thru was growing rapidly prior to the onset of the COVID-19 pandemic, and we believe this growth will only accelerate as a result of the pandemic. Given Jeronimo brand’s appeal to a younger demographic and its lower price point, we believe it has the most significant whitespace opportunity across our platform. Based on management estimates, we believe that we have the potential to open 700 Jeronimo restaurants throughout Brazil over the next 10 years. For every potential new restaurant we consider – at both brands – we apply rigorous planning and analysis designed to help us achieve our targeted profitability.

Drive On-Premise Same-Store Sales Growth (SSS)

We aim to drive increased frequency and spending from our existing guests, as well as to extend reach to new guests through six principal on-premise drivers:

Increase Awareness of Our Brands: We want our Madero and Jeronimo brands to be top of mind for our guests. We believe that our brand awareness is currently developing. We believe that Chef Junior’s reputation in Brazil helps drive awareness for Grupo Madero, and our restaurant growth in new and existing markets will continue to increase guest exposure to our brands.

Utilize Marketing to Reach Existing and New Guests: Historically, we have achieved significant growth in terms of total revenues with minimal marketing expenditures. To increase visit frequency with our existing guests and to bring new guests to our restaurants, we plan to grow our marketing investments over time. Our marketing efforts will focus on an “always on” media approach in order to capture the most attention from existing and potential guests. We will utilize campaigns across several digital and traditional media that communicate new offerings and products, offer promotions and maintain our brand awareness throughout the year.

Grow and Utilize Data in Our Guest Loyalty Program: Our loyalty program was launched in 2019 and comprises the Madero and Jeronimo brands. This program provides cash back to our more frequent guests by giving them a percentage of the check as a discount on their next visit. We utilize the data we gather to engage our guest base, to identify key drivers of restaurant visits, and to design and deliver offerings that are important to our guests. As of December 31, 2022, we had about 95,000 guests enrolled in the program.

Expand Our Happy Hour: We believe there are significant opportunities to drive more traffic in our restaurants throughout the day. In particular, we believe that happy hour is an underpenetrated daypart at our Madero Steak House and Madero Container locations, and we plan to drive increased traffic through targeted marketing campaigns. We believe that this effort will help support guest awareness and drive alcohol, beverage and appetizer sales during happy hour.

Innovate Our Menu Offerings: Our frequent menu innovation incentivizes guests to return to our restaurants to enjoy new offerings. Across each of our brands, we regularly look for opportunities to improve our menu, introducing changes on at least a quarterly basis. Furthermore, we began offering Madero ingredients (e.g., burgers, steaks, buns, mayonnaise, etc.), which is driving sales with minimal changes to our supply chain or inventory planning. This allows guests to enjoy our food in the comfort of their own homes.

Introduce More Drive-Thru Locations: Prior to the COVID-19 pandemic, drive-thru lanes were only available at select Jeronimo Track restaurants. With the ongoing shifts in consumer behavior as a result of the COVID-19 pandemic, we anticipate that contactless restaurant experiences will remain important for growth, and we view drive-thru as a strategic opportunity for the Company. We have begun testing a second drive-thru lane at Jeronimo Track restaurants and expect to add additional drive-thru locations in the coming years, which may also include other Grupo Madero brand restaurants.

Expand Delivery Across All Brands, mainly through the Grupo Madero App

Off-premise consumption will continue to be an important option for our guest base. We believe that delivery can drive significant growth at each of our brands in the future.

Our delivery offering is still in its infancy, and we believe that our targeted marketing campaigns will increase awareness of this offering and build a strong delivery revenue stream. In October 2019, we began offering food delivery services in a number of cities through a third-party provider at a few selected Jeronimo restaurants. As a result of the COVID-19 pandemic, we have also significantly accelerated the implementation of food delivery options across our restaurants, and as of December 31, 2022, a delivery option was available from all restaurants in our chain. We have also accelerated the implementation of our proprietary delivery app and platform, both for Madero and Jeronimo. In the year ended December 31, 2021, delivery corresponded to 25.3% of the gross revenue from restaurants, and by the twelve months ended December 31, 2022, this figure represented 15.2% of the gross revenue from restaurants, given the lesser impact of the restrictions caused by the COVID-19 pandemic on the volume of sales in restaurants. On a going-forward basis, we currently believe delivery will grow to represent approximately 15% of our total revenues, considering the return of dining-in in 100% of the Group’s restaurants, increasing the sales both in the restaurants and in delivery. In this respect, delivery expenses did initially reduce our profit margins; however, as the size and scale of our delivery platform has continued to increase, we believe this has allowed us to take advantage of the existing whitespace, while also improving margins, benefitting from economies of scale.

Leverage Recent Investments in Supply Chain and Technology to Expand Margins

Our vertically integrated production, distribution and logistics platform will allow us to increase our profits. Over the past three years, we have made significant investments in our Central Kitchen, distribution network, technology and other shared services, which will be leveraged across our restaurant base for years to come. Significant capacity is built into our supply chain for additional restaurants and increased demand. Furthermore, we believe that our unique model has reduced operational complexity across the entire Grupo Madero network, enabling us to scale efficiently.

In 2019, we increased our capacity and expanded our production capabilities of our Central Kitchen meaningfully, including through our investments in automated bread and burger production and a smoked meat production facility. These investments have grown our bun production capacity to 9.5 million buns per month, while enabling us to consistently maintain our burger production capacity at approximately 16.0 million burger patties per month throughout the period, due to improvements and new machines installed at the Central Kitchen. In 2021, we inaugurated the robotized cold storage, using 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 truck loads and routes in order to optimize our own logistics. The growth in the number of restaurant, as well as our same-store sales growth, will allow us to fully leverage these fixed investments, driving increased profitability and higher margins at the corporate and restaurant levels. We are also constantly evaluating new opportunities to leverage our existing vertically integrated platform and the strength of the Grupo Madero brand through new brands, concepts or locations, to enable us to extend our reach to an even broader audience.

Expand Through New Operations and Brands, Taking Advantage of Synergies Within Our Vertically Integrated Platform

We are a multi-brand restaurant company and our vertical platform allows us to launch and withdraw brands without major investments. We acquired significant know-how in launching the Madero Container and Jeronimo brands, both of which later became relevant to our revenue. We believe we are well positioned to continue expanding with new concepts, such as Ecoparada Madero. The first unit was launched in December, 2020, in Castello Branco highway, and the second unit was launched in July, 2022. This ecologically sustainable complex comprises operations, including Madero Grill, Madero Burger, Jeronimo, as well as the introduction of new brands such as Madero Café, Empório Madero and Convenience store, with each brand having potential of growth in the medium and long terms. Based on managerial estimates, we believe we have the potential to open 100 Ecoparadas across Brazil over the next 10 years.