Madero arrives in Congonhas and ends expansion fast – 05/10/2023 – Market

The Madero restaurant chain will interrupt the slowdown in the pace of openings, necessary to improve cash conditions and calm investors, to open its first unit at Congonhas airport, in the south zone of São Paulo.

With 155 square meters and 40 seats, the restaurant is located in the departures area of ​​the terminal and should open its doors on May 11th.

Junior Durski, founder and president of the group, says that the Congonhas unit was an old dream. The chain has stores at airports Santos Dumont, in Rio, Afonso Pena, in Curitiba, and Brasília.

Spaces for new businesses at the São Paulo domestic terminal are disputed, expensive and scarce.

Negotiations for the new Madero unit began even before the pandemic (and before the chain needed to change the flight plan). When the process started, the company’s understanding was that it was a justified investment.

According to Durski, the main attraction of the restaurant at Congonhas airport will be the price.

“We’ll sell it for the same price as the others. There’ll be good food and it won’t be more expensive than what you pay elsewhere.”

The foot on the brake in 2022 was a setback for those ready to go public. The IPO (acronym for public offering of shares) was scheduled for May 2020, in New York, but the onset of the pandemic required a route correction.

The group still stuck to the plan the following year. During the window for IPO requests, it requested registration as a publicly-held company, which was approved by the CVM (Securities and Exchange Commission) in November. The public offer, however, did not come out.

The years 2020 and 2021 were bad for business. In the first year of the pandemic, the loss was BRL 249 million, and in the second, BRL 121.4 million. It was in 2021 that the network received a contribution of BRL 300 million from the Carlyle group through the Madrid fund, which today owns 34.4% of the network’s shares.

The accumulated bad results caused the group’s financial debt to skyrocket, which stood at BRL 764 million at the end of 2021 and at BRL 898.8 million in December of last year.

Despite the increase in value, debt fell in relation to Ebitda (earnings before interest, taxes, depreciation and amortization) – from 3.55, in 2021, to 2.53, at the end of 2022; the target was 3, according to the covenants indicators.

To contain the debt growth, Madero needed to hold back openings, downsize operations and improve resource management. Durski says that during the most acute period of the pandemic, the waste rate in restaurants reached 10%, driven mainly by unexpected closures and the lack of control in the balance of inventories. Now, he wants to take that percentage to the range of 2.5%.

Since 2020, the group has significantly reduced the volume of investments to ensure a reduction in leverage.

In 2021, the group also invested BRL 233.3 million in new restaurants, a figure that dropped to BRL 105.8 million last year. The total reduction in investments was 43.3% from 2021 to 2022.

Despite the general tightness, Durski says he is excited. High interest rates, credit, lack of money, all this is a problem, but he says that in the segment in which he operates there have been many ups and downs in recent years.

Without being able to invest in new restaurants, something that would require burning cash, the solution found by the group was the creation of “sub-restaurants” within the chain itself. That’s how Madero Steak House units also started to have an Italian menu, under the name of Legno.

At Jerônimo, hamburgers now share space with Dundee, a fried chicken restaurant. Adding these businesses to established stores was a way, according to Durski, of improving cash flow without making large investments.

The group’s units in shopping malls continue to be affected by the reduction in consumer circulation in these spaces, around 20% lower than at the beginning of 2020.

The Madero group currently has 275 restaurants and maintains a 100% verticalized operating model. In other words, it practically controls the entire chain right up to the end, in the restaurants. From the central kitchen, in Ponta Grossa, Paraná, come chilled hamburgers, washed lettuce and tomatoes, prepared bread.

The central kitchen now has the capacity to serve up to 500 restaurants. The trucks that leave Ponta Grossa belong to the group, as well as the driver who drives them is a company employee.

Durski says that chain control makes sense so that he can guarantee the standard of what is served in each unit, and because it speeds up problem solving. It also costs less than outsourcing, according to Durski, a view endorsed by Ariel Szwarck, the chain’s vice president of finance.

Used lettuces, tomatoes and strawberries from the Madero units are grown by producers who practically only serve the chain.

Szwarck claims that the regularity in demand gives these farmers the security to produce, since the capacity to sell and gains in scale are often pointed out as difficulties in growing organic products, which leads to the increase in the price of these products. “With regularity, we also manage to negotiate good prices”, says the financial head of Durski’s operation.

In order for the salads to reach states in the North and Northeast in conditions of consumption –the journey takes 11 days, as, according to Durski, drivers take all the breaks provided for by law–, they are placed in a type of special bag that regulates the oxygen exchange and maintains quality for up to 32 days.

Often remembered as a Bolsonarist businessman, Junior Durski says he never hid his support for former president Jair Bolsonaro (PL), but that, after the elections, “life goes on”. In an allusion similar to that made by Luciano Hang, another businessman close to the former president, he said that he is rooting for the success of the government, because “we are all on the same plane.”

The first two Lula administrations, recalls Durski, were a good period for business. “Experience, we know he has it. Now it’s time to cheer.”

The IPO projected in 2020 and later in 2021 did not leave the businessman’s plans, but, according to him, it no longer plays a central role in the decisions he makes.

With a book written and ready to be edited, the founder of the Madero group does not hide his desire to end the written record of his history with this step. “There’s an ending missing and I think it could be this one, but let’s open [capital] when it opens.”

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X-RAY | MADERO GROUP

4th quarter of 2022
Net Revenue: BRL 424 million
EBITDA: BRL 113 million
Net loss: BRL 42.3 million
Units: 275 restaurants; of which six are franchises