Hawaiian Bros’ current funding round has a valuation of $450 million. Hawaiian Bros earned $20,604,775 revenue in 2021. Given its recent revenue, the company has a revenue-to-valuation multiple of 8x. Other players in the fast food market average at multiples around 3x to 5x, so Hawaiian Bros’ is somewhat overpriced in this round. It is also helpful to remember how capital intensive it is to pay workers, grow a leadership team, scale restaurants locations, and engage in product development efforts. Given these factors, Hawaiian Bros valuation is only slightly overvalued given its strong revenue growth, market traction, and revenue multiple.

Hawaiian Bros operates in the US chain restaurant industry. It is important to note that while Hawaiian Bros has a possibly more unique flavor profile by pulling inspiration from the Hawaiian islands, it still aims to compete with other chain restaurant giants. US chain restaurants have an estimated market size of $162.6 billion that has grown at an annual rate of 2.2% from 2017 to 2022. Chain restaurants across the US faced serious obstacles since COVID-19 became a concern. Despite this slight dampening, fast food, take-away, and drive-through ordering surged throughout the pandemic. Fast and convenient food restaurants believe this trend will remain far into the future as it ensures safety, convenience, and ease for customers. 

Overall, Hawaiian Bros’ addressable market is large but slowly growing. The company will be facing major incumbents as it attempts to establish its market niche. But this is not a winner-takes-all market, and Hawaiian Bros could succeed in the fast food industry through its unique flavor profile, branding, customer service, and early traction in possibly underserved markets. 

Hawaiian Bros is led by Tyler McNie, Cameron McNie, and Scott Ford. Tyler McNie and Cameron McNie serve as co-founders and co-CEOs, and Ford acts as Hawaiian Bros’ president and third co-CEO. The McNie brothers grew up working in their family’s Hawaiian grill business on the West Coast for nearly 15 years. They longed to share their love for Hawaiian food and the aloha spirit with the greater continental US. After reconnecting with Paul Worcester and Joel Worcester in Kansas City, they had the funding needed to start their fast food Hawaiian plate lunch company. The Worcesters bought the building, and Hawaiian Bros opened its first store in Belton, Missouri in February 2018.   

The team is well balanced with a mix of hands-on restaurant experience and complementary formal corporate management experience. Tyler McNie holds a bachelors in physics from the University of Oregon. Cameron McNie relies on his hands-on experience in the restaurant industry to ensure high-quality service and unparalleled hospitality. Scott Ford also got his start in the hospitality industry and moved on to serve as the owner and president of a restaurant and catering company. Ford’s experience as a management consultant specializing in supply chain optimization project management for large large retailers and franchises is particularly relevant as Hawaiian Bros rapidly expands. 

Paul Worcester and Joel Worcester act as board members for Hawaiian Bros. The two are successful real estate moguls in Kansas City with a passion for startup innovation. Paul Worcester is an active proptech investor, proptech founder, and contributor to Forbes Real Estate Council. He holds a bachelors in biblical studies from Bushnell University. Joel Worcester is a specialist in multi-family real estate fundraising and property acquisition. He holds a bachelors in english and history from Corban University. Their experience in real estate acquisition and property management benefits Hawaiian Bros in identifying new locations and markets to serve. 

The Hawaiian Bros leadership is strengthened through team experience in the food and service industry, catering, and property acquisition and management industries.  However, the company will need to build out its branding, marketing, and legal teams to maintain its strong early traction. Additionally, Hawaiian Bros’ co-founders are generally inexperienced entrepreneurs, and they might need additional executive leadership support to ensure company growth and product development.

The market for fast food is crowded, and it can be difficult to determine qualities that distinguish one restaurant from another. Key market players in this very large market include Burger King, Chipotle, McDonalds, Panera Bread, Chick-fil-a, and Taco Bell, to name a few. These competitors vary slightly in price, specialty focus, and target audience, but they all offer similar products to Hawaiian Bros. Hawaiian Bros tries to distinguish itself through its uncommon flavor profile, focus on fresh ingredients, expansion in underserved markets, drive-through options, and affordable prices.  

Hawaiian fast food restaurants that might be considered to be more “direct competitors” for Hawaiian Bros are few and far between. L&L Hawaiian Barbecue, Homestyle Hawaiian, Rutt’s Cafe, and Aloha Specialties fall into the niche of Hawaiian fast food restaurants, but they lack the widespread regional expansion, affordable pricing, and convenience that Hawaiian Bros offers. L&L Hawaiian Barbecue and Homestyle Hawaiian don’t offer the same fast service, drive-through options, or focus on fresh ingredients. Rutt’s Cafe and Aloha Specialties remain regional and primarily focus on dine-in and take-away options. These more “direct competitors” have much larger menus, offering customers more options but pulling away from the fast service Hawaiian Bros champions. Additionally, Hawaiian Bros’ drive-through design is a serious benefit, as the pandemic demonstrated how dining in restaurants could become obsolete through increased public safety regulations. 

Despite Hawaiian Bros’ early market traction and expansion efforts, there is little that truly differentiates its product from key players in the fast food industry and more niche Hawaiian fast food restaurant space. The company could struggle to attract consumers who are overloaded with fast food choices. Hawaiian Bros hopes that its distinction of offering quick Hawaiian cuisine will help it stand out in the crowd, but it’s unclear if that will be enough.

Hawaiian Bros previously raised $5 million to fuel its growth efforts. Since its last raise on Republic in 2021, its product offering, team, revenue, and customer base has seen significantly high growth. Such growth also means that the valuation has increased from $221.3 million to $450 million. Despite this large valuation jump, Hawaiian Bros has outperformed past milestones and shows no sign of slowing down as it looks to tap into new markets. The growing chain restaurant company is only slightly overvalued, given its growth and profit generation. 

Hawaiian Bros’ revenue grew by 167% from $20.6 million in 2020 to $55 million in 2021, and the company has been profitable for multiple years. The company has 21 traditional locations operating and five ghost kitchens as of December 2021. It boasts a 4.5-star average rating in more than 14,000 ratings and customer reviews. In a survey, 98% of Hawaiian Bros customers were very likely or likely to recommend it to friends, and nearly 80% reported that Hawaiian Bros was the first- or second-highest value compared to other chain restaurants listed in the survey. 

COVID-19 had little impact on Hawaiian Bros operations as the company successfully pivoted to drive-through, pick up, and delivery strategies. Its average unit volume of more than $4 million ranks among the highest in the limited service category that is made up of fast casual restaurants. 

Hawaiian Bros has impressive performance metrics. Growing revenue, profitability, and high customer satisfaction are all strong signals that the company is on the right track.

Overall, Hawaiian Bros investment risk level is very low, although team, differentiation, and market are areas of some concern. Hawaiian Bros team is experienced in the food services industry and real estate acquisition process through hands-on learnings, but the leadership team lacks formal business experience. For the company to continue expanding and gaining traction across the US, Hawaiian Bros will likely need to bring on team members with formal business expansion and management experiences. Additionally, it needs to form legal, marketing, and branding teams to support growth efforts and ensure continuity across locations. 

Hawaiian Bros experiences some market risk due to the competitive nature of the chain restaurant industry and how challenging it is to differentiate their offering. The company may struggle to stand out among established and trusted brands. While the company offers more unique flavor profiles, only time will tell if this is enough to stand out within the market.

Since Hawaiian Bros‘ last round, it has made significant progress and met key development milestones. The company tapped into new markets through the establishment of new locations. It expects to open an additional 20 to 25 locations in 2022 as well. Maintaining current locations and expanding into new locations will increase brand awareness and help to further refine its offering. 

Accompanying Hawaiian Bros new locations was significant revenue growth. The company’s revenue soared from $20.6 million in 2020 to $55 million in 2021, a 167% growth over one year. Hawaiian Bros remains profitable and can begin chipping away at a small amount of long- and short-term debt that it has accrued since beginning operations. The company’s previous valuation was a little over $221 million and has doubled. However considering its substantial revenue, traction within the market, and growing customer base this increase seems justified.

Hawaiian Bros’ biggest concerns are competition and leadership. Hawaiian Bros operates in a crowded, slowly growing market where legacy chain restaurants dominate. Name recognition is often vital for product adoption and brand loyalty. As a relatively new chain restaurant that is still working to expand, Hawaiian Bros could struggle to convert customers if its food quality or convenience suffer due to rapid expansion. To avoid being one of many, Hawaiian Bros will need to maintain high quality food and service while also expanding across the US and developing a distinctive brand that customers can embrace. 

Hawaiian Bros’ leadership team also lacks formal business management experience. While they benefit from hands-on restaurant experience and real estate acquisition experience, they likely will need to introduce new team members for additional business guidance during its expansion. 

Hawaiian Bros is exceeding past goals for financial growth, creating loyal customers, and exploring new marketing opportunities. The company’s revenue has grown significantly to $55 million in 2021, and it has maintained profitability for multiple years. Hawaiian Bros has gained loyal customers through its high quality products, fast service, and unique flavor profiles. The company has expanded to new locations while weathering the challenges COVID-19 posed to the restaurant industry. 

The competition in this industry is fierce, but it is not a winner-take-all industry. Hawaiian Bros provides fast food that isn’t burgers, chicken sandwiches, tacos, or pizza options, making them standout among current competitors. The company’s customer base is strong and becoming more loyal with time. As Hawaiian Bros continues to open new locations, it has the ability to establish a strong market niche through its unique food style. 

Hawaiian Bros is a US fast food chain restaurant focused on offering delicious, affordable, and convenient Hawaiian favorites. Although the founding team lacks formal business management experience, they benefit from hands-on experience in the restaurant industry. Competition in the fast food market is fierce, and the market’s growth is quite slow. 

However, Hawaiian Bros seems to be blazing a trail and creating a name for itself within the US chain restaurant industry. Hawaiian Bros has drastically increased its revenue, team, and number of locations over the past year – despite the pandemic heavily impacting restaurant operations. Hawaiian Bros anticipates opening 20 to 25 new locations in 2022, further driving its revenue, profit, and market share. Overall, Hawaiian Bros offers a solid investment opportunity for investors interested in the food services industry. For these reasons, Hawaiian Bros is a Deal to Watch.

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Analysis written by Carolyn Price, April 20, 2022.