February 18, 2008
Taco Del Mar, Panchero's, Juan's Mexicali Cafe and Baja-Sol Restaurant Group capitalize on slightly lower price points than other Mexican fast-casuals to help fuel expansion. Taco Del Mar will open up 50 units this year with the first 25 openings in the next couple months. With 12 leases already inked, Panchero's pipeline includes up to 20 units opening this year. The company anticipates ramping up expansion in 2009 with 35 to 40 units. Juan's will rev up expansion again after taking a break to slim down its prototype in order to provide better ROIs. Watch for six to eight units this year. Baja-Sol is in development for 13 Baja-Sol Tortilla Grills and three casual-dining Baja-Sol Cantinas. The company plans to open 25 units by year's end.
It is apparent that consumers are more frugal than last year and the difference of only a couple of bucks could dictate restaurant selections. Taco Del Mar, Panchero's, Juan's and Baja-Sol are careful to keep price points in the $7 to $8 range, about $2 below segment average. Fast-casual Mexican concepts have always benefited from being perceived as a healthy option with a lot of fresh vegetables. In recent years, black beans, brown rice, white meat chicken and whole-wheat tortillas have increased the healthy profile, but the average check has also increased. Some fast casuals are past the $10 average check mark. A concept can't go too low or it risks entering the Del Taco and Taco Bell domain, and no one wants that. Look for these concepts to set this $7 to $8 pace for the next year or so, and rope in customers who will become loyal to a healthy but affordable Mexican option.
Watch for Taco Del Mar to break into a ton of new markets this year up-and-down the Eastern seaboard and in the Midwest including - The Carolinas, Central Florida, Georgia, Indianapolis, Virginia, Albany, N.Y., Grand Rapids, Mich., and Chicago. The very next store will open this month in Detroit. The concept pushes a value meal this year with a burrito, chips/salsa and a drink for $4.99. An average check fits nicely into the niche at $7.25. Signature items include the Mondo Burrito and Rippin' Tacos. Keep an eye on Taco Del Mar to make a big push in SoCal with units in development for Orange, Los Angeles, Riverside and San Bernardino Counties. The concept works best in 1,200-s.f. inline spots, but some newer units are as large as 2,000 s.f. Franchise Sales Manager David Welts likes power centers and ideal neighbors are big-box retailers like Costco, Wal-Mart and The Home Depot. The 272-unit concept proves it can grow quickly by adding more than 50 units since the end of 2006. Owner-operators make up around 70% of franchisees. An average initial investment to open one unit is only $200K.
Panchero's heads into Arizona, California, Georgia, New Jersey and Virginia this year with an upscale product at a fast casual price. The company boosts it menu offering by featuring fresh pressed tortillas to order while still keeping price points under $8. With tortillas morphing from a ball of dough in front of your eyes, it's no mystery why one in four people orders a quesadilla. Founder and President Rodney Anderson looks for end cap units around 2,400 s.f. Panchero's likes neighborhood and lifestyle centers but is careful to make sure parking and accessibility is easy. Co-tenants can outweigh the type of retail center when determining sites. Starbucks, Cold Stone Creamery and cell phone retail stores work well as neighbors. Big-box stores are okay, but Anderson is choosy on which retailers will work. Panchero's prefers established markets and is much less likely to go into an upstart community, especially with the economy taking a downturn. The concept looks for multi-unit franchisees that can sign on for a minimum of three units but five or six is ideal. An average initial investment to open one unit is $350K to $360K. Typical fast casual prevails at Panchero's: burritos, quesadillas, tacos, fajitas and salads.
Expect Juan's Mexicali to focus on Arizona, California, Florida, Georgia and Texas for future expansion. The company plans to double its goal for 2009 with 14 to 16 units opening. Juan's brought on a third partner, Chairman of the Board Mark Roden, to help raise ROIs and decrease unit sizes. The concept re-enters the franchising game after a short hiatus. During the break, the concept shaved more than 700 s.f. off its prototype bringing it down to about 1,750 s.f. The menu is also slimmer to help ensure a higher quality product and a $7 to $8 average check. Decór and equipment packages were reevaluated to help raise ROIs. The company looks for inline units with office and retail neighbors within a one to three mile radius of a residential development. Juan's attracts a similar clientele to Panera Bread and Noodles & Co., which are both good neighbors.
Keep an eye on 14-unit Baja-Sol to more than double in size this year in the Midwest - especially in Chicago, Columbus, Ohio, and the Twin Cities, as well as San Diego and New York. The concept brings flavor combinations from Central and South America and features a salsa bar with eight varieties. An average check is around $7.50. President Bridget Sutton looks for units around 2,000 s.f. to 2,500 s.f. The company prefers end caps but inline units also work. Lifestyle centers are ideal and other restaurants, entertainment, shopping and movie theatres are great neighbors. The franchise is $25K with 4.5% royalties. The concept's decór is very contemporary with original artwork; so don't expect to find any sombreros, adobe or tiles here.
Baja-Sol Cantina is a full-service casual-dining version of the Baja-Sol concept with an expanded menu. The company's pipeline contains three more Cantina's for this year. The ideal size of a Cantina is 5,000 s.f. to 6,000 s.f. with 150 seats, and an average check is about $12.50. Watch for the company to use the Cantina as the prototype for expansion.