Overstuffed burritos made to order were an innovative concept in 1992, when Panchero's Mexican
Grill launched in Midwestern university towns. The filling product made sense to owner Rodney
Anderson, just out of business school himself, and it became hugely popular, especially among male
college students.
But despite their devoted following, the big burritos proved limiting when Anderson considered growth beyond college towns. In 1998 he decided it was time for his brand to grow up, and he began a conversion to upscale fast-casual restaurants, entering the emerging Fresh-Mex category. He expanded into suburbs and picked up new devotees: women and children. "In 1992 we really had to educate people on what we were doing - this idea that we were going to focus on burritos with all kinds of fillings," Anderson says. "Now, it's a lot easier, there's no need for explaining; Fresh-Mex is everywhere."
The experience gained while growing slowly and adapting to customer tastes makes the brand stronger than many fast-growing Fresh-Mex startups, Anderson says. "Not only are we more tested, but we developed in the Midwest, where there have been a lot of high-profile failures in this segment. There's less density and less exposure to new foods. You really have to fine-tune and be efficient. We've done that."
Panchero's truly focuses on the "fresh" in Fresh-Mex, with no microwaves, fryers or freezers in the stores. Meats are marinated and trimmed in-house, and the guacamole is made fresh daily. "Even next to the best of the pre-mades, you can really taste the difference in our guacamole," Anderson says.
More significant to the brand than the fresh meats, vegetables and guacamole are the signature tortillas, hence the slogan, "It's all about the tortilla!" "We make the dough in our stores and bring out dough balls on the line, " Anderson says. "As the customer orders, we press out their tortillas in front of them. Most other Fresh-Mex restaurants steam their tortillas and wrap them in foil to hold them together. We don't need foil; ours are naturally soft, stretchy and chewy."
Burritos are the most popular menu item, but the quesadillas are a close second. "Making quesadillas with fresh tortillas, more so than the burritos, really sets us apart on flavor," Anderson says. Panchero's offers numerous limited-time quesadilla offerings, the most recent being a portabella mushroom quesadilla. Other menu items include fajitas, tacos, and salads served in fresh tortilla bowls. The average check is $7.
Panchero's stores have a warm, industrial look. Exposed ductwork, track lighting and metal accents are softened with warm tones, colorful tile and padded booths.
The chain's aggressive growth began two years ago. There are 32 stores in seven states, primarily in the Midwest, from Colorado to Michigan. The first Florida store recently opened, and there are plans for additional stores there and soon in Illinois and South Dakota. "We are looking for multiunit franchise developers and trying to get more exposure out west and in the East," Anderson says. He plans to have 45-50 stores open by the end of 2006 and 70-75 open by the end of 2007.
"We're a good deal," Anderson says. Recent franchises have opened for $310,000, including all expenses from franchise fees to working capital to equipment and training.
The typical store is 2,400 square feet and an end-cap unit. "We look for upscale suburban areas with a mix of daytime office traffic and evening retail," Anderson says. The ratio of lunch to dinner sales for most stores is 60-40 percent.
Anderson is confident that his truly fresh Mexican concept will compete well against larger, faster growing chains. With 14 years of steady growth behind him, he feels he's on the cusp of greater success. "We didn't start somewhere where success was easy. We're very concerned with single unit economics and are committed to making every franchise work.
WHY IT BEARS WATCHING: Panchero's Mexican Grill sets itself apart from the plentiful fresh-Mex competition with one item: the tortillas. Not only are the made-in-the-store dough balls pressed out in front of the customers when they order, but the signature demonstration is played out on TV commercials and it's the first thing you see on the company web site.
For those who haven't been to a restaurant, intrigue brings them in. For experienced customers, the tortillas bring them back. Being different, if only slightly, can be a major advantage in heated competition.
Anderson expects competition for Panchero's as it moves into more urban areas flooded with
popular fresh-Mex brands, but he says tweaking his concept over 14 years, developing efficiency
and customer understanding, has provided strength to grow successfully at a rapid pace.
"What's really exciting is to see the continued sales growth we're seeing at our stores," Anderson
says. "Many have improved sales by 25 percent in a year. And with more exposure, January started
off at an even faster pace than that."