“Craft Casual” Sensation Torchy’s Tacos Expects Store Count to Rise to 160 from 71 in Four Years
When Torchy’s Tacos appeared in Orlando, FL this week, it whetted the appetite of the financial community not once but twice: First, with a feast of its tacos, queso, and deserts at a cocktail party Tuesday night. Second, with the appearance of CEO G.J. Hart, who took stage in front of a packed room of investors to lay out the company’s growth plans.
Torchy’s, which offers high-quality fare it dubs “craft casual” and might be called the Shake Shack, Inc. of Mexican restaurants, is partly owned by growth-equity giant General Atlantic and has made no indication of plans to go public. But the company arguably generated the most buzz among the dozens of private companies presenting on the third day of the ICR Conference 2020, which drew upwards of 3,000 attendees.
Most appetizing among Mr. Hart’s comments was a forecast for the company’s restaurant count to more-than double to at least 160 units by the end of 2023 from just 71 units today. The rollout will include growth into at least 15 states from the four where Torchy’s operates today: Texas, Arkansas, Oklahoma, and Colorado. (In the very long run, Mr. Hart imagines an ultimate potential for 1500 locations in the United States).
What makes Torchy’s so hot? As conference attendees could attest, the restaurant utilizes fresh ingredients that differentiate it from incumbent quick-service restaurants like YUM! Brands, Inc.’s Taco Bell or even Chipotle Mexican Grill, Inc. An easy parallel exists with the likes of Shake Shack and BurgerFi, which have used superior ingredients to draw customers from McDonald’s Corporation, The Wendy’s Company, and other longstanding burger chains.
“We shuck our own corn in the kitchen,” Mr. Hart told the audience. In his previous role, Mr. Hart was the CEO of both Texas Roadhouse Inc., whose shares have soared since their 2004 IPO and California Pizza Kitchen. He added that tortillas are freshly-made in house at each restaurant and meats are cooked onsite rather than reheated.
Torchy’s, which was founded in Austin, TX by chef Mike Rypka in a single food trailer, draws on the popularity of street-served tacos, also adding zest with a devil-themed ambience. The dining rooms have giant letters reading “Damn Good” and the mascot is even a baby devil.
The popularity translates to extremely-high average unit volumes, just below $4 million per restaurant per year. That compares with a peak of around $2.5 million at Chipotle during its best years on record.
And while Torchy’s is a phenomenon in Austin where it began, it also competes well against the most authentic Mexican food in towns closer to the border. “We crush it in San Antonio,” Mr. Hart said. He also noted that average sales volumes are above average in new states it has entered beyond Texas.
Of course, there is a cost to preparing extremely fresh food – longer wait times that could discourage customers who are in a hurry. But Mr. Hart said that the company has a program designed to reduce prep times to 7 to 9 minutes, down from 12 to 15 minutes.
Mr. Hart also takes solace in perfecting a food that has become a permanent fixture in American cuisine. “Tacos have been around a long, long time and I don’ think they’re going out of style,” he said.
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