Hot Concepts: Abuelo's Mexican Diplomacy

Abuelo’s customers journey to the center of Mexico.

By Deborah Silver -- Chain Leader, 3/1/2004

Abuelo's Mexican Food Embassy

The dining-room walls of Abuelo’s Mexican Food Embassy restaurants replicate murals by famous 20th-century Mexican painters. Each site also prominently displays hand-carved statues by Mexican artisans. The artwork signals that Abuelo’s is serious about its cultural heritage and the food that represents it.

“We’re nothing like what most Americans think of when they think of a chain restaurant that specializes in Mexican food,” says Charles Anderson, president of Abuelo’s. “Border-town food—enchiladas, tacos, etc.—has its place, but there’s so much more to Mexican dining.”

Transforming Tradition
Anderson developed the idea for Abuelo’s, which means grandfather’s or elder statesman’s, after traveling extensively in Mexico. When he returned to the United States, he couldn’t find food that was reasonably priced and comparable to the quality fare he had eaten in Mexico. “The goal of Abuelo’s is to introduce Americans to the more complex and interesting side of Mexican cooking without totally challenging the flavor profile that’s comfortable for them,” Anderson says.

Co-founders James Young (l.) and Charles Anderson plan to introduce Abuelo’s high-end, moderately priced Mexican fare to customers nationwide.

The concept’s house specialties reflect an innovative approach to Mexican dishes. Beef tenderloin medallions are wrapped in bacon and grilled; mahi-mahi is served with shrimp, scallops, mushrooms, red peppers, sliced avocado and cream sherry sauce; and sauteed chicken breast is topped with sliced zucchini, roasted red peppers, onions and spicy cream sauce.

Even traditional Tex-Mex dishes have a unique twist, including enchiladas with shrimp, scallops, mushrooms and roasted peppers covered in sherry sauce, or layered with beef and cheese and topped with chili con carne and two eggs. Substitute side dishes for rice and refried beans include Mexican-potato or spinach casserole. For the less adventurous, items such as burritos, chimichangas and fajitas are available. Dinner entrees range from $9 to $16, while lunch dishes average about $6.

Abuelo’s decor also combines the unusual with the traditional. Besides the murals and statues, the dining room resembles an open-air courtyard in Mexico, complete with a high, painted-sky ceiling, white pillars and tropical plants. Large statues of important figures in Mexican history, such as Augustin de la Rosa, a priest known for his work with the poor, greet patrons as they enter.

The company selects sites based on their proximity to retail malls, high-end mixed-use developments, middle- or upper-middle-class housing, business centers and hotels. Older units are located in in-line or end-cap sites, while most of the new stores are freestanding. Seating capacity is 112 in the newest units, which are 7,800 square feet in size. The original restaurants—the first of which opened in 1989—are larger, but management has since reduced the size because, Anderson says, an intimate setting proved a better fit for the concept.

All Systems Go
Unit size may have been scaled down, but the chain’s expansion plans are anything but small. Abuelo’s parent company, Food Concepts International Holdings Inc. in Lubbock, Texas, is poised to take its 16-unit concept nationwide. By year-end, it will open five units in its current markets of Arizona, Oklahoma and Texas, and one in Arkansas. Within two years, Abuelo’s will add Illinois, Indiana, Kansas, Missouri, Nebraska, Ohio and Tennessee to its roster. By 2007, FCI expects 50 Abuelo’s in operation.

To fill the ranks of its expanding empire, FCI has developed an incentive program for restaurant managers that does not require them to put up cash for profit sharing or stock and rewards them with a competitive base salary and a share of their units’ profits. When a restaurant hits a sales target, its manager also receives stock and stock options. “We’re trying to develop entrepreneurs with incentives based on sales,” says Robert Lin, FCI president.

In addition, Abuelo’s is expanding and developing its training program. Store managers first work each position in a store. Then they advance to department managers. “Everything is made from scratch in our kitchens, and we also have elaborate presentations,” says Anderson. “We expect all our managers to be able to not only make our dishes but also plate them correctly.” They also must know how to maintain every piece of equipment in the restaurant.

“We want hands-on managers,” says Lin. Because the concept is young, FCI is recruiting managers from outside the company. As it expands, the company expects to hire managers internally.

Dishes such as Los Mejores de la Casa—medallions of beef tenderloin and bacon-wrapped shrimp—reflect Abuelo’s innovative approach to Mexican cuisine.

Ethnic Experience
Ambitious growth plans are new for FCI, which was founded by James Young, a Chinese immigrant, in 1974. The company’s first concept, Chinese Kitchen, grew to 12 units, all but one in Texas. Anderson brought the idea for Abuelo’s to Young, who liked it and decided to develop it under the Food Concepts umbrella. In 1996, after Anderson had firmly established Abuelo’s momentum, Young decided to phase out Chinese Kitchen and focus the company’s efforts on Abuelo’s.

Whether Americans are ready for an upscale yet moderately priced Mexican chain is yet to be determined. The consumer’s increasingly sophisticated palate expects more diverse flavor profiles and authentic ethnic cuisine, says Gerald Hornbeck, president of Concept Management, a Nashville, Tenn., restaurant-consulting firm. And now that 12 percent of the U.S. population is Hispanic, according to the 2000 U.S. census, there is a heightened awareness of Latin foods.

A statue of Augustin de la Rosa, a Catholic priest who helped Mexico’s poor in the 1800s, greets patrons as they enter Abuelo’s dining area, which resembles an open-air Mexican courtyard.

But sales at several full-service Mexican chains dropped last year, and Dallas-based Brinker International Inc. announced last summer that its 16-unit Cozymel’s Coastal Mexican Grill is for sale. “The concern is that the growth in numbers of fast-casual Mexican restaurants will continue to put pressure on their full-service Mexican counterparts,” says Mark Kalinowski, restaurant analyst with Salomon Smith Barney in New York.

Bounty at a Bargain
Abuelo’s appears to have escaped that pressure thus far. With a check average of $12 at lunch and $15 at dinner, its systemwide sales for 2003 are $45.8 million, up 10 percent from the previous year. If new units open according to schedule, systemwide sales in 2004 are projected to jump to $70 million, based on an average unit volume of $3.5 million.

Consumers appear to be won over by Abuelo’s, despite an overabundance of Mexican restaurants in the area. Dotty Griffith, restaurant reviewer for the Dallas Morning News, considers the operation one of the best. “Abuelo’s greatest asset is its variety,” she says. “With its ample portions and moderate prices, it’s tough to beat.”

Anderson believes that Abuelo’s upscale dishes and affordability will catapult the chain into the limelight. “People who come to Abuelo’s are ready for a special ethnic experience,” he says. “We expect to do for Mexican food what P.F. Chang’s did for Chinese.”