Franchising Moves to the Back Burner at Tijuana Flats Restaurant Chain
The fresh-Mexican chain puts franchised growth on hold in favor of company expansion.
By Maya Norris, Managing Editor -- Chain Leader, 8/16/2007
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Tijuana Flats was an upstart chain known for its cheap Mexican fare, sci-fi murals and hundreds of hot sauces and poised for franchised expansion when Chain Leader spoke to CEO Camp Fitch in December 2001. Founded in 1995 by Brian Wheeler, then a student at the University of Central Florida, the Maitland, Fla.-based company has since grown to 53 units in the Southeast, Indiana and Pennsylvania, with $49 million in sales for 2006. Chain Leader caught up with Fitch, former president of Steak & Ale and regional vice president of Bennigan’s, to talk about how the sassy concept has set itself apart in the ever-competitive fast-casual Mexican segment and why he slammed the brakes on franchised expansion.
When you first joined Tijuana Flats in 1999, what did you like about the concept?
It was a little edgy, which was fun and very different for me. In my past I had worked for some very conservative companies. So I liked the edginess.
I liked the upfront capital costs to open a restaurant, which was miniscule compared to what I had done. For full service, you’re talking $2 million. And we open them for $300,000 to $325,000, so that was very attractive.
The size of the company being small, and from my perspective, the opportunity to build a company the way I had always envisioned one being built. Very close knit, very personable.
And I just felt that the fast-casual segment really had some legs and that really has proven to be true not just with us.
What did you do to prepare Tijuana Flats for expansion?
We built the necessary systems and put systems in place, established very clear standards, built a succession plan—how we needed to grow the people side along with growing the number of restaurants.
That’s where a lot of companies go wrong, is that they do that backwards. They build a bunch of restaurants and then say, “Where’s the management going to come from?” And we did it really the opposite way. We started growing our people, built what I believe is a very strong management team and structure, and then we went out and built restaurants.
How does Tijuana Flats differentiate itself in such a crowded field of national and regional players?
All of our competitors have a good product, but we do a level of service that nobody else does. When you go to our competitors, you pay your check in the line and you’re done.… Where we have service that takes place until the time you leave the building. We get you another beer. We refill your soda. We clear your table. We get you churros for dessert. So the service goes on. And, again, that’s part of that jazz that we say makes us different from competitors. We have really tried to move the concept almost into a category of its own.
Also the breadth of our menu. We do a lot of things that nobody else does. Nobody else does enchiladas, flautas, taquitos. We do every item that you would find in a full-service, high-end Mexican restaurant. The array of items that we have doubles what anybody else is doing.
We have a really strong focus on dinner. Most of our competitors are viewed as a lunch place. We have broken through that. We do 55 percent of our sales at dinner time.
What do you attribute your strong dinner business to?
It’s a combination of the breadth of the menu as well as the level of service. I think those two things take us out of that lunch-place feel.
What prompted your decision to stop franchising after five years of franchised expansion?
It’s better to answer by telling you what prompted the decision to start it. We were a small company, and it was one of the means that we had for raising capital for company growth. And we had maintained ourselves as a debt-free company from Day One, and we still ‘til this day are debt free. We reached a point where we no longer needed that source of revenue. We would much rather own the restaurants ourselves than to franchise them.
We have a group of franchisees that are great people, good operators. We are thrilled to have them, and we’ll continue to grow with them. But we’re just not bringing on any [more] partners. We don’t need to. We never intended to be a franchised system. We want to own and operate our own restaurants.
How did franchisees react to the news?
They were certainly puzzled. Once they got the reassurance that we were excited about continuing to work with them and they understood, it was fine.
Our restaurants are relatively difficult to operate, and they require a lot of support. Some of our franchisees were relieved that we had made the decision because they were concerned about us diluting the level of support to them. We’ve probably got 12 or 13 current franchisees. They’ll get the high level of support from this point forward.
That’s not to say we’ll never do another franchise. Our approach may change at some point down the road, but right now we just don’t need to.
Do you plan on buying back franchised units?
We have bought back several already. If the opportunity presents itself and it makes sense for that partner and it makes sense for us, then, sure, we would be happy to do that. We have to look at that really on an individual basis.
The one case that I’m thinking of, we bought back two restaurants in Pensacola. The franchise partner there was really in the pizza business. They were a Papa John’s franchisee. And one of the partners bailed, and they wanted to go back and focus on the pizza business. They had 25 Papa John’s and two Tijuana Flats. So I said, “Sure we’ll buy them back.” It was just one of those isolated things that made sense. And I will tell you that we have made offers to other partners to buy their markets back and they’ve declined.
What lessons have you learned from franchising?
Different people have different definitions of what a restaurant operator is and what a high level of involvement it is. And in almost every case, the franchise partners thought that being involved would be very passive. And it’s just not the case with our concept. They really do need to be involved. Once we would coax them into that involvement, then they would really get into it, their level of success would go up. Obviously their sales and profitability would go up as well.
Really understanding the people that we were taking on as partners better would be the biggest lesson that I’ve learned. Capital alone doesn’t make for a good partner. They really need to be operators.© 2009, Reed Business Information, a division of Reed Elsevier Inc. All Rights Reserved.