Charlotte - 14 June, 2005 -

Southeastern-based burrito chain operators, citing explosive growth across their home region and the penetration of outside megabrands into Atlanta, Orlando, Fla., and other markets, say the fast-casual Mexican segment is primed for virtually limitless expansion within and beyond the Sunbelt. Key reasons given are the segment's ability to meet growing customer demand for product freshness, nutrition, service speed and comfort all at affordable prices. Salsarita's Fresh Cantina expects to have 20 units in operation by year-end in such markets as Austin, Texas; Baltimore; and Knoxville, Tenn. "Burrito operators are making money, and that's the main thing driving this segment's growth," said Martin Sprock, founder of Atlanta-based Moe's Southwest Grill, whose 140-unit chain extends as far as Boston, Denver, Phoenix and San Diego. Moe's now sees itself as a first-tier contender among such leading national burrito brands as Baja Fresh Mexican Grill and Chipotle, each with nearly 300 locations, and Qdoba Mexican Grill, which has more than 100 restaurants. Those three segment leaders are owned, respectively, by Wendy's International, McDonald's and Jack in the Box. "Our menus, ambience and delivery systems have appeal to customers wanting more flavor and food quality than they can get with quick service but less cost and less waiting time than they find with casual dining," Sprock asserted. "This is the main logic behind fast casual, but with burritos you get the addition of fresh product." Founded three years ago with three employees, Moe's expects to end the year with 200 units and has another 200 in the development pipeline, according to Sprock. Moe's aim to become a dominant national player is supported by recent 20- and 25-unit area deals with the Tampa, Fla., group that founded and now franchises the Hooters brand in Chicago, and with Rocky Mount, N.C.-based Boddie Noell Enterprises, a leading Hardee's franchisee. "Except for special dining occasions like Mother's Day, people are tired of paying to park, paying for tips and then waiting an hour to eat," Sprock said. "When you go out for burritos, the longest wait is 10 minutes for a great product in a great atmosphere, and that's why this segment is so strongly on fire." Charlotte, N.C.-based Salsarita's Fresh Cantina and Orlando-based Tijuana Flats also have begun to grow explosively via multiunit deals out of their home states. With 17 restaurants already open in Florida, including eight in the Greater Orlando market, Tijuana Flats is poised to enter four new states by early 2005, according to president and chief executive Camp Fitch, a casual-dining veteran who bought into the group three years ago. Since the first of the year, Fitch said, 10 multiunit operators have made commitments for four restaurants each. Among them are former Steak and Ale operator Ray Stanovich and Dairy Queen veteran Don Grimsley, who inked separate deals for Atlanta. Fitch said brothers Richard and Todd Barrett likewise signed separate deals to open Tijuana Flats units in Louisville, Ky., and in Fort Wayne and Indianapolis. Two other groups have committed to the Mobile, Ala., market as well as to that state's Jefferson and Montgomery counties, Fitch added. Elsewhere, he pointed out, four new groups have signed Tijuana Flats deals for Florida. "We'll be double in size by next year, and the opportunities will continue for us," said Fitch, echoing Sprock's view of the segment. "It's a fun, easy and exciting way to eat that is not by accident also very affordable." Also fueling the burrito explosion for Southeastern operators are the advantages of low-budget startup and simplified systems. Tijuana Flats was launched in 1995 with a $20,000 investment by University of Central Florida student Brian Wheeler, who still heads operations for the chain. "The operation is very simple Mexican food is not complex," Fitch said. "We hire 15 people, and that's it. In our system the cashier takes your order, gets your beverages, puts your name on a ticket and hands it to the kitchen. In a few minutes someone comes out and yells your name. There's an element of service that extends beyond quick service. It makes opening and training a whole lot easier." The signature Tijuana Burrito, filled with a quarter pound of beef, refried beans, black beans or chicken, and cheese, starts at $4.50. A smaller regular burrito starts at $2.95, and a vegetarian burrito with beans, Mexican rice and salsa is either $4.95 or $3.75. According to Fitch, Tijuana Flats is generating an average check of $7. Some units are turning 300 covers a day. Lunch systemwide accounts for 55 percent of total sales, and dinner is 45 percent. Beer represents 8 percent of sales. Salsarita's Fresh Cantina, founded in 2000, has seven units open now, and, like Tijuana Flats, has another 40 in development, according to founder Bruce Willette. By year-end 20 Salsarita's will be in operation, according to the company's franchise director, Bruce Holzman. New markets that the brand intends to enter during the next 18 months include Austin, Texas; Baltimore; Knoxville, Tenn.; Louisville; Minneapolis-St. Paul; and Virginia Beach, Va. Meanwhile, Charlotte-based Compass Group has agreed to open Salsarita's units in airports and on college campuses. "Most of our new deals are with multiunit franchisees and area developers," Holzman said. "One of the features they like is our margarita bar a circular arrangement much like a sushi bar for customers who like to stay and dine. They sit, fill out a piece of paper with the order, watch the burrito being made and eat it right there," he explained. Like his peers Sprock and Fitch, Willette sees the burrito segment nibbling away at quick service and casual dining. "None of our segment's biggest players Baja Fresh, Chipotle, Moe's or Qdoba has hit 400 restaurants yet," Holzman explained. "We're where the fast-food segment was decades ago." A menu initiative that speeds service for Salsarita's is the listing of "categories" rather than individual items. "We'll have 40 people in line, and that 40th person is going to be served in six minutes," Holzman said. "The category menu supports faster decision making." Another practice speeding service at Salsarita's is "pricing by protein category," which allows customers to choose their burrito fillings without concern for additional cost. "Once you choose your meat filling, the price is set," Holzman said. "Also, our regular-size burrito introduction [similar to the Tijuana Flats regular version] has become popular with women and children." All of the region's burrito operators confirmed the strength of takeout business. "We're doing 24 percent of sales in takeout without working at it," Fitch reported. "This is not just lunch either it's parents calling in and stopping by to pick up a quick dinner for the family on their way home from work," he added. Atlanta-based Willy's Mexicana Grill and Athens, Ga.-based Barberitos are expanding at a more modest pace compared with that of Moe's, Salsarita's and Tijuana Flats. Nonetheless, their respective growth still is outpacing the industry's other segments. With 13 restaurants and one kiosk now in operation, Willy's has two openings planned for this year and early 2005, according to the brand's founder and co-owner, Willy Bitter. Barberitos, meanwhile, has six units open, four more in the build-out stage and six new-unit commitments, founder and owner Downing Barber said. "Most people who come to us are casual-dining customers," Bitter said. What's more, "there's a whole new generation of entrepreneurs coming our way," Barber said. "Some of them are former chefs, some are former pharmaceutical salespeople they're coming from every industry."

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