The Mexican way

28 June 2012
The Mexican way

Since 2007, the Mexican dining scene has taken off in a big way. But has the market peaked or are we set to see a Mexican restaurant on every high street? Elly Earls finds out

Over the past five years, the UK, and particularly London, has witnessed what can only be described as an explosion in fast casual Mexican dining, with Benito's Hat, Wahaca, Tortilla Mexican Grill, Chilango and Mission Burrito opening within months of each other in 2007-08. Since then, established American brand Chipotle Mexican Grill has joined their ranks, and the sector's growth shows no sign of slowing.

"There's room for lots of players in this market and Mexican has nationwide appeal," says Paul Backman, director of services at analyst firm Horizons, which specialises in the food service sector. "There's a lot of growth potential outside the main cosmopolitan centres."

For many of the sector's newest operators, the decision to create a Mexican offering was based on their experiences in the USA.

"I grew up in California, where I've eaten tacos and burritos since before I can remember," says Brandon Stephens, founder of Tortilla Mexican Grill. "When I arrived in the UK, I couldn't find a decent burrito at a reasonable price. After researching it, I realised there was a market for such an offering and decided to start Tortilla."

Ben Fordham, founder of Benito's Hat, was similarly frustrated at the lack of good-quality Mexican restaurants in the UK.

"In Texas, it's on every street corner and it's everything from spit-and-sawdust plastic tables and chairs to fine dining," he says. "But it was this simple, fresh, casual version of it that London was really calling out for."

So what is it is about the Mexican offer that appeals so much to the discerning cosmopolitan consumer?

"It's safe exotic," says Jan Rasmussen, co-founder of Mission Burrito. "It's food people recognise but it's a bit different from the usual British flavours."

"Everything from vanilla to chillies to tomatoes to avocado to squash are indigenous to Mexico, so there's an incredible variety and depth," Mark Selby, co-founder of Wahaca, adds. "It is the richest culture of food in the world, and we're a nation of flavour lovers."

Perhaps more importantly, Mexican cuisine slots effortlessly into the casual dining model, which has seen massive growth in recent years.

"People are moving out of top-end, full-service restaurants into this casual dining area. It's good value, it's consistent and it's quick," notes Guy Fielding, business development director of NPD Food Service Europe.

The casual offer also appeals to a variety of demographics. "Office workers enjoy it at lunch as it's affordable, available quickly and very tasty," Stephens explains. "‘Young revellers enjoy the fact that it's a cheap and cheerful dinner and families enjoy it because it's fun, casual, hand-held food that works for kids."

Mexican cuisine is also relatively healthy compared with its casual dining competitors. "It doesn't have to be heavy, reheated, sloppy and refried," Stephens says. "A Tortilla burrito with rice, beans, chicken, salsa and guacamole has less fat than an average Pret sandwich."

top class ingredients

For Jacob Sumner, MD of Chipotle Mexican Grill in the UK, another important reason the American brand's offering works so well in the UK is the potential to source great raw ingredients from sustainable sources.

"Great ingredients are more readily accessible over here than they are in America and that's at the core of who we are," he explains.

Selby, whose Wahaca chain was voted Sustainable Restaurant Group of the Year 2012, feels that sustainability is set to become more key to the Mexican dining sector.

"We're trying to work with innovative farming communities so we can source things like chillies from closer to home," he says.

With the Mexican sector becoming increasingly established, competition is on the up, particularly in the capital.

"When we launched, we only knew of a burrito shop in Soho, a small chain in Manchester and a competitor up the street," Stephens recalls. "Now there are numerous chains with multiple sites."

Yet, none of the operators are phased. "I've got a healthy view of competition," says Morgan Davies, co-founder of Barburrito. When it launched in Manchester in 2005, it was not only a new brand, but also a new category.

"Although we had good levels of repeat business, we were constantly having to get people to try the product," Davies explains. But as the brand begins its expansion into London, Davies is confident he will not face the same challenge. "There's a much greater understanding of what a burrito is now and I'm looking forward to the competition."

For Davies, the reason Barburrito has been so successful is because of the company's heavy investment in its supply chain, its operational controls and its service standards. "We've been doing this for seven years and we've got a fairly clear view on how to run a burrito bar," he notes. "You need to be entirely on top of both your supply chain costs and your operating costs."

Indeed, although Mexican food businesses have the advantages of low labour costs, particularly if they offer counter service, and a small retail footprint, there are challenges that come with offering a cuisine replete with such high-quality ingredients.

"The margins on the food are tricky, as we require specialised products," says Stephens. "Ancho chillis are not cheap and neither are Habañeros or jalapeños."

beefing up profits

There is also a lot of protein in a burrito, which means operators can struggle on the meat margins. Adding alcohol into the equation is one solution.

"We have a full all-day offer," Fordham says. "And when you're combining a burrito with a margarita or a beer, that makes the money side of things that bit easier."

But with the sector's good value being such a key draw for consumers, it is essential that operators don't overprice on alcohol. "It's important that they keep that value proposition for the customer and keep the pricing right," Fielding stresses. "They also need to keep offering something new and inventive to consumers to keep the interest level there, particularly in London where there are other cuisines, such as Vietnamese, Korean and Lebanese, dipping their toes in the market."

Looking further to the future, Fielding predicts that the sector will be split into London and the rest of the country. "In London, there will be enough traffic to support independent restaurants, but outside London, it will be chain-led in the big city centres," he says. There's little doubt, however, that significant growth will be seen in both areas.

"There'll come a time where competition is competitive," Fordham concludes. "But, right now, I'm just excited to be part of it."

Chipotle Mexican Grill
Chipotle opened in the USA with a single restaurant in 1993 and now operates more than 1,200 outlets. The established brand launched its first UK site in London in 2010, and will have five UK restaurants by the end of Q2 2012. The brand aims to do "a few things better than anyone else" and prides itself on its fast throughput. Although there is usually a queue at lunchtime, customers receive their meals within five to six minutes (UK sites only).
Founded 2010
Outlets 3
Staff 65
Founder Steve Ells
Financial backers Listed on New York Stock Exchange as Chipotle Mexican Grill (NYSE CMG)
Average spend £9-£11

Founded in 2007, Chilango, which takes its name from the word for a Mexico City dweller, has made innovative use of social media to grow its brand. "It has worked out well for us because it has not only allowed us to have a bit of fun with people; it also allows us to rectify mistakes very quickly and very publicly," says co-founder Eric Partaker, who aims to grow the business one restaurant at a time, never compromising on the quality of the food, the people or the environment.
Founded 2007
Outlets 3
Staff 45
Founders Eric Partaker, Dan Houghton
Financial backers Venrex Investment Management, Ambient Sound Investment, Don Henshall (former CEO of Krispy Kreme), Chris Moore (former CEO of Domino's), Mike Dowell (former CEO of Costa Coffee), Simon Kossoff (CEO of Carluccio's), Kevin Bacon (former MD of Jamie's Italian International), Laurie Morgan (former VP of marketing for McDonald's UK)
Average spend £7-£9

Tortilla Mexican Grill
Tortilla Mexican Grill operates eight sites, but owner Brandon Stephens is anything but complacent. "Competition keeps you on your feet," he says of the growing number of Mexican operators cropping up. "But it also means there's increased demand for certain Mexican ingredients."
Founded 2007
Outlets 8
Staff 160
Founder Brandon Stephens
Financial backer Quilvest
Average spend £8, including a beer

Mission Burrito
One of the few Mexican chains operating outside the capital, Mission Burrito launched in Oxford in 2008 and has since opened sites in Reading, Bristol and Bath. Although it currently has little competition, co-founder Jan Rasmussen is watching the situation like a hawk. "In five years' time, there will probably be a burrito place on every high street," he predicts.
Founded 2008
Outlets 5
Staff 50
Founders Jan and Sharon Rasmussen
Financial backers None
Average spend £8.50

Benito's Hat Mexican Kitchen
Benito's Hat co-founder Ben Fordham lived in the USA in 2000-01, where he witnessed the gulf between the Mexican food being produced in America and what UK consumers were eating "in the name of Mexican food". He felt that London was calling out for a simple, fresh, casual version of real Mexican food, and, in 2008, Benito's Hat was born.
Founded 2008
Outlets 4
Staff 50
Founders Ben Fordham and Felipe Fuentes Cruz
Financial backers Private investors
Average spend Under £10

Manchester entrepreneurs Morgan Davies and Paul Kilpatrick were the first people to open a burrito bar in the UK, and the North-west business Barburrito now operates six sites in Manchester, Liverpool and Leeds. Having recently attracted £3.25m in new investment, they now plan to triple the number of Barburrito restaurants and target the London market.
Founded 2005
Outlets 6
Staff 100
Founders Morgan Davies, Paul Kilpatrick
Financial backers Rapid Realisation Fund and Business Growth Fund
Average spend £6.70

Wahaca was started in 2007 out of co-founders Thomasina Miers's and Mark Selby's desire to bring Mexican market eating to the UK.
"No one was really doing any form of food in the UK that did justice to the food that you get in Mexico at a street food level," Selby explains.
Wahaca now operates six outlets as well as Wahaca's Mexican Street Kitchen, a fully converted 1958 Citroen HY van, which allows the business to experiment with new recipes and locations.
Founded 2007
Outlets 6
Staff 350
Founders Thomasina Miers, Mark Selby
Financial backers Capricorn
Average spend £15

Las Iguanas
Las Iguanas started in Bristol in 1991 and now has 26 outlets, with the latest opening in Cambridge.
Founded 1991
Outlets 27
Staff 900
Founder Eren Ali
Financial backers Bowmark Capital
Average spend £22

Chimichanga, part of the Prezzo group, opened its first restaurant in 2003 and now has 17 sites.
"We believe there is enormous scope to grow the brand and we're looking to open many more outlets," says chief executive Jonathan Kaye.
Founded 2003
Outlets 17
Staff 250
Founder Jonathan Kaye
Financial backer Prezzo
Average spend £17

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