Tortilla to accelerate expansion to ‘take advantage' of market conditions
Mexican restaurant chain Tortilla has said it expects to increase its number of new openings to 12-15 every year from 2023.
The group said 10 sites were expected to open this year and it plans to increase its roll-out rate to take advantage of the commercial property market.
In its unaudited interim results for the six months to 3 July 2022, Tortilla reported a 30% increase in revenue to £26.9m, like-for-like revenue growth of 19%, and adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA) of £2.5m with a pre-tax profit of £300,000.
The group acquired rival Chilango earlier this year for £2.75m and opened five sites across the UK, as well as one delivery kitchen, taking its total number of sites, including the eight acquired Chilango restaurants, to 84.
The company said its recovery in London continued, with sales trending at 98% of pre-Covid levels across Zone 1, giving it "great confidence" in the Chilango acquisition.
Since the end of the half-year point, the group said its new Tortilla Club loyalty scheme had driven a 29% increase in visitation frequency among loyalty customers, while five of the eight Chilango sites were converted to the Tortilla brand. A further two Tortilla sites opened in Lincoln and Leicester.
Tortilla's sales over the summer period were "more challenging than anticipated", due to a combination of train strikes, the heatwave, and pent-up consumer demand for overseas holidays, with an estimated impact of approximately £250,000 in lost sales.
Despite this, the group said like-for-likes in September were already close to pre-summer levels.
The business also highlighted that inflationary cost pressures remained "the biggest challenge across the industry", estimated to result in a three percentage points reduction in gross margin for the 2022 financial year (approximately £1.8m), driven primarily by an approximately 40% increase in protein costs, and a further £500,000 hit expected from increased utility costs.
However, the group said it would "resist making short term gains" and was "cautious" over significantly raising prices.
Richard Morris, chief executive of Tortilla, said: "Against a backdrop of challenging macroeconomic conditions, I am really proud to report that we have continued to make great progress against our ambitious growth plans laid out at our IPO last year. Our strong top-line growth was significantly ahead of the broader market, again reflecting Tortilla's growing reputation for great value, high quality food.
"We continue to focus on our plans for strategic expansion, accelerating our new site roll-out to locations across the UK through both our acquisition of Chilango and organic roll-out programme. We are pleased to be ahead of our expansion targets set out at IPO, adding 18 sites this year, and excited by the opportunity to increase organic roll-out to 12-15 sites per annum from FY23.
"Times remain tough across the industry at large reflecting the extent of recent cost pressures. However, we remain confident in our ability to successfully navigate our way through these industry-wide challenges whilst continuing to deliver against our ambitious growth strategy.
"Our long-term progress will continue to be underpinned by a firm focus on consistent operational excellence, ensuring a great value proposition, and the continued broad appeal of our offer. The board is highly confident in achieving the group's exciting long-term growth potential."
