Striking While the Tortilla Warmer Is Hot
Mendocino Farms co-founders Mario Del Pero and wife Ellen Chen have put their money where many mouths are. Last month, the couple invested an undisclosed sum in Dos Toros, a 11-unit New York City-based taqueria chain that plans to expand to Chicago next year. “There is an unbelievable runway for them [to grow],” Del Pero declared in a recent interview.
The timing of the investment is no accident. Investors have been scouting for a viable investment vehicle in the category given the troubles at beleaguered Chipotle Mexican Grill. “I think that with the decline in traffic to Chipotle, the opportunity for other restaurants to capture share and support their desire for flavorful Mexican fare is very high,” Technomic Inc. President Darren Tristano told the Monitor. The market research firm expects Mexican fast-casual to grow 8% overall in 2016.
Del Pero and Chen invested alongside Managing Director Nick Marsh of GrowthPoint Partners, which last month made a $10 million minority investment in Dos Toros. Marsh, an early investor in the Studio City, Calif.-based premium sandwich chain, is also CEO of Chopt Creative Salad Company. “He’s a close restaurant friend that we trust,” Del Pero said.
Although Del Pero declined to reveal how much capital the couple put up, he acknowledged it was their own money. Still, he added, he sought permission for the investment from private equity firm L Catterton, which has a substantial stake in 13-unit Mendocino Farms. “We made it very clear that we’re just investors, though we are a sounding board for Leo and Oliver," Del Pero explained.
Brothers Leo and Oliver Kremer founded Dos Toros (“two bulls” in Spanish) in 2009, slowly opening units in Manhattan and Brooklyn until they added a second inline store in a busy Manhattan food court two years ago. The addition has allowed new units to serve 450 people an hour.
Del Pero wouldn’t comment on Dos Toros AUVs or unit economics but claimed Dos Toros unit sales rivaled Chipotle’s. Before the chain’s food-poisoning problems, CMG reported volumes of $2.5 million. Dos Toros reportedly rang up $20 million in 2015.
He also said the couple would likely offer Dos Toros advice on catering and procurement as the brand scales outside New York City. “We think there is opportunity in catering. So that’s one of the things we can help with,” Del Pero noted.