PE firms shell out the big bucks for taco fast casuals

As news swirls of Taco Cabana parent Fiesta Restaurant Group possibly being sold to a private-equity firm, Restaurant Business is taking a look at other taco-centered fast casuals that have attracted attention from investors. Taco brands are making gains in the fast-casual Mexican segment—currently dominated by burrito and bowl kings like Chipotle, Qdoba and Moe’s Southwest Grill—for their portable street food-style tacos made with premium ingredients like scratch-made tortillas and natural proteins, often available from breakfast through late night. Here’s a look at other taco brands that have received investments.

Serving Mission-style burritos and tacos in New York City, Dos Toros Taqueria attracted the attention of leaders from not one, but two growing fast casuals. Chopt CEO Nick Marsh’s investment group GrowthPoint Partners—which also includes Chopt founders Tony Shure and Colin McCabe, along with Mendocino Farms founders Mario del Pero and Ellen Chen—made a $10 million minority investment in Dos Toros in late September. The investment will mostly be used to fund Dos Toros’ expansion to new markets, starting with Chicago. Dos Toros currently operates 12 units in New York City.

Also in September, Connecticut-based private-equity firm L Catterton announced an undisclosed “significant strategic growth investment” into Velvet Taco, a four-unit chainlet launched by Twin Peaks parent Front Burner Restaurants. From morning until the wee hours, the hip concept offers WTF (Weekly Taco Feature) specials and globally inspired tacos in varieties such as tikka chicken and falafel.

L Catterton is currently searching for a CEO to lead Velvet Taco and grow the brand in new and existing markets; the chain now operates in Chicago as well as Dallas, Houston and Fort Worth, Texas, and plans to further expand in the state through Austin this winter. The firm has invested in about a dozen other restaurant brands, including fast casuals like Mendocino Farms, Snap Kitchen and Piada Italian Street Food.

Fuzzy’s Taco Shop—known for Baja-style tacos, all-day breakfast fare and Fuzzy Driver vodka drinks—received a majority investment from NRD Capital Management to aid in expansion in late February. Since then, Fuzzy’s has grown from 90 to 100 locations in about a dozen states and has announced plans to enter Tennessee next year. CEO Chuck Bush stepped down in September, and NRD is currently seeking his replacement.

NRD—which focuses on growing small to mid-sized franchisors—last year acquired Frisch’s Restaurants for $175 million. The firm is under the leadership of Aziz Hashim, chairman of the International Franchise Association and a QSR chain franchisee.

TPG Growth, part of private-equity firm TPG, acquired Tex-Mex chain Taco Bueno late last year. The acquisition was set to help Taco Bueno—which, at the time, operated 177 units in seven states—expand in new and existing markets. The menu includes BFTs (Big Freak’n Tacos) and pita bread Muchacos along with specials like 59-cent tacos and $2.99 taco platters on select days. 

Though not a fast-casual chain, quick-service concept Del Taco makes an appearance on this list because it’s a recipient of major P.E. money. Levy Acquisition Corp. purchased the chain last year for $500 million and later merged with Del Taco Holdings to become publicly traded Del Taco Restaurants. Since then, the brand has worked on emphasizing freshness and value with initiatives like expanding its Buck & Under Menu and launching LTOs such as beer-battered shrimp tacos and chorizo breakfast tacos.

Del Taco reported on Monday that same-store sales for its fiscal third quarter increased 6.7% from the prior-year period, marking the 12th consecutive quarter of same-store sales gains. The company reported net income of $4.9 million, compared to $0.2 million in the year-ago period.