Leaders of the new parent company of El Torito and Chevys, purchased out of bankruptcy last year, have made several changes to the iconic Mexican food brands including broadening the menus with rotating specials, closing more underperforming stores and adding a labor surcharge in California.
“We’ve been spending the time to determine what part of the portfolio makes the most sense for a long-term investment,” said Randy Sharpe, CEO of the newly formed Xperience Restaurant Group.
Xperience, based in Cypress, Calif., was formed in late October 2018 after private-equity firm Z Capital Partners LLC completed its acquisition of assets of the Real Mex Restaurants Inc. The purchase came after the company, known for its large collection of full-service Mexican restaurants, filed for bankruptcy protection for the second time in six years in early August. Terms of that deal were not disclosed.
With its finances stabilized, the new owners signaled a fresh start for the company by rebranding. Sharpe said the new name Xperience represents what the company stands for: service and hospitality.
“It rang with all of us,” Sharpe said. “We really want to be about the experience. It doesn’t limit you to just Mexican.”
During an exclusive interview with Nation’s Restaurant News, Sharpe discussed some of the immediate changes he’s made at the company, while also talking about what’s ahead.
Menu surcharge in California
Sharpe, previously the senior vice president of operations at Romano's Macaroni Grill, said a few restaurants began testing a mix of surcharges and price increases last year prior to his appointment.
The overwhelming feedback was that the surcharge went over better than expected with guests, he said.
In January of this year, he made the call to roll out a 3 percent surcharge at all California restaurants, which have been hurt the most by “brutal” rising labor costs, he said.
On Jan. 1, minimum wage for businesses employing 26 or more employees increased by $1, to $12 an hour in California. The hourly rate will increase to $15 in 2022.
The 3 percent surcharge applies to most of the company’s restaurants, roughly 46 of 52 locations. That includes all El Torito, El Torito Grill, Acapulco, Chevys and Pink Taco restaurants in California. The only exception is the brand’s upscale coastal restaurant, Las Brisas in Laguna Beach, Calif. That menu is still under evaluation, Sharpe said.
The surcharge is communicated to guests in two ways: a sign at the hostess table and a statement on the menu. Sharpe, who served as vice president of operations for Real Mex before leaving for Macaroni Grill, said he’d rather do a surcharge than bury price hikes within the menu.
“We want to try and avoid that,” he said.
Will there be more closures?
At the end of 2015, Real Mex operated about 109 Chevys, Acapulco and El Torito restaurants.
At the time of the August bankruptcy, the company had downsized to 78 restaurants. In the asset sale, the new owners purchased 56 restaurants.
Since the deal closed, Sharpe said he’s closed three underperforming restaurants. A fourth closure occurred in Northern California, but only because lease negotiations failed.
After years of closures, Sharpe said he has no plans to shutter more restaurants. In fact, the company is looking to grow.
“We are done with closing restaurants, and our goal is to extend any leases coming up,” he said.
In terms of expansion, the company is considering buying another chain and growing a few of its existing brands including the fine-dining Las Brisas.
Sharpe said the Mexican resort-themed restaurant is looking at a possible site in Vancouver, Wash.
“We feel really good about growing Las Brisas,” he said.
Also in the works: Pink Taco is expected to open two more locations — a new unit is slated to open in May in Boston and another will open in June in Miami. Sharpe is also looking at opening a Chevys in Las Vegas, though no lease has been signed.
Adding a new brand to the portfolio is also a priority. It could be “big, small or fine dining” and it doesn’t have to be a Mexican brand, Sharpe said.
“We are actively looking for an acquisition that makes sense to our company and our hopes is to have that take place in 2019,” he said.
Menu and store refresh
After scouring the books to look at restaurant performance, Sharpe said his team also looked at the culinary offerings at each concept.
“We’ve gone through and analyzed every single menu at every single brand,” he said.
He discovered menus had grown stale and didn’t offer enough variety. In fact, a lot of trimming had been done, limiting each restaurant’s ability to attract a wider audience, he said.
To fix that, each brand is introducing a “Chef’s Specials” menu, which features classic dishes revived from the company’s recipe archives but with a modern spin.
The new menu, which will rotate each quarter, has already debuted at El Torito, El Torito Grill and Acapulco. Next month, Chevys will roll out new dishes, including a new plated brunch on Saturday and Sunday.
At El Torito, the featured dishes include a crispy flautas appetizer served with a side of jalapeño and red pepper dip; tacos al pastor; a grilled barbecue burrito stuffed with shredded carnitas, rice, and whole pinto beans; and a salmon entrée with Veracruz sauce served on a bed of sautéed vegetables.
“They are a twist on some old classics,” Sharpe said.
Over the next two to three years, each restaurant will go through a refresh. The extent of the changes will vary by restaurant, but Sharpe said customers can expect fresh paint, new upholstery and updated fixtures.
“We’re not going to be shy about taking care of the restaurants,” said Sharpe, who was headed to Monterey, Calif. to oversee an extensive overhaul at an El Torito in Cannery Row.
While it’s too soon to tell if any of the changes are working, Sharpe said he’s happy about where the company stands. Since emerging from bankruptcy, “we’ve seen positive sales every month,” he said.
“We feel great about these brands. They have tremendous amount of guest loyalty. We just want to do our best to make them relevant and make them a part of people’s lives for a long time.”
Contact Nancy Luna at [email protected]
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