Fajita Pete’s to-go franchise could be hot target within 2 years, CEO says
02 July 2019
Fajita Pete’s, a Houston-based restaurant franchise focused on delivery and take-out services, could be ready to entertain exit or minority investment discussions by 2021, said CEO Pedro “Pete” Mora.
At that time, the company projects to generate roughly USD 25 to USD 30m in revenue and have roughly 35 stores open throughout Texas, said Mora, noting it is working off a three-to-five-year growth plan.
If it accepted a minority investment, it would use capital to expand the brand into states beyond Texas, said Baker Tilney, vice president of business development and strategy. Other exit options include an initial public offering or a sale, he added.
Texas-based family office Circle G Partners, which has a track record of growing restaurant franchises in Houston, invested USD 10m in Fajita Pete’s in 2018 and owns 50% equity, said Tilney, who works for Circle G Partners.
“They had a good growth plan that’s now benefiting from our infusion of capital and expertise,” he said, noting a significant amount of capital was invested in its mobile online ordering services and digital capabilities.
Fajita Pete’s recently received one buyout offer from another family office, but management felt it is too early for an exit because of the brand’s growth potential, said Mora.
The company generated roughly USD 8m in revenue last year, and it projects nearly USD 10m in revenue in 2019, said Mora.
Currently, it has 11 franchised stores in Texas and seven franchisees. It also has one corporate-owned store and eight corporate employees, he said. With more stores currently under development, it expects to have 18 franchised units open in Houston by 2020.
The Fajita Pete’s concept specifically targets the to-go crowd by focusing on catering, delivery and pickup services, which together comprise 94% of its revenue. “Very little of our business is dining-in,” said Mora, noting each store has only four or five dining tables.
Its menu features Tex-Mex fare like grilled-to-order fajitas, tacos and enchiladas. It also offers Pete’s Ritas To-Go, which are alcoholic margaritas available to-go and sold by the gallon for parties.
The company boasts a small footprint of about 1,200 square feet, roughly 800 of which is kitchen space. “It’s all based on efficiencies,” the CEO said, noting its small size is an advantage when choosing prime real estate for new stores. Each store costs roughly USD 300,000 to build, he said.
Mora, who formerly owned a full-service restaurant, began the delivery- and catering-focused Fajita Pete’s in 2008 after seeing a trend toward on-the-go dining. It franchised its first store in 2015, with support from Circle G Partners.
In 2020, it plans to open franchised stores in the Dallas and Austin areas and hopes to average six to eight a year. By 2021, it hopes to expand beyond Texas into states like Colorado, Tennessee and the Carolinas.
Fajita Pete’s will look to attract more franchisees and meet with potential private equity investors or buyers later this year, when it exhibits at the Restaurant Finance and Development Conference in Las Vegas in November, said Tilney.
PE firms could be interested in investing in multi-unit franchise contracts for specific regions of the US, Tilney continued, noting potential buyers may also wish to establish early contact.
When asked about active buyers in the restaurant franchise and operator space, Baker named New York-based Garnett Station Partners as an active strategic.
Fajita Pete’s banks with Allegiance Bank in Texas.
