The Enchilada Millionaire
Mexican-food chains are hotter than chili peppers
The margaritas are smooth and strong at Chi-Chi's in Milwaukee, and the spicy enchiladas pack a punch. Crowds fill the gaily colored restaurant every noon and night. Such enthusiasm for Mexican dining was once largely confined to the Southwest, but now Chi-Chi's and other aggressive chains are sweeping through the heartland like modern conquistadors. With moderate prices and robust fare, they are capturing an ever growing chunk of the American dining-out dollar. Mexican-style eateries gulped down a hearty $3 billion in revenues last year, or nearly 4% of total U.S. restaurant sales. They bit off only $1 billion as recently as 1977, by contrast, and accounted for less than 2% of spending for away-from-home meals.
Not even the recession, which has cut deeply into many other parts of the restaurant business, has been able to cool the Mexican boom. The slump may, in fact, have helped fuel the explosive growth. Reason: many working mothers and two-income families, who are frequent restaurantgoers, have found that Mexican food can be salvation for the budget. The average dinner-and-drink tab is less than $10 at leading Mexican dining spots. Notes Alan Creditor, a top food analyst with the Wall Street firm of Drexel Burnham Lambert: "Mexican restaurants have two things that are very attractive to Americans—taste and a good price."
The south-of-the-border binge has been a bonanza for restaurateurs like Ramon Gallardo, 45, a-Mexican immigrant and ex-dishwasher who opened a St. Louis dining spot called Casa Gallardo just six years ago. The place quickly became so popular that General Mills purchased it in 1979 and immediately began building Casa Gallardo restaurants from Florida to Ohio. The chain (1981 sales: $20.4 million) now has 17 outlets and will soon open seven more. Gallardo, who was promoted from Casa Gallardo president to chairman last June, now drives a silver Mercedes and lives in a posh St. Louis suburb, next door to a restaurateur for whom he used to work as a cook. Says he: "They can't tell me this isn't a great country. Where else could this kind of thing happen to someone who used to wash dishes?"
Larry Cano, 58, has also cashed in on the Mexican craze. A World War II veteran who was once a bartender, Cano opened the first El Torito restaurant in Southern California in 1954. He had 22 eateries by the time WR. Grace & Co. bought him out in 1976 for 450,000 shares of Grace stock, worth about $17.5 million at current prices. At Grace, Cano is president of El Torito-La Fiesta Restaurants (1981 sales: $150 million); he has expanded the division into a 90-unit operation with restaurants strung from Tacoma, Wash., to Tampa. Up to 15 will be added next year.
No other company has gained more from the rage for Mexican dining than Louisville-based Chi-Chi's (fiscal 1982 sales: $35.8 million), the growth champion of Latin chains. The five-year-old firm opened its first unit in a converted A & P supermarket in Minneapolis, and now has 73 restaurants in the U.S. and Canada. The red-hot expansion pushed Chi Chi's profits to $4.5 million in its latest fiscal year, nearly double the level of the previous year.