MEXICAN WAVE

Casual dining’s growing tribe.

The marketplace is bustling: think Guzman Y Gomez, Mad Mex Fresh Mexican Grill, Salsas and Zambrero. Add to this list the longstanding chain of Montezuma’s restaurants, the innovative Burrito Bar, the Funky Mexican Cantina concept, and Taco Bill, the first Australian business to capitalise on Tex-Mex cuisine and not to be confused with US favourite Taco Bell, owned by Yum! Brands.

And while Taco Bell is exploring growth across Australia, Guzman Y Gomez has staked out a path to US expansion, backed by a mega capital injection from the Magellan Financial Group. The first store opened early 2020 outside Chicago.

In August 2020 GYG passed a mega milestone, turning over $1 billion since opening 14 years ago.

TEX-MEX TRENDS IN THE US

The latest report (August 2020) from IBIS World, Mexican Restaurants, reveals the hugely popular US dining option has embraced technology, particularly with delivery and takeaway options.

Some chains have reconfigured their restaurant layout to add more kitchen space dedicated to off-premises dining demands.

The US Mexican wave has also brought menu innovation focused often on expanding vegetarian meals.

WHO OWNS TACO BELL IN AUSTRALIA?

Good question. The parent company is Yum! Brands, based in the US. When the business brought the brand to Australia in 2017 it was the third attempt to get the high-profile global chain established here.

To help achieve this, Yum! signed a deal in 2018 with Collins Foods, a big franchisee business operating a number of fast-food brands, to open 50 outlets across Australia. Collins Foods started with seven restaurants in its home state of Queensland.

But Restaurant Brands, another multibrand operator, based in New Zealand, is also spreading the Tex-Mex love with Taco Bell expansion across NSW.

BURRITO BAR’S MEXICAN FUSION

The Burrito Bar fuses Mexican street food and art, offering both take-aways and a dine-in experience accompanied by a cocktail, beer or tequila.

It’s expanding beyond its Mexican roots however, bringing in new revenue streams for franchisees.

Last year, it piloted a Baskin-Robbins ice-cream and dessert parlour in a Burrito Bar restaurant and the concept took off.

Its first drive-thru site will also be the first to showcase a restaurant partnership with sister brand Smokin

Ribs & Burgers, previously just an online delivery service.

The unveiling of the first Smokin Ribs & Burgers physical restaurant means franchise partners can enjoy four distinct revenue streams: the Burrito Bar, dessert parlour, Smokin Ribs & Burgers, and drive-thru.

“This not only helps boost profits, it also creates a more resilient business,” says GM Shaun Butcher.

Q&A WITH MAD MEX

Inside Franchise Business posed founder Clovis Young some questions about the business.

Q. WHAT INNOVATIONS ARE HELPING FRANCHISEES’ BUSINESS?

A: We’ve completed a major aesthetic design refresh to our restaurants to align them with our “fresh fuel for life” brand positioning. We want to support and inspire our customers to live a big life and to eat healthy and tasty Mexican food as part of these big life ambitions. Our restaurants provide a beachy, relaxed environment that suits the “Mexicana” theme, and is decluttered, clean and bright.

With delivery growing, we’ve also partnered with delivery providers to extend the reach of our stores and deliver the

Mad Mex brand experience into people’s homes. Our brand-new app reflects the FFFL design and makes it faster and easier for customers to place orders and get cool loyalty member benefits.

Our digital marketing has evolved to be more metric and ROI oriented and when combined with grassroots local area marketing is helping franchisees reach their community beyond the bounds of their restaurant, resulting in greater engagement and more customers.

Q. WHAT ARE THE BIG CHALLENGES FOR THIS YEAR?

A. Our biggest challenge was pivoting to a fast and nimble mentality, and the team totally embraced the urgency that Covid-19 forced on all of us. In the first three months of the pandemic, we did 12 months’ worth of work, all while working remotely. It was inspiring to see the team rise to the challenge.

The recovery out of Covid will continue to disrupt our businesses, with many of our locations in the CBD and airports, but we are already seeing a recovery in these markets. We expect the CBDs will continue to be a challenge in 2021 and that the five-day office work week won’t be back this year, so there will be fewer people in the city.

International tourism is non-existent, which adds to the challenge, but we still believe the CBD will be an important and relevant market in the future, it’s just going to take some time. The good news is that restaurants in neighbourhoods are booming and sales here are up dramatically. It really is a “tale of two cities”.

The Covid-19 dislocation has created some great opportunities for us to grow, and we’re actively looking for A-grade locations in neighbourhood shopping centres where people are now spending more time.

Q. WHAT EXPECTATIONS DO YOU HAVE FOR THE MEXICAN FAST-FOOD MARKET IN AUSTRALIA FOR 2021–22?

A. Australians have embraced Mexican like no other nation in the world (outside of the US) and we expect that trend to continue. The quick service restaurant (QSR) market is primarily serviced with burgers, chicken and pizza, which all have their appeal, but miss the global trend towards real food with minimal additives and preservatives, as well as Australian consumers’ desire to eat food that is both tasty and healthy.

High-quality Mexican food is made using fresh ingredients and traditional home cooking techniques, and is incredibly tasty and wholesome. At Mad Mex you can get a burrito with brown rice, vegetarian or vegan fillings or freshly grilled chicken and topped with fresh guacamole that’s hand smashed each morning.

Q. WHAT IS YOUR EXPANSION PLAN FOR THE NEXT 18 MONTHS?

A. We have some big goals and a clear vision to grow our network across the country to build on the regions where we have a solid restaurant footprint. While the specific targets are confidential at this stage, we are super excited about the opportunities out there and landlords are excited by the new look and feel of Mad

Mex’s “fresh fuel for life” positioning. We will have some exciting news to share about growth plans in the Central Coast and Newcastle soon.

To bolster our growth plans, we brought in new development experts who are veterans and leaders in their respective fields. Our franchising, leasing store design and construction team will support our franchisees to get them set up for success from the first day of operation.

We have also completed a full network development plan to better understand what drives success in our locations and we are applying that to future locations, helping us to better drive performance and profitability for our franchisees.

Q. WHAT ARE YOU DOING TO ATTRACT FRANCHISEES TO YOUR BRAND?

A. Potential franchisees know and love the brand, so our biggest shift has been to simply get our message out to prospective franchisees using more sophisticated digital marketing, SEO, social media and PR.

We run a range of initiatives for new franchisees to help them get going successfully, but the biggest value now is in leveraging the Mad Mex brand and the disruption related to Covid-19, to get great lease deals with shopping centre support to ensure the cost of entry is manageable and the potential profit margins are attractive.

In addition to a competitive franchise fee and our commitment to locating them in prime real estate locations, we take each of our new franchisees through a rigorous six-week training program, and additionally provide them with significant on-theground support for the first two weeks of the restaurant opening. The team is

100 per cent focused on each franchisee’s success and while that might sound obvious, it is a real point of difference with our Mad Mex support office team.

In some regions we are finding that the traditional marketing channels still work, so we have pushed ahead with PR efforts in local newspapers and local media channels. There is no one size fits all when trying to get your message out to different communities, which has encouraged us to try some traditional print media and which still works surprisingly well.

We also have an active “fresh fuel for life” youth sponsorship program that is raising awareness across many favourite youth sports, bringing the next generation into the Mad Mex familia. This program aligns with our core values around healthy living and living a big life and we are aligning this with our customers to ensure our franchisees benefit from the clout of the younger demographic.

Q. HOW DO YOU SUPPORT FRANCHISEES IN THEIR BUSINESS?

A. Every franchisee has a dedicated regional operations manager (ROM) who shepherds the franchisee through the challenges of business. Their ROM provides advice, guidance, best practice and experience in best in class operations to give our franchisees every possible success to run a profitable business.

From a store level, our ROMs drive performance, with transparency to our franchisees of restaurant performance and incentivising them and their teams to reach new heights. We create competitions for restaurants to challenge each other and outperform their own expectations. We like to have fun while getting awesome results.

Performance targets for our stores are derived from where we see franchisees getting the most bang for their buck and encouraging sales and operational behaviours in the restaurant teams to continually raise the bar.

As a franchisor, we obsess over the details as we too have skin in the game through our corporate restaurants. We continually monitor supplier agreements and market pricing for improvements in our costs of goods sold, and maintain key relationships with our landlords to make sure we are the Mexican brand of choice in their future dining precincts.

Rental discussions are always ongoing with landlords as we continue to build symbiotic relationships.