AIMING TO GO NATIONWIDE
Hot Head opening units in other states.
Hot Head Burritos has slowed its formerly rapid-fire expansion in the area, but the Kettering-based Mexican restaurant company is opening new units in other parts of the country and is laying the foundation to become a national chain, co-founder Ray Wiley says.
In recent weeks, new franchise-owned Hot Head restaurants have opened in northwest Florida and on the campus of Youngstown State University, bringing the total to 53, Wiiley said. More are in the works for the Cincinnati and Columbus areas, and in Michigan and northeast Ohio.
“We did slow down a bit in 2013, but I expect we’ll pick up speed again in mid-2014,” Wiley said.
Not bad for a restaurant chain that opened its first location in Kettering just seven years ago on March 7, 2007.
Hot Head has managed to flourish in a competitive quick-service and “fast-casual” Mexican restaurant category that includes Chipotle, which has 23 locations in the Dayton, Springfield and northern Cincinnati area; and Qdoba, which operates restaurants near the Dayton Mall in Miami Twp. and near the Mall at Fairfield Commons in Beavercreek and which will soon open a third location on Brown Street near the University of Dayton.
But a couple of other potential competitors, Moe’s Southwest Grill and Baja Fresh, operated briefly in the Dayton market, then later pulled out (Moe’s still operates a restaurant in Mason).
Fast-casual restaurants have been a bright spot of the restaurant industry locally — as evidenced by the surge in sandwich and sub shops in the Dayton area — and nationally. For the fifth consecutive year, the fast-casual segment’s growth in traffic surpassed that of every other restaurant segment in 2013, according to the NPD Group, a Port Washington, N.Y.-based market research firm. NPD analysts found that total customer visits to fast-casual restaurants increased 8 percent for the 12 months that ended in November 2013, compared with flat traffic on average for all restaurant segments.
“Overall, restaurant customers are trading down, forgoing some of their visits to full-service places while increasing the number of visits made to fast-casual restaurants,” Bonnie Riggs, the NPD Group’s restaurant industry
analyst, said in a news release last month. “Fast-casual concepts are capturing market traffic share by meeting consumers’ expectations, while midscale and casual-dining places continue to lose share.”
And in its most recent report on the Mexican restaurant industry that includes Hot Head, Los Angeles-based IBISWorld, Inc., an independent industry research firm, estimated that revenues at Mexican restaurants would grow an average of 2.7 percent a year through 2017, to a total of $35.1 billion.
Wiley — who co-founded and co-owns the Hot Head chain with his wife, Cynthia — does not disclose overall sales figures or revenues for the privately held company, but he said Hot Head’s same-store sales rose about 6 to 7 percent in 2013. Average annual sales at a Hot Head restaurant reaches about $625,000, Wiley said. It costs about $250,000 to get a new Hot Head off the ground and open, he said.
Wiley, 48, knows a thing or two about franchise restaurants: He is a franchisee for Subway, operating seven stores in the Dayton area while overseeing Hot Head. When he became a Subway franchisee in 1989, the chain had only about 1,000 locations, Wiley said. Now it has more than 40,000.
Why start from scratch trying to establish a new chain?
“It’s a challenge, and it’s always fun to tackle a challenge and to do things people say you can’t do,” Wiley said. “And it’s fun to make money, and to help other people make money. This is a high-risk, high-return industry.”
A dozen of Hot Head’s Dayton-area restaurants are corporate-owned, while another six in this region are operated by franchisees, as are 35 other Hot Head locations elsewhere in Ohio and in Indiana, Michigan, Pennsylvania, Kentucky and Florida.
Hot Head’s rapid initial growth didn’t go unnoticed by the restaurant industry and those who write about that industry.
In December 2011, it was named among the “Ones to Watch” by QSR Magazine, which monitors the “quick-service restaurant” category. And in March 2011, the chain was ranked 54 in FastCasual.com’s list of “Top 100 Movers & Shakers,” which recognizes restaurant chains that best reflect the fast-casual segment’s phenomenal growth, FastCasual.com officials said in 2012.
To nurture that growth through 2014 and beyond, Hot Head will unveil an online ordering system later this year, and is incorporating pickup windows into some of its newest stores, Wiley said.
The Hot Head location at 1120 E. Stroop Road opened a year ago with a pickup window and serves as a prototype of sorts for the chain’s future restaurants. On a Monday afternoon last week, Cara Boothe and her son Cody of Kettering sat down to a late lunch at the Kettering store. After overhearing part of Wiley’s conversation with a reporter, Cara Boothe approached the Hot Head founder to praise the store’s crew — and its food.
“Our entire family has converted from Chipotle to Hot Head,” Cara Boothe said, before correcting herself that one of her sons still does prefer the national chain.
“But me — well, I come here way too often,” she said.