The first Tacone opened in Westfield Shoppingtown Century City nine years ago with more fanfare than most mall eateries the novelty of its signature “taco in a cone” even attracted the attention of the Food Network.
But somewhere along the way, the cone-shaped taco crumbled under the weight of its ingredients. Founders Craig Albert and Michael Bernstein tried replacing Tacones with wraps, but that didn’t work out. So they’ve come up with a smaller Tacone that will be served again later this year.
“We realized that wraps were not a concept in and of themselves,” said Albert, chief executive of Los Angeles-based Flavor Firm LLC, Tacone’s parent company, which plans to expand the chain nationwide.
Such is the difficulty of standing out in the fast-casual restaurant niche, a growing segment of the industry favored by aging baby boomers pressed for time but also wanting higher quality fare than fast-food restaurants.
With average meal tickets over $8, this niche has seen revenues increase 15 percent annually over each of the last three years, to $8.5 billion this year though that’s only a fraction of the $160 billion fast-food take.
The growth has attracted Carl’s Jr.’s parent CKE Restaurants Inc., which also owns La Salsa Fresh Mexican Grill, and Jack in the Box Inc., which owns Qdoba Mexican Grill.
“It’s probably the fastest growing niche in the food industry,” said Joe Pawlak, a vice president with Technomic Inc., a Chicago-based food industry consulting firm.
Besides reintroducing the Tacone, Flavor Firm plans broader menu offerings. The company has hired Culver City-based Flux Business Communications to craft an ad campaign selling Tacone as the place to go for fresh flavors.
The menu has 15 sandwich items, along with a grilled lobster sandwich that’s being introduced to complement the Tacones. The average tab is $8.50.
“I look at our menu like we are a fashion company,” Albert said. “We always have to bring out a new collection that garners interest.”
Flavor Firm is still honing the look of the restaurant, with a new prototype that softens Tacone’s bright and colorful interiors. It will be rolled out in all restaurants, starting with a Huntington Beach location in a few months.
The chain, which opened 23 units over the past decade, plans to add more than 120 over the next four years. Albert expects revenues will double to $30 million in 2006 from a projected $15 million this year. So far, Tacone has been concentrated in Southern California, but Albert said its plans are nationwide, including a South Carolina location about to open.
Growth has been accelerated by a shift in Flavor Firm’s business model to a franchisor from an operator of corporate-owned units. The shift came when Albert saw up to 10 percent increases in store sales after selling off two San Diego units.
Corporate Tacones were capital intensive, with each store setting Flavor Firm back $200,000 to $400,000. Franchisees pay from $250,000 to $500,000 to acquire the rights to a territory usually a state as well as a $25,000 franchise fee and a 6 percent royalty fee annually.
Flavor Firm isn’t putting all its eggs in Tacone’s basket. Once the company became a franchisor, opportunities opened up for other concepts.
These include City Kitchen, a caterer that has generated $2 million in sales this year in Los Angeles. The three-year-old venture provides meals to offices. Another is the Counter, a Santa Monica make-your-own hamburger joint that generated $1.8 million in revenue last year selling Ahi, chicken, veggie and beef patties topped with dried cranberries, roasted red peppers and ginger soy glaze, among other items.
Next on Flavor Firm’s plate: an Asian fast-casual restaurant. The ultimate goal could be a sale to a large restaurant company. “As long as it’s fun, I think we are going to stay independent,” Albert said. “We will know when the time is right to do something with one of these larger players.”
