After Bill Phelps and investors built Dave’s Hot Chicken into the fastest-growing franchised restaurant chain and sold it last year in a $1 billion deal, the big question was what they would do next.
The answer: birria tacos.
Phelps and partner Andrew Feghali on Tuesday announced an early-stage investment in the San Diego-based concept Mike’s Red Tacos, which was born in 2021 initially as a food truck known for its birria tacos boasting “the dip is worth the drip.”
Birria tacos are known for fillings of slow-braised meat (typically beef or goat, but in this case beef), which can be dipped in rich, hot consommé.
Founded by Mike Touma, the fast-casual concept has two locations in San Diego, with a third scheduled to open in March.
Terms were not disclosed for the deal, but Phelps described it as a significant investment by Four Wall Partners, a franchising investment firm led by Phelps and Feghali.
Feghali was the first Dave’s Hot Chicken franchisee, and has a large franchising portfolio that also includes Jersey Mike’s and Little Caesars.
Phelps said Touma first began working with Feghali on the Mike's Red Tacos food truck concept in San Diego.
“When Mike was ready to do an in-line store, Andrew was busy working with Dave’s, so he said he could have it,” Phelps said.
With the deal, Vincent Montanelli, the former CEO of Wetzel’s Pretzel’s, will serve as Mike’s Red Tacos’ president. Touma will serve on the concept’s board and has become a franchisee, operating units in the San Diego market.
It’s a playbook Phelps and investors have used before.
An industry veteran, Phelps co-founded the Wetzel’s Pretzels brand in 1994, grew it to more than 400 units and sold it in 2022 to MTY Food Group. He later invested in Blaze Pizza, co-founded by Rick Wetzel, which they grew to about 350 units as a franchise brand and later sold.
Next came Dave’s Hot Chicken, which, like Mike’s Red Tacos, was an early-stage investment in 2019, coming just a year after the parking lot popup opened its first brick-and-mortar location in Los Angeles.
The co-founders of Dave’s also stayed involved as franchisees, and that brand’s explosive growth was aided in part by the network of Blaze franchisees, who were looking to grow their portfolios.
Last year, private-equity firm Roark Capital acquired Dave’s Hot Chicken in a deal valued at about $1 billion. The fast-casual chicken chain has nearly 400 units worldwide.
Now, Phelps said they have the model down, and he feels it can be replicated with other brands, starting with Mike’s Red Tacos, but more investments are likely.
Birria is a niche within the larger Mexican category that Phelps believes has legs. When first considering an investment in Mike’s Red Tacos, he sent franchisees down to San Diego to try it.
“My people said it’s delicious and it’s really fun. It’s just different. You’re dipping it in the consommé and it’s fun,” he said. It also appeals to a broad demographic, not just Gen Z or Millennials, he noted.
Mike’s Red Tacos already has more than 200 locations in development across the country. Phelps said most of those are new franchisees, not necessarily those already working with Dave’s, Blaze and Wetzel’s.
Later this year, a company-operated location of Mike’s Red Tacos is scheduled to open in Pasadena, California, where Four Wall Partners is based, which will serve as a prototype unit and brand training center. The brand is already set up with national distribution to scale across the country, said Phelps.
An interior of Mike's Red Tacos in San Diego. |Photo courtesy of Mike's Red Tacos.
Birria, the deal indicates, is the next hot thing.
Last year, the mention of birria on restaurant menus increased more than 17% over 2024, according to Restaurant Business sister-brand Technomic’s Ignite Menu data.
A number of restaurant chains have played with birria on their menus, including El Pollo Loco, Taco Bell and Qdoba. In 2024, birria was one of the most ordered foods for delivery, according to Grubhub.
Mike’s Red Tacos menu also includes burritos, quesadillas, nachos and birria ramen—the latter a particularly Southern California variation representing the blend of Latin and Asian cultures.
Phelps said he loves finding early concepts that have potential to be a hit.
Four Wall Partners will continue to look for early-stage franchise brands to invest in, he said, saying another could be announced later this year.
“We fill a role,” said Phelps. “Entrepreneurs have a sixth sense for business that corporate businesses don’t, and they are able to create these cool brands that are authentic and real and fun and exciting, but they don’t know how to scale them. That’s where we come in.”
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