Guillermo Perales built an 800-unit Dallas empire as a franchisee, developing and acquiring restaurants in numerous brands such as Burger King, Arby’s, Popeyes and Krispy Kreme.
But now he is on the other side of that relationship after his company, Sun Holdings, completed its acquisition of Taco Bueno.
“I want to develop,” he said in an interview with Restaurant Business. “We’re always developing stores, and we think there are opportunities to develop the brand.”
Taco Bueno filed for bankruptcy in November and sought a quick sale to Perales amid concerns about the brand’s finances—landlords for some key locations were starting eviction proceedings, for instance.
The brand’s sales fell 20% over the summer amid heavy rains, and the chain was deep in debt: $130 million.
The restructuring provided the company with a more “sustainable capital structure” that should help the brand restart spending on remodels and marketing that had been abandoned as the chain struggled.
Perales said that the brand has strong unit economics that were simply hampered by the loan payments. “I don’t know why but our unit economics are much better than any other brand,” he said, noting that they are “comparable to or better than Taco Bell.”
But he also said that the brand started making compromises because of its financial concerns, which ultimately hurt sales.
“You get into the cycle where you’re not putting money into marketing, you’re discounting, your profits and cash flow get worn [down] and you stop doing maintenance and now you’re in even worse shape,” he said. “You have to kind of go back to the basics.”
Taco Bueno has 145 locations and had to close numerous restaurants last year just before the bankruptcy filing. The brand had 184 units at the end of 2017, according to Technomic data. The company operates most of its locations but has some franchise units.
Perales said that remodels will be key in the short term. The brand has already started 20 remodel projects. “We really need a fresh look,” he said.
Yet he also said that such moves are not necessarily done to lift sales. Rather, they are defensive moves to keep customers from going to a competitor.
“A lot of buildings are very old,” Perales said. “Sometimes you don’t get much of an increase in sales, but it helps to stay alive. Otherwise you keep going down. More of your customers stop going if the store looks old and tired.
“It’s not really an ROI investment. It’s really a way to survive and be in business longer.”
He also said that the company is making other changes, such as switching suppliers, changing its beverage contract to Coke and working to improve the food and the freshness of the produce.
He said that the company stopped marketing as it struggled. Taco Bueno will restart its marketing spending to get customers in the door.
“We don’t have the money that a lot of bigger brands have,” he said. “We will try to make the most impact we can in the market.”
And Perales said that he can develop the brand, too. With more than 800 locations, Sun Holdings will sometimes close underperforming units in locations where it owns the property so it can develop one of its other concepts in that space.
He said that he can convert some of those locations to Taco Bueno.
“If we have a bad store, we can convert it to other brands,” he said. “It gives us a lot of flexibility. We can correct the mistakes. Taco Bueno is going to take advantage.”