Kyle Gordon, owner and co-founder of rising fast casual Dillas Quesadillas, knew two years ago large-scale expansion was in his brand’s future. He just needed the right growth partner to make it happen.
Amid those conversations, Anand Gala, managing partner of Gala Capital Partners, kept surfacing. With Dillas being a Texas-based brand, it fit. Gala Capital owns MOOYAH Burgers, a fast casual headquartered in Plano, Texas, and also co-owns Cicis, which calls Dallas home.
“We were really looking for a group that could bring a lot of experience, not just capital,” Gordon explains. “The capital was something that was interesting to us, but we were in a pretty good position financially. We really needed some guidance. We really needed somebody to help us scale up and take it to the next level.”
When Gordon and Gala conversed, the Dillas executive quickly recognized they spoke the same language in terms of restaurants, core values, and people. After nearly a year of talking through the arrangement, the fast casual officially announced the growth partnership at the beginning of March.
Currently, Dillas has seven stores throughout North Texas and Louisiana. The menu consists of nine “Primo Quesadillas,” like the Buffalo Bacon (chicken, red onion, bacon, blue cheese, cheese blend buttermilk ranch) and the Lone Star (smoked brisket, red onion, cilantro, barbecue sauce, and cheese blend jalapeño ranch).
Since its founding in 2013, the typical cadence has been one or two restaurant openings per year, and sometimes none. With the backing of Gala Capital, the company is eyeing its biggest growth spurt by far with nearly 20 projected store openings across 2022 and 2023.
“We really talk about real estate, the direction of the company, stuff like that, but from a day-to-day perspective, there’s not a whole lot of involvement,” says Gordon, explaining the nature of the partnership. “I’m still the founder, CEO, make all decisions, the buck stops with me type of deal. But they’re definitely there to help guide us, move us in the right direction, and provide resources as needed—as much or as little as we need actually.”
Gordon has much confidence in the initial round of expansion, which will mostly consist of company-owned units around the Dallas-Forth Worth market.
It’s the home base and the type of expansion Dillas has leveraged for the past nine years. Additionally, because of the chain’s solid banking relationship, the company would have made it through this stretch even if Gala Capital didn’t invest. Dillas also implemented Entrepreneur Operating System, a comprehensive toolbox of organizational solutions, and Gordon stepped away from operations to spend more time on brand vision and managing profitability, scale, and capital.
“It’s a confluence of different factors that happened in 2021—topline sales growth, more profitability, got the people plan put together, implemented [Entrepreneur Operating System],” Gordon says. “So we’re all aligned and gaining traction with our accountabilities, week to week, month to month. That coupled with a great banking relationship, where we could finance the new projects, all came together and that’s how we got to where we are.”
The real concern comes with later stages of expansion, which will shift to franchising. Gala Capital, a current franchisee of Famous Dave’s and the franchisor of MOOYAH and Cicis, intends to ease that anxiety and teach Gordon’s team how to properly keep control of the brand and pick the right partners.
The franchising foundation—people, infrastructure, intranet, and systems—already exists, Gordon says. Now, the Dillas team is working through constructing the FDD and formulating the processes of connecting operators to the proper real estate, prototype, and equipment package, and building vendor relationships into something that can handle 20-30 openings per year.
“We’ll need to rely on Gala Capital to help connect some of those dots as we grow and scale and add new people to the system,” Gordon says. “I’m very thankful for the guidance so far.”
Granted, Gordon isn’t completely unfamiliar with the franchisor-franchisee structure. Dillas has a joint venture partnership with Primeaux Restaurant Group, a company that runs three restaurants in Shreveport, Louisiana. That business will convert to a franchise and maintain control over a sliver of East Texas and all of Louisiana.
If a new franchise partner were to join the brand, it wouldn’t be until the back half of 2023 or early 2024. Dillas is searching for potential operators in Oklahoma and Waco to build outward concentric circles from the Dallas-Fort Worth market.
“It’s so we can really support [franchises] in a strong operational way until we get enough scale and size to expand our reach and then go into different states and further into Texas,” Gordon says. “I’m more scared about going into Houston or Austin than I am Oklahoma City, a different state, just because of proximity and the scale and size of those DMAs.”
When that time does come, Dillas will be prepared with flexible store designs. The restaurant has everything from a 3,200-square-foot second-generation drive-thru to a 1,800-square-foot endcap with no drive-thru.
Roughly 85 percent of sales are off-premises, including 60 percent drive-thru. So naturally, Dillas’ ideal location is a freestanding drive-thru that ranges between 2,250 and 2,500 square feet or an endcap drive-thru between 2,100 and 2,500 square feet.
With supply chain stoppages and delays, Gordon says equipment must be purchased at least six months out, and the financial infusion from Gala Capital should assist with putting down deposits. It also helps that Dillas restaurants aren’t overly extravagant and don’t require materials that would be more difficult to obtain.
Sometimes there are surprises, Gordon says. At the most recent store in Denton, Texas, an unforeseen electrical issue popped up.
“You got to roll with the punches, you’ve got to be flexible. You’ve got to be patient, you got to be able to go in different directions, but we’ve got fantastic vendors that we treat like family, and they return the favor,” Gordon says. “They love working with us. I think that’s a really big piece of what’s going to help us get it done is that we’re all committed to it, and we want to make it happen, but there will be surprises and there will be delays. We just anticipate that and we’re not going to let it get us down. We’re just going to continue to move forward, be flexible, and get great people.”
Although quesadillas aren’t typically hero menu items like burgers and pizza, Gordon isn’t worried about customer acquisition in new markets.
To him, high quality flavor and service always wins. Plus, quesadillas may not typically be the featured meal, but it is prevalent on menus nationwide like Chipotle and Taco Bell. The difference, Gordon says, is that Dillas took tortillas and melted cheese and elevated the product.
One of the chain’s busiest restaurants, based in a little South Shreveport location, earns about $2.4 million in AUV. Those numbers confirm Gordon’s belief that people are bored of burgers and pizza and looking for something different.
“It’s like, wow, those people love quesadillas that much?” Gordon says. “Well yes, the quesadillas are amazing, but also there’s great service. We’re a community restaurant. French fries is our No. 1 side. We’re an American take on a Mexican favorite.”
“I think that fusion is what has really resonated with people and gets their comfort level out to be like, ‘Man, this could be a staple for me. I like coming here. I could easily do this once a week and boot one of the burger places or boot one of the pizza days that have usually filled this segment for me,'” he adds.