Fuzzy's Taco Shop Lays Out Plan for Experiential Empire

    The 150-unit chain will lead a company that seeks acquisitions in fast casual, quick service, and full service. 

    Web Exclusives | November 19, 2021 | Ben Coley
    Interior of Fuzzy's Taco Shop.
    Fuzzy's Taco Shop
    Fuzzy's Taco Shop intends to double in size to more than 300 units in the next five years.

    Paul Damico has more than 35 years of experience in the restaurant and hospitality industry, but the vibe, culture, and camaraderie of Fuzzy’s Taco Shop is stronger than anything he’s seen.

    “When the corporate team and the franchisees’ rally cry is ‘make every day badass,’ that leads you to make certain decisions on how you thrive within that culture,” says Damico, who was named CEO of the 150-unit fast casual in August.

    The culture is so unique that Damico and Aziz Hashim, founder and managing partner of Fuzzy’s majority owner NRD Capital, felt the chain could serve as the foundation of a larger, multi-brand company. The executives recognized Fuzzy’s identity went beyond food; it’s about the overall atmosphere that guests seek, including the patio, bar, and dining room.

    That’s the scope in which Fuzzy’s and NRD will seek acquisitions in the near future, and it will do so under newly formed platform Experiential Brands, with Damico serving as lead executive.

    “As we think about potential acquisitions, they are going to have some kind of experience component to them,” Damico says. “They could be in the fast-casual space, it could be in the casual-dining space, it could be in the quick-service space, although there's very few brands out there today that have an experience when you think about quick-service. But any of those different categories are possible for us.”

    “I think for us, what is the experience that can be created in a concept and does that fit with this new filter, if you will, of making sure that there's an experience along with the fantastic food,” he continues.

    Damico isn’t sure yet how many restaurants Experiential Brands will ultimately seek, but he knows there’s a significant number of concepts—whether young and emerging or well-defined and mature—that are looking for growth capital or an M&A deal. At any given time, the CEO and his team are looking at two or three brands.

    Aside from Damico being named CEO of Experiential Brands, no incremental resources have been brought in, but the industry veteran expects that to change as the platform scales. Experiential’s intention will be to keep core values in place for any acquired brand, including marketing, operations, and training. However, there will be opportunities to spread services like accounting, IT, and legal throughout the company.

    “It's all about the brand that we acquire,” Damico says. “Fuzzy’s is poised for great growth right now. We don't know what that next brand is. And so we've got to evaluate not just the brand, but what is the infrastructure that comes with that brand and how might we use that to help Fuzzy’s or how we might choose not to use it and bring in new talent. That's the fun part of the acquisition strategy.”

    Damico says his experience with bigger parent companies equips him with the requisite knowledge to build Experiential Brands. The executive previously served as president of North America for Focus Brands, a concept that operates Carvel, Auntie Anne’s, Cinnabon, Moe’s, McAlister’s, Jamba, and Schlotzsky’s.

    He also briefly worked as CEO of Global Franchise Group, which operated Round Table Pizza, Great American Cookies, Hot Dog on a Stick, Marble Slab Creamery and Pretzelmaker. The company was purchased by FAT Brands for $442.5 million earlier in 2021.

    “I got my MBA in pandemic management from Global Franchise Group, but my 13 years at Focus Brands will surely play a role in how we put together and grow Experiential,” Damico says.

    Fuzzy's Taco Shop

    “I think the timing is perfect because there's lots of concepts out there that are looking for acquisition and I think the time is right for us to do this,” says Paul Damico, CEO of Fuzzy's Taco Shop and newly formed Experiential Brands. 

    As Experiential Brands gains momentum, Fuzzy’s will position itself as an example of what growth should look like. The long-term goal is to double in size to more than 300 locations in the next five years, and Damico feels that’s well within reach with the current franchise sales and marketing teams in place. The pace would be 15 to 20 stores next year, followed by 40 in 2023 and then 50 openings annually in the final stages of the five-year plan.

    Texas, Oklahoma, Missouri, and Colorado will serve as growth markets for existing franchisees while new partners will focus on expansion in the Carolinas, Georgia, the Florida Panhandle, Alabama, and Tennessee.

    “Fuzzy’s is the base of this new platform, so we're not going to do anything to hurt the growth of that brand, and it's poised really for incredible growth,” Damico says. “My role as the CEO of Experiential is really to make sure that the brand—and it's not just Fuzzy’s, it’s whatever brand that falls into that new platform company—gets the resources they need to not only support franchisees, but to get at that growth. And the growth is planned to be significant. So there will be some significant investments in whatever brand we acquire.”

    With atmosphere and experience being a heavy focus at Fuzzy’s, dine-in sales mixed 75 percent prior to the pandemic. That’s now lowered to roughly 60 percent, with delivery rising from roughly 2 percent of sales to between 12 and 13 percent.

    Damico isn’t sure if Fuzzy’s dining rooms will return to that 75 to 80 percent range, but if it does, he doesn’t see it reaching that level until at least 2023. But just because consumers are moving away from the dining room, doesn’t mean the chain’s experiential values disappear.

    They simply shift to different channels, like the opening of Fuzzy's Taco Shop Taqueria, a slimmer version of the fast casual that offers a reduced menu and to-go focused footprint. The concept will open in spaces between 1,200 to 1,800 square feet, compared to the 3,000 to 4,000 square feet of regularly sized restaurants. The first Taqueria unit opened in Minnesota earlier this year. 

    Fuzzy's also plans on opening its first drive-thru location in the first quarter.

    “How are we going to make that experience badass, and how are we going to make that experience better than other fast-casual drive-thrus,” Damico says. “There's a lot to learn there. There's a lot to do. We’re watching every state right now and what drive-thru means from an alcohol component, because our restaurants generate a significant percentage of our revenue from the alcohol, from the margarita, the beer, and the full bar. We've got to figure out how to carry that through the drive-thru where we can legally.”

    Fuzzy’s desire to align with multiple brands is very much in line with what’s been seen across the industry in recent months—both in quick service and full service. For instance, Panera recently joined forces with sister companies Caribou Coffee and Einstein Bros. Bagels to form Panera Brands, a new fast-casual conglomerate that encompasses nearly 4,000 stores across 10 countries.

    In the casual-dining segment, Famous Dave’s parent BBQ Holdings purchased Village Inn, Bakers Square, and steakhouse concept Tahoe Joe’s within a span of months, and Logan’s Roadhouse and Old Chicago parent SPB Hospitality acquired J. Alexander’s.

    “I think the timing is perfect because there's lots of concepts out there that are looking for acquisition and I think the time is right for us to do this,” Damico says. "When we think about 2022, my expectations are to continue to build the team at Fuzzy's to get at the growth that I anticipate happening and really spend some time understanding the concepts that are out there that will fit into our filter and can become an important part of driving the value of Experiential Brands.”