Torchy’s Tacos has big plans. In November, the fast casual sold a $400 million stake to a group pf investors led by General Atlantic, a majority shareholder that initially invested four years ago. It was joined by D1 Capital Partners, T. Rowe Price, Lone Pine Capital, and XN.
The capital injection, Torchy’s said, would help the brand break into 10 states in the next four years, and spark the growth ignition for a brand that started in a food trailer in Austin, Texas, in 2006. Founded by Michael Rypka, Torchy’s expanded to 80-plus stores (at the time of the investment) across Texas, Oklahoma, Colorado, Arkansas, Louisiana, Missouri, and Kansas, with average-unit volumes of $3.8 million.
In January 2020, the brand outlined a goal to hit at least 160 stores in the next three years—a path that would coincide with a new managing partner model and revitalized kitchen that cuts wait times from 12 to 15 minutes to seven to nine minutes. Additionally, rumors of a possible IPO filing surfaced in March.
One less publicized corner of Torchy’s recent story, however, concerns digital kitchens. The brand opened its first near Ohio State University’s campus in Columbus. The to-go kitchen serves Torchy’s “Damn Good Tacos,” lineup and offers the university community and local neighborhoods with online ordering for pickup and delivery via Tochy’s site and app, as well as DoorDash.
Torchy’s CMO Scott Hudler sat down with QSR to discuss the decision to jump into the ghost kitchen conversation, and how the fast-rising brand continues to navigate the COVID pandemic.
Let’s start with the digital kitchen news. Obviously, this topic has been widespread in recent months. But how did these conversations start at Torchy’s? When did the brand realize it wanted to dive in?
At Torchy’s, we’re focused on offering our guests a range of ways to experience our brand, how, where and when they want. While many enhancements were in the works prior to COVID, the events of the past year have escalated many initiatives to speed new solutions and conveniences to our guests. That includes enhanced online ordering, contactless delivery and curbside pickup, and the launch of our new Torchy’s App with conveniences like one-tap ordering, saved payment methods and direct access to our not-so-secret Secret Menu.
At the same time, we’ve been exploring new formats alongside the traditional Torchy’s restaurant experience, such as smaller indoor footprints with expanded patio seating, drive-thru service at select locations, and opening our first takeout- and delivery-only Digital Kitchen in Columbus.
Our Columbus Digital Kitchen allows guests to get their taco fix through easy, contactless ordering on the Torchy’s App, our website or on third-party food apps like DoorDash, for local pickup or delivery.
At the end of the day, we want to help our guests get the Damn Good Torchy’s experience however and wherever they’re most comfortable—whether that’s a seat on the patio, dining room or bar counter, or at home with a tech-enabled experience for pickup or delivery.
Talk about the digital kitchen itself. What are the details, from menu to channels to branding?
Our Columbus Digital Kitchen offers almost every item on our core menu, so guests can find Torchy’s classics like Green Chile Queso, the infamous Trailer Park Taco, Baja Shrimp Tacos and more. In addition, we chose the Columbus Digital Kitchen to debut another new innovation, The MoFaux, our new plant-based taco that’s made with “cowboy-style” Beyond Beef, plus an assortment of fresh ingredients like green chiles, grilled corn, peppadew peppers and fresh avocado, served on a housemade corn tortilla with Diablo Sauce.
Guests in the Columbus area can order on the Torchy’s App, our website or on DoorDash.
In Columbus specifically, there is a healthy opportunity for this digital kitchen due to its population density, large college student base and growing demand for pickup and delivery orders. We think Columbus is the perfect home for us to introduce our first digital kitchen and are also exploring opportunities to bring our full Torchy’s experience to the state. We look forward to sharing more information about our plans soon.
Did you consider going the virtual brand route?
While we certainly wouldn’t rule anything out in the future, right now we are eager to take away some learnings from our first Torchy’s digital kitchen while continuing to grow our traditional Torchy’s footprint, which remains our priority focus.
Is this something you might scale? And if so, could it also lead to physical growth later on after you see what the market demand looks like?
While our “traditional” footprint that offers dine-in, takeout and delivery service will continue to be our primary focus, this current environment has shown a significant percentage of our business shift to off-premise, and we think the timing is right to test this option for us.
Broadly speaking, Torchy’s has some pretty expansive growth targets, especially after November’s $400 million investment. Could a virtual strategy play a role in getting there?
We are continuing to explore additional options but have no plans to create a virtual brand at this time. While we wouldn’t want to rule anything out in the future, our focus for now remains on expanding into new and existing markets with physical restaurants that offer our guests dine-in, outdoor dining as well as takeout and delivery.
Let’s switch gears to the pandemic. What are some wins Torchy’s was able to secure over the past year-plus? And how will these set the chain up for the future?
Despite the unprecedented challenges that came with COVID-19, we successfully opened 12 new locations and expanded into three additional states in 2020 alone. We also announced a $400 million fundraise last fall, one of, if not the largest, raises for a restaurant brand, as we continue to bring our tacos to more communities and states across the country. This year we are on track to open 15-17 new locations, including within new states like Indiana and North Carolina.
What was perhaps the biggest lesson to come out of COVID?
Innovation proved instrumental to our business and our ability to remain resilient despite the challenges of the pandemic. This included bringing to market several upgrades that were already in the works to enhance the guest experience. On the technology front, we launched the Torchy’s App offering one-touch ordering for pickup and delivery with saved payment methods and delivery addresses as well as a new streamlined online ordering platform through CardFree with a better, more convenient guest experience as off-premise traffic grew during the pandemic. We also launched Torchy’s Delivery powered by DoorDash within our online ordering platform, offering our loyal taco junkies a convenient delivery option right from Torchys.com and our app.
Serving “Damn Good Food” built on high-quality ingredients, scratch-made preparations and a steady stream of new product innovation also has driven our success. This included bringing to market new off-premise innovations during the pandemic that proved popular, including Family Packs, which serve four to five and comes with everything guests need to create a fresh Torchy’s meal at home, several new Tacos of the Month, and taking advantage of new state and local mandates that made taking home our signature Margaritas possible through takeout and delivery.
Looking at the industry as a whole, do you think we’re headed for a golden era of sorts this summer and beyond?
After such a challenging and unprecedented year, we believe people want to return to their favorite places and will do so in an abundance. We have already seen that from our taco junkies who stuck with us through takeout and delivery and have eagerly returned to our dining rooms and patios.
What might be the most significant and lasting change to stem from all of this?
If the last year or so has taught us anything, it’s that takeout and delivery are here to stay. Our newest venture into the digital kitchen space is incredibly exciting and we look forward to providing our Columbus taco junkies with a damn good meal to-go. As we continue to look toward the future, the way we approach our site selection, restaurant layout and menu offerings will continue to shift in alignment with our guests and their needs, always grounded in giving guests a “Damn Good” Torchy’s experience.