Torchy’s Tacos is looking to fuel expansion after selling a $400 million stake to a new group of investors.
The group is led by General Atlantic, a majority shareholder that initially invested in 2017. It will be joined by D1 Capital Partners, T. Rowe Price, Lone Pine Capital and XN. Bloomberg reported the new funding is “likely a precursor” to Torchy’s filing an IPO “as soon as next year.”
Torchy’s was founded by Michael Rypka and began in a food trailer in Austin, Texas, in 2006. That chain has since grown to 83 locations across Texas, Oklahoma, Colorado, Arkansas, Louisiana, Missouri, and Kansas, with an AUV of $3.8 million. The chain has managed to open 12 stores and add three new markets amid the pandemic.
“All of us at Torchy’s are incredibly grateful to Mike and the original ownership group that built this amazing brand over the past 14 years, and we are thrilled that they will all remain a part of the ownership group as individuals,” said CEO G.J. Hart in a statement. “We are also very fortunate to welcome investors of the caliber of D1 Capital Partners, T. Rowe Price, Lone Pine Capital and XN. Pairing these four firms with our existing partner General Atlantic, we feel that we have assembled a premier ownership group that will allow us to accelerate our growth and write the next chapter in Torchy’s history.”
Torchy’s said it will use the capital injection to enter 10 more states in the next four years. In January at the ICR Conference, Hart said Torchy’s plans to reach at least 160 stores in the next three years. He added that the growth will coincide with a new managing partner model and revitalized kitchen that will cut wait times from 12 to 15 minutes to 7 to 9 minutes. The reduction will prove crucial as off-premises orders now account for 60 percent of sales, according to the CEO.
“We have long lines of people at lunch and dinner. And when you have 12-to 15-minute ticket times, it inhibits frequency … and you’re not going to go as much as you want to as a result of those lines. Just because our guests love us today that won’t happen tomorrow as competitors come to the marketplace,” Hart said at the conference.
The chain, which uses “Damn Good Tacos” as its slogan, describes itself as a craft-casual concept serving a wide range of handcrafted tacos, margaritas, queso, and more.
“Since our initial investment in 2017, Torchy’s has demonstrated the strength of its brand as it has successfully captured impressive unit growth,” said Andrew Crawford, chairman of Torchy’s and Global Head of Consumer at General Atlantic, in a statement. “We admire the management team’s deep operational experience and commitment to providing an original and differentiated experience. We believe their vision will continue to resonate across a wide-ranging demographic of guests, geographies and footprints as Torchy’s expands across the United States.”