California Tortilla CEO Keith Goldman has co-owned California Tortilla for 23 years, and one of the biggest lessons he’s learned is that complacency is the death of a brand. He’s a firm believer that it’s his responsibility to evolve the concept.
“Every day you got to beat the day before,” Goldman says. “You have to understand how the demographics are changing, how people’s preferences are changing, how competitors or the environment is changing.”
Nothing confirmed that belief more than the COVID pandemic, a time when California Tortilla consciously halted growth initiatives because of severe supply chain issues and squeezed profit margins. Still, the fast casual worked its way through those times by reinventing itself to a degree. That included understanding parts of the business that it wasn’t good at before like delivery and curbside pickup.
California Tortilla, which has around 30 locations in six states and Washington, D.C., also went through a “pretty big overhaul” of the brand, Goldman says. The chain emerged from COVID with a new ACE model, which stands for accuracy, customization, and engagement.
“Those were three opportunities that we identified as being something we needed to improve on to meet the demands of today’s customers,” Goldman says. “[Accuracy] was our biggest complaint. So we tried to fix it, and I think we did. And the second trend we were trying to address is customization. It seems like the younger demographics very much wanted to have the freedom to modify, delete, change things on the menu so that they could be satisfied with what they were eating. And we changed our service system to where that would be easy for us to accommodate. And then we also felt that customer engagement was important. We wanted customers to have a good experience in our restaurant. So we did things to improve the way we engage with customers.”
All three funnels were covered by changing how customers ordered inside the restaurant.
Previously, guests gave their order at the cash register and then paid for the meal. This required the cashier to enter details correctly into the POS system and then the ticket that went to the line had to be properly interpreted. Between those two stages, “there are a lot of ways where that can fail,” Goldman explains.
To resolve this, California Tortilla changed to a “pay last” model in which a guest goes down a service line and picks ingredients while talking to employees. The restaurants will even let customers sample the products.
“You’re controlling what goes into your dining experience,” Goldman says. “So there’s actually hardly any way that it couldn’t be exactly what you want because you’re telling us what you want.”
Additionally, the new store model feels aesthetically lighter and brighter, along with a new furniture package, signage, and digital menu boards. Ten have opened thus far—some new construction and others being remodels. These units are performing “considerably better” than California Tortilla’s traditional restaurants, specifically with AUV.
The ACE model was first adopted by company-operated locations. California Tortilla even purchased three franchised restaurants in Pennsylvania from a long-time franchisee and remodeled the stores to the ACE design.
“We love running restaurants,” Goldman says. “That’s what we do. Everybody on our executive team all the way down to our mid-level management has operated restaurants as their career. So we’re a bunch of restaurateurs. We like to operate restaurants. So we’re not afraid to take over or buy back a franchise if the opportunity is right and we feel it’s a good location, and that’s what we did in Pennsylvania. For personal reasons, the franchisee needed to get out. He’d been there for about 16 years. So he ran a very good business, and the locations have always performed well. So we didn’t even hesitate to help him out and work out a deal to acquire those three locations.”
Some multi-unit franchisees are planning to adopt the ACE model as well.
Historically, California Tortilla’s franchise growth has been mostly organic, with loyal customers and employees coming to the brand for a business opportunity. Post-COVID, the fast casual has been more aggressive about putting together a team, including a VP of development, a third-party real estate company to help find plots of land, and a PR firm to help spread the word.
Despite the COVID break, California Tortilla is seeing continued demand from prospective operators. After deciding to jumpstart expansion, the leadership team reviewed a franchise application from a former employee who worked in a company-operated restaurant 16 years ago when she was 18 years old. She served at a national chain for years and was finally in a position to start her own business with her husband and another investor.
“She had such an affinity for our brand from her time with us that California Tortilla was really her first and only choice to jump into the business ownership,” Goldman says. “It makes us feel proud and honored that she would come back to the [California Tortilla] family and will be our newest franchise partner. We’re looking forward to working with her. Currently, we’re just looking for real estate for her. We got a few things we’re looking at now. So I think we’ll find her something pretty soon, and they can start building out the restaurant.”
Goldman prefers to grow with a hub-and-spoke model, like the cluster of restaurants in the DMV and Pennsylvania markets. He believes there’s prime whitespace in the corridor between those two trade areas. The proximity helps with purchasing efficiencies because everyone is buying from the same distributor, concentrated marketing, and stronger brand awareness. The corporate headquarters is in Potomac, Maryland, so leadership can reach any of these locations within a few hours as well. The ACE model is meant to work in smaller, high-volume spaces, so nontraditional spots in airports, travel plazas, or college campuses could be in the future.
“We’re ready to grow,” Goldman says. “We like to grow quality, not quantity. We want to find great operators, and we want to find great real estate. That’s always a formula for success. We’re not the guys that want to open up 100 stores a year. We just want to do them as they come and make sure we get good operators in good locations. I just really think the indicators right now are very positive for Mexican. I think Mexican food continues to grow and is expected to continue as a top three choice for dining out. I think the fast casual segment that we operate in is the sweet spot for the restaurant industry because it’s really where the best value is.”
