Austin's Torchy's Tacos seeks to be 'the next Chipotle' with $400M national expansion

Could Torchy's Tacos be the next Chipotle?

That's what a group of investors is betting as it pumps a whopping $400 million into the restaurant chain that started as a food truck in South Austin.

Under the deal, Torchy's sold a stake to an investor group led by global private equity firm General Atlantic, which initially invested in 2017. It was joined in the ownership group by D1 Capital Partners, T. Rowe Price, Lone Pine Capital and XN. Torchy’s Founder Mike Rypka and all members of the original ownership group will reinvest as individuals, according to the company.

With the cash infusion, the chain known for its "damn good tacos" will kick off an aggressive national expansion.

Today Torchy's has 83 outlets in seven states. That includes 12 locations opened in 2020 — a year in which the coronavirus pandemic has pummeled the restaurant industry.

In Austin, Torchy's has 16 restaurants and employs 806 people, both at its restaurants and at its headquarters in East Austin on Springdale Road. The company has 4,311 employees nationwide.

The goal is to open 100 restaurants in 10 additional states over the next four years, the company says.

"Overnight COVID hit and we had to pivot 100%," Torchy's CEO G.J. Hart said in an interview. "Early on we lost 50 to 60% of our business, but we rebuilt that and have done really well through the pandemic. The markets were very receptive to our brand and we think this is the time to go on the offensive and grow."

Competition to invest in Torchy's was fierce, said Aaron Allen of restaurant consulting firm Aaron Allen & Associates.

"They're really an A-plus brand — there is a lot of cachet around them as a future national player along the same ilk of a Shake Shack," Allen said. "There was such active interest in investing in them from the real marquis players. Everyone's looking for the next Chipotle."

More than 110,000 restaurants have closed permanently or long-term across the country as the industry reels from the devastating impact of the pandemic, according to the National Restaurant Association. In Texas, more than 10,000 restaurants have shut down and 30% percent of Texas operators say it's unlikely their restaurant will still be in business six months from now, the Texas Restaurant Association says.

Those figures might make it seem like an unlikely moment for investors to throw millions behind a restaurant chain, but Allen said this is the time to be opportunistic.

"The pandemic is actually an advantage for some," he said. "It's true people have less money to spend on eating out. But on the other hand, as a restaurant operator you have access to the best real estate and the best talent. If you've got capital during a downturn your strength is even greater than it would be with the same amount of capital when the economy is strong."

Torchy's got its start 14 years ago when Rypka opened a food truck on South First Street and spread the word by riding around Austin on a Vespa scooter and handing out free samples.

The Statesman recently caught up with Rypka about how he got Torchy's off the ground and how the company's culture will keep it grounded as it enters this next stage.

What was your background before you decided to open a food truck? How did you get the idea?

I’ve been in the restaurant business since I was a teenager growing up in D.C., starting out as a fry cook at Popeye’s Fried Chicken. After working in a few restaurants, including a country club in Virginia, I’d started to catch the bug for the culinary world. Still, by the time I graduated high school and it was time to select a career path, I wasn’t sure. The restaurant business requires a lot of hours, a lot of evenings and weekends, and at 18 years old that wasn’t incredibly appealing. But one night, I woke up and thought to myself “I should be a chef.” Instead of going back to sleep, I immediately dug out some old culinary school pamphlets I’d collected, and that was that.

I attended Johnson & Wales University in Miami, Florida, which solidified my love of food from places like Mexico, Argentina and Costa Rica. After graduation, I became an executive chef at the World Bank, which featured flavors from all over the globe, and you’ll still see some of those inspirations on the Torchy’s menu today. 

It was running the café at Enron that brought me to Texas. Obviously, Enron was not a viable career option for long, so at that point I knew it was time to go after something I’d always wanted: to run my own food business.

How did you come up with the Torchy's name and the "Damn Good Tacos" slogan?

In coming up with our name, we knew we wanted something that would signal a shift from the more traditional taco shop, to match our unique spin on flavors and ingredients. When the Torchy’s name came up in conversation with my original partner, we knew that was it. We had a vision of that food trailer, with a red neon Torchy’s sign, maybe with some flames coming out of the Y. To this day, you’ll find a lot of red neon buzzing the Torchy’s name at many of our restaurants. As for our mascot, Torchy is the anti-cherub on your shoulder, saying “go ahead, eat the queso.” We’re all about enjoying life and having some fun – you have to enjoy some of life’s guilty pleasures from time to time!

We have our early Torchy’s fans to thank for the "damn good" slogan. I can’t tell you the number of times someone took a bite of our tacos and said “That’s damn good!”  We think our fans know best, and hence our slogan was born. 

In a city with so many taco joints, how did you stand out in the early days? 

I bought a food trailer, before people were even doing food trucks, which I think in and of itself grabbed some attention. But what really helped us stand out was our creativity. We took the idea of a street taco, in a tortilla base, and pushed the boundaries, adding inspiration from flavors around the world. From there, it was our food quality and attention to service details that kept people’s attention and is what keeps our taco junkies coming back. 

What were your biggest challenges in the early days?

Awareness was one of our early challenges. We knew we had damn good food, but we weren’t in the best location at the time. So I took my red Vespa and hauled our food around town, handing out chips and salsa and just letting the food speak for itself. Once the awareness grew, which happened pretty quickly, I was able to open my first brick-and-mortar location and the rest is history.

Did you envision expanding to become a national chain? How does it feel to see how the company has grown and added so many employees?

I am so passionate about Torchy’s, and that passion is contagious. I’m thrilled with the growth and success we have seen, which has far exceeded my wildest dreams. While a lot has changed in terms of our size and scale, we haven’t lost track of who we are. We still offer that same down-to-earth culture for our people, the attention to detail and service for our guests, and of course, damn good food. That is what will propel us into the future.