COVID is tough, but Velvet Taco’s growth plan is better
Velvet Taco started 2021 with fewer than 20 locations, and in the nearly two years since then, the fast casual has not only faced unprecedented inflation, but also a change in ownership.
Still, the brand now has 35 restaurants across the country, with two more remaining before the end of the year, meaning the company has doubled in size. Velvet Taco’s has reached new markets and AUVs continue to exceed $4 million.
CEO Clay Dover says perseverance starts at the top, with private equity firm Leonard Green & Partners, which bought a majority stake in 2021. He describes the transition as smooth for several reasons. One being that L Catteron, the former majority owner, and FB Society, the group that founded the taco chain in 2011, are both still invested in Velvet Taco as minority owners. The other is the fact that Leonard Green & Partners has given away a host of resources for the restaurant. The company has even connected Velvet Taco with other brands in its portfolio, giving Dover the opportunity to speak with Shake Shack CEO Randy Garutti about navigating the early stages of fast-paced expansion. .
“They’ve been great partners and provided us with additional resources to help us continue to evolve and grow,” says Dover.
So far in 2022, Velvet Taco’s has opened restaurants in Charlotte, Houston, Dallas, Nashville and Oklahoma. Later this year, stores will open in Grapevine and Rockwall, Texas, in suburban Dallas. In 2023, the company will innovate in Florida.
Achieving those goals hasn’t been easy, says Dover, with construction costs, supply chain and raw material inflation all creating noise. The pressures have extended the time it takes to build a restaurant, stretching some of Velvet Taco’s aggressive growth plans. The chain actually bought five kitchen packages in advance and put them in storage just to be ready to open stores.
“It’s tough in an industry where we already have pretty thin margins,” says Dover. “I learned more about electrical panels than I ever thought I would, and getting glass, steel, and wood — some of those hard goods — and having that supply was tough. I don’t think it’s something anyone else in the industry hasn’t experienced as well.
That said, the channel isn’t too far off from the expectations it has set for itself. Last year, Velvet Taco called for 40 locations by the end of 2022. It will be 37 instead. The remains were pushed back to 2023. Additionally, the chain was able to lease its first restaurant support office in the Dallas-Forth Worth area, taking up more than 10,625 square feet of space on the second floor of a 90,000 square foot offices. And for customers, Velvet Taco launched both an online merchandise store, a recipe contest for a weekly taco feature, and its first loyalty program.
In terms of leadership, Lee Evans, after stints at Raising Cane’s, Rock Bottom Restaurants and Good Smoke Restaurant Group, was named the chain’s first chief financial officer in February. Robb Cherne, who started as chief operating officer in March 2019, has been promoted to regional vice president. In September, Michael Pereira, with experience from The Cheesecake Factory and Snooze an AM Eatery (which Dover calls the Velvet Taco of breakfast), became the brand’s first COO. Dover says he interviewed more than 100 candidates before landing on Pereira, whose wisdom will allow the CEO to focus on other elements of the business, like international growth and new cities.