Santa Ana-based Wahoo’s Fish Taco is watching its competition a little more closely these days.
A few years back, two of Wahoo’s biggest challengers, Carlsbad-based Rubio’s Restaurants Inc. and Thousand Oaks-based Baja Fresh Mexican Grill, both went on expansion binges.
Back then, “fresh Mex,” or healthy Mexican food, was on fire. Think black beans, charbroiled chicken, fresh fish and rice.
Baja Fresh grew to some 300 restaurants. Rubio’s has 150. Wahoo’s has 44.
Expansion didn’t go as planned for Rubio’s and Baja Fresh, said Ed Lee, cofounder of Wahoo’s. Both saw sales slip amid more competition. Now they’re regrouping.
Baja Fresh was just sold by Wendy’s International Inc. for $31 million, a fraction of the $275 million the Dublin, Ohio-based chain paid for it four years ago.
“They grew too fast,” Lee said. “They’re now both looking to see to how they can fix things.”
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Wahoo’s in Irvine: company opening five restaurants a year |
Wahoo’s, which runs tight and grows slow, has a lot to win or lose in the fallout, Lee said.
The woes of Baja Fresh, which cost Wendy’s $300 million in write-offs, charges and closures since 2002, “on one front kind of hurts our category,” Lee said.
“It makes it more difficult to borrow money,” he said. “We try to distance ourselves from Baja Fresh.”
Wahoo’s now has to work harder to sell lenders on the company and has to play up what gained it a loyal following: fresh fish tacos, salads and other healthy food made to order. And don’t forget the chain’s surf vibe.
There’s opportunity, too, Lee said. Wahoo’s may look to snatch up leases held by Baja Fresh if the chain’s new owners,a group led by Anaheim investor David Kim,decide to close some eateries next year, Lee said.
“I’m looking a lot better now (to potential landlords) than my competitors are,” Lee said. “Hopefully it opens more doors. I’d like to open more restaurants in Southern California.”
Wahoo’s and Baja Fresh often vied for the same space, Lee said. Baja Fresh, which had Wendy’s deeper pockets, would win, he said.
“There were a handful of locations I walked away from,” Lee said. “When I look back, I still kick myself.”
Lee didn’t say how privately held Wahoo’s is doing amid a slowdown for restaurants. Sales, which are about $30 million yearly, have been “up for the last couple of years,” he said.
“The category itself wasn’t hurt,” Lee said. “Where it might hurt is if Baja Fresh starts to shut down too many units. People might think there’s something wrong with the food.”
Wahoo’s plans to keep with what works: growing slow, opening about five restaurants per year, Lee said.
The company opened four this year, including in Hawaii and Arizona, two new states for the company.
Next year, Wahoo’s expects to open up to six more, including in Rancho Bernardo, Palo Alto and Temecula.
The company also is scouting OC and other parts of Southern California, where it hopes to open its 50th store.
It will be a milestone for Lee and his two brothers, who founded Wahoo’s nearly 20 years ago. The three surfing Asian brothers who grew up in Brazil are part of the chain’s persona.
“Here we are 20 years later still talking to each other, still surfing together,” Lee said. “That’s an accomplishment in itself.”
Wahoo’s now has 15 restaurants in OC.
The company plans to stick with markets that have “a lot of transplants from Southern California,” Lee said.
Wahoo’s intends to keep running lean.
The company has nine workers in its Santa Ana headquarters and about 800 in all.
Next year, Wahoo’s may look to add two workers to its marketing department, Lee said.
The company has had to continually find ways to offset rising costs without raising prices too much, Lee said.
“It’s a constant battle,” he said.
This year, the fight was fierce. Wahoo’s had to raise prices on some menu items by 5% after facing hikes in electricity and gas, Lee said.
It took some loyal customers off guard, he said.
“They come in with exact change,” Lee said. “One day the order was 15 cents more. We let them off the hook a couple of times.”
The chain potentially could double in the next five to 10 years to 100 restaurants, Lee said.
Having money and capable workers to grow is key, Lee said.
“It’s still hard to find quality employees,” he said. “Then you’ve got to fight to keep them around.”
For now, Wahoo’s has no plans to go public or bring in a major investor.
“That’s not to say we won’t entertain people,” Lee said. “We’re not foolish. We’re never going to stop listening and entertaining.” n
