A taco-and-tequila specialist with rock ’n’ roll credentials and a spot on the Sunset Strip has joined the ranks of Mexican-themed, casual dining chains run by Cypress-based Real Mex Restaurants Inc.
The multichain operator recently struck a deal to add Pink Taco to its roster of brands, which include Acapulco, Chevys and El Torito restaurants.
Terms of deal were not immediately disclosed.
Real Mex is an affiliate of New York-based private equity firm Z Capital Partners and has about 120 restaurants overall. The restaurants and some packaged-food operations accounted for an estimated $330 million in annual revenue, according to a recent Orange County Business Journal estimate, with about 8,200 employees, including some 1,600 in OC—a total that’s spread over its Cypress headquarters and various restaurants here.
The deal for Pink Taco looks to be a bid by Real Mex to put something in its lineup with more appeal to younger diners.
“It’s a smart buy,” said Kevin Burke, managing director at Los Angeles-based investment bank Trinity Capital. “It’s got a following, and it’s hip and sassy. If they can stay true to the original concept, Real Mex will do very well with it.”
Z Capital Partner said it plans for Real Mex to bring its decades of restaurant experience in opening Pink Taco locations nationwide and overseas, and launching Pink Taco-branded food and drink products.
“We believe there is tremendous potential to elevate the brand and expand its unique restaurant experience,” James Zenni, Z Capital’s chief executive, said in a statement.
The company did not respond to a request for further comment.
Pink Taco—with its colorful decor, cheeky name, loud music, and reputation for hosting celeb bashes for the likes of Aerosmith’s Steven Tyler—follows a funky Mexican cantina concept. Its creative direction under Real Mex will continue to stem from founder Harry Morton, 35, who opened the first Pink Taco in 1999 at the Las Vegas Hard Rock Hotel & Casino when he was just 18. That site will remain under the hotel’s ownership.
Morton’s knack for developing theme-based restaurants is part of a family legacy: Morton is the grandson of Morton’s the Steakhouse founder Arnie Morton and the son of Hard Rock Café International Inc. co-founder Peter Morton.
Morton has talked for at least several years about plans to open more Pink Taco sites, telling the Los Angeles Times in 2014 that he hoped to eventually open between 80 and 100 internationally.
There have been stumbles—a Scottsdale, Ariz., location closed in 2009, and a site at Westfield Corp.’s Century City mall closed in January after nine years, leaving only the restaurant on the Sunset Strip the location beyond Las Vegas.
Real Mex has not revealed the scale of its expansion plan and did not return calls for comment, nor did representatives of Pink Taco.
Harry Morton is said to be staying on with the company to guide marketing, design and location scouting.
The acquisition comes as Real Mex contends with an aging clientele and growing competition from fast-casual options. The full-service Mexican restaurant industry as a whole did $13.2 billion in business, even as El Torito closed at least three locations, and Chevys and Acapulco each closed at least two locations last year.
Real Mex had filed for bankruptcy in 2011 as customers opted for cheaper Mexican fare offered by chains such as Denver-based Chipotle Mexican Grill Inc. during the recession.
Z Capital became Real Mex’s largest shareholder in the company’s reorganization, which shuttered dozens of locations.
The new approach still faces plenty of competition from Chipotle, despite its recent problems with food safety. Fast-growing Mexican-style chains, such as Dallas-based On the Border and Norwalk, Conn.-based Bartaco, tend to emphasize their liquor offerings—the better to sidestep competition from chains such as Chipotle, which typically don’t serve alcohol. They also focus on limited menus—serving a handful of tacos, for example, rather than everything from enchiladas to chile rellenos.
“They’re not going the traditional route, with five-page menus of pretty much everything,” said Lauren Hallow, a researcher at Technomic Inc., an industry tracker in Chicago.
But even eateries tailored to millennials—as the generation of younger adults are called these days—face the challenge of growing competition.
“That space is getting crowded—it’s a battle for market share,” said restaurant analyst Bonnie Riggs of NPD Group Inc., a retail consultancy based in Port Washington, N.Y. n
The initial version of this story appeared in the Los Angeles Business Journal, a sister publication of the Orange County Business Journal.
