First, Tacolicious was a San Francisco pop-up. Next, owner Joe Hargrave turned the Mexican concept into a brick-and-mortar restaurant in the city’s Marina district, and he’s since expanded to four locations in the Bay Area. Last year he opened Chino, a Chinese-influenced restaurant unlike anything he’s ever done — and he’s already thinking about what’s next.
We asked Joe all about his rapid growth, how his operations have evolved, and what he wishes he’d known when he was first starting out. Read on for some of the most important learnings from every stage of his expansion.
When he was in his early 30s, Joe opened a Spanish restaurant called Laiola in San Francisco. He studied wine, traveled through Europe and invested a million dollars into the venture — and although Laiola received critical acclaim, it was never profitable.
Joe had always cooked Mexican food at home, and he decided to start a taco pop-up every Tuesday out of Laiola (he had a stand at the San Francisco Ferry Building as well). It was an instant success; his Tuesday nights were suddenly busier than his Friday nights.
“When restaurants open and they don’t work, they try to stay in business,” says Joe. “I was talking to one of my investor friends who’s not in the restaurant business, and he said, change the concept. The hardest part is the restaurant itself, the four walls — what happens inside is easy.”
Joe listened and converted Laiola into a permanent brick-and-mortar Tacolicious. In the last year of Laiola, he did $980,000 in sales and amassed another $400,000 in debt (in addition to the initial investment). Every day he was on the brink of shutting down. After a year with the new concept, he did almost three million in sales, paid off all of his debt, and started returning capital back to his investors. The next year, he paid them off.
“You have to be ready to be flexible, to drop things and redo them,” says Joe.
Joe is the first to admit that when Chino first launched it wasn’t up to par. “We popped it up at the market, and that was a terrible disaster. We just didn’t know what we were doing; we’re just starting to figure out what we’re doing. But I’m not in it for seven to eight months, I’m in it for decades. We’ll be great.”
Listen to Your Customers
Joe’s advice to young restaurateurs is the same thing he reminds himself constantly: Don’t try to be too clever. “We get so fixated on ideas we think are clever, but sometimes you have to go in a different direction,” he says. “Our greatest weakness is that we think we’re right, but really it’s about what the customer wants.”
To keep the customer top of mind, Joe studies product mix reports that show him what’s selling and what’s not to get inside the brain of the customer. Then he tries to identify opportunities for improvement. “Is it too expensive? Is it worded incorrectly? I play around with those things and try never to think that I’m right.”
Keep Scalability in Mind
When he first brought Tacolicious to the Ferry Building, Joe was making carne asada tacos. He only had enough space to make five orders at a time, but there were hundreds of people in line. Frustrated, he decided to braise the meat for his tacos, as many people do in Mexico — that way he could cook the meat overnight and hold it warm at the venue. With modified equipment, he served 200 people in 25 minutes, no problem.
In the restaurant, Joe’s team initially served tacos a la carte, which was confusing and cumbersome for groups. “The kitchen was falling apart and the waiters were bringing all of these clunky plates to the table,” he says. He decided to offer orders of four or 10 and serve them family style to simplify the ordering and presentation. Having the pop-up allowed him to observe his customers and identify creative solutions to challenges that would arise.
Currently, Joe is working on a Tacolicous stand that he can take to ballparks and other locations offsite. “I’m having these white boxes made that are biodegradable, and you can have four or 10 tacos inside. It looks the exact same and fits our concept, so it’s totally scalable and moveable.”
The top-performing Tacolicious locations are in two distinct neighborhoods, and early on Joe had slightly different menus for each one. Since then, he and Chef Telmo Faria have made them all the same for consistency. “It’s easier to work with our four restaurant chefs as one, so we pull them in and work on new recipes together.”
Know Your Audience
Consistency is great, but don’t expect different customers in different areas to have the exact same patterns. Talking about Tacolicious’ Palo Alto location, Joe says, “It took a year of us absolutely sucking before figuring out the different market.”
San Francisco is full of 20- and 30-somethings who work off hours, so it’s not unusual for Tacolicious to be full at 3 p.m. on a weekday. In Palo Alto, however, people tend to eat lunch and dinner and nothing in between.
“We lost a whole bunch of money,” says Joe. “If he didn’t have the infrastructure of the other restaurants we would have been done. We just had to change the model.”
He started focusing on catering and corporate events, taking Tacolicious outside the walls of the restaurant to reach customers. The restaurant became a vendor for local tech companies and now brings in the same amount of revenue as the original Tacolicious location. “We’re not messing with the quality of what we’re doing, we’re just trying to figure out different vehicles for getting it to them. We’ve done really, really well down there.”
For Joe, “restaurants are fun, but the real excitement is in seeing them come to life.” That’s why he’s always thinking about the next project, and he’s grown savvier in the way he approaches them over the years.
With more experience, he’s changed the way he writes business plans. In the beginning he believed people would invest in him because of his great ideas alone, but he’s since learned to be very detailed about the concept, pricing, forecast, menu, design — even the smell of the place.
In the past six months, staffing has been a priority for Tacolicious and Chino. Joe currently has 360 employees and growing, compared with four when he started Tacolicious in 2009. “We’ve had more turnover at the top than I ever would have wanted,” says Joe, including directors of sales and operations, a couple of chefs, and a few managers. The reason? The people were great, but from a business perspective they needed to start doing things differently.
“You micromanage everything in the restaurant business — every invoice, every napkin, where every dime goes,” says Joe. “And then you get to a certain size and you can’t micromanage. You have to delegate everything or you’ll go crazy. We were making so much money, and then I couldn’t watch everything anymore and we stopped making money.”
He brought in a Director of Administration, a Director of Human Resources, and a new Director of Operations. He needed a different operating system: not one made for mom-and-pop shops, but an infrastructure that was made for broader management.
“It’s not going corporate, it’s just protecting everything and making sure that this vision is scaled and documented properly,” says Joe.
Make People Care
When Tacolicious first opened, Joe couldn’t get any press for the restaurant to save his life. “We were moderately sophisticated restaurant people who were doing a pretty basic concept, and the public didn’t really care and the food media didn’t really care about white people doing a concept called Tacolicious on Chestnut Street,” he says. “It doesn’t get more gentrified-sounding than that. But the truth is that we actually had knowledge and a lot of care to what we were doing.”
Joe decided to align himself with other restaurant industry leaders and put philanthropy at the center of his operations. His team started the Guest Chef series, asking fellow chefs to cook with him at the Ferry Building and donating proceeds to CUESA (Center for Urban Education about Sustainable Agriculture). All of the sudden, the press started coming. They also launched the Tacolicious School Project, giving proceeds from their Monday sales to local schools, and they have now given half a million dollars to San Francisco public schools.
“We keep that philanthropy and that power at the center of our business, engaging the community however we can,” says Joe. “If we can make a living, hire hundreds of people, and our investors are getting paid back, and we can give money to charity? That’s perfect.”
Now that 2015 is here, resolve to make this the best year yet for your restaurant business. Every day this month we’ll be featuring a new tip from restaurateurs, chefs, and other industry leaders to shape up your marketing, operations, hospitality, and more. Check back daily for expert advice and successful strategies to start your year off right, and see them all here.