Mike’s Red Tacos, a homegrown brand that got its start just a few years ago as a food truck, is making the leap into big-time franchising, having inked deals to eventually open more than 200 locations across the country over the next six years.
While the birria-centric restaurant group has just two San Diego locations — in Point Loma and Clairemont Mesa — with a third to open in Mira Mesa next week, its investors are confident that the chain is more than ready to take its concept on the road in a very ambitious way.
Leading the franchising effort are a couple of veteran players with links to such high-profile chains as Dave’s Hot Chicken and Wetzel’s Pretzels. Under a plan first conceived more than a year ago, Mike’s Red Tacos has sold the rights to 10 to 15 franchisees to develop restaurants in particular territories of the country.
To date, those agreements call for some 200 new restaurants to be located in Arizona, California, Nevada,Texas, Michigan, Minnesota, Indiana, Illinois, Virginia, Massachusetts and New Hampshire, said Andrew Feghali, an early investor and now board member who helped the taco brand’s founder, Mike Touma, start his business. It began as a food truck in 2021, to be followed by the first brick-and-mortar location in 2022.
Feghali acknowledged that no future leases have been signed yet, as franchisees are currently in the process of scouting locations.
“So we’re not going to grow for the sake of growth, and we’re not going to ask franchisees to sign leases in sub-tier markets,” said Feghali, who describes himself as a multi-unit franchisee with a portfolio of about 100 restaurants, including the Little Caesars Pizza, Jersey Mike’s Subs and Dave’s Hot Chicken brands. “So we can be patient. It’s not like we have an investment group that’s forcing any kind of development.
“But here’s why I’m confident it’s going to happen. It’s the people who are the franchisees. We don’t sell franchises to someone that doesn’t have franchising experience. We only sell to large, existing, experienced, well-capitalized, multi-unit franchise operators. The other thing is, a lot of the landlords are familiar with our group, and so when you’re looking at who’s going to be your tenant, the team behind it kind of means a lot.”
The Mike’s Red Taco franchising website states that interested franchisees “should be prepared for a million-dollar commitment to open a store, which includes build-out, equipment and working capital.” Helping lead the overall effort is newly named company President Vincent Montanelli, former brand leader of Wetzel’s Pretzels.
While Mike’s Red Tacos is hardly a household name, its local profile was elevated in 2023 when it made it onto Yelp’s Top 100 Places to Eat in the United States. The restaurants’ birria tacos get their name from the flour tortillas that are first dipped in red chile oil, then grilled for a crunchy exterior and filled with slow-stewed beef (birria). The menu also includes birria burritos, ramen and loaded nachos, as well as a two-layer tostada-style “Crunchstack.”
The taco brand’s aggressive expansion comes at a time when some restaurants in the fast-casual genre — a step up from conventional fast-food chains — are showing signs of weakness. Last year, Chipotle Mexican Grill, long the darling of the fast-casual category, saw same-store sales decline for the first time since it went public 20 years ago. And the San Diego-born fish taco chain, Rubio’s, has suffered its own financial woes, having filed for Chapter 11 bankruptcy twice, the most recent in 2024.
Feghali takes the position that in the fast-casual sphere, it’s newer, younger, unique brands that are flourishing compared to older, legacy chains.
“What we’re seeing is sort of an evolution in the restaurant world and even in franchising, where a lot of legacy, big-box quick-service restaurants are not doing as well, and these rising emerging brands that have more focused, more specialized menus are doing very, very well,” he said.
San Diego restaurant analyst John Gordon said that while the Mike’s Red Tacos franchising effort is being helmed by individuals with considerable franchising experience, none of it has been in Mexican fast-casual. He also notes that the signed commitments so far are just that, and there is no guarantee that there will be 200 leases consummated.
“The brand is so young and still in the oven, so to speak,” he said, “and competition for existing franchisee operators, sites and customers is extremely intense, although Mike’s could crack that over a period of time. We also don’t have any basic numbers, such as average sales and restaurant operating profit. So success will be luck and hard work over time.”
Future expansion in San Diego County will be controlled by Touma, the founder, as he purchased those rights, Feghali said. As for California as a whole, he said areas so far with commitments include Temecula and Murrieta, Orange County, Los Angeles, Tulare, and a wide swath of the San Francisco Bay Area.