Taquerias Arandas

Recipe for Successby
Portfolio, 19-Mar-08
Kate Murphy

An ethnic fast-food chain's success illustrates three key points of any ambitious startup: Find a niche, know your customers, and prepare a successor.

In a Hispanic neighborhood on Houston's east side, the parking lots of a Burger King and Church's Chicken were vacant during a recent lunch hour while the spaces at the nearby Taquerias Arandas were all full. Most of the customers' cars and trucks had little Mexican flags hanging from their rearview mirrors.

With 35 restaurants in five Texas cities — Houston, Dallas, Nacogdoches, Waco, and Bryan — Taquerias Arandas is a popular and rapidly expanding chain that appeals to immigrants craving authentic, inexpensive Mexican food. The chain has also generated a loyal following among second- and third-generation Latinos as well as non-Hispanics.

Started more than a quarter century ago by Jose Camarena, an immigrant from Mexico, Taquerias Arandas has survived — and thrived — by focusing on three elements that are key to any small business with big plans. It has a niche, knows its customers very well, and was able to survive its founder's retirement.

Now it is positioned to pursue its ambition of growing beyond Texas and becoming a national chain.

"Taquerias Arandas is definitely on our radar," says Darren Tristano, executive vice president of Technomic, the restaurant industry consulting and research firm in Chicago. "It's an emerging chain that's tapped into the fastest growing demographic in America."

Legal and illegal Hispanic immigrants in the U.S. are estimated to number between 17 million and 19 million. According to the U.S. Census Bureau, the nation's Hispanics, who total 44.5 million, will make up a quarter of the population by 2050 and are or will soon be the majority population in 35 of America's 50 largest cities.

"Hispanics are very much into authentic cuisine," Tristano says, "and aren't impressed when a mainstream chain puts something like queso [Spanish for cheese] on the menu."

Taquerias Arandas, which is named for the town closest to Jose Camarena's birthplace in the state of Jalisco, is nothing if not authentic. Its menu includes cabrito, or goat, and menudo, a tripe and bean soup. But the real draw is the savory soft tacos like those sold at taquerias and pushcarts throughout Mexico.

At Taquerias Arandas, three tacos — soft corn or flour tortillas stuffed with cabrito, pork, chicken, skirt steak, or beef tongue and topped with lettuce and tomato — go for $1.49. Large tostadas are $2.89 and giant burritos are $3.99.

Many diners are undocumented workers who have left their wives and children in Mexico to work in the U.S. "These guys are living five to an apartment and don't know how to cook and want a taste of home," says Neil Foley, a professor of Hispanic history and culture at the University of Texas at Austin. "They walk into something like a Taquerias Arandas and get a fistful of tacos at Mexican prices and it's like they're no longer in the U.S."

Robb Walsh, food critic for the Houston Press and author of The Tex-Mex Cookbook (Broadway Books, 2004), says taquerias are proliferating in the U.S. "Taquerias are the soul of Mexican street food offering hearty, home-cooked, well-made, inexpensive food that is spicy, garlicky, and wonderful," he says. "Taquerias Arandas is just the first that has managed to become a chain."

As successful as the business was under its founder, Taquerias Arandas ran into a problem common to many small businesses when its founder decided it was time to step down. When Camarena, who speaks mostly in Spanish and declined to be interviewed, wanted to retire to his Texas ranch in 2002, he reluctantly permitted the middle of his three daughters, Judy, to assume more control.

Judy Camarena, 25, has worked at the business since she was 12, and had advanced to a managerial position in the corporate office when she was in high school. Still, she says, her father was not eager for her to run the business. "He feels women are made to make babies and stay at home," she says.

Camarena and her father agreed on a yearlong trial period to see if she could run the company. The daughter quickly created a corporate structure, consolidated bank debt, standardized and catalogued recipes, and installed a point of sale software system to track expenses and inventory; profits more than tripled.

"When my father saw the numbers after that first year, he kind of realized that maybe I knew what I was doing," says Camarena, who is unmarried and often works 12- and 14-hour days. She doesn't have a college degree — she intends to pursue one some day — but her vendors say she's a shrewd businesswoman who is obsessed with quality, and, according to one vendor, "knows how to cut a deal."

The U.S. Minority Business Development Agency named Taquerias Arandas Minority Retail Firm of the Year in 2004.

"The old guy doesn't have a son and Judy knew the business, so I guess he gave her a shot," says Trey McHale, a Coca-Cola account manager who has worked with both father and daughter. "Judy's turned it up a notch through an expansion of the brand and maintaining consistency across all the restaurants."

Each taqueria is owned and managed by a member of the extended Camarena family or by former employees. Franchise agreements include a $65,000 fee up front and 6 percent of sales. By contrast, a McDonald's franchise requires an initial investment of $650,000 to $1.6 million, and at least 12.5 percent of sales.

Camarena says her focus now is finding sites for new locations. She has opened 10 restaurants in the past four years and is looking to expand outside of Texas. Moreover, she hopes to attract more non-Hispanic customers via promotional events with TV and radio stations.

One thing Camarena says she does not plan to do: Americanize the menu to draw a wider following. "I'm biased in that I love Mexican culture and food," she says. "I know that if people try it they will like it." She also doesn't want to alienate her core Hispanic base, which she fears would bolt if the food loses its authenticity.

Taquerias Arandas, which is privately held, declined to release sales or any other figures. Tristano, the Technomic restaurant consultant, estimates sales are at least $1 million per restaurant, though he says that number is probably low since the chain, unlike most other fast-food franchises, sells beer.

The company also has four Arandas Bakeries, which specialize in Mexican breads, tortillas, and pastries. They supply both the retail stores and wholesale customers, including Wal-Mart stores in Texas. There are also two Mexican-style seafood restaurants called Ostioneria Arandas Seafood. All the divisions operate under the name Arandas Franchises Inc., which is headquartered in Houston.

Its success will depend on whether the company can sustain its growth in an age of tightening credit for opening new locations, soaring food prices, and stricter immigration enforcement, which has slackened sales. "It has definitely cut into our business," Camarena said. "People are afraid to come out."

Attracting non-Hispanics like Cathy Williams, an account executive with a rock radio station in Houston, will be essential. Williams says she had never heard of Taquerias Arandas before she orchestrated a promotion at one of its locations. Most of the station's target audience who came to the event, Anglo men in their 20s and 30s, had never been there either.

"Everyone was sort of blown away by how good and how incredibly reasonably priced the food was," she says. "It's way better than something like Taco Cabana or Taco Bell."

However, Williams adds that she will continue to go to Taco Cabana when she's in the mood for Mexican fast food because there isn't a Taquerias Arandas near where she lives. Camarena says she's working on it.