In 2002, Pedro “Pete” Mora opened his first Fajita Pete’s in Houston in a 6,500-square-foot space with 60 tables he made himself in his garage. At 23, he was fresh out of college, full of energy and ready to embark upon a career in the restaurant industry.
The full-service restaurant was profitable, but Mora quickly learned that operating and staffing such a large space required a lot of work and was expensive for measure, so he added a catering business to generate more revenue.
In 2004, Fajita Pete’s secured its first catering gig at BP.
“That was my ‘a-ha’ moment,” Mora said. “I dropped off some business cards and the catering business just took off from there.”
In 2007, the lease was up at the original Fajita Pete’s and Mora closed the location, pared down the menu and moved into a 1,200-square-foot kitchen that focused almost entirely on catering and delivery. There are now 11 similar Fajita Pete’s locations throughout Houston and Dallas, with four more currently in development.
For Mora, getting smaller was a necessary move to better compete in an intense industry.
“I was catering for lunch and then coming back to the home base and waiting on 60 tables for the rest of the day. It wasn’t an efficient use of time,” Mora said. “It’s hard to compete with the big boys when you don’t have the same funding and resources. That’s when I realized I needed to get smaller and start catering more.”
Since reducing its footprint, Fajita Pete’s fixed costs dropped to 20% of what they used to be. Also, ticket averages are higher due to larger catering orders.
“And, most importantly, we were able to be really excellent at one thing,” Mora said.
Mora added that more chains have embraced smaller footprints within the past few years and he doesn’t expect that trend to change due to the cost savings realized and consumer preferences pivoting toward off-premise dining. According to Technomic research, 86% of consumers use off-premise channels at least once a month, and a third of consumers use these channels more than they did a year ago.
For Fajita Pete’s, 95% of the business is now out the door and overhead costs and food costs are smaller because the restaurant and menu are smaller. The off-premise focus has yielded an interesting cycle for the brand.
“About 30% of our business is catering and the rest is delivery and carry out. But the more delivery I do, the more catering business I get because of that exposure,” Mora said.
To succeed with this model, Fajita Pete’s learned quickly that it couldn’t be everything to everyone. The original location included about 70 menu items. The brand now features about 14 items – five of which are core offerings.
“This smaller footprint allowed us to better see what’s moving and what’s not moving, what travels well and where we can be most efficient. We eliminated so much waste and complexity from our original menu and it has helped with our speed of service. If you want to be convenient, you can’t be slow,” Mora said.
The delivery piece required some trial and error, as well. Fajita Pete’s learned, for example, that anything delivered further than 2 miles away would take too long in Houston traffic, so the brand sticks to that set radius. Fajita Pete’s also uses its own delivery fleet versus a third-party aggregate. This, Mora said, is a critical component for the success of the brand.
“For many of our customers, the only interaction they have with the company is with the delivery driver. That is why we take so much care in it – there can’t be a disconnect there,” Mora said. “We want to control that impression because it might be the only chance we get to.”
“It’s weird to me that someone would give away 20% of their ticket in such a low-margin business. There’s not enough meat on the bone. It’s almost like some of these full-service brands are spinning their wheels and creating so much work for diminishing returns,” Mora said.
He also predicts more restaurants will adopt smaller footprints and will continue to hone their focus on off-premise channels, including some of the bigger players.
“There will always be room for the big box restaurant because people will always want to go out to eat. But the segment will become smaller. The whole world is getting so fast. There’s nothing wrong with it – people are more productive and need more convenience to fit their pace. But as a business person, you have to know how you’ll fit into this. You have to start selling convenience,” Mora said.
There are challenges in doing so. Packaging has to be right for delivery, for example. So does the kitchen flow to shift between carry out, catering and small-order deliveries. And, training is critical to ensure brand consistency in off-premise channels. Operational and logistics details can be boring, Mora said, but they solve big problems.
“It’s amazing how a chopping table that’s an inch wider can save so much time for an employee. These types of efficiencies, no matter how small, are so important in our model,” Mora said. “Ten years ago, a restaurant with a small footprint and specialized menu was innovative. No one was doing what we were doing and we capitalized on that. I couldn’t afford to play catch up on this. I had to get ahead of them and take a big risk to do so. I’m glad I did.”