For investors, finding the next big thing in the restaurant business can be difficult because, after all, there are just so many restaurants out there.
And sometimes the next big thing is right around the corner.
This was the case with Dos Toros, which this week received a $10 million, minority investment from GrowthPoint Partners, an investment group headed by Chopt Creative Salad Company CEO Nick Marsh — and including the founders of Chopt and Mendocino Farms.
“Chopt headquarters is right around the corner from our first location,” Leo Kremer, Dos Toros’ cofounder told NRN.
“Nick Marsh has been kind of a mentor to us the last few years. I never imagined he’d be an investor.”
Said Marsh: “I’ve already spent a bunch of time with them and the members of their management team. It was pretty natural when Leo and Oliver (Kremer) decided they were going to look for some outside financing.”
“I’ve been watching those lines for a lot of years thinking that if there was an opportunity to partner with them, I’d take it.”
The financing is a step forward for the burrito chain. Leo and Oliver — “the Burrito Brothers,” as they called themselves in an interview — opened the first location on Union Square in New York in 2009.
The funds from GrowthPoint will help fund a milestone in Dos Toros’ young history: Its growth outside of New York. The company will use the funds to add locations in Chicago, its first major, non-New York market.
“That’s the next big thing on the horizon,” Oliver said. Yet the brothers added that they’re not so focused on those other markets that they’re going to ignore New York. “We’ve got more restaurants here coming in the next 12 months. We’re going to keep our eyes on the ball here.”
The brothers grew up in the San Francisco Bay area, “eating a million burritos,” Leo said. They grew up loving the area’s mission-style burritos, and decided to use some “reverse engineering” to bring the concept to New York.
Neither had restaurant experience. Oliver worked with an internet startup before he graduated in college in 2008. Leo had been a bassist for the band Third Eye Blind.
“I put a lot of time and thought into our [restaurant’s] playlist,” he said.
Dos Toros opened its first location in 2009 and has since grown to 11 locations in Manhattan and Brooklyn. The chain had financed its growth through a combination of SBA loans and financing from friends and family. This represents the first major outside investment for the chain.
The company boasts menu offering similar to those found in many Bay Area taquerias, with burritos, tacos and quesadillas made from scratch.
The investment comes at a time of upheaval in the fast-casual business, as some cracks begin showing at some of the major players — notably the big burrito chain Chipotle Mexican Grill, which has struggled with significant sales losses all year.
Yet, despite the presence of burrito chains like Chipotle, Moe’s Southwest Grill and Qdoba Mexican Eats, the Kremer brothers believe the space remains underpenetrated.
“There are not a ton of players, especially at the higher end,” Leo said. “We feel like the better burrito segment is wide open.”
The brothers found that GrowthPoint was a good fit for the company, largely because of the experience of Marsh as well as entrepreneurs from Mendocino and Chopt.
Marsh “truly has lived it,” Leo said. “They can speak to where we are, and where we’re going.”
In addition to Marsh, Chopt founders Tony Shure and Colin McCabe, along with Mendocino founders Mario del Pero and Ellen Chen.
Marsh said the brothers have the right mindset to build a successful business.
“The first ingredient in a restaurant success story is the creative energy of the founders,” Marsh said. “They bring passion and a maniacal focus on the experience and the food that makes Dos Toros really special.”
Marsh also said that Dos Toros, like Mendocino and Chopt, “share next generation food quality and have a similar business approach. It’s the culture at these young companies. They’re direct extensions of the founders’ personality.”