Dan Houghton has a headache. The source of his pain, ironically enough for a self-professed maths geek, is getting his multiplication right. Houghton, 35, co-runs Chilango, the Mexican food chain he founded five years ago while working at Skype with friend and colleague Eric Partaker. Its aim is to blast a hole in the fast-food stodge we have come to expect from south American food. Its fresher, lighter food has won plaudits from the pundits and a clutch of awards, including Number One Mexican Restaurant and Best Buy by Zagat.
The problem is Chilango wants to be as big as Japanese food chain Itsu. Within five years it would like 30 stores. Currently it has three. With business roaring and queues out of the door most mealtimes, Houghton never thought he would be lying in bed at night worrying about property. “The primary constraint is getting good units,” he says. Its three London properties are all around 1,000 sq ft. So far this year the company is developing a store on London Wall, EC2, and has just exchanged on a unit at 32 Brushfield Street, E1. It is in legal talks about one more site and has offers out on a couple more for next year.
After that it becomes more difficult. A fuschia sign on the company’s homepage calling for help with its expansion is testament to this headache. The pair have even gone to property events dressed up as their beloved Mexican wrestlers, complete with face masks, to explain the concept and drum up interest. Yet, finding units is still a problem.
Houghton says he would like to open two stores this year and four next. “If I could get them all lined up now, that would make my job so much easier, but it is lumpy,” he says.
Learning curve
Chilango started from an innocent conversation. Partaker, who is half-Norwegian, half-American, craved the food he had grown up with in Chicago, but was unable to find it, even in cosmopolitan London. Houghton had always worked with start-up companies and felt now was the time to push out on his own. By begging and borrowing, the pair set up with £290,000 cash, mostly from friends and family.
Their first restaurant, then called Mucho Más, in Islington, was a steep learning curve. “We focused on the food and nothing else, we were happy to spend all our energy there and we quickly ran out of money,” says Houghton. By 2009 they had brought in Luis Castro as a director to oversee the food quality, rebranded as Chilango, opened in Fleet Street and were promptly surprised when it was a runaway smash and there was a queue down the street.
“Islington was all about weekends; Fleet Street was more about lunchtime, and it taught us about location.”
That rebranding doubled sales almost overnight and gave them the confidence to expand further. Then, disaster hit. Buoyed by the success in central London, they opened up stores in Meadowhall, Sheffield and Bluewater in Kent. Both shut shortly after. Houghton is candid: “It was the wrong audience, it did well at the weekend but there was not enough young urban trade (see below).
“There was a hiatus, then we came out stronger and opened in Chancery Lane. It was a great success. In terms of branding, it was off-pitch, so it was a much lower rent, but that meant a lower break-even.”
The experiment has given the company ideas about its future pitches. The Chancery Lane store was a conversion, an A1 unit that had been vacant for a while and, being off High Holborn, was just off-pitch. This played a big part in convincing the authorities to agree to a change of use for the unit. “In the long term, it is harder work to get off the ground, but it is incredibly low rent,” says Houghton.
Now, it is time for the company to start stretching itself. The pair recently raised £1.5m from investors, including the people who have been behind Carluccio’s, Krispy Kreme and Domino’s. It has two concepts: one high street, the other off-pitch, explains Houghton, so it is comfortable with different locations. “But, frankly, I would be worried if there wasn’t a Pret, a Starbucks or something similar nearby because that says young professionals are in the area.”
However, he warns: “We are very different to the coffee shops, whose overheads are small and wastage high, we are selling the brand on fresh food, so we can’t have it just sitting around.”
Nothing much, it seems, sits around at Chilango.
Houghton on the property industry
Unlike much of the talk from retailers who want short leases and turnover rents, Dan Houghton says Chilango is looking for 15 years on a lease, with breaks at five and 10 years.
“A site will take us three years to pay back, so on a short lease would only give us a couple of years. We would look at turnover – it’s a useful tool in negotiations – and if we end up
paying more because we are ahead of our sales targets, well, it’s a nice problem to have,” he says.
The reality of negotiating has been something of an eye-opener for Houghton, given the much publicised woes in the property sector.
He says: “Honestly, when I am talking to landlords at the moment it is like there isn’t a recession on.”
The regions
Chilango opened in Bluewater in Kent and Meadowhall in Sheffield in 2011. It was one of the first mid-range, mid-priced fast-food operators to go in, but the concept failed to catch on. “It was a big mall,” says Luis Castro, whose job description on his business card is simply “quality”. “People either wanted to sit down and be served or they would want to grab fast food that was full of calories, and we are not that.”
But Chilango would consider a similar location again. Founder Dan Houghton says there is potential in Bristol, Manchester, Leeds and Sheffield, where he says the concept would have worked in the city centre. Shopping centres have changed, as have expectations.
Houghton says: “It was too early. Our food was more expensive and we were not casual dining.”
nadia.elghamry@estatesgazette.com
