Tuesday, February 22, 2005

Robin Buckson / The Detroit News Panchero's Mexican Grill officials are betting that customer loyalty from its East Lansing and Ann Arbor campus franchises will help its new Livonia store average about $1 million annually.

Local spotlight

Restaurant franchise hopes loyalty pays

By Neal Haldane / Special to The Detroit News

Panchero's Mexican Grill • New location: 17390 Haggerty, Livonia • Opening May 1: Southfield • Niche: quick-casual Mexican food • Average meal cost: $7 per person • Other Michigan locations: East Lansing, Ann Arbor, Okemos, Lansing and Grandville. • Information: www.pancheros.com Comment on this story Send this story to a friend Get Home Delivery

LIVONIA -- Panchero's Mexican Grill representatives expect their restaurant's popularity with college students in East Lansing and Ann Arbor will help the chain make inroads in the Detroit area.

A Livonia location opened Monday, a Southfield store is set to launch May 1, and the Flyers Group out of Beaver Dam, Wis., the franchisee for this area, plans as many as 20 more in Southeast Michigan, Flint and Kalamazoo, said Ernie Byerly.

"We think there is a good name recognition in Michigan and all the college kids who have gone through those two universities are familiar with Panchero's," said Byerly, who expects a third Panchero's to open in the area by early next year.

The chain, based in Iowa, operates 25 restaurants and has 90 in development. In addition to East Lansing and Ann Arbor, Panchero's also operates stores in Okemos, Lansing and Grandville.

"We have a huge following of people who have gone to Michigan State and Michigan and Detroit is very logical in that mix," said Rodney Anderson, president of the chain

The Flyers Group is investing around $600,000 to open the two restaurants and hopes to see sales of $700,000 each the first year and $1 million annually after that, he said.

"We're pretty confident," he said. "The better stores do a $1 million a year. The concept is extremely popular and the food really sells itself." Fresh tortillas serve as the main attraction at Panchero's.

"The No. 1 thing is we make our own tortillas," Anderson said. "It is so much better than anything any other restaurant pulls out of a bag. We make the dough in the store and press the tortilla in front of you. You pick the ingredients."

Taco Bell dominates the Mexican quick-service segment of the restaurant market and sales for the segment are expected to increase 4 percent a year to $9.3 billion by 2007, according to Smith Barney and Technomic. But one player in this segment, Baja Fresh, has stumbled a bit. The chain, owned by Wendy's and with six outlets in the Detroit area, announced last year that it was closing 15 to 18 underperforming stores.

"Baja Fresh has run into some serious problems," said

Ron Paul, president of Technomic, a restaurant consulting and research firm in Chicago. "That's one we still have to watch how it plays out. As Taco Bells get better, there is not going to be as big a market for Mexican quick-casual as we expected. It's a niche and if independents can do it as well as a chain, what does a chain really bring?"

McDonald's-owned Chipotle, which has yet to enter the Michigan market, looks to be growing, he added.

But Panchero's Anderson remains confident about his efforts.

"Taco Bell doesn't really relate to us," he said. "We are in the fast-casual segment. We think the market is wide open for us. We are a leader."

Anderson said the recipe for success goes beyond considering what the other Mexican food outlets offer.

"This business comes down to finding the right location and taking care of your customers," Anderson said.

Neal Haldane is a Metro Detroit freelance writer.