A Flavorful Market Explosion With more than 54,000 US restaurants, generating $39 billion in annual revenues, Mexican restaurants outnumber Italian, Chinese, chicken and seafood restaurants, and is third to pizza and burgers as Americans’ most-popular restaurant cuisine. Approximately 75% of all Mexican restaurants are independent businesses; the other 25% are chains. Almost half (48.7%) of all Mexican restaurants are located in California, Texas, Florida, Illinois and New York. The growing popularity of Mexican dishes among Americans of all ethnicities and the increasing immigrant population resulted in a 2.8% growth in the Mexican restaurant sector from 2009 through 2014.

Growth Leaders Growth among the Mexican QSR sector (quick service restaurants) has contributed to the growth of limited service and full-service Mexican restaurants. Revenues for limited service restaurants increased from $9 billion for 2003 to $18 billion for 2013. Full-service Mexican restaurants have experienced a similar significant increase in revenues, from 2003’s $5.6 billion to 2013’s $12 billion. Most of the growth is in independent restaurants located in Hispanic-American communities. Fast Casual Magazine’s 2014 Top 100 Movers & Shakers listed Chipotle Mexican Grill 2nd and FREEBIRDS World Burrito 4th. Giraffas, a Brazilian/Latin American chain, was 24th and Moe’s Southwest Grill 38th.

Chipotle Is the Champ Many industry analysts claim Chipotle Mexican Grill is responsible for the fast-casual sector, as it has developed a brand that serves fresh, often locally sourced products, but with a fast-food-type operation. On Nation’s Restaurant News 2014 Top 100, Chipotle was 4th of the top 5 growth leaders, with a 17.3% increase in revenues to $3.2 billion and a total of 1,637 units. During Q3 2014, same-store sales increased 19.8%, net income 57% and the number of units to 1,724. Chipotle’s target audience is definitely Millennials, as the company uses mobile, social and viral channels to engage with its customers. The company’s commitment to naturally raised meat and organic ingredients and its tofu protein option, or Sofritas, also appeals to younger adults.

Fresh Is the Test According to industry analysts, Chipotle’s leadership in using the freshest ingredients has had an impact on menu development at Mexican and other Hispanic restaurants. They’ve learned that authenticity and spicy flavors drive young adult traffic. An April 2013 survey found that Chipotle Mexican Grill was the 9th favorite Mexican restaurant among Asian Americans; Pollo Tropical and El Pollo Loco, 1st and 2nd, respectively, among Hispanic Americans; and Taco John’s 1st among European Americans. During February 2014, 65% of Americans said their favorite Mexican restaurant was Qdoba Mexican Grill; followed by Chipotle Mexican Grill, 63%; Moe’s Southwest Grill, 56%; Del Taco, 44%; Taco John’s, 32%; and Taco Bell, 32%.

Impact and Influence With the boom in Mexican and Tex-Mex restaurants in the fast casual sector, other Hispanic restaurants are entering the US restaurant market. For example, the menu at El Corral Burgers, with its first location near Miami, is Columbian-based. Giraffas, serving Brazilian-style steaks and burgers, has a goal of 100 to 150 US units by 2020. Pollo Campero is a Guatemalan fried chicken chain with 55 US locations. Leading chefs, restaurateurs and food commentators expect Mexican as well as South American and Latin American ingredients and cuisines to be the major influencer on global dining during 2015.

Advertising Strategies Independent Mexican restaurants can compete with chains by using TV advertising to promote their use of fresh, locally sourced and sustainable ingredients. Recommend that independent Mexican restaurants consider promoting a Fiesta Day, with music, dancing, art and other cultural elements to attract an audience to a total ethnic experience that includes more than food. Suggest that non-Mexican Hispanic restaurants use TV advertising to promote their specialty cuisines, emphasizing flavors and ingredients that are similar to Mexican, but providing a new taste experience.

Social Media Strategies Independent Mexican restaurants should be prominently displayed and actively using all the restaurant-oriented apps, including Yelp, Urbanspoon and FourSquare, especially to generate reviews. Mexican restaurants can use point-of-purchase signage and other collateral material to motivate guests to post photos and videos on social media of their visit to the restaurant, what they ate and what they liked about the ingredients and service. Full-service restaurants can use social media to distinguish themselves from quick-service restaurants, with a regular blog about unique ingredients and dishes and professionally shot photos of top menu items.