Ojos Locos Finds Success in Booming Niche Market

The 18-unit brand believes it can reach 90 units by 2025, or 400 percent growth.

January 19, 2022 Ben Coley

The idea for Ojos Locos Sports Cantina began roughly 15 years ago when Rich Hicks and his former business partner Todd East visited a local Hooters.

One of East’s employees sipped a beer, placed it on the table, and then looked at East, saying, “We need a place like this, for us,” meaning the Hispanic demographic.

That set Hicks on the path of Ojos Locos, which he called “one of the most intriguing, niche, successful” brands he’s ever been a part of in his 40-year foodservice career. The concept debuted in 2010 in partnership with East and Front Burner Restaurants executives Jack Gibbons and Twin Peaks founder Randy DeWitt.

Ojos Locos is similar to Twin Peaks and Hooters in nature, but specifically for Hispanic customers. The restaurant features wall-to-wall televisions mostly offering Latin coverage and an all-women wait staff that’s mostly fluent in Spanish. Hicks described Ojos Locos as a “home game for the Latins and an away game for gringos.”

“It’s a customer that we have talked to for the last number of years, and we own the category,” Hicks said at the recently held ICR Conference. “Reminds me of the old P.F. Chang’s days where they were the first to market. Ojos is the first to market here to this customer.”

Since its debut about a dozen years ago, the sports bar has grown to 18 locations, with 14 in Texas, three in Arizona, and one in New Mexico. Several years ago Hicks bought out his partners, and then in 2018, Ojos Locos received an investment from Garnett Station Partners, which has fueled the past 10 restaurant openings.

The chain has a $5.5 million AUV and witnesses six consecutive years of same-store sales growth. Comps rose 33 percent in 2021 compared to 2019 (same-store sales rose 9 percent that year).

Store-level margins are around 30 percent, and the brand swings about $1.5 million in store-level EBITDA per restaurant. The chain took some price in 2021 because of the inflationary environment, and will look to do the same this year, but the restaurant remains sensitive to value. Hicks said Ojos Locos is "scrubbing P&L" to find any opportunities outside of COGs to keep prices low, but still hit profitability.

The concept plans to open 11 stores in 2022—Southern California and Las Vegas being key markets—but long-term, Hicks believes the brand is capable of reaching 150 units, including 90 by 2025 (equal to 400 percent growth). That doesn't count the potential of licensing or franchise agreements in international markets.

Restaurants are usually 6,500 to 7,000 square feet, with $1.9 million in net buildout costs and a payback period of little more than a year. When seeking sites, Ojos Locos searches for both conversions (i.e. Applebee’s, TGI Fridays, Luby’s) and ground-up opportunities.

“This customer uses Ojos not only for sports and to meet family and friends, but it’s their casual-dining experience,” Hicks said. “That’s how they use this brand because we’ve built it for them and they authentically and genuinely feel that.”

Ojos Locos Sports Cantina.

The restaurant leverages an affordable, scratch kitchen, Hicks said, with street tacos, hamburgers, and wings representing nearly 80 percent of the food mix. Entrees are priced lower than $10 and typically served within 10 minutes. Ojos keeps its menu at or around 25 menu items to maintain simplicity and high levels of execution.

The beverage menu is even more popular, with its large selection of tequila, margaritas, and beer. Ojos Locos claims to have popularized the first “Balon,” a long cylinder-shaped container that can hold up to 100 ounces of beer. Beverages mix 65 percent, compared to 35 percent for food.

To leverage underutilized kitchen capacity amid the pandemic, Ojos Locos launched $3 million Wild Peckers, a virtual brand that primarily focuses on a la carte and combo wings.

The sports bar sees 35 percent of its sales during happy hour, which is Monday through Friday from 2 p.m. to 7 p.m. and includes specials on house margaritas, mojitos, and domestic and import bottles and drafts. Dinner takes up 30 percent, followed by 20 percent at late-night, and 15 percent for lunch.

“We take a lot of passion and pride in our food. We are a scratch kitchen, and have been there for 12+ years,” Hicks said. “No interest in changing that. Most people that experience the business, I hear comments that the food is much better than they thought.”

The accelerating growth of the Hispanic population in the U.S. gives Hicks much confidence around Ojo Locos’ growth strategy. The 2020 Census showed the Hispanic population (39.26 percent) in Texas is now almost as big as the non-Hispanic white population (39.75 percent). In the past decade, the Hispanic population grew by nearly 2 million, while the non-Hispanic white population increased by about 200,000.

The U.S. Census Bureau projects the Hispanic population nationwide will reach 111.2 million by 2060, and make up 28 percent of the U.S., an increase from 62.3 million and 19 percent in 2020.

According to Ojo’s internally sourced data market research, Hispanics have a buying power of roughly $1.7 trillion. Forty-eight percent are considered heavy users of casual dining, meaning they visit chains more than 10 times in three months.

Hispanics are also more likely to come with a higher average check (non-Hispanics, $13.70; bilingual, $14.02; Spanish as first language, $14.21), dine with larger parties (4.2 per group vs. 3.3 for non-Hispanic), and watch more sports programming (20 hours on average per week vs. 12 hours for non-Hispanic).

“When you authentically and genuinely talk to this customer, they respond very well to that,” Hicks said. “There are folks out there that have not succeeded in delivering an authentic experience, and this customer sniffs that out. We have made it a high priority to make sure we very specifically talk to this customer because of the growing trends in just how important it is to authentically talk to them.”