Tex-Mex is a growing segment in the restaurant industry. While new concepts selling tacos, margaritas, and queso are popping up across the South, there is one brand in particular that has spent the last three and a half decades growing and dominating the Tex-Mex scene in Texas.
Lupe Tortilla debuted in a quaint 1940s frame house in the Houston suburbs in 1983. After attending The Culinary Institute of America, Judson and Peter Holt returned to their parent’s restaurant in 1995 and were ready to take the concept to the next level. The brothers’ goal while attending the CIA was to learn how to run an efficient kitchen with systems that could be easy replicated if the company wanted to scale.
As the oldest son in the family, Judson Holt, who is now Lupe’s chief executive officer and president, knew he would always end up in the family business. His mother’s family was in the restaurant industry and his parents owned two other restaurants before opening Lupe Tortilla.
“My entire childhood and young adulthood was spent around restaurants. It was always an interest for me,” Holt says. “It was kind of an understood thing that I would come back and help the family expand the business when I went to the CIA.”
Lupe was a mom-and-pop operation in its first decade, but it was ready to grow by the mid-90s when the Holt brothers returned from school. At the CIA, Holt says, the experience helped them understand what they would need to turn Lupe Tortilla into a multi-unit brand.
“It was a very successful single-unit restaurant and so going to the CIA was to kind of give some structure to how do you do this professionally, how do you do this correctly,” Holt says. “Both my brother and I approached CIA not really from the stand point of, oh we’re going to be chefs someday. We clearly had an interest in cooking and food we wanted to understand that but really more from a how do the pros do this perspective.”
Growing the brand
It took about two years for the brothers to organize the kitchen, create systems and processes, and “lay all the groundwork for expansion purposes,” Holt says. The company also needed funding for the new location and worked with private angel, private equity type investors to raise the money.
The new location was strategically placed in an area where the company could test if the concept would work in an urban setting. So in 1997, Lupe Tortilla opened up near the intersection of Kirby Drive and Route 59 in Houston.
“The original restaurant was out on the outskirts of town you know kind of in the suburbs. The second was at one of the strongest areas for restaurants in the city [Houston],” Holt says. “It was really a test to see will the restaurant, will the concept travel.”
“It didn’t take off immediately,” he adds, “but it was clear it was going to be a success and the sales were growing. Things were going well so within 12 months we moved to open a third location.”
Since then Lupe’s has expanded to 20 locations, opening two to three stores each year in Houston, San Antonio, and Austin. The company will break into the Dallas-Fort Worth market this year with three restaurants slated to open by the end of 2019 and another three in 2020.
“Our expansion philosophy is to go into a city and fully develop the market as opposed to hopscotching the country,” Holt says. “We’ve kind of been students of success and failure of our peers and some of the mistakes that we’ve made has been putting distance between your stores for the sake of opening one in a city whether it be because it’s fun to go there or your market research says ‘Oh yeah Denver’s a good city,’ well yeah but we feel out of balance.”
Holt points out the brand is at a point where it could franchise, but they have yet to find the right partners and are not actively pursuing that avenue.
“There are certain areas of the country that we know we’re not going to go to ourselves,” Holt says. “If a known restaurant group is having success in full service and has the experience and capital and the right infrastructure and everything to expand Lupe, say like in California, and understand that market and had an interest we would be open to the concept of regional franchising.”
The new locations are a mix of remodels and updated construction. In the beginning, the first few locations were built from the ground up, but over the past few years Lupe Tortillas have opened in retrofitted venues that were previously similar restaurants, like On The Border Mexican Grills.
The charming look of the original Lupe Tortilla location was replicated a few times when the company started expanding. However, that design would not allow the chain to go into certain locations. Holt says, in order to open in those newer developments, the brand needed to modernize.
“We wanted to go into more developed centers and we were finding we were getting rejected because of the outside look and feel of our building. So, we redesigned the exterior of the building for that,” Holt says. “We felt like while it was charming and cute, the little house didn’t have a presence of we know what we’re doing. We redesigned it early on.”
The original locations also didn’t have a full-service bar, so that was worked into the redesign as well.
A classic menu
The look of the restaurant transformed over the past 35 years. The menu? Not so much, at least not in the last decade. Lupe tends to stick to its best-selling staples like fajitas, smoked ribs, and fresh seafood with a Tex-Mex twist.
“Our CIA background definitely helps us in developing the flavors and understanding what can and can’t be deployed at scale. Staying not on the cutting edge—we don’t at Lupe—there’s really no reason for us to go out and be experimental, we’ve already got a crowd,” Holt says.
Lupe’s takes “made fresh” to another level. Everything on the menu is handmade to order. “We even go so far as to rolling our own flour tortillas,” Holt says. But it’s the sizzling fajitas that bring customers back for return visits.
“There are lots of other items that are popular on the menu,” Holt says. “I would say the fajitas are definitely a main driver of what makes Lupe’s, Lupe’s.”
Lupe is in the middle of one of the most agriculturally rich areas of the country. When it’s possible, the kitchen sources from local Texas farms. Holt says, “As you reach scale sourcing becomes a challenge in a lot of ways being able to keep up, but fortunately we’re in Texas where sourcing is a good deal of what we naturally buy is locally sourced. We’re very fortunate in that aspect.”
With a few other CIA grads in the kitchen, the menu stays up with trends and new products that were not on the original menu, but have become more popular over time. There is no seasonal change of food items, but the bar side of the company has seen success with timely cocktails.
“It’s a lower risk item,” Holt says. “Walking into a restaurant that you’ve been eating at for 20 years and going instead of eating the fajitas—that have become famous throughout the state … I’m probably not going to go try your new enchilada dish, but I will go try your new margarita and it may entice me to make another visit.”
Lupe’s has found seasonal cocktails to be a better driver for getting people to come in and try them with appetizers and entrees, Holt says.
Lupe found out that delivery and off-premises dining doesn’t work for every company. A few years ago, the chain was abruptly added to DoorDash when it was breaking into markets throughout Texas. Lupe’s wasn’t warned that it had been signed up for the service so “we had a little bit of a bumpy start with them,” Holt says.
After working out the kinks, Lupe worked the service into its system, which partially worked for about a year. When it came to renegotiating a contract it just didn’t make sense for the brand, Holt says. An in-house online ordering system was already in development before the company started working with DoorDash and Holt felt Lupe was already pushing its capacity.
“We were almost at full tilt as it is already. It wasn’t a value add for us. Just simply we were moving our existing to-go customer into this convenient delivery thing and then we were going to pay for it and risk our quality for it. That combination just didn’t add up,” Holt says.
Customers didn’t seem to mind that delivery was no longer an option. Those who had been ordering went back to placing to-go orders and picking them up in the restaurant. The change didn’t impact guest traffic, Holt says.
When the brothers took over the company they began infusing technology into its operations.
“We were one of the first, if not the first restaurant in the Houston area to deploy the Aloha POS System into our restaurants,” Holt says. “We’ve been eager adopters of technology ever since fully deploying menu management software and even reaching the point where we now have a full time set of folks that do nothing but internal system development for us.”
From gift card systems to rewards programs, Lupe’s leadership worked to integrate every type of technology product they could into the company.
Technology also allowed the brand to expand smoothly and maintain a large employee base with only a small corporate staff.
“Technology has really allowed us to do is keep our infrastructure small. We’re approaching a 2,000-employee company and have an administrative staff at corporate headquarters of 25, which is pretty astonishing,” Holt says. “By leveraging technology we’ve really been able to keep our head in control, which obviously in turn allows us to be a more competitive value menu pricing. It’s been a big driver for us.”
By creating more efficient systems through technology, Lupe is able to shift its resources to the areas that matter for the brand.
“You can spend more on cooks, wait staff, and management by keeping our administrative costs down we believe that gives us a real competitive edge and advantage,” Holt says.
With the ongoing success, the Holt brothers hope they can help other brands grow into a legacy operation as Lupe has over the past 35 years.
“At this point I think my brother and I we’ve got Lupe’s on a good trajectory. It’s well-funded and everything is good to go so I think our future holds looking at a combination of strategic and investment partnerships going forward,” Holt says. “We’re looking for businesses that need and are where we were 30 years ago.”
Holt believes Lupe’s can acquire or partner with other small businesses—between two and 10 units—and replicate the systems, infuse capital, and use the support of the Lupe’s network to grow.
“Everything we’ve built that’s allowed us to be so competitive for other brands we see that as our future kind of our real opportunity,” Holt says. “We’ve got a solid group of folks that have an interest in investing in whatever we do going forward and so it helps put that capital into work as well as my brother and I’s capital to work.”