Flores Cooks Up National Plan

Cafe Santa Fe plans to cha-cha on Chi-Chi’s empire

Tom Flores believes Cafe Santa Fe is poised to unseat Chi-Chi’s as the largest Mexican restaurant chain in America.

Flores’ secret weapon? Standardized, mass-produced food and spices.

With only 10 restaurants now, and $8 million in sales last year, Flores plans to open five more by the end of the year and 25 in 2000. Along with the rapid growth, Flores plans to begin selling stock in the Fayetteville-based restaurant chain.

“We have a concept,” he says. “We have franchises that are making profits. The market is demanding it. The market wants it. Small-town America is growing, and there’s nothing to serve them. All we’re doing is filling the need with something that’s affordable.”

Before he goes national, Flores is going regional. Thirteen of his planned restaurants will be in Oklahoma and 10 are slotted for cities in Missouri.

With 40 restaurants by the end of 2000, Flores will still have a long way to go to catch up with Chi-Chi’s, a Prandium Inc. chain that has 154 corporate-owned restaurants in 22 states and sales of $243.7 million in 1998.

Are they worried about this threat at Chi-Chi’s? Well, not exactly. Robert Carl, Chi-Chi’s vice president of media and public relations, says he’s never heard of Cafe Santa Fe.

“Unfortunately, I haven’t run across them yet,” Carl says.

From Texarkana to Santa Fe

Flores, 42, grew up in the restaurant business. He was raised in Corpus Christi, Texas, and Texarkana. His father, Herb Flores, worked in the restaurant business in Corpus Christi and moved to Texarkana to run an El Chico restaurant there.

Tom Flores bussed his first table at age 6. He also cooked and waited tables. But Flores didn’t plan to stay in the restaurant business.

He went to the University of Arkansas, where he earned a bachelor’s degree in business management in 1981. After graduation, Flores moved to Searcy, where he worked for Great American Fund raising Co.

In 1982, Dale Holland opened the first Cafe Santa Fe — in downtown Fayetteville — and sold it soon afterwards to Carlos and Millie Gracian. In 1988, the Gracians sold the restaurant to Flores.

“They were ready to get out of it,” he says. “They called me, and boy I hit the door.”

At that time, the Fayetteville Cafe Santa Fe was bringing in about $250,000 per year in sales. The numbers rose steadily under Flores’ leadership: $390,000 in 1989, $450,000 in 1990, $500,000 in 1991 and $700,000 in 1992.

“It leveled off at about $800,000 or $850,000 for a few years until we expanded in 1995, when we did $1,050,000,” Flores says.

The expansion westward meant Cafe Santa Fe had purchased a small building that previously housed Morning Glorys, a bakery.

In 1992, Flores opened the second Cafe Santa Fe, in a downtown Rogers building that previously housed Tony C’s Italian Ristorante.

In 1994, he opened Cafe Santa Fe restaurants in Fort Smith and Eureka Springs, and in 1995, Flores opened one in Springdale.

In 1997, he began selling franchises. Three of his four restaurants were sold to the managers that year. Sad Abu-Haleema bought the Fayetteville restaurant. Ted Danish purchased the Eureka Springs store. And Eric Ferguson bought the Rogers franchise. The Springdale restaurant remains corporate owned today.

Since then, Flores has opened Cafe Santa Fe stores in Benton, Harrison, Mountain Home, Hot Springs, Fayetteville (a second location) and Joplin, Mo. Eight of the Cafe Santa Fe restaurants are operated by franchisees. The Springdale and Hot Springs locations are corporate-owned.

In 1998, sales at the eight units open at that time had brought in about $8 million, and some of those restaurants were open for only part of the year. About 10 percent of that $8 million was profit, Flores says.

By the end of 1999, Flores plans to open five more Cafe Santa Fe restaurants — in Little Rock, Van Buren, Searcy, Russellville and Neosho, Mo.

“We’ll be in acquiring mode by next year,” Flores says, indicating he’ll be looking to buy existing restaurants (or possibly even entire chains) and convert them into Cafe Santa Fe restaurants.

Flores says he’d like for half of the restaurants to be corporate-owned and the other half to be owned by franchisees.

“I’ve got a critical path,” he says, “Two new openings per month. … We’ve got to maintain momentum for our shareholders.”

Santa Fe stock

Flores plans to begin selling stock in Cafe Santa Fe by January. CSF Franchise Group, which owns the franchise rights to Cafe Santa Fe restaurants, actually made a first step toward going public this past February with a reverse merger into a shell provided by Mountain Valley Vineyards of Denver, Colo. At that time, Flores was planning to begin selling stock by June. But he put off selling stock until the company had more growth momentum.

Flores hopes CSF stock will eventually trade on the Nasdaq market.

“We have to be able to preserve our stock value,” he says. “We have to go in with financial strength, true expectations and above-board mentality.

“There’s no dominant player out there. The largest chain is Chi-Chi’s with 154 stores. And the reason is they don’t know how to mass produce food.”

Flores says he is prepackaging and standardizing the spices to be used in each dish at Cafe Santa Fe. That will ensure that the meals are identical no matter which Cafe Santa Fe is serving them.

Applebee’s International recently sold its chain of 65 Rio Bravo Cantinas because they weren’t profitable, Flores says. Chevy’s Inc. purchased the Rio Bravos for $53 million in cash and $6 million in assumed debt. The Rio Bravos will be integrated into Chevy’s chain of about 100 Fresh Mex restaurants.

Cafe Santa Fe restaurants range from 4,000 to 5,600 SF in size. Rights to a franchise can be purchased for $35,000, and 4.5 percent of net income goes to CSF.

“We’ve got to grow,” Flores says. “Good things happen when you grow. The big boys come knocking at your door. You can devour the competition when you grow.”