The restaurant investors behind the success of Dave’s Hot Chicken are making a new national bet on the next big restaurant trend: birria.
San Diego-based birria chain Mike’s Red Taco, which has just two locations, plans to announce Tuesday a new franchise initiative to build hundreds of restaurants across the United States with the help of early backers Bill Phelps and Andrew Feghali, CNBC reports.
Financial terms of the investment, made in early 2025, were not disclosed.
“We found this to be a really powerful brand and concept,” Phelps told CNBC. “And the important thing is that we turned away prospective franchisees. … Everyone appreciated that.”
Phelps said she had never heard of Birria before Feghali introduced her to Mike.
Traditional birria is a beef or goat stew that is slow-cooked with spices and chili to add flavor to the meat. Birria tacos, like those sold at Mike’s, use slow-cooked meat as a filling and are usually served with consomme as a taco dip.
Once known as Mexico’s national dish, birria now appears on 3.7% of U.S. menus, according to Datassential. According to the company’s data, menu penetration is more than four times what it was four years ago, but there is still a long way to go.
Mexican-inspired fast food brands like Qdoba, El Polo Loco, and Del Taco taco bell We have released our own version of birria. And at least 478 restaurateurs operate birria-specific restaurants, according to Datassential.
Mike’s menu also includes burritos, hearty nachos and fries, and birria ramen.
“It appeals to a very wide range of customers, not just Millennials and Gen Z,” Phelps said of Mike’s Red Taco restaurant customers. “There are older people in the restaurant, and there are young children, so it appeals to a very wide range of people.”
Phelps co-founded Wetzel’s Pretzels in 1994 and became a founding investor in Blaze Pizza, a fast-casual pizza chain founded by Elise and Rick Wetzel. In 2019, Mr. Phelps joined Dave’s Hot Chicken as an investor and CEO and used franchises to quickly expand the chain to hundreds of restaurants around the world. Last year, private equity firm Rourke Capital acquired a majority stake in Dave’s Hot Chicken in a deal worth about $1 billion.
Feghali was one of Dave’s Hot Chicken’s first franchisees. He is also one of the largest Little Caesars operators in the country.
Together, Mr. Feghali and Mr. Phelps founded Four Wall Partners, a restaurant franchise investment company. In addition to being early-stage investors in Mike’s, they will also serve as advisors and members of the chain’s board of directors.
Vincent Montanelli, who most recently served as CEO of Wetzel’s, has joined Mike’s as president.
Mike’s Red Tacos, which started as a food truck five years ago, opened its first brick-and-mortar location in 2022. Founder Mike Touma plans to open a third store in March. He will remain with the company as a board member and franchisee of the chain’s San Diego store.
“We worked out an agreement under which (Touma) would retain the rights to his store in San Diego and future stores, and then franchise it in the rest of the United States and internationally,” Phelps said.
The new team plans to rapidly grow Mike’s Red Tacos, following established strategies used by Wetzel’s and Dave’s.
“We’re going to be very aggressive about growing with this because we know we can do it,” Phelps said.
The taco chain already has franchise development agreements with multi-unit operators for more than 200 locations across the country, from California to Texas to New England. Some of these franchise restaurants could open as early as the end of the year.
Phelps expects strong competition from national chains and local taco restaurants. But he said he thinks the chain’s simple menu, delicious food and aggressive marketing strategy will help Mike’s overtake its rivals.
“We think this could be a winner,” Phelps said.
