Baja Fresh Mexican Grill is poised for a turnaround with a menu revamp and a new restaurant design in the works.
Two years after chief executive Chuck Rink took the role, the 233-unit chain is positioning itself to better compete in the increasingly crowded fast-casual space, where 1,500-unit Chipotle Mexican Grill looms large.
Baja Fresh was a pioneer of the fast-casual Mexican niche when it was founded in 1990. At the time, it was one of the first chains to focus on fresh ingredients and eschew microwaves, freezers and can openers, with a menu that did not use lard or MSG.
The concept was going strong before Wendy’s International acquired it in 2002 for $275 million. Four years later, however, Wendy’s sold Baja Fresh for $31 million. The concept has since struggled to find its footing, as Chipotle has been hailed as redefining the fast-casual space. Now Baja Fresh is making changes — but not to compete with Chipotle.
“I don’t believe we’re competing with Chipotle as much as we are competing with a very exciting yet competitive segment,” Rink said. “The good news about that is more consumers are turning to the segment for more dining occasions. The bad news is so is the competition.”
Last year, Baja Fresh began an internal initiative dubbed Fresh New Flavors, which was initially rolled out to about 134 units, mostly in the West. The chain revisited many of its core recipes, from guacamole to pico de gallo, to seek out the best flavor profiles and emphasize freshness.
Reworking those core recipes resulted in tweaks that ultimately impacted about 70 percent of the menu, since products like beans and guacamole are used in burritos, tacos, salads and other dishes.
“In fast casual, there’s been a tremendous amount of capital. Everyone’s growing and there are lots of new players. We feel that the product quality has to be there, and it has to be ever improving at the foundational level,” Rink said.
The company is currently testing a second phase of that effort in about 17 units, which includes further recipe development and a potential upgrade of the fresh salsa bar.
Recently appointed director of product development Roberto “Pepe” Lopez, who has 30 years of experience with such brands as El Torito, Acapulco and Chevys Fresh Mex, has developed a limited-time Bonfire Bowls promotion, a new platform of grilled surf and turf, chicken and roasted veggie, and steak bowls priced between $6.99 to $8.99. Bonfire Bowls already represent about 11 percent of the menu mix, while limited-time offers typically represent about 9 percent.
“What we’ve seen is retention in the mix,” Rink added. “This one has hung on strong.”
The chain will roll out in May its annual seafood taco promotion called “Catch 2 or 3,” a value promotion featuring mix-and-match seafood tacos with rice and beans. Customers can add a third taco for an additional 99 cents.
At the same time, the chain will debut two new Primo salads, premium items presented on a 13-inch oval platter. The salads include an upgraded lettuce mix featuring purple kale, roasted vegetables and housemade dressings, priced from $8 to $8.99.
Rink said such products mark a shift to a more premium, fast-casual positioning. Baja Fresh’s average check is about $8 per person, but in tests, guests still gave the salads a high value rating.
“You could easily pay $14 to $16 for a salad like that,” said Rink. “We’re seeing growing demand from guests willing to purchase at that level.”
Efforts so far are gaining traction. Rink said systemwide same-store sales rose 1.2 percent in fiscal 2013, with sales at company units increasing 6 percent and comps at franchise locations rising 1 percent, though he declined to give specific sales numbers. The chain’s same-store sales have been positive for 19 consecutive months, he added.
Baja Fresh has also developed a new restaurant design that will be tested in five units in Northern California, starting next month. San Francisco-based Tesser Big Picture Branding developed the new look.
The remodel is being evaluated with unit economics in mind, Rink said.
“We don’t want to burden our franchisees with doing a remodel they can’t afford,” he said.
The reimaging will include new employee uniforms, marketing materials and potential changes to the guest ordering process — all of which are meant to emphasize brand attributes of freshness and quality in a new way, said Rink.
Meanwhile, Baja Fresh is working to grow its nontraditional Baja Fresh Express formats, which target college campuses and airports. The chain currently includes about 22 of the limited-menu Baja Fresh Express locations.
“We’re very excited about the nontraditional opportunity and working with successful players to build out the brand,” Rink said.
Finding a new footing
Baja Fresh was acquired from Wendy’s by David Kim, an entrepreneur and Cinnabon franchisee, along with unnamed private-equity investors behind current parent Fresh Enterprises LLC. Fresh Enterprises also owns the 26-unit La Salsa Fresh Mexican Grill and the five-unit Canyons Burger Company brand.
Kim, who served as CEO after the acquisition, left the company in 2012, though he maintains a minority stake. At that time, Rink, who was then Baja Fresh’s president of four years, became CEO.
Rink said Baja Fresh left Wendy’s as a “troubled brand” that faced internal challenges going into the recession.
According to the annual Nation’s Restaurant News Top 200 research and franchise disclosure documents, Baja Fresh had domestic sales of about $342 million, with 298 units, in 2006. By 2012, the chain had 211 units, with U.S. systemwide sales of an estimated $240.2 million.
At one point in 2011, Kim and the company’s backers were shopping Baja Fresh for sale, but Rink said the sale process was terminated for reasons he couldn’t disclose.