The deal further bolsters Tortilla’s presence in central London, with six of Chilango's eight restaurant units positioned in Zone 1.
Chilango's only bricks and mortar site outside of the capital is in Manchester. It also operates four delivery-only kitchens, three of which are in the capital with the other located in Brighton.
Tortilla, which listed on AIM in October last year, adds that the acquisition strengthens its position as the UK’s leading fast-casual Mexican chain and accelerates its expansion across the UK.
The group intends to retain and continue to operate the Chilango brand at certain locations and via the delivery channel in a number of Tortilla sites.
“We are delighted to announce Tortilla’s acquisition of Chilango,” says Richard Morris, CEO of Tortilla.
“Chilango is a highly complementary brand that, similarly to Tortilla, provides a fantastic value-for-money proposition and embraces popular and growing sector trends for healthy, customisable food from an estate of restaurants situated in premium locations in London and Manchester.
“This acquisition accelerates our ambitious plans to further expand the Tortilla brand and these sites are in addition to our initial target of opening 45 UK restaurants over the next five years, helping us to surpass this target. It also adds another brand to the Tortilla Group, enabling us to further strengthen our leading position in the UK’s fast-casual dining market.
“We’re very excited about this acquisition and look forward to leveraging our combined knowledge and expertise within the Mexican fast casual dining sector.”
Tortilla and Chilango were both founded in 2007, but have not shared similar sucess. While Tortilla now has 68 sites worldwide including a core estate of 59 locations in the UK, Chilango was acquired by RDCP Group in 2020 after falling into administration, having previously also gone through a Company Voluntary Arrangement (CVA).
As a result of the two companies’ similar product propositions, Tortilla says it has identified several 'synergy opportunities' that include leveraging the group’s 'favourable buying power' and 5,500 sq ft central production kitchen in Tottenham Hale.
For the 52-week period to 26th December 2021, Chilango delivered revenue of £7.3m and loss before tax of £0.2m.
“When we acquired Chilango in August 2020, the business and the sector were facing significant headwinds,” says Sameer Rizvi, chairman of Chilango and founder/CEO of RDCP Group.
“However, Richard Franks, his management team and the board members, including Iryna Dubylovska and Wagamama COO Nigel Sherwood, worked to stabilise the business, agree good deals with landlords and manage the supply chain. Chilango took advantage of the growing delivery market, which allowed the business to grow quickly and stay profitable even during national lockdowns.
“Today, the business has been successfully turned around and is ready for its next stage of growth. Tortilla are the strongest operators in this space and the perfect strategic fit for Chilango.”
The total consideration of £2.75m has been paid entirely in cash, with £0.25m of this total to be paid via an earn-out following the satisfaction of certain criteria relating to the leases, which is expected to take approximately six months.
Tortilla adds that the acquisition is expected to contribute earnings before interest, tax, depreciation and amortisation (EBITDA) of around £100,000 to the company over the current 2022 financial year, and EDITDA of c.£1m a year from 2023.