Taco Cabana is an American fast casual restaurant chain that serves Tex-Mex cuisine. It is a wholly-owned subsidiary of YTC Enterprises LLC, and headquartered in San Antonio, Texas. As of January 2022, Taco Cabana has 148 locations throughout Texas and New Mexico. Taco Cabana is recognized for its "pink" color scheme and semi-enclosed patio dining areas. Many menu items are handmade daily on-site, in open-display cooking areas.
History
Formation of the restaurant chain
Taco Cabana was founded by Felix Stehling in September 1978, with its first restaurant at the corner of San Pedro and Hildebrand Avenue in Midtown San Antonio. Stehling purchased a vacant Dairy Queen because the family needed additional parking space for their bar across the street, the Crystal Pistol. Stehling decided to open a taco stand. The open-air design of the existing structure led to the "patio cafe" concept that defined the chain's subsequent locations. Felix Stehling's wife, Billie Jo Stehling, created the décor and interior theme for the restaurant chain. After finding all of the patio furniture stolen following the first night of business, Stehling decided to keep the place open 24 hours.
The restaurant focused on fresh foods rather than pre-packaged or pre-prepared foods. The restaurant served beer and margaritas, staying open 24/7 and allowing takeout orders. As the business grew, Stehling asked his two brothers to help expand the chain throughout San Antonio. It soon grew to nine restaurants. In 1986 the brothers left the company after differences in opinion on how to manage the business.
In 1990, Taco Cabana began expansion into neighboring states and continued its growth throughout Texas. Richard Cervera became president of the company in 1990, implementing a plan to franchise the brand.
IPO and imitators
In the late 1980s and early 1990s, the success of Taco Cabana encouraged imitators such as Two Pesos. In January 1987 Taco Cabana filed a suit against Two Pesos for allegedly duplicating Taco Cabana's branding style. Two Pesos lost the case and appealed, and in 1992 the Supreme Court ruled in favor of Taco Cabana and awarded the company $3.7 million in damages.
In 1992 Taco Cabana went public with its first stock offering, and ended the year with 17 restaurants. In January 1993 Taco Cabana announced that it was purchasing cash-strapped Two Pesos' restaurant assets in exchange for 940,000 shares of Taco Cabana stock, valued at approximately $22 million. For $30 million, the sale included all 30 San Antonio restaurants of Two Pesos. Taco Cabana converted most Two Pesos locations into Taco Cabana restaurants, closed others and sold the associated Shortstop Hamburger chain.
Taco Cabana sales hit a high in 1994 at $127 million. That year, Stehling resigned as chairman and was succeeded by Richard Cervera. Despite the rise in revenues the company saw while Cervera was in charge, stock prices for Taco Cabana drastically dropped, and Cervera resigned in 1995 and was replaced by Stephen Clark.
Business model change and purchase
In 1995, Cervera resigned as president for a position with the House of Blues, remaining chairman and CEO.
Stephen Clark was appointed both COO and president. Clark began an evaluation of Taco Cabana's operations with his own management team. He closed several of the company-owned restaurants, restructured some of the franchisee debt, sold assets not related to restaurants, and slowed the expansion. In 1996, Taco Cabana introduced a new type of restaurant to the Dallas-Fort Worth area which was reminiscent of an old Mexican cafe. It featured a rounded front, clay tile roofing, aged wood paneling, and stainless steel counter tops. As customer visits and profits increased, there were plans to extend the designs to new restaurants.
Acquisition by Carrols
By 2000, Taco Cabana spent around $30 million on brand image and while profits had grown, the stock price remained low. Clark began looking at sale options. In 2001 the company became privately held as a wholly owned subsidiary of Carrols Restaurant Group. After the acquisition, Clark left the company and was succeeded by Mike Biviano.
In 2001, it introduced its Mexican grill concept, including made-to-order grilled beef, chicken, pork and shrimp. Throughout 2002, the franchise closed seven stores in the Phoenix, Arizona area, but Taco Cabana proved profitable. In 2003 Taco Cabana began creating a new restaurant prototype with an eight-foot char-grill. That year Taco Cabana opened nine new restaurants. In 2004, it marketed the concept of fresh food and San Antonio heritage. From 2004 through 2005 Taco Cabana added five more restaurants.