The acquisition of Wahaca by the owners of Nando’s gives a much-needed injection of equity to a brand that has experienced more than its fair share of turmoil over its 13 years.

Bringing the two pioneering and popular casual dining brands closer together under the same investment vehicle, both are long-standing leaders in their specialist cuisine, with a company culture and customer engagement that goes beyond the typical restaurant brand.

As the senior partner brand, Nando’s continues to ride high, the undisputed king of not only grilled peri peri chicken, but UK fast-casual dining in general, a fixture on UK high streets since the 1990s under the South African Enthoven family.

The more junior Wahaca has more recently established itself as an influential player in casual dining, though has not always been able to live up to its early promise and ambition.

The street food inspired concept, from former Merrill Lynch banker Mark Selby and MasterChef winner Thomasina Miers, was one of the first to aspire to bring Mexican cuisine at scale to the UK high street.

No first-time investment, the Nando’s/Wahaca connection goes way back, Selby having previously worked for the Enthhoven family-backed Capricorn Ventures International during the time it owned Gondola Holdings.

The Enthovens knew of Selby’s ambition to go it alone, and after an inspirational trip to Mexico and a meeting with Miers, Capricorn backed the pair to launch the new concept and has remained a shareholder ever since. 

With an ambitious management team, solid backing and an innovative, relatively competition-free concept, Wahaca represented a new generation of casual dining.

Despite a bumpy debut in Covent Garden in 2007, the site went on to become hugely popular once operational issues were ironed out.

The newcomer was hailed for its vibrancy and freshness, unafraid to serve what was at the time lesser known specialist Mexican cuisine.

Preferring for the large part to stay out of the more counter-based burrito wars, Wahaca gravitated towards more street food focused soft shell tacos, with imported beer and quality tequila.

From the early days Selby was clear about his ambitions for the brand, saying there was scope for 15-20 sites in London.

By 2013 this was already close to being achieved, with 10 sites in London, and a growing regional pipeline, with sites in Cardiff, Bluewater and Edinburgh.

Selby talked about not only creating a restaurant chain, but a lifestyle concept, which he envisaged as a mid-market equivalent to Soho House.

But for the former banker, there were expectations to manage when coming from an industry which required 100% certainty, to one with so many moving parts that it was much harder to control.

Wahaca’s growth journey was not without bumps in the road, and at times it has seemed as if the company has suffered undue misfortune.

The year before its 10-year anniversary, overshadowing what should have been a celebratory period, came the existential threat of a norovirus outbreak.

More than 300 staff and customers fell ill, which led the closure of nine sites, and losses of £4.7m.

In 2015, Wahaca was caught up in a tipping furore, with claims staff were required to hand over a fixed proportion of sales each shift, regardless of how much they made on tips. At the time, Wahaca defended its position, saying 100% of the levy went into tronc.

More recently, it was claimed serving staff were liable if customers walked out without paying, leading the company to rewrite the policy.

Despite these challenges, and the accompanying headwinds of oversupply, rates, rent, and more, Wahaca has remained popular and well regarded in the industry and by the dining public, Selby humbled by the response to the norovirus outbreak in particular.

Having barely survived one virus outbreak, the arrival of coronavirus once again tested the limits of Wahaca’s resilience.

In the midst of the first lockdown, Selby told MCA the restaurant sector needed a nine-month rent free period for it to survive.

Like many of its peers, the brand was forced to enter into a company voluntary arrangement (CVA) in order to deal with this rent burden.

According to reports, debts of £25m were written off as part of the restructure, with 10 restaurants closed.

Lenders led by the taxpayer-backed NatWest Group saw roughly 60% of their exposure, or £13m, written off, while shareholders wrote off the entirety of the £12m they were owed by the company.

As part of the CVA, shareholders and lenders injected £5m of new money into the business.

A large proportion of this is now understood to be from two entities controlled by the Enthoven family - the Luxemburg based Yellowwoods, and Capricorn Ventures, giving the family a controlling stake in the business.

Selby said the new cash would take the business forward in the “strongest position possible” and help Wahaca achieve its drive to be the “most sustainable restaurant group in the UK.”

The injection of equity solves Wahaca’s most immediate cash problem, the most keenly felt issue across the industry.

Looking ahead, Graeme Smith of AlixPartners cited the potential to further develop multiple channels at Wahaca, such as retail and delivery, as well as its position as a the original Mexican street food player, as key draws for the Nando’s owners. 

He likens the deal to other recent coronavirus-era buy-outs, such as Epris’ of Casual Dining Group (now The Big Table), and TowerBrook of Azzurri.

Smith told MCA: “I think there is an expectation that the market will recover, and it’s about backing those brands which have a position in the market, so that when recovery comes, they’ll be well placed to take advantage of it.

“I think it’s much more now about brands then it is necessarily about locations. Pre-crisis, if you had a business which was heavily central London based, it was viewed as a big advantage because it was the most kind of economically profitable part of the market, but that’s no longer necessarily the case.”

Will the Enthovens be looking at a major rollout? Smith is not sure.

“I don’t think anybody at the moment is planning a rapid roll out,” he says. “But I’m sure there will be an aim to expand.

“What they’ll be looking at is where and how that should take place. Is it national or is it still staying broadly London-based? What are the right locations and the right number to expand to?

“I think probably they see an underdeveloped brand, which hasn’t made the most of what it can yet, and so there’s an opportunity to grow

With Capricorn also having backed a number of other major brands, Pizza Express and Ask Italian for example, could they see Wahaca as the next Nando’s?

“Probably not,” Smith adds. “Though that’s probably more to do with the scope for Mexican food compared to a chicken offer.”