Tortilla has acquired Chilango for up to £2.75m from investment firm RDCP Group.
Tortilla said the acquisition strengthens its position as the UK’s leading fast-casual Mexican chain and accelerates its expansion across the UK.
The deal also bolsters Tortilla’s presence in central London, with six of the eight units positioned in Zone 1, allowing it to take advantage of the high-quality locations operated and the trend of workers returning to offices.
As outlined at its IPO in October 2021, Tortilla plans to open 45 sites over the next five years, with the eight acquired Chilango sites in addition to the target of 45.
The acquisition adds a complementary, premium brand to the group, enabling Tortilla to capitalise on the popularity of Chilango.
As a result of the two companies’ similar product propositions, the group has identified several synergy opportunities, including leveraging buying power and the 5,500sq ft central production kitchen in Tottenham Hale.
Tortilla intends to retain and continue to operate the Chilango brand at certain locations and via the delivery channel in a number of Tortilla sites.
The total consideration of £2.75m is 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.
The transaction was done on a debt-free and cash-free basis, with the majority of the transaction consideration used to satisfy intercompany loans and other creditors.
For the 52-week period to 26th December 2021, Chilango delivered revenue of £7.3m and loss before tax of £0.2m.
The acquisition is expected to contribute EBITDA (pre-IFRS-16) of c.£0.1 million to the group for the remainder of FY22 and FY23 EBITDA onwards of c.£1.0m.
Richard Morris, CEO of Tortilla, commented: “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.”
Sameer Rizvi, chairman of Chilango and Founder/CEO of RDCP Group, commented: “When we acquired Chilango in August 2020, the business and the sector were facing significant headwinds. 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.
“I would like to take this opportunity to thank Richard Franks and the whole Chilango team as well as our loyal guests who have helped to develop the business into the established and popular brand it is today, and I look forward to seeing Chilango enter the next phase of its journey as a much-loved brand under Tortilla’s ownership.”
