How Taco Flats Built a $4.4M Austin Taco Business and Took a $1M Deal

Everybody loves a great taco in Austin, Texas, and Taco Flats is eating up that market share.

In 2023, so we did 2.1. We paid off our investors within the first three years.

I mean, that sounds pretty darn good to me. Launched in 2014, they've grown really fast since then, but now they're running into some problems.

I mean, people are drinking less. We started changing our hours to accommodate that. So we truly believe that the coffee program, if we invest enough time in it, that's the trajectory.

And you can't say you're a coffee business, but your great brand is called Taco Flats.

Yeah.

It just doesn't make any sense.

Right. Sure.

If I see an opportunity to put my cash behind their business, I'll offer to invest on the spot. I'll put a million bucks in the business, but I want 30% of the business. What do you guys think about that offer?

Hey. How are you guys?

Hey. Good evening.

Simon. Simon, really good to meet you. Nathan.

Hobie.

Hobie. Very good to meet Nice

to meet you too.

This is your place. This is your baby?

So this is Taco Flats. Right? Taco Flats started twelve years ago on Burnett Road. This is the second location of Taco Flats.

How did you guys meet? Are you cofounder? What's the relationship?

I met Simon at the first Taco Flats. So I was just a regular.

Mhmm.

And I would go in with my girlfriend and we'd sit there and have tacos. And we just struck up conversations and and basically turned from a regular into his wife. What?

That's amazing. Like that. What was your favorite taco order back in the day?

It was the gringa. It's this pork with this pineapple and these homemade tortillas, and it was just this this concoction of flavors I've never tried before. Mhmm. And it was delicious.

So, Simon, where did you come up with this idea? Do you come from, like, a taco family? Yeah.

Or Yeah. My mom's a chef. Right? My mom's a chef, grew up on a farm, knew how to make cheese, and we lived in... I was born in Washington State. Right? We moved to Mexico as kids, and then we moved to a border town in South Texas. So since my mom had all this knowledge of making food and started a little a little catering outfit, right, than a little restaurant. I grew up in that in that world. Yeah. Yeah.

So when I think tacos, I think morning tacos, but we're shooting here in the morning and no one's here. So is this are these, like, evening tacos? Or

Well, so the concept always started as an 11AM to a midnight type concept. Right? We've recently shifted it into a morning type thing. Coffee launched a year ago. Breakfast plates and tacos launched, like, two months ago.

You've got a breakfast menu here, which just launched recently, but can I go ahead and pick something to order? Let's go ahead and order because the number is an even number. $6, huevos rancheros.

Okay.

Done. And we'll just... We'll do one. One taco.

You got it. We make all of our tortillas in house.

Okay. Great. Do you make corn and flour We do. Custom from scratch?

We do. We have machines that make them. We used to hand roll them, and then our production got too extensive that we invested in some Mexico City conveyor belt and then a press. So this is our corn tortilla production. Right? So we make all of our corn tortillas for the entire for the entire Taco Flats ecosystem and restaurants that we manage aside from the Taco Flats brand. Right?

And in a given day, how many tortillas will you make?

We're doing about 2,000 tortillas. Yeah. And we do that twice a week, sometimes three times a week.

You guys mentioned a key part of business is your coffee business. When did that launch?

That launched last June.

Okay. So about a year.

I mean, people are drinking less, but as a business, we're still trying to capture that sale of someone having a beverage.

Right.

And so for us, we thought that bringing in coffee, because more people are drinking coffee, matcha, chai, that if we introduce this slowly to our customers, that they would, instead of bringing in a coffee from somewhere else, they would get it from us.

Because it's a heavy production restaurant or store, this particular... It was easier it was easy to launch it

here because they were already here at 07:00. Mhmm.

So it's like, not introduce it? It... You know, one bartender barista gets to come in an hour early. So the ship wasn't... It wasn't a huge commitment other than buying the equipment.

Yep. Right? How much did the equipment cost?

To get the infrastructure, the water softener, the... About 25 to $30,000.

You made a $30,000 bet times two about a year ago. Is it paying off? Are we seeing good coffee sales? Not yet.

It's trickling in. Right. Right. People like it.

Yeah. We're starting to see the uptick. We see more of the to go business Mhmm. Than we actually are seeing in in dining. And we think some of that is still training our customers. And the other part is we... While we're excellent at making tacos and we're excellent at making cocktails, we are still trying to be better at making coffee.

Okay. When you guys opened the first couple of years, what percent of the revenue was coming from margarita, liquor, beer?

Anglia Vernet Road was, like, 40, 45%.

Yeah.

So meaningful. Meaningful.

Big time.

And your margin is awesome. Right? Our Our margaritas are really what we're known for. We have a a famous frozen margarita, a spicy frozen margarita. Yep. We have a three two one with three ingredients. Right? It's it's guffard triple sec. It's fresh lime juice, and it's tequila.

Yep. So So fast forward now to June 2026. If you look at revenue across all locations, what percent of the business is margarita, liquor, beer? It's probably 20.

No. It's it's closer to three.

Yep.

30%. Mhmm. Okay. Okay. You're saying that business is generally trending down as people are drinking less?

Right. Yes. Right.

Okay. And that's being made up and replaced by the coffee sales, hopefully.

Right. Right. That's what we're hopeful for.

Long term goal.

Yes. Long term goal. In 2015, do you remember, like, first year sales all in?

We're doing about 1,300,000. At one location? At one location.

That's that seems crazy high to me.

Yeah. It's great.

I mean, that... Was that above your pro form a, below your plan?

The highest point we got there was in 2023, which is a year we don't count because of the because of the overconsumption that was happening right in the market. So we did 2.1. So Bernard did great for many, many years. Was 900, one one point three, 1.5, 1.9, and it just kinda went. And then we saw the kinda decline in summer of twenty twenty four.

When you compare your liquor sales to others, Everyone has dropped. Correct. It's not just you guys. This is a macro trend that's happening, and and the winners will be the ones that can adjust the quickest. Exactly. I don't know what the costs were necessarily at Burnett. So when you do 1.4, 1.5 at Burnett, do you make money? It paid off

our investors within the first three years. So 4 or 500 k in profit.

Yeah. I mean, that sounds pretty darn good to me.

The next thing we did is we bought a bar on the East Side that we were gonna turn into the second taco flats, but we didn't see the fit. We bought this old bar, this old cantina from this Mexican family who only sold it to me because I was Mexican. Right? And I decided not to put a taco flats there, and instead, I built a place called La Holly because the La Holly neighborhood is right around me, I put a taco flats food truck in the back, and that blew up. The food truck does about 20% of their sales.

Yes.

Okay. And their sales are about 1.2, 1,300,000.

Okay. So the food truck is doing, like, 200 to $400,000 per year in sales. Correct. This second brick and mortar location, that is the taco concept opened in 2019?

2019.

Okay. So it was basically four years between your first taco flats and your second taco flats.

Right. That's right.

How many total brick and mortar locations for taco flats? We have four. Four. When did the other two open?

They opened in the same year.

Same year. A month apart. Well, you know, after COVID, banks were giving money away. Right? It was like, no interest, free interest, 2%, 3%, whatever.

Were these good decisions or bad decisions?

They were

They're not our favorite decisions.

Our favorite decisions. We're not getting that that influx we thought we'd get for lunch and for dinner, and and they're maintaining that we're also carrying them because we we support them with food and resources and management and payroll.

And about how much did you raise to go open those two locations?

About 300 k.

It's $2.60.

$2.60 and we're... So in... At the end of twenty twenty eight, we're debt free. Okay. The entire company.

Wait. That's not that's not... I was expecting you to say, like, you've taken millions to open two other locations. No.

We have equity debt. We have equity debt with partners. Right? We're a fully aligned holding company. Right? So every location is owned by by one cap table.

So if we look at Taco Flats Holdings up here here and then there's an individual LLC for each location?

Correct. That's right.

Okay. So if we do the consolidated version up top, if I looked at that balance sheet today, how much total equity have you raised just for the whole business?

I would think an average of like 4 to 500 per store. Some of them, like, burn it. Those investors made their money probably eight times over.

What percent of parent code do you two still own?

We own about 40.

Are you guys still in control, or have you lost control?

No. We have control... Full control. That's good. The the newer stores have not paid off, which is why we did the roll up. Right? Instead of us being like, hey, we're gonna shut down Lakeway. I wanted to make right by the idea that I still thought the inner city stores were gonna do well.

Yeah. You basically took the good stories plus the bad stories. You married them together. Now you have, like, still a good story, but not as good as just the two good stories. Exactly. So you're of doing it to everyone.

That's accurate.

What's the plan going forward? How do you grow this business?

We still believe in this brand. You know, there's such... There's still such a following and people still love it. We recognize people are drinking less. How do we recapture that? We've started investing in things we didn't even know we needed to invest in, the coffee program. We truly believe that the coffee program, if we invest enough time in it and energy and resources and knowledge we just don't have, then that's the trajectory for us.

If you've just sunk the whole business today, what was total revenue in 2025?

I think it was like 4.4 way. Just taco flats.

Do you make money on that or no? You're about breakeven?

There's some profit in there, we're paying off debt. Right? We've got some bank loans.

Total debt it sounds like is about $270,000.200

and we have a line of credit, I would say under $400.03 $50

Okay, so that's not terrible, That's 10% debt leverage against the annual rent So it is the company making money on million top line or no it's about break even?

Right now it's about break even. I think one of them might distribute. We might make 100 ks, 200 ks off of that.

So you have two paths basically, One is take what you already have and really optimize it to generate free cash flow. So you build a buffer to then go do whatever your next idea is. Right. The other is just keep reinvesting, stay, you know, break even or burn a little bit for the next couple of years and drive growth. Do think now is the time to strike? Where's your head at?

So for us, the direction of the brand, it is coffee. We have an outdoor bar at La Holly at this really cool East Side spot that we wanna launch this entire idea collaboration with a local coffee brand. Mhmm. Bringing these things together where your new image is, you're an all day spot. Yeah. Right? And so is that gonna move the needle? I don't know, but I think it is. Right?

So many founders always assume the grass is greener on the other side, and I think you guys are overlooking a bit about what you've built. I mean, Tacos is your name. Right. Like, it's what you've known for. You've got ten, fifteen years in the brand. Why not just figure out ways to triple and quadruple down on the corn tortilla, on the flour tortilla, on the taco brand? Mhmm.

We are still tacos, but now we also want to incorporate more breakfast tacos. We wanna capture a little bit more sales all throughout the day versus prior, it was eleven to nine, 10:00.

Yeah.

If you only have five words though to describe your brand, because that's all consumers... That's their attention span today.

Right.

If you say we are the best breakfast taco, You say we are the best taco when you have the munchies late at night. Right. You can't say we're the best breakfast taco, and we've got a pop up on the East Side, and we've got a coffee collaboration with three brands, and also we have a great margarita.

Right. You have to narrow it down.

What do you wanna be known for? What do you wanna dominate? I think

it's best tacos and margaritas.

Right. I think in the age of AI, storytelling is what wins. People wanna feel an emotional connection to whatever it is they're engaging with or they're consuming, putting in their bodies, food. The way you beat that is you lean into your story. Right? There's pictures of your mom and you cooking the first taco when you're a baby at twenty ten on every wall.

Right.

Right? There's your guy... A picture of your guys' first date on the wall. Right? There's a picture of your favorite taco with your girlfriends back in 2015 on the wall. And there's a story.

I think we've leaned so heavily on continuing to serve high quality when a lot of places don't need to and continuing to sweet lime juice, right? When a lot of places are doing pasteurized lime juice. And I think the story we keep repeating is the quality story. And and I think you're right that there's more of the person element to it.

Going back to the breakfast, right? Yeah. The investment, yeah, it was $60,000 but we're here all morning. The risk was minimal. Right?

But if I search breakfast tacos right now in Chatuchiki in Austin, Texas, who's gonna pop up?

Not us. No. Well, that's a problem.

Right.

I just don't know don't know how to how to move that forward. We also, like, we think the brand is really cool.

I think it's a great brand. Yeah. That's why, like, you can't say your coffee business, but your great brand is called Taco Flats. Yeah. It just doesn't make any sense.

Right. Sure.

There's obviously, as you know, major coffee brands. I mean, the thing that is the consistent between 8AM to 11AM and 6PM to 11PM is the taco, the ingredients in the foreign tortilla, the ingredients in the flour tortilla.

Right.

Right. The machinery that you purchased from that's organic to Mexico City that you're using now in the back room. We just execute your guys' growth ideas right over the next two, three years. How much capital do you need to execute that?

We don't want to burn people's money, right, for our own.

Right.

A Hobie, because of the direction of where we don't know where we're taking the Taco Flats brand, I'm like, well, let's shut a couple down or as soon as those leases are up and as soon as that debt's paid off and we'll move to a better area. South Austin is a place that I think is desperate for something like this, with outdoor space. Right. She's like, don't really wanna build more tuggle floods without a clear path and a clear direction. So truly, we're we're more looking for partners and equity teams.

When are the leases done at the other two locations?

2028.

'20... And there's no way to... Have you talked to... And there's no way to get out early when you talk to the landlord?

Just... Because the debt the debt is right aligned with those leases ending, it just makes sense to to ride it. And they're pretty even. They do about 600 to 700 k a piece.

So they're breakeven is what you're saying?

They're pretty breakeven with the little support that we kinda... The backdoor support that we give it.

Can you sell them off to... Would you ever franchise this

We've we've thought about it.

I mean, you find a young hustler that wants to be in business. Could you sell off the break? I mean, starting off with 600 k of annual sales and a great location and then having them focus only on that location, making it work. Correct. Enables you to scale that way.

Yeah. We've toyed with that idea for sure.

Guys, any of you any of you on YouTube, what would you pay for a a taco flats franchise? It's breakeven, so you gotta get in there and build it yourself. But if you're interested, leave a comment below. I mean, this is how all these brands scale. Right? You guys take five to ten percent of the revenue you service and their ingredients you're serving. This is the central production facility and you're servicing all these other locations.

Right. Would you guys be open to that? Yeah. With the right right structure. Yeah.

For sure. No. Of course we would. That would be smart.

Yeah. What would you sell the Lakeway location for? If a franchise owner wanted to come in and own it top to bottom?

Like a few $100,000, and I think we we part ways with it. If it wasn't for those two locations, we'd be...

Our EBITDA would be awesome. Well, you'd be paying profits. I'm trying to think on the spot here, I'm getting... I'm... This is gonna be a very creative deal. If I did something like put a million bucks into the business at the opco, but the strategy I wanna execute is to help you guys go sell off those other two locations.

Mhmm.

And then support whatever that entrepreneur is that's running each of those locations. And then make sure that the revenue stream back to you guys, your friend... Your first franchise agreement is good for you.

Right.

Right. So is it 5% of sales, 10% of sales coming back, 6%? Yeah. That's where I think I can help the most. But I don't... I'm trying to think how how could I structure that? Would your other investors be open? Would you guys be open to, you know, another million dollars at OpCo? And if so, do we structure that as debt or equity?

I mean, in my mind, it would be equity because... And I mean, we would rather have somebody that wants to take that ride with us. Mhmm. Simon and I have been teaching each other and learning from each other, but we don't have a big voice from outside that's like, hey. Have you thought about this? Like, the pictures, for example. Mhmm. Right? Of all of this history that we have, we... We've never thought of that. I... And that's so basic....

Is open up your camera rolls, scroll back ten years. I'm taking all those pictures, I'm making you guys celebrities. Okay. What is the value of the business? If I put in a million bucks at Opco, I mean, do these things trade at one x revenue, five x EBITDA? How do you guys value the whole business?

I don't I don't really... I don't know that answer because our EBITDA is now... Because of the two locations we brought on, our EBITDA is pretty flat. Our EBITDA is probably a 160 k, a 180 k.

It's gonna be more than you want though, but I'll give it and see how you guys respond.

Sure.

I'll put a million bucks in the business at OpCo, but I want 30% of the business. So that would dilute you guys if you're at 45% today, would dilute you down to about 33%. The other investors that own, what, 60% say would get diluted down to something like 45 ish percent, then I would own the other 30%. The purpose of that would be that makes it worth my time to get in here and try to figure

out how to make these two other places that are sort of flat right now, get it off your balance sheet, generate revenue in terms of franchise sales percent coming back to the OpCo, and then we scale from there. What do you guys think about that offer? I'm basically putting a valuation of point eight x annual revenues on the business. If you're doing 4.4, I'm valuing the business at somewhere around $31,500,000. Right.

We can multiply that. That's where the value is. Like, we dilute, but now we have a, you know, a million dollar EBITDA business that...

Because you move the things that are burning off your balance We find a franchise there to sell it to. Correct.

A million for 30%. So that's a...

I mean, you can also counter and tell them a million for 20%.

Well, honestly, I'm learning a little bit as we go. Perspective, what do you think? Do you think 30% is too much?

It is right now, but we're not negotiating that right now. It's about how to how to go about it.

No. Negotiate it. What was your counter with?

I would think a 20% is probably for that amount. I think we're more valued at about 5,000,000. Mhmm. I think three years ago, we were probably valued at, like, 12 Mhmm. Because our EBITDA was so strong. Mhmm. Yeah. And I think we're gonna get back to that. So... But are

we gonna value on an EBITDA multiple or a revenue multiple? Because if...

Well, we need to do revenue because our EBITDAs.

Exactly. So you can't anchor to a comp from four years with EBITDA, but then... So now today, we wanna change the methodology. Re reprice it. Yeah.

For sure.

We did top line revenue. I think going above a one x multiple on a business like this, I I think is too much. Right? I guess 5,000,000 is what you're asking for versus 4,400,000 of annual sales. Right?

So it's basically based on current sales.

Mhmm.

Is that accurate? Yeah.

So what would you counter with?

I think 25. What do you think?

I think 25 is good.

I won't do a million dollars for 25%. It needs to be a million for 30%. If you want me to come down to 25%, I would change my offer. And here's how I would change it. A million dollars for 25% of Holdco, but I want a 100% of the franchise revenue. Right? So if we say in our franchise agreement, 5% of the the two franchises have to come back to Opco, I want a 100% of those

revenues until my millions paid back even if it takes ten years. And then that can flow back into Holdco. That way I have a path basically to give you guys the offer at a higher valuation, but I'm de risking my money because I have a clear path to getting it out over time. But I only get it out over time if those two franchises work.

So you're taking the risk on a franchise.

A little bit. Exactly. 5% of zero sales is no money coming back. Right?

That's fair.

It's fair. Do you have a deal?

Yeah.

Let's get to work? Yes? Yeah. Alright. Good stuff. Good stuff. That was a good back and forth.

Yeah.

My real thinking is my dating life is terrible. So if it worked for you guys, I think if I invest in the Right. Business my my dating life is my dating life is going up no matter what.

Oh, no. Understand.

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