A couple explains how they turned a pop-up breakfast taco side project into a brick-and-mortar restaurant that brought in more than $1 million in revenue in year one – DAVID RAUDALES

DAVID RAUDALES

Businessman, musician / former Full Stack Developer

DAVID RAUDALES UK

A couple explains how they turned a pop-up breakfast taco side project into a brick-and-mortar restaurant that brought in more than $1 million in revenue in year one

La Tejana co-founders Gus May and Ana-Maria Jaramillo (top row, first and second from the right), opened a brick-and-mortar shop in August 2022.

Courtesy of La Tejana

Ana-Maria Jaramillo introduced her now husband, Gus May, to breakfast tacos when they met in 2017.
They agreed that if their relationship became more serious, they’d bring breakfast tacos to DC.
They perfected their tortillas in 2019 and began doing pop-ups, then opened a brick-and-mortar in 2022.
This article is part of “Banking on Small Business,” a series about wise money management by small-business owners.

Ana-Maria Jaramillo grew up eating homemade breakfast tacos on a flour tortilla — and figured almost everyone else did, too. 

“I didn’t know that other states did not have breakfast taco culture,” Jaramillo, who spent the first several years of her life in Monterrey, Mexico, before her family moved to McAllen, Texas, said. So when she asked her now husband to pick up an order of breakfast tacos the morning after her 29th birthday party in Austin, she assumed he’d consumed some combination of eggs, meat, and cheese in a flour tortilla.

Turns out, Gus May had never had a breakfast taco before.

La Tejana serves up breakfast tacos in Washington, DC.

Courtesy of La Tejana

“He took a bite, and he was like, ‘What is this tortilla? What are these fillings? Everything is so flavorful. These salsas are incredible,'” Jaramillo told Insider.

That was in August 2017. The couple had just started dating — Jaramillo lived in Austin at the time, while May was in Washington, DC, where he grew up — and agreed that if their relationship became more serious, they’d bring breakfast tacos to Washington.

“A lot of people say, ‘Oh, we have to open this restaurant. We have to bring this food.’ And they never really do it because it’s so hard,” Jaramillo, who said she’d assumed they fell into that category of people, said. “I didn’t think anything of it for a while until we actually started making tortillas right before the pandemic.” 

Experimenting with tortilla recipes in their kitchen in Washington, DC: ‘The whole apartment building smelled like pork lard’

Jaramillo and May knew early on that if they wanted to build a breakfast taco operation, a high-quality, authentic flour tortilla would be essential.

Originally, they planned to source their tortillas from Texas. But at some point, they decided to tackle the task themselves and in-house, May said.

In the summer of 2019, May started tinkering in the kitchen. The couple lived together in Mount Pleasant, a neighborhood in Washington known for its diversity, activism, and strong sense of community.

Jaramillo and May perfected their homemade flour tortillas from their apartment kitchen.

Courtesy of La Tejana

May, who had worked in the food and beverage industry for years but had no formal cooking background, researched flour-tortilla recipes online and crowd-sourced information from a handful of Jaramillo’s family and friends who had made them from scratch for years. 

It helped that he lived with a reliable taco critic.

“She really knows them — what the tortilla should taste like, how thick it should be, whether it should be chewy, if it has the right level of salt,” he said. “And same thing with all the ingredients that go in: the salsas and the cheesy eggs and the chorizo.” 

After workshopping their tortilla recipe, and experimenting with various fillings, they felt confident they had a product that was good enough to share with others.

It’s basically a love story of Ana and I meeting, she decides to move to DC, and as a selfish desire to eat the food she grew up with, she and I started this restaurant together. Gus May, a co-owner of La Tejana

The couple hosted their first pop-up from the stoop of their apartment building and sold 100 tacos to friends and complete strangers walking down their block. In December 2019, they partnered with a local bar and started hosting Saturday morning pop-ups.

“We got some good local press, and there was always a line around the corner and it was total chaos,” May said. “We had no idea what we were doing, but it was really fun, and we learned a ton. That was when we were like, ‘OK, maybe we’ve got something here. This concept might catch on.'”

Shortly after, the coronavirus pandemic derailed their momentum. 

But Jaramillo and May didn’t halt operations entirely in early 2020. One of their friends was leaning into cooking meals at home during the lockdowns and asked whether he could pay them to deliver a batch of homemade tortillas.

During the early months of the pandemic, May and Jaramillo did tortilla deliveries until they could return to hosting pop-ups.

Courtesy of La Tejana

“I was like, ‘Sure, what else do we have to do? We’re all just stuck at home,'” May, who figured it’d be a one-off, said.

Their friend, who happened to be a popular local artist with a social-media following, posted a photo of the tortilla delivery on Instagram, and it opened the floodgates: “All of a sudden all these people started messaging us asking if they could also get tortillas,” May said.

From there, the couple started selling a dozen tortillas for $7, with free delivery.

“We were making them all in our apartment,” May said. “We’d wake up at 4 o’clock in the morning and make, like, 300 tortillas. The whole apartment building smelled like pork lard.”

The delivery business wasn’t profitable.

“We were losing money,” May said. “But we just wanted to do marketing and get a product out there.”

From nomadic pop-ups to opening a brick-and-mortar

After a couple of months of exclusively doing tortilla deliveries, Jaramillo and May started landing pop-up gigs again as restaurants started to reopen.

“We got our business license, we got a commercial kitchen space, and then we would partner with bars and restaurants around DC and do pop-ups two, three, four times a week,” May, who got laid off at the start of the pandemic and went all in on the business, said.

Jaramillo was working full-time as a speech-language pathologist and studying part-time for her doctorate while helping launch their business, which they named La Tejana. It means “the woman from Texas,” but there are also people in Texas who self-identify as Tejanos or Tejanas based on their heritage, explained May: “It is meant to represent both Ana-Maria and every strong Latina or Tejana you have in your life.”

On opening day, Jaramillo and May sold out in three hours.

Courtesy of La Tejana

From summer 2020 through the end of 2021, the couple leaned into the pop-up concept — and it worked. They ran a lean operation and were technically profitable, “but that didn’t incorporate the amount of hours or labor that we were putting in ourselves as founders,” said May. “We basically gave unlimited time to La Tejana without compensating ourselves other than absolute bare minimum living expenses.”

May took a small salary to cover some of their fixed costs, such as rent and groceries, and they reinvested the rest of their earnings into the business.

Opening a brick-and-mortar space was always in the back of their minds. While they had a proven concept and the support of their customers, the timing didn’t seem right.

“This is still peak COVID times,” May said. “This is pre-vaccine, when everything was still so scary for the restaurant industry and the regulations seemed to be going back and forth: Things would open up for a little bit, there would be a spike in cases, and things would close down again.” 

They decided to keep hosting pop-ups and building their brand, ride out the pandemic, and reevaluate when circumstances improved.

In the summer of 2021, they started “putting some feelers out there for the brick-and-mortar,” May said. 

They knew where they wanted to be — Mount Pleasant, where they lived, and where their best-selling pop-ups always were — and started networking with other restaurant owners and landlords in the neighborhood. 

“We had really been trying to make inroads with independent landlords and were trying to figure out how to play that game because in DC, commercial real estate is such a scammy business, and finding a decent landlord and striking a decent deal on rent is hard to do,” May said. 

After months of building out their brick-and-mortar space, Jaramillo and May opened the doors in August 2022.

Courtesy of Suzannah Hoover

An advantage of running the pop-up business was that they weren’t in a hurry to sign a lease and could wait until the right opportunity came along. For restaurateurs, negotiating a lease that makes sense financially can be the difference between surviving and having to permanently close down, he said: “It’s just so high risk to open up a restaurant. Most restaurants fail. So we wanted to try to eliminate every factor we could to take on less risk.”

One of the landlords they’d spoken with called them up a few months after their initial meeting. The restaurant he was leasing to was closing down, meaning the space was opening up. 

Jaramillo and May jumped on it. They negotiated and signed the lease in January 2022. A couple months later, they got married.

“I think we learned to live in a state of somewhat controlled chaos,” May said.

They stopped hosting pop-ups and shifted their focus to building out their three-story shop, which required raising $180,000 from family and friends. That’s a relatively small amount for opening a brand-new restaurant, May said: “A larger dine-in, full-service restaurant would have to raise at least $400,000 to $500,000, if not over a million dollars for the build-out and all the opening costs.”

Their space is smaller, which helped keep costs down, and they did much of the work themselves, outsourcing only what they needed to. Their major costs were labor for the build-out and materials, including countertops, tiles, and light fixtures. Between labor and materials, they put about $100,000 into the construction of the space.

Equipment including their flattop griddle, six-burner stove with ovens, and deep fryer cost another $20,000. And then hiring staff and buying inventory (food and paper goods) for opening week was another large expense.

Jaramillo and May plan to open a bar on the top floor of La Tejana within the next year.

Courtesy of La Tejana

When they raised money, they didn’t give up any equity, meaning Jaramillo and May own 100% of the company.

They essentially took loans from investors and came up with a four-year payback plan starting at the end of 2023, which gave them about 16 months to get up and running before having to make their first payment.

“Our view is that if we’re the ones who are doing the work, then we should have complete say over the types of decisions we’re making and eventually the long-term profits,” May said.

But not all restaurant owners have the option to set up such favorable terms.

“Most restaurateurs don’t have the benefit of having a proven concept, so they have to give up more,” he said. 

A line around the block on opening day and over $1 million in revenue in year one

Jaramillo and May planned to open their doors at 7:30 a.m. on opening day: August 6, 2022. Their first customer arrived 45 minutes early and started the line outside.

“I remember walking into the shop and being like, we’re about to get rocked,” Jaramillo said. “Because this dude is sitting out here at 6:45 a.m. That means there’s a lot of other people that have that same idea.”

By 10:30 a.m., Jaramillo and May had to shut down the kitchen. They’d run out of tortillas.

“It was exhilarating and exhausting and exciting and soul-affirming, but also stressful, too,” May, who credits their success to a couple of factors, said, adding: “One of them is that we have a unique product. Homemade flour tortillas are not an easy thing to make — not that many restaurants are willing to make them, and that’s really the foundation of our breakfast taco.”

Jaramillo introduced May to breakfast tacos in 2017. Now he runs the La Tejana kitchen.

Courtesy of La Tejana

Plus, their story is genuine: “It’s basically a love story of Ana and I meeting, she decides to move to DC, and as a selfish desire to eat the food she grew up with, she and I started this restaurant together,” he said.

Their customer service is what brings customers back, Jaramillo added: “You can have an incredible product, but if you have the worst customer service ever, people will not go back.”

Operating a restaurant is a much bigger responsibility than hosting pop-ups. They’re open for far more hours in a week, have a physical infrastructure to maintain, and have 12 people on payroll. 

“Being responsible for that many human beings’ employment is one of the biggest differences,” May said. “They’re depending on La Tejana for a paycheck. We take that responsibility very seriously.”

Financially, they exceeded expectations in their first year. They expected to do $750,000 in revenue in year one and brought in over $1 million, according to profit and loss statements viewed by Insider. And their profit margins are above industry norms, May said: “We’ve been lucky to be over 15% every single month that we’ve been open.”

Their early success means they’ll be able to eliminate their debt quicker. It also gives a sense of confidence to their investors, which will make it easier to pitch them again if they decide to scale up and need more capital.

“We both want to expand, but we’re not in a rush to do so,” May said.

At the end of this year, after they make their first debt payment and have a better picture of their financial situation, they plan to think more seriously about what scaling would look like. 

“But for now, the one place is kind of our baby still,” he said.

Read the original article on Business Insider