The first location of Rubio's.
Rubio’s Coastal Grill was a trendsetter in early 1990s with its fish tacos and overall lighter Mexican fare. The chain grew to over 200 locations at one point, but too-rapid expansion plans and COVID shutdowns forced the company into bankruptcy last year. It is emerging from bankruptcy with about 150 locations. In this interview, company founder Ralph Rubio, 65, who is no longer president but is involved in many decisions, talks about growing pains.
El Restaurante: Tell us about how Rubio’s Coastal Grill grew in the early days.
Ralph Rubio: There was a point very early on, where I was just very happy with where we were going and where we were. And, I wasn't thinking as big, but as we got into the late 90s, and we started to use the money that we raised privately to grow the company from 11 restaurants to 63 restaurants, then I started to think big, and realize, "Gosh, this could be a national chain." Now, I came to find out, that's a lot easier said than done.
ER: What mistakes did the company make in its growth plans?
RR: [We grew] continuously geographically, which was a mistake, because there’s a socio-demographic aspect to your customer base that you have to deal with. The food culture in Denver, or say Texas or Florida, is very different from the Southwest, and you have to know that. …. Especially in a business that features a fish taco as a signature product and people in new markets don’t have any clue what a fish taco is, they think it’s really weird.
ER: Did the IPO in 1999 affect your growth?
RR: Going public gave us the capital to really grow the business. But the key thing is that you have to consistently grow quarter after quarter, and that’s hard to do….We were growing just right up to the IPO and post the IPO at a 30 to 50 percent clip, year-over-year units. And that was way too fast. We were growing beyond our ability to operate.
ER: Was it difficult to profit in new markets as you expanded out of Southern California?
RR: It was hard because we didn’t have the brand equity. So in Denver or Salt Lake City, for example, there were a lot of homegrown competitors that we were vying with, along with chains of scale, like Chipotle and Panera. [Restaurants with scale] are ubiquitous so people knew who they were. When someone was looking for a job, they weren’t sure what Rubio’s was, so it was daunting.
ER: You recently pulled out of Florida and reduced your presence in other states. Was COVID to blame for that or other problems?
RR: It was probably half and half. We were challenged in Florida because [our eight restaurants] were spread out, we weren’t concentrated enough. Denver and Salt Lake were always challenge, operationally and from a revenue point of view, but we were making some ground, especially in Denver. Then COVID came, and that just gave us the impetus to retreat. We figured, let’s retreat now from Denver, Salt Lake and Florida, and live to fight another day. As we start to grow again we can look to enter one, two or three of those markets.
ER: How will Rubio’s be different post-bankruptcy and post-COVID?
RR: That’s a tough question to answer right now because we’re still in the midst of it. But one thing is that there was a big digital effort at Rubio’s [starting decades ago] so when COVID came…and we pivoted to digital ordering, we were geared to do that. And we’re going to continue to grow revenue digitally.
But what about our iconic salsa bar? When we talk about freshness, that’s a big fresh cue, right? Those have been shut down since March or April of last year, can we bring them back? Is there going to be such a thing as a buffet anymore? Or a salad bar? So there are a lot of things we need to sort out from the guest experience. There are more questions than answers at this point, in terms of what the future looks like.
On the positive side, we recently introduced an Impossible Taco Salad that’s amazing. And it’s done pretty well, so we’re going to keep Impossible in the restaurants. And we did a partnership with Top Chef judge Richard Blais on a line of street tacos that we’re going to roll out this summer. We’re excited about those.