Taco Cabana is expanding its signature pink restaurants into nearby states, with redesigned stores and blue agave tequila in every margarita, but San Antonio will remain home to its headquarters and its test kitchen.
The iconic 46-year-old chain was born in San Antonio and will stay here, said Ulyses Camacho, the company’s president and chief operating officer.
“We’re part of the culture,” he said. This will come as little surprise to many, but the San Antonio market, which includes about 38 locations, also holds the distinction of buying the most margaritas.
Now Camacho, along with John Ramsay, director of franchise sales and development who joined the company this summer, is overseeing the chain’s national franchising push, announced in October.
A diaspora of nostalgic San Antonians living in other states, he believes, is responsible for some of the positive response Camacho said the company has gotten in the wake of its announcement. Out-of-state visitors entranced by the cheap but fresh Tex-Mex, the pink and papel picado-inspired decor and of course the neon-colored margaritas form another fan club.
“It’s been wonderful,” he told the San Antonio Report. “We didn’t expect the amount of attention we’ve gotten. There’s a lot of interest outside Texas to take the brand national.”
The company is looking for experienced operators who can run five or more restaurants, he said. And while the main targets are Arizona, Arkansas, Colorado, Missouri, Oklahoma and Tennessee, the I-35 corridor between San Antonio and Austin is also ripe for expansion, Camacho said.
“Learnings” from those future operators in other states could eventually influence menu items and flavors in San Antonio, he said, but the company will always offer its legacy menu items, like the breakfast taco box, freshly-made tortillas, fajitas and house-made salsas.
This is the second time in the chain’s history it has attempted to franchise, but it’s the first under the ownership of Yadav Enterprises, a powerhouse restaurant franchise company based in California that bought Taco Cabana in 2021 for a reported $85 million, with the intention of franchising it into a national brand, Camacho told the San Antonio Express-News last year.
San Antonio history
Founded by San Antonio resident Felix Stehling in 1978, the story of the first Taco Cabana has been recounted in many places. An empresario who owned several bars and clubs across the city, Stehling bought the property across Hildebrand Avenue at San Pedro from his popular Crystal Pistol Bar for overflow parking.
He and brother Mike Stehling turned the old Dairy Queen on the site into the first Taco Cabana, tapping Margie Lopez Abonce to develop the recipes and do the cooking. Abonce would later become the face of Mama Margie’s Mexican Cafe, started by Mike Stehling after he left Taco Cabana.
The original Taco Cabana location stayed open all night to the delight of bar patrons; the choice was made in part, according to local lore, to prevent the furniture on the semi-enclosed patio — which would become a signature of future restaurants — from being stolen.
Stehling used fresh meat and produce from the beginning, yet intentionally kept prices low; both features helped drive the success of that first location and the eight more that followed. It appears that beer and margarita sales have been part of the concept from the nearly the beginning.
That early move differentiated the chain from many of its competitors and today makes up “a good percentage” of the company’s overall business, Camacho said.
As Taco Cabana grew, disagreements among the Stehling family increased, especially around growth and possible franchising. They ultimately divided the existing restaurants. After further growth, thanks in large part to then-company president Richard Cervera, Felix Stehling took the company public in 1992, followed by even more aggressive expansion.
The company’s stock price and its growth, including franchised stores in several states soared — until it didn’t. By 1994, Stehling was forced out as chairman, and the following year, Cervera exited. By 2000, the company was private again, purchased by Carrols Restaurant Group. Twelve years later, it created the Fiesta Restaurant Group to oversee the chain, which sold it to Yadev in 2021.
By then, Taco Cabana had been struggling for some time. It closed nine locations in 2019 and 19 more the following year, the first year of the pandemic. Today there are 144 locations across the state.
Margaritas to the rescue
In the earliest days of the pandemic, Gov. Gregg Abbott signed a waiver allowing the bar and restaurant industry to sell alcoholic drinks to go. The change was so welcome by businesses and customers that the state legislature made the change permanent in May 2021.
Being able to buy alcohol in the drive-thru “changed things completely,” Camacho said.
Many other pandemic-era customer habits have also become permanent, he said, leading to design changes for Taco Cabana’s future restaurants. Today, customers are still ordering more online — 30% of sales come through apps, he said — and spending less time inside dining rooms.
San Antonio is home to the first example of the new design, unveiled in the fall of 2022 at 2403 Babcock Road. Because that store was previously another restaurant and not built from the ground up, it doesn’t have all the features of the new design, but it does boast a bold, updated color scheme, new exterior design elements and a return of the “beloved” salsa bar.
The first completely redesigned store opened in Spring earlier this year. Along with the new exterior, it has two drive-thrus and a smaller dining room. The patio remains — “we’re known for our patios,” Camacho said, so it was redesigned instead of being cut. “We may close the dining room at 10 p.m., but we’ll keep the drive-thru open until midnight, for the delivery drivers.”
Sales at the newly designed location “has been exceeding by far what we expected,” he said.
Taco Cabana continues to lean heavily into its margaritas, which Camacho believes will be a differentiator among the many other Tex-Mex and Mexican inspired fast casual restaurants that are also attempting to grow nationally.
In July 2020 the company launched its first “MargaritaPalooza” — 12 flavors, $2 a piece, “all day every day.” In 2022, it announced that its Texas locations would become “margarita headquarters,” with 12 permanent flavors and a rotating seasonal 13th flavor.
Previous seasonal flavors have included everything from pickle to pumpkin spice. When Yadav moved Taco Cabanas from Coke to Pepsi products, that also meant it could partner with San Antonio-favorite Big Red soda for a limited run of Big Red-flavored margaritas. Paired with barbacoa tacos, the promotion was one of the chain’s most successful.
This summer, San Antonio served as the test market for a new tequila now used in all Taco Cabana margaritas, a “premium, small batch,” 100% blue agave from Jalisco. Branded Casa Alta, the tequila will be produced exclusively for Taco Cabana, including future franchise locations.
Customers — especially those in San Antonio — have “a real attachment” to Taco Cabana margaritas, Camacho said, along with the chain’s “value-driven” menu. That includes a happy hour, which offers deals on menu items, as well as the margaritas.
While the plan is to grow nationally via the frranchise model, Camacho said the company also still plans to open more corporate-owned stores in Texas.
“The growth has to be strategic,” he said, and “it has to be at a pace where we can support the right franchising group outside of Texas.”
