Los Tacos No. 1 takes an investment from TSG Consumer

Los Tacos No. 1 has taken a strategic investment from TSG Consumer, the private-equity firm behind Dutch Bros and Crumbl, in a deal whose size was not disclosed.

Neither party said whether TSG has taken a majority or a minority stake. Co-founder and chief executive Christian Pineda and chief operating partner Jacobo Ackerman continue to run the business day to day, with the firm described as an investor and a strategic partner. No new markets and no opening timeline were named.

The company runs ten sites in New York City and Los Mariscos, a sister seafood counter, and it started as a single stand at Chelsea Market in 2013. Its trade is Tijuana-style: adobada carved off a trompo, mesquite-grilled carne asada, corn tortillas pressed on site, no seating to speak of and queues that do the marketing.

The queue is the product. That is the thing private equity cannot buy twice.

What the Los Tacos No. 1 deal buys

TSG's back catalogue explains the interest. It has backed Dutch Bros, Yard House, Crumbl, Pura Vida Miami and the retail side of Stumptown, which is a portfolio of concepts that scaled from a small number of sites into national chains. That is the promise on the table, and it is the same promise that has flattened plenty of good counters.

The counter-argument belongs to the operators, and they have made it: the founders keep the kitchen and the day-to-day. Los Tacos No. 1 is also unusually hard to dilute, because the format is short, the menu is four or five items and the queue is the product. The risk is not the recipe but the supply chain, which is where a chain of ten becomes a chain of fifty and the trompo turns into a tray.

Money returning to fast, cheap food

Capital moving into cheap counter formats while full-service chains contract is the pattern of the year in the United States. This week alone, O'Charley's closed all of its company restaurants and Double Zero shut after twelve years in the East Village. Casual dining sheds sites; twelve-dollar tacos raise money.

No expansion plan has been published. The first thing to watch is whether the next Los Tacos No. 1 opens outside New York, and whether the queue travels with it.