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Chilango is leading a Mexican wave

Written by Emilie Sandy, Adam Pescod on Thursday, 01 October 2015. Posted in Big business, Interviews

Eric Partaker and Dan Houghton were high flyers at Skype before setting up Chilango. Now their Mexican restaurant brand is all set to soar overseas

Chilango is leading a Mexican wave

The founders of Chilango, London’s hottest new fast-food chain, aren’t your everyday restaurateurs. While the blonde-haired Eric Partaker has the presence of a Hollywood actor with his half-Norwegian, half-American drawl, his bespectacled British co-founder Dan Houghton enjoys some serious street cred from those of us who grew up in the 1990s; Houghton interned at gaming giant Electronic Arts in 1996 and 1997, working with the team that created Theme Hospital in his second stint at the company.

The pair met at Skype back in 2004. At the time, it was evident the company was onto big things; so big that it was snapped up a year later by eBay in a deal worth £2.6bn, before later being acquired by Microsoft for $8.5bn.

With only 30 staff working at Skype at the time, Partaker and Houghton were captured by its entrepreneurial spirit. “The environment at Skype was all about trying a lot of things out and seeing what worked,” says Partaker. “There was plenty of room for failure and autonomy and together these things give you the confidence to venture out on your own.”

But this wasn’t their first taste of entrepreneurship. While Houghton founded TextMagic, a mobile marketing company, in 2001, Partaker’s money-making schemes began in the late 1980s. He moved to Chicago from Norway when he was five and took on his first paper round at the age of ten. Then, at 13, he started to branch out a little: mowing lawns in the summer and shovelling snow in the winter. “After a period of time, I had about 15 different homes, each paying me $10. Back in 1988, $150 per week was pretty good money for a 13-year-old.”

Partaker went on to study finance at the University of Illinois at Urbana-Champaign and, after graduating, joined McKinsey & Company, the global management consultancy firm. “When I was at university, a professor said, ‘If anyone in this room manages to get a job at the company I’m about to profile, I’ll fall out of my chair,’” says Partaker. “That company ended up being McKinsey. I had no idea what it was but the way he had positioned it caught my attention and I thought, ‘Hell, I’m getting a job there.’” 

Spending his first two years at McKinsey’s Chicago HQ, Partaker relocated to the company’s office in his native Oslo in 2001. The following year, he became the managing director of Venture Cup, a not-for-profit company that was sponsored by McKinsey. “The aim of that organisation was to stimulate new business development and entrepreneurship throughout Norway,” he says. “I led that for a year before coming down to London and joining Skype in 2004.”

Partaker had seen the potential of Skype early on and knew he had to get involved. “I had been using Skype well ahead of most people and thought it was amazing,” he says. “I just knew that journey would be something incredible.”

Houghton arrived at Skype shortly after Partaker and the pair worked so well as a team that they agreed to go into business together one day. “Both of us got quite inspired by that environment at Skype to want to start our own thing,” says Partaker. “We made a pact that whoever had an idea first would tell the other.” 

Given their experience of the technology space, launching a business in the sector certainly would have played to the pair’s strengths. However, while they were riding high at Skype, Partaker had been yearning for something since leaving Chicago. “I had grown up loving Mexican food in Chicago, which is home to the second largest population of Mexicans in the United States behind Los Angeles,” he says. “My family had also worked in the restaurant industry in the States so I was already familiar with the sector.” 

Suffice to say, Partaker had struggled to find anything in London that came close to matching the Mexican fare he had enjoyed across the pond. “I knew it could be so much more than what it was here,” he says. “It seemed like a great opportunity so I mentioned it to Dan and he agreed.”

So, a mere three years after joining Skype, Partaker and Houghton took the brave decision to strike out on their own. All they needed was capital. In addition to investing £60,000 of their own money, they received the backing of Saul Klein, their former boss at Skype who, along with a handful of other former colleagues, stumped up £85,000. And with HSBC matching their investment with a loan guarantee of £145,000, Partaker and Houghton were all set. 

In August 2007, they opened their first restaurant in Islington under the name Mucho Mas, which translates as ‘much more’ in Spanish. The focus was on authentic cuisine and speedy service, the hallmark of Mexican fast food restaurants in the United States. Partaker’s numerous visits to Mexico over the previous two years helped ensure that customers were getting as close to the real deal as possible. “Going direct to the source on certain key ingredients helps protect both the quality and the flavour of the food that we serve,” he says. “One of our investors is the former global head of tourism for Mexico. He helped us develop direct relationships with farmers in Mexico to get our chilli supply, certain bottled sauces and tomatillos.” 

The people of Islington were soon queueing out the door to get their hands on a Mucho Mas burrito or taco. So phenomenal was the reaction that in March 2008 the company secured further investment to the tune of £1.1m in a round led by Venrex Investment Management with participation from Ambient Sound Investments, which was established by four of Skype’s founding engineers.

However, despite this initial success, Partaker and Houghton weren’t satisfied. While the food they were serving up was unmistakably Mexican, the name of their company didn’t quite fit what they were trying to build. A trip to Mexico City later, Chilango was born. “Our favourite place in Mexico is Mexico City itself. It’s just a riot of contrasts, energy and vibrancy,” says Partaker. “[And] Chilango is the term for someone from Mexico City.” 

The new name certainly struck more of a chord with the company’s character. “Our one-word distillation for the brand is ‘vibrancy’ and we have aligned the entire company with that,” says Partaker. “The food is vibrantly flavoured, displayed and presented and the interiors themselves are a combination of an incredibly vibrant colour pallet, neon and imagery.”

The first Chilango site opened on Fleet Street in 2008. The company has since added a further seven sites across London; the ninth is set to open in London Bridge this month and the tenth is in construction in Soho. While the first seven were funded using equity investment and the loan from HSBC, the latter three outlets – including Camden, which opened last October – have sprung out of something that has well and truly captured the attention of the British public: the Burrito Bond. 

At the start of 2014, the company had been looking to shake up the way it raised capital. “We decided we could start looking to bring more debt into the company rather than purely selling equity to fund the company’s growth,” says Partaker. “We had created our own debt facility agreement, which is effectively a mechanism to loan money from people who are passionate about Chilango in exchange for 8% interest.” 

However, it soon became apparent that a minimum investment of £100,000 was too much of an ask. The idea was put on the back-burner until Partaker discovered that Crowdcube, the crowdfunding platform, was launching a new mini-bond product. It caught their eye immediately. “The beauty of it was that we were able to combine the 20,000 people a week coming through our restaurants with the 75,000 registered users Crowdcube had at the time,” says Partaker.

Chilango became the first company to launch a mini bond on Crowdcube on June 9, 2014 and the rest is history. The Burrito Bond surged past its £1m target ten days before the deadline – which was promptly extended. By the time it came to a close at midnight on August 26, the company had doubled its initial investment target, raising over £2m from 709 people with an average investment of £2,900.

Along with an 8% interest rate, all investors received two free burritos, with those who invested over £10,000 receiving a Chilango Black Card – entitling them to a free burrito every week for the duration of the bond. The campaign therefore proved a tasty proposition for both Chilango and its new backers. “The Burrito Bond was as much an exercise in brand-building as it was in fundraising,” says Partaker. “Not only did we have the cash that we needed to grow, but we also had over 700 new brand ambassadors promoting Chilango after the campaign ended. I always thought from day one that it would be great if Chilango’s growth and success was funded by its guests and fans.”

These fans included some high-profile names from the restaurant business who have since been appointed to Chilango’s ranks. David Haimes, the former CEO of Itsu, has joined as operations directors to help drive the company’s expansion at home and abroad. And further board appointments include Simon Kossof, chairman of Carluccio’s; Don Henshall, the former CEO of Krispy Kreme UK and current CEO of Farrow & Ball; and Chris Moore, the former CEO of Domino’s Pizza UK. “There are always people who have done it before and it’s great to surround ourselves with them because it helps us make the right decisions going forward,” says Partaker.

Things are certainly moving apace for Chilango. Partaker says he hopes to double the number of UK restaurants over the next two years and open Chilango’s first international outlet; it is currently seeking master franchisees who can invest a minimum of $1m to help establish the brand overseas.  

Partaker is confident that the success it has enjoyed in the capital stands the company in good stead for international expansion. “What’s great about cutting your teeth in London is that it’s one of the most cosmopolitan and competitive markets that exists,” he says. “To develop the brand here, go through the hard knocks, survive the recession and successfully compete against some of the biggest international and UK brands in our space really sets us up to do well wherever we go.” 

On the face of it, Chilango has all the necessary ingredients to become an international success story. As Partaker says: “There is no reason why Chilango can’t become a multi-billion pound global brand and household name.” 

It’s little wonder he is already talking about floating the company down the line. “Chilango would probably at some point make an exciting IPO story, which would be a mechanism for us to fund even further growth and to continue pushing the brand.”

But while Partaker and Houghton are currently taking all of the plaudits, there will probably come a point when they have to pass on the torch. “This brand and its ambition has far more mileage in it than I have years left on the planet,” says Partaker. “I am 39 and I will give it my best for the next 25 years but Chilango is a 100-year business plan in the making.” 

About the Author

Emilie Sandy

Emilie Sandy

Aside from dashing between the Cotswolds and London to shoot business types for magazines such as EB and TV stars for the Beeb, Sandy is also a visiting lecturer at a college in Stroud – not to mention a proud mother to son Freddie and daughter Fjola. She has photographed our cover stars since our very first edition. You know what they say – if it ain’t broke...

Adam Pescod

Adam Pescod

EB's former editor, Pescod was tasked with ensuring these hallowed pages are rich with excellent, engaging and error-free stories, all written with the entrepreneur in mind. Pescod previously plied his trade penning pieces about pubs and pints. He is also a sucker for alliteration. 

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