Mexican Food Chains Hoping New Leader Brings Fresh Ideas.

The Long Beach-based owner of The faded Acapulco and El Torito Mexican restaurant chains is preparing to undertake a significant makeover, orchestrated by its new president and chief executive, Frederick F. Wolfe, who steps into the ring on May 15.

Wolfe, 50, is a turnaround specialist known for breathing new life into dog-eared chains that have grown a little moldy around the edges.

At his most recent job as chief operating officer at California Pizza Kitchen, Wolfe helped inject a contemporary look into the pizza restaurants' decor, provide a menu featuring lighter and fresher dishes, upgrade the food ingredients and give customers larger portions, analysts said.

Acapulco Acquisition Corp., owner of the two Mexican restaurant chains, is hoping that Wolfe, who had been vice president of operations at Acapulco for 14 years before joining CPK in 1997, can pull off the same dazzling turnaround for El Torito and Acapulco.

Wolfe said he plans to immediately launch a plan to improve the chains' quality of food, service and ambience.

"We will also find out what the other issues are and what needs immediate attention," he said.

Analysts note that both chains have menus that are slightly out of step with the times, and offer food selections that need a dash of culinary inspiration.

"El Torito has been in pretty bad shape for a very long time," said Hal Sieling, an independent restaurant consultant in Carlsbad. "If you look at both restaurants, there is a lot of room for improvement."

Acapulco Acquisition Corp. bought 95 El Torito restaurants for $130 million last June from ailing restaurant holding company Prandium Inc. of Irvine. El Torito, which Prandium bought in 1994, was considered the strongest link in the Orange County company's restaurant lineup, with sales of $220 million in 1999.

Prandium -- which operates 143 Chi-Chi's Mexican restaurants in the Midwest, 43 Koo Koo Roo restaurants and 14 Hamburger Hamlets -- sold El Torito because it needed the funds to help pay $270 million in debt coming due over a four-year period. But last week, Prandium revealed in its annual report that it might have to file for Chapter 11 bankruptcy to protect itself from creditors.

Neglected restaurants

Because of Prandium's lingering financial difficulties, little money was invested in recent years in El Torito restaurants, many of which need to be upgraded to keep pace with other mid-price family restaurant competitors such as Lone Star Steakhouse and Claimjumper.

"El Torito has been under a company helm that has been cash-strapped for years," said Janet Lowder, president of Restaurant Management Services in Rancho Palos Verdes. "The new management will probably put some emphasis on improving El Torito and see how the two compete against each other."

Acapulco executives, who were not available for comment last week, previously asserted that they would continue operating Acapulco and El Torito as two separate entities, even though many of the establishments are located within blocks of each other and appeal to the same customer base.

"I expect we will see some conversions to one concept or another, or we may see some better definition between the two concepts," Wolfe said about the two chains.

Under common ownership, the two former rivals now dominate the sit-down Mexican restaurant market where faux Mexican architecture and Latin music lend a fiesta atmosphere to the dining-out experience.

In many ways, Acapulco's purchase of El Torito locked up this particular dining segment. It also allows the company to run the two restaurant chains more cost effectively, due to economies of scale. The two chains can purchase food at a better price while combining back-office services and marketing costs.

Also the acquisition allowed Acapulco, which operates 49 Acapulco restaurants, to triple its market reach by adding nearly 100 El Torito restaurants to its line-up.

"Somewhere along the line, Acapulco needed to do something to expand its concept, and El Torito seemed to be an opportunity to do that," said Keith Elmer, a restaurant expert for Ernst & Young.f

Economic changes

But Wolfe will have a particular challenge on his hands this year. That's because experts predict the restaurant industry will have a tough time making ends meet due to the shifting economic landscape.

While restaurant sales in California are projected to increase slightly this year to nearly $40 billion, up from $37.7 billion in 2000, operating costs will be climbing even higher, said John Dunlap, president of the California Restaurant Association.

"We have energy costs going up as much as 300 percent in some areas, such as San Diego," Dunlap said. "Restaurants are large users of energy because of all the refrigeration, interior and exterior lighting, ovens, griddles, microwaves and hot water. And then you have a large number of minimum-wage workers, and the minimum wage increased this year."