Why Los Tacos No. 1 is betting on private equity

The reflexive backlash against private equity is well-earned. Firms often saddle acquired businesses with heavy debt, stripping them of the quality that once drew customers. However, TSG executive Colin Welch argues that the firm’s interest in the taco chain stems precisely from its loyal fan base. The challenge now lies in scaling the business across an expensive Manhattan market while keeping the product identical to the original.

Jersey Mike’s serves as a rare industry success story for this model. Blackstone spent two years professionalizing the sandwich chain for an IPO without altering suppliers or portion sizes, even establishing a shared ownership plan for employees. Despite these operational gains, the reality of the market remains unforgiving; Jersey Mike’s shares are currently trading near $18, well below their $23 debut price.

For smaller operators, the alternative to private equity is often non-existent. Sky-high borrowing costs show no signs of retreating, and the public markets remain fixated on artificial intelligence, leaving traditional businesses in the cold. With the costs of essential ingredients like beef and avocados climbing, Los Tacos No. 1 is choosing to partner with capital firms rather than face stagnation in a punishing fiscal landscape.