BWW invests in Rusty Taco

Buffalo Wild Wings said Monday that it has made a majority investment in Dallas-based Rusty Taco Inc., a second foray into diversification beyond the sports-themed chain's core concept.

Golden Valley-based Wild Wings has been wildly successful with its wings, beer and sports format. Indeed, it's one of the fastest-growing U.S. restaurant companies, this year surpassing the 1,000-outlet mark. Rusty Taco is a tiny chain with nine outlets, including three in the Twin Cities.

The taco firm represents a small investment for Wild Wings, and the deal's price wasn't disclosed. But Rusty Taco fits right into one of Wild Wings' key long-term strategies: investing in niche restaurant companies with big potential.

"We want to invest in small emerging brands, companies with the desire to grow but maybe not the financial means or expertise to do so," Wild Wings CEO Sally Smith said in an interview with the Star Tribune. "We are really more of a strategic partner for them."

Wild Wings' strategy is a low-risk way to diversify, since the company isn't shelling out big bucks for an established brand. Such deals often present big integration challenges and can lead an acquirer to become distracted from its core brand.

Wild Wings' criteria for its investment candidates include: Their concepts must work nationally, not just regionally, and they should have a fresh and healthy theme.

Smith said Wild Wings has "probably looked at 200-plus" restaurant concepts, and plans to invest in up to seven over the next five years or so. The first came last year with a minority investment in Southern California-based PizzaRev.

Rusty Taco has a relatively simple menu of what it calls "street-style tacos" and also serves beer and margaritas.

The company launched in 2010 in Dallas and in 2011 opened its first franchised restaurant on Lexington Parkway South in St. Paul. It also has an outlet in Minneapolis on E. Hennepin Avenue, a location that opened this year in Maple Grove and a Minnesota food truck. There are five Rusty Taco outlets in Texas and one in Denver.

PizzaRev has nine outlets in Southern California and two that have opened this year in the Twin Cities, one each in Hopkins and Edina. Buffalo Wild Wings is effectively the franchisee owner of the Twin Cities PizzaRevs, as it has a minority investment in the company at this point.

Mike Hughlett • 612-673-7003