Rivalry Heats Up In Arena For Healthy Mexican Food -- Todo Loco Sees Rapid Growth As Macheezmo Mouse Slows

Competition is getting as hot as a habanero pepper in the market for inexpensive, low-fat, Mexican-style food.

The two main competitors in the Northwest are Macheezmo Mouse Inc., a Portland-based chain of 22 restaurants, and Seattle-based Todo Loco with 11 restaurants.

Both chains have grown quickly and Todo Loco has plans to add 14 more restaurants by the end of 1996. The privately held Todo Loco expects total annual sales to reach $10 million by then.

Macheezmo Mouse, which went public last year, surpassed the $10 million mark in sales this past year, with profit of $1 million. But its expansion plans will be slowed, although a new restaurant at Green Lake is still scheduled to open as originally planned, said Rex Bird, president and chief operating officer.

Macheezmo Mouse stock has been sliding over the past year and took another hit last week after company officials announced they were expecting lower profit for the quarter than originally expected, due partly to increased competition.

The stock, which dropped 25 cents yesterday to tie its all-time low of $3.50 a share, has been steadily declining since shortly after the company went public in September 1994. It made a slight gain early today but was unchanged in late trading. The stock peaked at $11 last November.

Diane Daggatt, an analyst at Pacific Crest Securities in Seattle, said she has changed the stock's rating from a buy to a hold, but remains optimistic for the long-term potential since the company has hired an outside consultant to identify its position in the market and develop a new marketing approach.

"The good news is Macheezmo Mouse has a strong balance sheet. Once the market analysis is complete and the new marketing approach is implemented with expansion plans back on track, Macheezmo will represent a compelling investment opportunity," Daggatt said.

When Macheezmo Mouse went public last year, it was greeted with excitement by investors. The timing seemed to be just right with consumers demanding lower-fat food choices.

And when the Center for Science in the Public Interest, a nutrition-advocacy group based in Washington, D.C., released a report in its July/August 1994 newsletter criticizing Mexican food, saying it had high fat and sodium content, the group gave a thumbs up to Macheezmo Mouse for its more-healthful choices.

William Warren, chairman and chief executive officer, started the chain in 1981 with an emphasis on fresh, healthy foods, served quickly. Nothing on its menu is fried. Everything is steamed, baked or grilled.

Macheezmo Mouse believes it will succeed with the quality of its food and service, and accommodating people with special dietetic needs.

"We encourage people to special order," Bird said. "We believe the things that make us unique will also shine as time goes on."

The ability to special order is one of the selling points for customer Tom O'Brien, 46, at the Lower Queen Anne restaurant.

"You don't have to go by the menu. I order a side of beans, a side of rice and tortillas, and it's less than two bucks," he said.

Another customer Betty Chamberlain, 55, was attracted to Macheezmo Mouse for its "low-calorie, low-fat good food and fast service." Since her husband Richard is a diabetic, she said, it's just the type of restaurant they look for.

At Todo Loco, owner Dave de Varona said his restaurant offers Mexican-style food, but the menu is not solely limited to Mexican.

"We're really kind of a hybrid of Mexican food, we really have a lot of multicultural flavors. . . . We're really just a big-flavor, high-energy company, and Mexican is just one category," de Varona said.

Todo Loco goes outside the traditional Mexican category with such items as the "Wrap" - a meat and vegetable-filled tortilla (wheat, spinach or tomato) that can come with Thai-style peanut sauce, basil barbecue sauce or yogurt cucumber-lime dressing.

Owners of traditional Mexican restaurants said they aren't threatened by the newcomers.

"They have carved themselves out a very specific niche," said Randy Thurman, president and chief operating officer for the 27 Azteca restaurants, an area family-owned chain. "The clear definition of the market segment just makes it much easier for us."

Azteca does offer vegetarian, low-fat and lighter menu items, but also has traditional dishes.

Chon Garcia, owner of five Jalisco restaurants in the Seattle-area and Taqueria Jalisco in Lower Queen Anne, said he was concerned business would drop off with the new restaurants.

"But we're still OK," Garcia said.

Nevertheless, traditional Mexican restaurants seem to be adapting their menus to consumers' changing tastes.

At Jalisco, vegetable oil is used instead of lard in its refried beans. Lard has been used for generations in Mexican cooking. Jalisco also has begun to add more items with vegetables to the menu, Garcia said.