Chacho's was founded as a typical quick service Mexican restaurant approximately 30 years ago. We enjoyed very limited success in our early years. Like so many restaurant operators, our philosophy was to control costs in order to make a profit. Although our food was okay and our service was not usually terrible, this philosophy did not create a compelling customer experience.
Over time we experimented with some higher quality, more expensive ingredients and were surprised at how positively customers responded. Sales gradually started increasing, so we steadily started improving the quality of other ingredients. Sales increased again. Seeing such results, we kept buying better and better stuff until we were buying the same ingredients as the best full service restaurants (which charged much higher prices). Unfortunately, for a long time this approach actually made our restaurant less profitable, but we thought we were on to something, so we continued anyway.
We then thought "why not try the same thing with service?" We started scheduling more employees and raising wages. We had always hated paying minimum wages, so we simply quit doing that. We got better employees who really cared. Again, sales responded positively, although profits moved in the other direction.
We decided the only path we wanted to follow was one of terrific food quality, consistently good service, and low prices. We decided we would either make it with this approach or quit the business. Our accountant thought we were crazy, and even told us that any company can do a lot of business if they give their products away. But we believed that if we persisted we would finally attain sufficient sales to make it worthwhile. Since we do not advertise, the needed sales increase has taken a long time but has finally happened. Nevertheless, we earn a lot less money than one would think given the sales volume of our restaurants. Our approach creates a low margin business, kinda like Wal-Mart, in which we need to serve many thousands of customers just to break even.
We are continuing to try to improve our business every day.