The businessmen who dreamed up Chi-Chi's actually had a pretty solid idea in the beginning — they were in Minnesota, in the 1970s, and Mexican food options were pretty nonexistent. Even Taco Bell hadn't gone nationwide at that point. These entrepreneurs felt the time was right for a sit-down Mexican restaurant in the Midwest. Well, their profits went way beyond their expectations — at $2 million, they took in five times their projected revenue that first year in business.
Naturally, success like that does not escape the eyes of big money investors. Within a few years, the franchise operation was bought out, and control was given to one of the bigwigs at Kentucky Fried Chicken. While he moved company headquarters from Minneapolis to Louisville, the chain's expansion in the '70s and early '80s remained centered on the Midwest.
The Midwestern restaurants remained quite successful, mostly due to the fact that they faced little or no competition or expectations when it came to Mexican food. When Chi-Chi's tried expanding into other markets like New York or Miami, places where people's taste buds were more refined, they didn't catch on. Their failures in Texas, California, and New Mexico were, perhaps, to be expected, but when Chi-Chi's failed to take hold even in New England or the deep South, it started to seem like the fiesta might be starting to wind down.