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Earnings Claims of Top Franchises Revealed

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Franchise Costs: Detailed Estimates of Del Taco Franchise Costs (2017 FDD)

by Franchise Chatter on January 21, 2015

in Franchise Costs, Mexican Restaurant Franchise

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Don't Invest in a Franchise Until You Check Out This List

Del Taco Restaurant Exterior Photo by Hazboy

This post was updated on September 19, 2017 to reflect information from Del Taco’s 2017 FDD (Item 7).

Detailed Estimates of Del Taco Franchise Costs Based on Item 7 (Estimated Initial Investment) of Del Taco’s 2017 Franchise Disclosure Document

For 5.1 Prototype

  • Del Taco has no obligation to refund any costs paid to it. Whether any third party will refund any costs will depend on the third party involved.

1.  Franchise Fee:  $35,000

2.  Promotional Fee:  $10,000

  • You must pay the Franchise Fee and Promotional Fee when you sign the Franchise Agreement; however, those fees for your first restaurant become due when you sign a Development Agreement.
  • Under the Market Specific Development Incentive Program, Del Taco may waive portions of the $35,000 Franchise Fee for certain restaurants.

3.  Professional Fees:  $0 to $55,000

  • Del Taco recommends that you consult an attorney of your own choosing to review the Disclosure Document, the Franchise Agreement, and the Development Agreement, as well as an independent accountant to review the financial statements attached to the Franchise Agreement, before signing the Franchise Agreement or the Development Agreement.
  • For markets or areas not already subjected to a real estate market plan approved by Del Taco, it also recommends that you engage the services of a reputable market analysis company to perform a thorough market analysis.
  • Additionally, you will need to solicit the services of an architect approved by Del Taco once your site package has been approved.

4.  Lease Payment:  $0 to $25,000

  • Del Taco expects that you will either purchase or lease the real estate for your restaurant. The rent will vary depending on the size and location of your restaurant. Often, the first month’s lease payment becomes due upon execution of the lease.
  • The lease you sign also may include percentage rent, contributions for taxes, common area maintenance fees, and payments for utilities, security deposits, and other items. Del Taco did not include those additional costs in the estimated amounts.

5.  Building:  $350,000 to $525,000

  • Del Taco based the amounts on a build-to-suit or build-out lease from a third party, which includes land, building, and construction costs.
  • Should you choose to purchase and pay separately for the construction of the building, you should adjust the total investment costs to cover the actual land and development costs.
  • Land acquisition costs may range from an estimated low of $200,000 to an estimated high of $3,000,000. The range of the cost of construction of the restaurant building and on-site and off-site work will vary depending on local conditions, the size and type of building that you select, and the real estate transaction that you structure.
  • The costs of building permits and fees from any governmental agencies and utilities may vary greatly as well, depending on location. Additionally, the lease you sign may include terms which may result in higher monthly payments, in addition to contributions for taxes, common area maintenance fees, security deposits, and other items.

6.  Site Work and Entitlement:  $50,000 to $400,000

7.  Architectural, Engineer, and Utility Fees and Costs:  $25,000 to $200,000

8.  Furnishings, Fixtures, and Equipment (“Supplies”):  $375,000 to $475,000

  • You must purchase certain items of furnishings, fixtures, and equipment. The amount of furnishings, fixtures, and equipment will depend to some extent on the size of your building.
  • The total costs of the furnishings, fixtures, and equipment will also depend on the vendors’ pricing, circumstances at your location, your distance from vendors, shipping charges, reimbursement of costs to technicians for lodging, meals, and travel expenses and similar variables, including point-of-sale equipment, ancillary small computer hardware and software items, small wares related to kitchen equipment, and the sign and awning package, all of which you must purchase or lease.

9.  Computer Systems:  $37,000 to $42,000

10.  Technical Support Fee:  $1,700 to $3,500

11.  Insurance:  $8,000 to $20,000

  • You must carry insurance. The amount listed above represents Del Taco’s best estimate of the premiums required for liability, casualty, and worker’s compensation insurance during a restaurant’s first year of operation.
  • You must have coverage for comprehensive general liability insurance in the amount of $2,000,000.

12.  Initial Training:  $15,000 to $25,000

13.  Crew Training:  $48,000 to $68,000

  • Del Taco does not charge a training fee for your initial training, although you may have to pay for certain textbook and testing fees.
  • You must pay the costs of transportation, lodging, and food for yourself and your employees during training. The costs of those expenses will depend on the distance you must travel, the type of accommodations used, and the number of employees attending the training and their wages.
  • The amounts listed above assume six weeks of training for you, your Operating Principal, and five managers. Also included are three weeks of in-restaurant training for crew members, if you are opening your first restaurant, or two weeks if you are opening your second restaurant.
  • The amount of crew training can vary, depending on whether you have a Certified Opening Trainer and a training restaurant available in the territory where you are developing a new restaurant.
  • Any investors holding a 20% or more interest in your franchise business must attend Del Taco’s Two-Day Overview. One day will be spent in a Del Taco restaurant and one day at Del Taco headquarters.

14.  Working Capital:  $20,000 to $45,000

  • Because of differences in many factors, like sales, managerial skills, and geographic areas, you should view the above estimate of working capital requirements as an absolute minimum. You may need substantially more working capital.
  • The amounts listed above represent an estimate of your operating expenses for the initial three months of business. Del Taco has based them on its own experience in operating Del Taco restaurants, mainly in the western United States.
  • They include costs for payroll, taxes, food, paper, supplies, utilities, licenses, permits, bank charges, and repair and maintenance. They do not include advertising or royalty payments made to Del Taco.
  • The amounts represent estimates, and Del Taco cannot guarantee that you will not have additional expenses starting the business. Your costs will depend on factors like the size of your restaurant; how closely you follow Del Taco’s methods and procedures; your management skill, expenses, and business acumen; your financing costs; local economic conditions; the local market for restaurants; the prevailing wage rate; competition; and the sales level reached during the initial period.

15.  Inventory:  $7,000

16.  Licenses, Fees, and Deposits:  $3,000 to $6,000

  • The range given provides Del Taco’s best estimate of the costs you will incur for business permits and miscellaneous deposits, including utility deposits, but not a lease deposit (listed separately above).

17.  Total:  $984,700 to $1,941,500

  • You should review the amounts listed above carefully with a business advisor before making any decision to purchase the franchise. Del Taco does not offer any financing directly or indirectly for any part of the initial investment.

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