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Earnings Claims of Top Franchises Revealed

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Franchise Costs: Detailed Estimates of Chronic Tacos Franchise Costs (2016 FDD)

by Franchise Chatter on January 12, 2016

in Franchise Costs, Mexican Restaurant Franchise

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Chronic Tacos Huntington Beach

This post was updated on July 15, 2016 to reflect information from Chronic Tacos’ 2016 FDD (Item 7).

Detailed Estimates of Chronic Tacos Franchise Costs Based on Item 7 (Estimated Initial Investment) of Chronic Tacos’ 2016 Franchise Disclosure Document

Build-Out Costs

  • This category includes items such as an alarm system, electronic cash register, dining room furniture, janitorial equipment, food preparation and other kitchen equipment, and major appliances.
  • It also includes equipment lease deposits, sales tax deposits or bonds, construction permits, sewer hookup charges, and utility deposits.

1.  Permits and Licenses:  $3,000 to $8,000

2.  Leasehold/Construction:  $100,000 to $400,000

  • These estimates are for the costs incurred for construction and remodeling a location to conform to the franchisor’s current standards, including a general contractor’s fee (generally equal to 10% to 15% of total construction costs); contractor’s insurance; materials and supplies; tools; labor and subcontractor fees; and other costs to construct leasehold improvements which conform to the franchisor’s standards.

Furniture, Fixtures, Equipment, and Signage

  • You must prepare and sell all of the menu items that the franchisor designates as part of its standard menu and provide all standard services it designates. You must purchase any additional equipment or fixtures necessary to provide these services or menu items, the cost of which may be significant.

3.  Tenant Improvements and Signage:  $7,500 to $10,000

4.  POS System/Cameras:  $8,000 to $15,000

  • This estimate includes the point-of-sale system, security cameras, wide screen televisions, and a sound system. Currently, the franchisor requires you to subscribe to POSIQ’s Loyalty Program and POS Support, which the franchisor estimates will cost you $100 per month.

5.  Equipment; Furniture (including sound/music equipment):  $70,000 to $120,000

6.  Opening Inventory:  $10,000 to $20,000

7.  Uniforms:  $500

8.  Grease Trap:  $8,000 to $50,000

9.  Grand Opening Advertising:  $7,000 to $10,000

10.  Taco Restaurant Premises (Lease Deposit and First 2 Months’ Rent):  $15,000 to $40,000

  • These estimates assume that your location will be a leased, unimproved, unfinished retail store-type unit. The estimates are based on the assumption that the premises will be rented and that the landlord will require an initial payment of one month’s rent and a security deposit of one month’s rent.
  • A typical Taco Restaurant will be located in a suburban area on a major thoroughfare or adjacent to or part of a suburban shopping center.
  • The typical location will be 1,200 to 1,800 square feet. Monthly lease payments usually range from $3,000 to $8,000.

11.  Insurance – Liability and Workers’ Compensation (initial deposit):  $3,000 to $5,000

12.  Legal Fees/Organizational Expenses:  $2,000 to $5,500

  • This estimate includes legal review and negotiation of the lease for the franchised Taco Restaurant and accounting assistance in setting up your books.

13.  Initial Franchise Fee:  $40,000

  • The Initial Franchise Fee is $40,000 for your first Taco Restaurant.
  • Your designated trainees must complete the franchisor’s Initial Training Program to the franchisor’s satisfaction for you to be eligible to become a franchisee. You will also be responsible for costs of travel, living, compensation, and other expenses during the Initial Training Program.

14.  Additional Funds (3 months):  $20,000 to $50,000

  • The estimates provided above include employee wages, including 6-8 weeks’ pre-opening training for 2 supervisorial or managerial personnel, opening cash, and other miscellaneous expenses incurred before opening and during the first 3 months of operations.
  • These estimates do not take into account (i) finance charges, interest, and related costs you may incur if any portion of the initial investment is financed, or (ii) the costs of a security system, which the franchisor estimates will cost between $500 to $750 per month to lease, or music system, which the franchisor estimates to cost between $450 and $500 per month to lease.

15.  Grand Total:  $294,000 to $774,000

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