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FDD Talk: The Costa Vida Fresh Mexican Grill Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

by Franchise Chatter on March 9, 2016

in FDD Talk 2017: Food Franchises, Franchise Earnings, Mexican Restaurant Franchise

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Costa Vida

In this FDD Talk post, you’ll learn the following:

  • Section I – Background information on the Costa Vida Fresh Mexican Grill franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Costa Vida Fresh Mexican Grill franchise, based on Item 7 of the company’s 2015 FDD
  • Section III – Presentation and analysis of Costa Vida Fresh Mexican Grill’s financial performance representations, based on Item 19 of the company’s 2015 FDD, including information on the:
  • 2014 average gross sales, cost of goods sold, labor, advertising, repair and maintenance, supplies/uniforms, utilities, and EBITDAR for the high ($1,200,000 and above in annual gross sales), mid-level (between $800,000 and $1,200,000 in annual gross sales), low ($800,000 and below in annual gross sales), and all 52 traditional Costa Vida Fresh Mexican Grill Restaurants that operated in the United States for the entire year ending December 31, 2014

Section I – Background Information

Costa Vida Planning Aggressive Expansion

Costa Vida Fresh Mexican Grill, on the heels of opening its 75th location, is on the move, with plans to expand into key high-growth markets with multi-unit franchisees. The chain is looking both at existing markets and new territories.

Costa Vida, whose 75th restaurant opened in February 2016 in Twin Falls, Idaho, plans to open at least 20 units in 2016.

Banking on its fresh food (the restaurants have no freezers) and healthful ingredients, the chain is taking on Chipotle, which itself is considered to be a reasonably healthy restaurant chain with fresh ingredients.

The chain has more than 210 stores in the works. Costa Vida is specifically targeting Las Vegas, Nevada; Dallas/Forth Worth, Texas; Houston, Texas; Phoenix, Arizona; San Diego, California; and Nashville, Tennessee.

Mexico Trip Inspired Founders

J.D. and Sarah Gardner were inspired to create Costa Vida while on a trip to Cabo San Lucas, Mexico. They wanted to combine the local cuisine with the feeling of the lifestyle of coastal Mexico. The Gardners opened their first location in Layton, Utah, in 2003.

As part of being true to the cuisine that sparked Costa Vida, the food is made fresh daily with healthy, fresh ingredients. Tortillas are hand-crafted each day and served hot. Sweet pork and shredded beef are seasoned and slow-cooked for hours. The avocados come from trees in Michoacan, Mexico, that are more than 100 years old.

The chain makes 10 million tortillas every year and has sold more than 2.2 million burritos and 2.5 million salads since opening in 2003.

Costa Vida offers a variety of made-from-scratch menu items, including enchiladas, burritos, tacos, quesadillas, nachos and salads. Burritos can be smothered in sauce for 99 cents extra, creating a dish that’s a little different from other Mexican restaurants. Another factor that sets Costa Vida apart is that all but four items on the menu are gluten-free.

Chain Honored for Growth

Costa Vida, which posted a 7.5 percent increase in same-store sales in 2015, was recognized for its continued growth in both sales and units.

  • Franchise Times ranked the chain 15th in its 2015 Fast & Serious rankings, citing more than 66 percent growth in unit count over three years.
  • Costa Vida was No. 2787 on the 2015 Inc. 5000 list of fastest-growing companies. Inc. noted three-year growth of 130 percent, 2014 revenue of $70.1 million and 850 added jobs.
  • The chain was No. 352 on the 2015 Franchise Times Top 200+ list of top revenue-producing franchises based in the United States.

Chain Expands to Chicago

Costa Vida made its way to Chicago in November 2015 as franchisees and cousins Amish Patel and Parag Patel, opened the first of 15 units. They also have 41 Dunkin’ Donuts locations in the Chicago area, in Michigan and in Indiana.

The majority of the Chicago restaurants will be in the suburbs, particularly Naperville and Orland Park. Ten of the locations are expected to be opened in the next three or four years.

Among other recent expansions that grew the brand’s footprint in 2015:

Costa Vida entered Florida in February 2015 with a multi-unit agreement that will bring in 10 locations by 2020.

The chain moved into the Pacific Northwest early in 2015 with agreements with franchisees in Vancouver and Portland.

In January 2015, Costa Vida signed an agreement that will bring the chain into greater Vancouver, Washington, and parts of Portland, Oregon. The franchisees plan to open their first three locations in the Vancouver area by 2017. The agreement will bring 10 locations to the area.

Costa Vida signed five multi-unit franchise agreements in 2014 for a total of 41 new locations, the first of which opened in February 2015 in Atlanta, part of an agreement for eight locations.

Chain Launches New POS System, Mobile App

Costa Vida in November 2015 partnered with Toast, a restaurant technology platform, replacing its previous point-of-sale system with a cloud-based program. The chain first tried the Toast All-In-One System at its new Chicago location, which is in a busy downtown location. The Toast platform was better able to handle large crowds in a swift, efficient manner.

Also in November, the chain debuted its first mobile app, through which customers can order food, gain rewards and enjoy other features. The app, available on the Internet and on iOS and Android devices, was tested in corporate-owned locations in Utah and is now available nationwide at all Costa Vida restaurants.

Section II – Estimated Costs

  • Please click here for detailed estimates of Costa Vida Fresh Mexican Grill franchise costs, based on Item 7 of the company’s 2015 FDD.

Section III – Financial Performance Representations (Item 19, 2015 FDD) and Analysis

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