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FDD Talk 2016: The Pancheros Mexican Grill Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

by Franchise Chatter on April 19, 2016

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

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Panchero's Mexican Grill's Exterior Photo

In this FDD Talk 2016 post, you’ll learn the following:

  • Section I – Background information on the Pancheros Mexican Grill franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Pancheros Mexican Grill franchise, based on Item 7 of the company’s 2016 FDD
  • Section III – Presentation and analysis of Pancheros Mexican Grill’s financial performance representations, based on Item 19 of the company’s 2016 FDD, including information on the:
  • 2015 average, high, low, and median gross sales for all 46 Pancheros Mexican Grill restaurants (26 franchised restaurants and 20 affiliate-owned restaurants that the franchisor operated under a management agreement) in operation for the entire three calendar years 2013-15, excluding two restaurants that are located in shopping malls
  • 2015 average, high, low, and median gross sales for the 26 franchised Pancheros Mexican Grill restaurants in operation for the entire three calendar years 2013-15
  • 2015 average, high, low, and median food and paper costs (separately stated) for the 26 affiliate-owned Pancheros Mexican Grill restaurants that the franchisor operates, that were in operation for the full 12 months of 2015

Section I – Background Information

Pancheros Adds New Rewards Program

Pancheros Mexican Grill has tossed out its stamp-based loyalty cards and replaced them with a card-based rewards program called Burritos With Benefits. A customer who registers a rewards card on the company’s website will get a free burrito.

Each dollar spent at any Pancheros location generates a point. When a customer reaches 100 points, he or she gets a free menu item.

Brink POS Added

Pancheros added ParTech Inc.’s Brink POS software in 2015, finishing the deployment in August. The cloud-based software solution features native loyalty programs and online and mobile ordering modules. Additional features will be added later.

The company said it chose Brink POS because of its integrated software solution and quick and easy deployment.

Chain Began Near Campuses

Pancheros Mexican Grill began in 1992 when founder Rodney Anderson opened restaurants in Iowa City, Iowa, and East Lansing, Michigan, near the University of Iowa and Michigan State University campuses, respectively. The chain has been franchising since 1995 and has a presence near many universities, including a good chunk of Big Ten campuses.

Pancheros is headquartered in Coralville, Iowa, and is still led by Anderson, its president and CEO.

Currently, the chain has more than 65 locations, including more than 25 corporate locations and more than 40 franchised locations, all in the U.S. The company is seeking new franchisees throughout the country.

Pancheros reached the West Coast in June 2015 with two new restaurants in City of Industry and Fremont. The expansion is part of a plan announced in 2014 to more than double the brand’s locations by 2019 with 70 new restaurants.

Made-to-Order Tortillas

Pancheros customers can order tacos, burritos, burrito bowls, quesadillas and salads from a relatively simple menu. The quick-serve restaurants make tortillas to order, using tortilla presses, when customers place orders deli-style. Guacamole, salsa and queso dips are made on site on a daily basis.

The chain’s mascot is Bob the Tool, a special decorated plastic spatula that mixes ingredients.

No. 408 on Franchise 500 for 2016

Pancheros was ranked 408th on Entrepreneur’s Franchise 500 list for 2016, a drop from 311th in 2015. The chain did have a one-year unit growth rate of 2.9 percent with two new units, and 7.4 percent growth with five units in three years.

Competition for Chipotle?

Huffington Post in 2015 put Pancheros on top of a list of Mexican restaurants that could give Chipotle a run for its money. The list, “The Next Chipotle: 6 Chains Ready to Blow Up in 2015,” stated that Pancheros uses high-quality, healthy and desirable ingredients and ensures that burritos are evenly filled.

Harvest Sweet Potato Mash Was Temporary Fall Treat

Pancheros Mexican Grill introduced a fall limited-time menu item in October in a handful of locations. Harvest Sweet Potato Mash could be eaten as a side or as part of a burrito, combined with other ingredients such as grilled chicken, pinto beans, rice and roasted corn salsa.

Section II – Estimated Costs

  • Please click here for detailed estimates of Pancheros Mexican Grill franchise costs, based on Item 7 of the company’s 2016 FDD (updated).

Section III – Financial Performance Representations (Item 19, 2016 FDD) and Analysis

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