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FDD Talk 2017: What You Need to Know About the Taco Bell Franchise Opportunity (Financial Performance Analysis, Costs and Fees)

by Franchise Chatter on May 2, 2017

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

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In this FDD Talk 2017 post, you’ll learn the following:

  • Section I – Background information on the Taco Bell franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Taco Bell franchise, based on Item 7 of the company’s 2017 FDD
  • Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Taco Bell franchise, based on Items 5 and 6 of the company’s 2017 FDD
  • Section IV – Presentation and analysis of Taco Bell’s financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:
  • 2014, 2015, and 2016 average net sales, cost of sales, and cost of labor for Single-Brand Company-Owned Taco Bell Restaurants that were open for at least one year as of December 24, 2014; December 22, 2015; and December 27, 2016, respectively

Section I – Background Information

11 Things You Need to Know About the Taco Bell Franchise

First Location in China

1.  At the beginning of 2017, Taco Bell Corp. and Yum China Holdings, Inc. announced that the first Taco Bell location in China had opened in Shanghai. The inaugural restaurant is located near the city’s landmark Oriental Pearl Tower. This first Chinese location is an important part of Taco Bell’s growth strategy of reaching 1,000 restaurants internationally by 2022.

2.  According to Micky Pant, CEO of Yum China, the company did extensive research to ensure that Taco Bell’s menu would fit the tastes of Chinese consumers. The menu features traditional Taco Bell favorites that have been adapted to local tastes. Exclusive sauces and items are being offered, such as the Shrimp and Avocado Burrito and the Volcano Chicken Burrito with a spicy Sriracha sauce. Other unique menu items include spicy fried chicken, Mexican fries, and alcoholic beverages like Margaritas and Mojitos.

3.  In addition to the unique menu items, the Shanghai location features an open kitchen which allows customers to see their food being made. Taco Bell has also used social media to teach Chinese consumers about the concept and main ingredients in Mexican food, which is a type of cuisine not widely known in the country.

4.  Initial reactions to the restaurant have been positive. Prior to the official launch, the restaurant held a soft opening and over 1,000 fans participated in a selfie soft opening promotion on social media to express their excitement over the arrival of Taco Bell in China.

Rolling Out New Rice

5.  In early April, Taco Bell got rid of its vegan-friendly premium Latin rice and replaced it with a seasoned rice that has butter as one of the ingredients. According to Missy Nelson, Taco Bell’s senior nutritionist strategist, the butter was added to “bring more flavor to the rice.” The company is currently developing a vegan Mexican-style rice which will launch sometime in the summer.

Celebrating Fifth Anniversary of the Doritos Locos

6.  Toward the end of March, Taco Bell celebrated the fifth anniversary of its famous Doritos Locos taco. To mark the milestone, the company launched the Feed a Dream promotion. For two weeks starting on March 23, Taco Bell donated ten cents for each a la carte Doritos Locos taco purchased, up to $500,000, to the Taco Bell Foundation’s Live Mas Scholarship. According to Brian Niccol, CEO of Taco Bell Corp. and Chairman of the Taco Bell Foundation, the company wanted to use the popularity of its most successful product to do something good.

7.  Taco Bell also used the Feed a Dream promotion to showcase the talents of Live Mas Scholarship recipients. The company asked recipients to create the television commercials and taco packaging for the campaign. Students participated in a creative workshop in Chicago where they worked side by side with veteran advertising and marketing creatives to develop the campaign’s ad concept and script. Recipients also created three unique designs that were featured on the Doritos Locos taco holster packaging and wrap.

Company History

8.  Taco Bell was founded in 1962 by Glen Bell in Downey, California. Prior to opening Taco Bell, Glen Bell had opened a few restaurants that sold hot dogs and hamburgers. Bell became interested in selling Mexican food after watching the long line of customers outside of Mitla Cafe, which was across the street from Bell’s Hamburgers and Hot Dogs. Bell became a regular of the Mexican restaurant and tried to reverse engineer its food.

9.  Eventually, Bell learned how to make tacos and other Mexican dishes from the owners of Mitla Cafe. Bell took what he learned and opened a few restaurants selling tacos and other Mexican-style foods. Eventually, he sold them off and opened Taco Bell.

10.  The first Taco Bell franchise was purchased in 1964 by Kermit Becky and was located in Torrance, California. The restaurant was immediately popular and by the end of the 60s, there were over 300 locations in the U.S. Today, there are over 6,000 Taco Bell locations in the U.S. and over 300 internationally.

Entrepreneur’s Franchise 500

11.  Taco Bell has ranked on Entrepreneur’s annual Franchise 500 list almost every year in the last decade. The company’s highest rank was No. 12 on this year’s list and its lowest rank was No. 45 in 2010. Taco Bell did not make the list in 2007, 2011, and 2013.

Section II – Estimated Costs

  • Please click here for detailed estimates of Taco Bell costs, based on Item 7 of the company’s 2017 FDD (updated).

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

  • Please click here for detailed information on Taco Bell’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2017 FDD.

Section IV – Financial Performance Representations (Item 19, 2017 FDD) and Analysis

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