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

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

• Section I – Background information on the Fuzzy’s Taco Shop franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Fuzzy’s Taco Shop 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 Fuzzy’s Taco Shop franchise, based on Items 5 and 6 of the company’s 2017 FDD

• Section IV – Presentation and analysis of Fuzzy’s Taco Shop’s financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:

• 2016 average, median, lowest, and highest gross revenue for the 82 system-wide, 76 franchised, and 6 company-owned Fuzzy’s Taco Shop Restaurants that were open and operating for the entire 52-week annual period beginning December 27, 2015 and ending December 25, 2016 (separately stated)

• 2016 average, median, lowest, and highest food cost %, labor cost %, and occupancy cost % for the 6 company-owned Fuzzy’s Taco Shop Restaurants that were open and operating for the entire 52-week annual period beginning December 27, 2015 and ending December 25, 2016

Section I – Background Information

13 Things You Need to Know About the Fuzzy’s Taco Shop Franchise

New Loyalty Rewards Program

1.  At the end of July, Fuzzy’s Taco Shop launched an updated loyalty app that allows customers to log in more easily and redeem their rewards at any Fuzzy’s location. The new mobile app, called “Friends with Benefits,” is generated by Punchh and can be downloaded from the iTunes Store or Google Play Store.

2.  Customers earn one point for every dollar they spend and when they reach 100 points, they are rewarded with a $10 off coupon which can be used for a food, beverage, or merchandise order. To collect points, customers must scan the barcode on their receipt using the app or state their phone number to the cashier upon ordering.

3.  Mel Knight, president of Fuzzy’s Taco Shop, said, “Fuzzy’s Taco Shop believes in adapting to the ever-changing digital world to personalize the customer experience while offering benefits to our loyal guests. Our new app is incredibly user-friendly, and we think our guests will agree.”

Three Fan Favorites Added to Permanent Menu

4.  At the start of May, Fuzzy’s Taco Shop brought back three of its most popular limited-time offers: Jalapeno-Cilantro Queso, Jalapeno Bottle Caps, and Burrito Bowls. All three items were fan favorites and will now be part of Fuzzy’s permanent menu at all of its locations.

5.  The Jalapeno-Cilantro Queso features Fuzzy’s signature Queso spiced up with jalapenos and cilantro, while the Jalapeno Bottle Caps are crisp jalapeno slices that are battered, fried, topped with Fuzzy Dust, and served with house-made avocado ranch dressing.

6.  The most requested item from Fuzzy’s fans is the Burrito Bowls, which are prepared with the customer’s choice of fajita chicken, fajita beef, or grilled veggies on a bed of cilantro-lime rice and black beans, topped with guacamole, pico de gallo, cheese, lettuce, and cilantro.

7.  Knight said that the return of these items is the company’s way of showing its loyal fans that Fuzzy’s is listening to what they have to say.

Outlines Plans for “Controlled Expansion”

8.  In June, Knight and Aziz Hashim, managing partner of Fuzzy’s investor NRD, talked about the brand’s current goal of “controlled expansion.” The company said that it expects to open about 30 new restaurants by the end of 2017, mostly by franchisees.

9.  Knight also said that since the investment by NRD in early 2016, the company has been “beefing up” its corporate structure in every possible area including “marketing, development, real estate and analytics to choose the right real estate, and hiring the right people.”

10.  Knight said, “If you are wanting to be a world-class organization, you have to get world-class people. You have to do it right and put it in a place from where a franchisee sits.” Since the investment by NRD, Fuzzy’s has created two in-house training teams to help franchisees. Knight notes that with only 28 franchisees total, they are heavily involved in the company’s decision making.

Company History

11.  Fuzzy’s Taco Shop was founded in 2001 by Paul Willis in Fort Worth, Texas. Two years later, in 2003, Willis sold the company to Alan and Chuck Bush, father and son restaurateurs, who began franchising the concept in 2009 after opening a second location in 2007.

12.  Fuzzy’s has grown steadily since it first began franchising, with most of its restaurants located in Texas. Today, there are over 120 Fuzzy’s Taco Shop locations across 17 states with plans for further expansion nationwide.

Entrepreneur’s Franchise 500

13.  Fuzzy’s Taco Shop has appeared on Entrepreneur’s annual Franchise 500 list three times in the past decade. The taco franchise first ranked on the list in 2014 at No. 274. It ranked again in 2015 at No. 259 and one more time in 2016 at No. 271.

Section II – Estimated Costs

• Please click here for detailed estimates of Fuzzy’s Taco Shop franchise costs, based on Item 7 of the company’s 2017 FDD.

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

• Please click here for detailed information on Fuzzy’s Taco Shop’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

• The following charts contain certain historical data related to the operation of franchised and company-owned Fuzzy’s Taco Shop Restaurants. The data included in this Item 19 was taken from information reported to the franchisor by its franchisees and affiliates and reflects information for the 52-week annual period beginning December 27, 2015 and ending December 25, 2016 (the “Measurement Period”).

Part 1 – Unit Gross Revenue

• As of December 25, 2016, Fuzzy’s Taco Shop had (i) 107 system-wide Restaurants, 82 of which were open and operating during the entire Measurement Period (“System Reporting Units”); (ii) 86 total franchised Restaurants in the system, 76 of which were open and operating during the entire Measurement Period (“Franchised Reporting Units”); and (iii) 7 total company-owned Restaurants in the system, 7 of which were open and operating during the entire Measurement Period.

• However, financial data for the one company-owned Restaurant located at Texas Motor Speedway is not included in this Item 19, despite operation during the Measurement Period, because it is located in a Closed Market and is not open for business to the public on a daily basis during the Measurement Period; therefore, the franchisor has included financial information for 6 company-owned units reporting during the Measurement Period (“Company Reporting Units”).

• All Company Reporting Units were operated by an affiliate of the franchisor during the Measurement Period (each a “Reporting Affiliate”).

Unit Gross Revenue

System-Wide