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

by Franchise Chatter on October 4, 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 John’s franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Taco John’s 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 John’s franchise, based on Items 5 and 6 of the company’s 2017 FDD
  • Section IV – Presentation and analysis of Taco John’s financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:
  • 2014, 2015, and 2016 average sales, costs of sales, gross profit, labor costs, variable expenses, controllable costs, royalty fees, advertising fund fees, and net income before occupancy and general and administrative costs for the 6 company-owned Taco John’s Restaurants in Colorado and Wyoming with drive-thru windows that were open for the full calendar years 2014, 2015, and 2016
  • 2016 average sales, by quartile, for the 259 franchised Taco John’s Signature T16 Restaurants with drive-thru windows that reported sales to Taco John’s through its QuikServe Point of Sale System for all of calendar year 2016
  • 2016 average sales, by quartile, for the 27 franchised Taco John’s Restaurants with Endcaps in Strip Malls with drive-thru windows that reported sales to Taco John’s through its QuikServe Point of Sale System for all of calendar year 2016
  • 2016 average sales, by quartile, for the 10 franchised Taco John’s Restaurants with Endcaps in Convenience Stores and Travel Plazas with drive-thru windows that reported sales to Taco John’s through its QuikServe Point of Sale System for all of calendar year 2016

Section I – Background Information

14 Things You Need to Know About the Taco John’s Franchise

Recruits Marketing Vet to Direct Digital Strategy



1.  In early June, Taco John’s appointed Jimmy Orr as its Director of Digital Strategy. Orr comes to the company with an extensive marketing background, which includes directing digital strategy at the White House for President George W. Bush, driving digital campaigns for Arnold Schwarzenegger, and leading the digital news effort at the Los Angeles Times.

2.  In his new role as Director of Digital Strategy, Orr will lead a team responsible for enriching Taco John’s online presence, creating digital campaigns, and optimizing media mix. Orr said that Taco John’s has two goals in mind as the brand continues to build a strong digital presence. He says, “One, we want to improve our return on investment for franchisees, so whatever we do, we want to see more foot traffic. Two, we want to create a buzz. We want to be in the news cycle. We want people talking about us.”

New Store Design Helps Taco John’s Move Toward QSR+ Goal

3.  In early August, Taco John’s published a blog post discussing the brand’s move toward QSR+, a segment where concepts feature the food quality of a fast-casual franchise with the convenience of a quick-service restaurant with a drive-thru.

4.  Taco John’s said that its updated store design, which is available to new franchisees as well as existing franchisees looking to remodel their current units, is the next step in the brand’s evolution. Rocky Clark, Vice President of Operations for Taco John’s, said, “There are a few national fast-casual players that proliferate, but there is clearly room for an opportunity that capitalizes on the fast-casual craze while maintaining our QSR roots. We can offer the best of both worlds – convenience and high quality – in one structure.”

5.  The new store model features modern elements such as exposed ceilings, TVs, WiFi, pendant lights, polished concrete floors, communal tables, and flexible seating options. Clark said that the brand wants to make sure that its millennial and iGen customers feel valued.



6.  In addition to the redesigned restaurants, Taco John’s has been working for two years to come up with new proteins to add to its menu. Pork and sirloin steak products were recently added to the permanent menu and Taco John’s has also launched several limited-time-offer campaigns.

New Menu Items

7.  Taco John’s often rolls out new seasonal menu items, with the most recent one being its Pork Carnitas Breakfast Taco. The new breakfast taco features a warm flour tortilla filled with hand-shredded pork, scrambled eggs, spicy roasted salsa verde, and a blended cheese. It was introduced at the end of August and will be available until October 22.

8.  Taco John’s has also recently rolled out the new Taco Blitz box which allows customers to pair a classic Crispy Taco or Softshell Taco with a 20-oz. fountain beverage and one of four burritos, all starting under $6.

9.  Customers can also text the code on their Taco Blitz box for a chance to win a trip to “The Big Game” (The Superbowl) or other prizes such as gift cards for various NFL team merchandise, footballs, binoculars, food prizes, and more.

Company History



10.  Taco John’s started out as a small taco stand named “Taco House” that opened in 1968 in Cheyenne, Washington. The owner of Taco House, John Turner, sold the franchise rights to James Woodson and Harold Holmes in 1969 and the two renamed the restaurant Taco John’s after John Turner.

11.  Taco John’s is known for its Mexican-inspired fast food, which it calls “West-Mex.” The chain is also credited with coining the “Taco Tuesday” concept and even owns the official trademark to the phrase.

12.  Woodson and Holmes immediately began franchising the Taco John’s concept, and locations popped up around the Midwest. In the franchise’s early years, growth was focused on smaller Midwestern and Western communities, but in recent years, the chain has targeted larger metropolitan areas.

13.  Around 2004, Taco John’s partnered with Good Times Burgers & Frozen Custards as well as Steak Escape to open co-branded restaurants. Today, there are over 400 Taco John’s locations across 25 states.

Entrepreneur’s Franchise 500

14.  In the past decade, Taco John’s has only appeared once on Entrepreneur’s annual Franchise 500 list (at No. 152 in 2009).

Section II – Estimated Costs

  • Please click here for detailed estimates of Taco John’s 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 Taco John’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

Part 1 – Average Net Income Before Operating and General and Administrative Costs for Company-Owned Restaurants

  • The following chart provides the average operating results for calendar years 2014, 2015, and 2016 for six of Taco John’s company-owned and operated Restaurants in Colorado and Wyoming with drive-thru windows. These same six Restaurants were opened for all of calendar years 2014, 2015, and 2016.
  • Taco John’s has ten company-owned and operated Restaurants. It did not include the other four Restaurants because two of the company-owned Restaurants were closed for a period of time during 2014 for remodeling; one has only seven seats (whereas all the other Restaurants reported having 30 or more seats); and one is in an economically depressed market area operated at a remote distance from all other company-owned Restaurants.
  • By limiting the chart below to the same six Restaurants opened for the full calendar years 2014, 2015, and 2016, Taco John’s is able to show same store average comparisons for those three years.

2014



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