FDD Talk 2018: Costa Vida Fresh Mexican Grill Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

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 2018 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Costa Vida Fresh Mexican Grill franchise, based on Items 5 and 6 of the company’s 2018 FDD

• Section IV – Number of franchised and company-owned Costa Vida Fresh Mexican Grill outlets at the start of the year and the end of the year for 2015, 2016, and 2017, based on Item 20 of the company’s 2018 FDD

• Section V – Presentation and analysis of Costa Vida Fresh Mexican Grill’s financial performance representations, based on Item 19 of the company’s 2018 FDD, including information on the:

• 2017 average 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 sales), mid-level (between $800,000 and $1,200,000 in annual sales), low ($800,000 and below in annual sales), and all 73 traditional Costa Vida Fresh Mexican Grill Restaurants that operated in the United States for the entire year ending December 31, 2017

Section I – Background Information

16 Things You Need to Know About the Costa Vida Fresh Mexican Grill Franchise

Using New Technology to Set Franchisees Up for Success

1.  In early March 2018, Costa Vida Fresh Mexican Grill announced that it had partnered with SiteZeus®, an exceptionally powerful data-mining platform, to ensure franchise owners open their restaurant in the perfect place. SiteZeus analyzes numerous data points to help Costa Vida determine just how well a site will work for a franchisee as the home of a new Costa Vida restaurant.

2.  Terry Jennings, director of development for Costa Vida, said, “I can tell you that a specific site is in an outstanding market for a restaurant based on population, demographics, household income and nearby businesses or offices. However, looking at it from a Mexican restaurant perspective, that specific market may already be overserved, and wouldn’t be the right fit for a Costa Vida.”

3.  According to Costa Vida, the site selection process for any franchised restaurant rests on four key human components: the developers, the brokers, the brand, and the franchisee. Combined with the hard data Costa Vida can analyze through SiteZeus, the company can pinpoint the right location with a higher degree of confidence.

4.  Jennings added, “Having everybody looking at it from the brand perspective, the developer and broker perspective and the franchise owner perspective really enhances our ability to make better decisions. It’s really important to have brokers with strong developer relationships to get you in the right developments and franchisees that have boots-on-the-ground knowledge of their markets. Then, the filtering and screening of sites is where SiteZeus comes in. It helps fine-tune the difference between good, better and best.”

5.  SiteZeus works by gathering data from a variety of sources: traffic counts, cell phone studies, social media, Yelp, Google Reviews, Costa Vida’s customer loyalty program, and more, and it builds its profile based around what the company already knows breeds success for a Costa Vida restaurant. SiteZeus even takes into account the competitive landscape, to help decide if an area is oversaturated with similar options, or if there’s the right opportunity for a Costa Vida to fill a gap in the market.

6.  Over time, more data gets fed into the SiteZeus system, allowing it to better track trends and predict where those trends are likely to recur. The tool then provides even more powerful analysis, helping to accurately pinpoint what locations will enable franchisees to thrive.

Adds New Airport Location

7.  As Costa Vida Fresh Mexican Grill continues to grow, the brand continues to find new avenues for the company and franchise owners to earn more business. At the end of December 2017, Costa Vida opened a new full-serve location in the Salt Lake City International Airport.

8.  Dave Rutter, president and CEO of Costa Vida, said, “Costa Vida is excited to have the opportunity to serve both international and domestic travelers the authentic, fresh Mexican flavors that we have become known for. Our new airport location will harness the same convenient customer options, such as app ordering for those in a rush and catering coming soon, that our stand-alone locations throughout the country have prided themselves on.”

9.  In addition to being a sign of the company’s continued growth, this new Costa Vida airport location also marks only the fourth food-service facility in the country to be on airport ground in front of the security wall. The location will also serve as a convenient option for those utilizing the airport’s park-and-wait feature as it is located nearby and is accessible from the parking lot without security clearance.

10.  The Salt Lake City International Airport Costa Vida restaurant, which features the full menu, is the only full service option in front of the security wall. The location will also feature app ordering and online ordering for customer convenience. At the time of the announcement, Costa Vida said that catering may also be available at the location within the next year.

Ranks in Top 50 of Franchise Gator’s Annual Top 100 Franchise Opportunities List

11.  In early March 2018, Costa Vida Fresh Mexican Grill announced that it had placed in the Top 50 of Franchise Gator’s annual Top 100 Franchise Opportunities list. Costa Vida was the highest-ranked Mexican restaurant on the list. Costa Vida said that it was proud of its ranking and that it reflects the company’s goal of being the best Mexican food franchise.

12.  According to Franchise Gator, “Rankings are mostly based on a formula created from various pieces of the Franchise Disclosure Document (FDD) that focus on financial stability, growth, transparency, engagement, continuity, and sustainability. Hundreds of FDD’s were studied this past year in an effort to bring you this ranking.”

13.  In the same press release, Costa Vida also discussed the company’s future and said that it was on track to hit 100 locations by the end of this year. Over the past few years, Costa Vida has expanded outside of its core western markets into new territories. The brand has also expanded revenue opportunities for its franchisees by adding drive-thrus and opening its first airport location. Additionally, Costa Vida is using pioneering new technology to enhance the site selection process, improve employee performance, and boost guest satisfaction.

Company History

14.  Costa Vida Fresh Mexican Grill was started in 2003 by JD and Sarah Gardener in Layton, Utah. The couple was inspired to bring home the flavors of coastal Mexico after enjoying a vacation in Cabo San Lucas where they ate freshly-made local cuisine. The Gardeners wanted to serve scratch-made Mexican-inspired food that featured fresh and high-quality ingredients.

15.  The Gardeners began franchising the Costa Vida concept in 2004. The first franchisees were Dave Rutter and Sean Collins. In 2009, Rutter and Collins bought Costa Vida from the Gardeners after they successfully opened 13 franchise locations. After taking over the company, Rutter and Collins assembled a team of franchise veterans to help them expand Costa Vida. Since then, Costa Vida has grown across the United States.

Entrepreneur’s Franchise 500

16.  Costa Vida Fresh Mexican Grill did not rank on Entrepreneur’s 2018 Franchise 500 list.

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 2018 FDD.

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

• Please click here for detailed information on Costa Vida Fresh Mexican Grill’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2018 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2015

• Outlets at the Start of the Year:  55
• Outlets at the End of the Year:  61
• Net Change:  +6

2016

• Outlets at the Start of the Year:  61
• Outlets at the End of the Year:  67
• Net Change:  +6

2017

• Outlets at the Start of the Year:  67
• Outlets at the End of the Year:  71
• Net Change:  +4

Company-Owned

2015

• Outlets at the Start of the Year:  13
• Outlets at the End of the Year:  14
• Net Change:  +1

2016

• Outlets at the Start of the Year:  14
• Outlets at the End of the Year:  16
• Net Change:  +2

2017

• Outlets at the Start of the Year:  16
• Outlets at the End of the Year:  23
• Net Change:  +7

Section V – Financial Performance Representations (Item 19, 2018 FDD) and Analysis

• The following table represents average 2017 financial performance for 73 Costa Vida Restaurants that operated in the United States for the entire year ending December 31, 2017.

• While there were 94 Costa Vida Restaurants operating as of December 31, 2017, 21 Restaurants have not been included because they (i) did not operate in the United States, (ii) did not operate for the entire year ending December 31, 2017, or (iii) are non-traditional Restaurants.

• The data in the table is grouped into four with the first three showing the highest one-third, middle one-third, and lowest one-third based on average sales performance, and the fourth group showing an average for all locations.

High ($1,200,000 and above)