FDD Talk 2018: Fuzzy’s Taco Shop 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 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 2018 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 2018 FDD

• Section IV – Number of franchised and company-owned Fuzzy’s Taco Shop 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 Fuzzy’s Taco Shop’s financial performance representations, based on Item 19 of the company’s 2018 FDD, including information on the:

• 2017 average, median, lowest, and highest gross revenue for the 103 system-wide, 97 franchised, and 6 company-owned Fuzzy’s Taco Shop Restaurants that were open and operating for the entire 52-week annual period beginning December 26, 2016 and ending December 31, 2017 (separately stated)

• 2017 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 26, 2016 and ending December 31, 2017

Section I – Background Information

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

Introduces Online Ordering at All Locations

1.  At the beginning of April 2018, Fuzzy’s Taco Shop rolled out online ordering, allowing customers to more conveniently order and pick up food from any of Fuzzy’s locations. Online ordering is now available through the Fuzzy’s website, offering the entire menu. Fuzzy’s also made online ordering available on its mobile app later in the month.

2.  Mel Knight, president of Fuzzy’s Taco Shop, said, “Our goal is always to ensure our guests have the most seamless and enjoyable possible experience each-and-every-time they come to a Fuzzy’s Taco Shop. With online ordering we have the opportunity to make our customers’ experience even more convenient before they even step foot into our restaurants.”

3.  To order Fuzzy’s online, guests can visit fuzzystacoshop.olo.com, where they will be assisted in finding the nearest location. Once they’ve selected a location, they will then be able to select items from Fuzzy’s full menu to place in their online cart, order, and pay online (using Mastercard, Visa, American Express, or Discover). When the order is placed, the portal will give a short window of time for when the order will be ready for pick up.

Celebrates Summer With LTO Menu

4.  At the end of July 2018, Fuzzy’s Taco Shop kicked off the summer with its “Baja Life” campaign consisting of new seasonal menu items as well as a Baja-inspired giveaway. Fuzzy’s Baja Life menu additions included a Mango Mahi Taco – seasoned and grilled Mahi Mahi, topped with Mango Salsa (mango, tomato, red onion, cilantro), drizzled with a zesty citrus habanero sauce; and a Baja Shrimp Bowl – grilled shrimp with roasted corn, black beans, cilantro-lime rice, tomatoes, red onion, and avocado slices on a bed of lettuce, served with cilantro-lime ranch dressing.

5.  Additionally, Fuzzy’s featured drinks included the Trop Everything Rita, a frozen margarita with a shot of tropical syrup; and the Sunshine Mule, with vodka, Ginger Beer, and a splash of lemonade concentrate.

6.  Fuzzy’s Taco Shop also partnered with Coca-Cola to give its fans the opportunity to win prizes such as a trip for two to Mexico, Fuzzy’s gift packs, and Fuzzy’s t-shirts.

7.  Mel Knight, president of Fuzzy’s Taco Shop, said, “As one of the original fish taco concepts, Fuzzy’s has always embodied the Baja spirit in both the food we prepare and the atmosphere we cultivate at all our restaurants. The Baja Life is all about gathering with friends and kicking your feet up while enjoying some fresh, delicious food and ice-cold drinks.”

Partners With Share Our Strength

8.  In early September 2017, Fuzzy’s Taco Shop announced that it had partnered with Share Our Strength on the No Kid Hungry initiative for the month of September, helping provide meals for children in America. Throughout the month, all Fuzzy’s Taco Shop locations donated $0.25 from each souvenir cup sold, to No Kid Hungry.

9.  The cost to connect a child with 10 meals is $1; each year though the Share Our Strength initiative, Fuzzy’s connects thousands of children to their next meal. In 2016, Fuzzy’s raised $87,000 across all locations, and it hoped to surpass that amount in funds raised in 2017.

10.  Mel Knight, president of Fuzzy’s Taco Shop, said, “At Fuzzy’s Taco Shop, we are in the business of feeding people, so it’s heartbreaking to know there are folks out there who don’t know where their next meal is coming from, especially when it comes to children. 1 in 6 children in America don’t get sufficient meals and this statistic is simply not acceptable. We are proud to partner with Share Our Strength each year and participate in helping to provide children in need with meals, and families with the tools to make educated decisions when it comes to preparing meals.”

11.  By dining with Fuzzy’s during the month and purchasing one of the special edition souvenir cups, customers helped No Kid Hungry launch school breakfast programs, recruit summer meal sites, and empower families to shop for and prepare healthy meals. As a donor, Fuzzy’s customers helped No Kid Hungry provide grants to hunger-fighting organizations across the country to help them end child hunger within their communities.

Company History

12.  The first Fuzzy’s Taco Shop restaurant was opened in 2001 by Paul Willis near Texas Christian University in Forth Worth, Texas. Although his restaurant was doing well, Willis sold Fuzzy’s to father and son restaurateurs, Alan and Chuck Bush, in 2003 (this year is often cited as Fuzzy’s Taco Shop’s founding). The Bushes expanded on Willis’ original concept and positioned Fuzzy’s Taco Shop for national growth.

13.  After opening a second Fuzzy’s Taco Shop in 2007, the Bushes started franchising the concept in 2009. The Bushes grew Fuzzy’s Taco Shop to about 90 locations, mostly in Texas and the surrounding states, before selling 70% of the company to Atlanta investment fund NRD Capital in 2016. The acquisition offered Fuzzy’s access to a multi-franchisee investor base and a wider franchisee network.

14.  About seven months after the sale to NRD Capital, Chuck Bush stepped down as CEO to “pave the way for a new leader to accelerate the growth of this exceptionally well-positioned platform.” Today, Fuzzy’s Taco Shop continues to grow and seek new franchisees across the United States.

Entrepreneur’s Franchise 500

15.  Fuzzy’s Taco Shop ranked No. 123 on Entrepreneur’s 2018 Franchise 500 list.

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 2018 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 2018 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2015

• Outlets at the Start of the Year:  70
• Outlets at the End of the Year:  79
• Net Change:  +9

2016

• Outlets at the Start of the Year:  79
• Outlets at the End of the Year:  100
• Net Change:  +21

2017

• Outlets at the Start of the Year:  100
• Outlets at the End of the Year:  127
• Net Change:  +27

Company-Owned

2015

• Outlets at the Start of the Year:  9
• Outlets at the End of the Year:  7
• Net Change:  -2

2016

• Outlets at the Start of the Year:  7
• Outlets at the End of the Year:  7
• Net Change:  0

2017

• Outlets at the Start of the Year:  7
• Outlets at the End of the Year:  7
• Net Change:  0

Section V – Financial Performance Representations (Item 19, 2018 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 26, 2016 and ending December 31, 2017 (the “Measurement Period”).

Part 1 – Unit Gross Revenue

• As of December 31, 2017, Fuzzy’s Taco Shop had (i) 134 system-wide Restaurants, 103 of which were open and operating during the entire Measurement Period (“System Reporting Units”); (ii) 127 total franchised Restaurants in the system, 97 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