In this FDD Talk post, you’ll learn the following:
- Section I – Background information on the Chronic Tacos franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a Chronic Tacos franchise, based on Item 7 of the company’s 2019 FDD
- Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Chronic Tacos franchise, based on Items 5 and 6 of the company’s 2019 FDD
- Section IV – Number of franchised and company-owned Chronic Tacos outlets at the start of the year and the end of the year for 2016, 2017, and 2018, based on Item 20 of the company’s 2019 FDD
- Section V – Presentation and analysis of Chronic Tacos’ financial performance representations, based on Item 19 of the company’s 2019 FDD, including information on the:
- 2018 average gross sales, cost of goods sold, gross profit, other operating expenses, and EBITDA for the top 25%, bottom 25%, and all 8 franchised Chronic Tacos restaurants located in Los Angeles County and Orange County, California that were open and operating for more than one year as of December 31, 2018. These 8 franchised Chronic Tacos Restaurants were selected because the information was available to the franchisor and believed to be complete, accurate, and reliable.
- 2018 median gross sales, cost of goods sold, gross profit, other operating expenses, and EBITDA for the 8 franchised Chronic Tacos restaurants in the sample
Section I – Background Information
11 Things You Need to Know About the Chronic Tacos Franchise
Partners with Beyond Meat
1. In mid-March 2019, Chronic Tacos announced that it was partnering with plant-based leader, Beyond Meat, to introduce an innovative plant-based protein option to its menu. Beyond Meat’s Beyond Beef Crumbles are vegan-friendly, gluten-free, soy-free, and packed with 13g of protein and only 3g of fat per serving. Now available at all 51 U.S. Chronic Tacos locations, customers can add Beyond Meat to any item of their choosing, including tacos, burritos, salads, or even nachos.
2. Beyond Meat creates delicious plant-based meats that look, cook, and taste like their animal-protein equivalent, but are made from simple, plant-based ingredients without gluten, soy, or GMOs. At Chronic Tacos, Beyond Meat is a protein-packed, delicious new option for guests to experience.
3. Michael Mohammed, CEO of Chronic Tacos, said, “Our menu is customizable so that all Chronic Tacos guests can create the meal of their choice, and it’s important that our offerings reflect a variety of options to accommodate diverse taste-buds and dietary preferences. Bringing Beyond Meat into our stores really enhances The Taco Life experience that we provide for our guests and we’re excited to have a delicious and healthy plant-based option as part of that.”
Adds Premium Grass-Fed Steak to Permanent Menu
4. At the end of November 2018, Chronic Tacos expanded its permanent menu with the addition of grass-fed premium Carne Asada. Grass-fed meat has become an increasingly popular trend amongst taco connoisseurs, so Chronic Tacos has decided to step up their steak game. Now at any Chronic Tacos location, customers can choose this premium carne asada as a base to tacos, burritos, and even Chronic Nachos. The steak is kept in a secret marinade for 24 hours before being seared and seasoned on the open grill, allowing for the boldest flavor profile.
5. According to Michael Mohammed, president and CEO of Chronic Tacos, “We constantly have our customers in mind and adding this grass-fed steak to our menu falls directly in line with the high standards our customers hold Chronic Tacos to. This addition is truly of premium quality and highlights what the Taco Life is all about.”
Brings Back Customer Favorite Surf N Turf Burrito for Summer
6. To kick off the summer season, Chronic Tacos re-introduced the popular Surf N Turf Burrito at the beginning of June 2019. The burrito will be available at all Chronic Tacos locations through September of this year. The Surf N Turf Burrito is made with premium grass-fed Carne Asada and a choice of either Beer Battered or Sautéed Shrimp. This new item is also available as a Bowl-Rito, Tostada Bowl, or salad.
7. Mike Mohammed, president and CEO of Chronic Tacos, said, “We always listen to our guests and take note of what they truly get excited about and the Surf N Turf Burrito was one of them. Bringing back our Surf N Turf Burrito this summer will spread the #TacoLife to customers at all of our locations, through a bold, new flavor combination.”
8. Chronic Tacos was founded in 2002 by Randy Wyner and Dan Biello in Newport Beach, California. According to Wyner, he wanted to start his own restaurant because he was “tired of biking so far to find a good taco.” Since Wyner and Biello didn’t know anything about running a restaurant or cooking authentic Mexican food, Wyner brought in his childhood friend Jason Bonilla. With the help of Bonilla, Wyner and Biello developed authentic recipes based on the food that Bonilla’s family had been making for generations.
9. After opening a few more shops, Chronic Tacos Enterprises was formed in 2006 with the help of Dan Biello’s brother, Mike Biello. The first franchised store opened later that year in San Clemente, California.
10. Mohammed brothers Michael, Dave, Dan, and Joey first became involved with Chronic Tacos when they helped finance the first Canadian location (in Vancouver) in 2010. The brothers eventually bought the company in 2012. Since then, Chronic Tacos has grown primarily in the Western and Southwestern United States. There are also a few Chronic Taco shops in Canada.
Entrepreneur’s Franchise 500
11. Chronic Tacos ranked No. 326 on Entrepreneur’s 2019 Franchise 500 list.
Section II – Estimated Costs
- Please click here for detailed estimates of Chronic Tacos franchise costs, based on Item 7 of the company’s 2019 FDD.
Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees
- Please click here for detailed information on Chronic Tacos’ initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2019 FDD.
Section IV – Number of Franchised and Company-Owned Outlets
- Outlets at the Start of the Year: 28
- Outlets at the End of the Year: 37
- Net Change: +9
- Outlets at the Start of the Year: 37
- Outlets at the End of the Year: 48
- Net Change: +11
- Outlets at the Start of the Year: 47
- Outlets at the End of the Year: 50
- Net Change: +3
- Outlets at the Start of the Year: 2
- Outlets at the End of the Year: 2
- Net Change: 0
- Outlets at the Start of the Year: 2
- Outlets at the End of the Year: 3
- Net Change: +1
- Outlets at the Start of the Year: 3
- Outlets at the End of the Year: 2
- Net Change: -1
Section V – Financial Performance Representations (Item 19, 2019 FDD) and Analysis
Part 1 – 2018 Average Gross Sales, Cost of Goods Sold, Gross Profit, Other Operating Expenses, and EBITDA for 8 Franchisee-Owned Taco Restaurants
- Part 1 includes actual, historical, unaudited information the franchisor has accumulated for 8 Chronic Tacos Restaurants that were owned and operated by its franchisees in 2018. All 8 franchised Chronic Tacos Restaurants included in Part 1 are located in Los Angeles County and Orange County, California.
- All of these franchised Chronic Tacos Restaurants are operations similar to the franchise offered in the Disclosure Document.
- The figures in Part 1 are taken from reports submitted to the franchisor by certain Chronic Tacos franchisees on their Gross Sales, Cost of Goods Sold, Gross Profit, Other Operating Expenses, and EBITDA.
- On December 31, 2018, there were a total of 50 franchised Chronic Tacos Restaurants owned and operated by franchisees. Eight franchised Chronic Tacos Restaurants are included in Part 1, which is 16% of the 50 franchised Chronic Tacos Restaurants in operation on December 31, 2018.
- The 8 franchised Chronic Tacos Restaurants included in Part 1 were selected because the information was available to the franchisor and believed to be complete, accurate, and reliable. Similar information for the remaining 42 franchised Chronic Tacos Restaurants was either unavailable to the franchisor or believed to be incomplete, inaccurate, or unreliable. All information is unaudited.
- Percentages (%) to the immediate right of each category represent that category’s value as a percentage of Gross Sales.
- All 8 franchised Chronic Tacos Restaurants included in Part 1 were open and operating for more than one year as of December 31, 2018.
- Gross Sales means the aggregate of the total revenues derived from sales of any nature or kind whatsoever from each Chronic Tacos Restaurant included in Part 1, whether evidenced by cash, services, property, barter, or other means of exchange, including orders taken in or from the Chronic Tacos Restaurants although filled elsewhere.
- Gross Sales includes the full value of meals the franchisees provided to their employees as incident to their employment (less the value of any discounts against Gross Sales given during the month in which the meals were provided) and all proceeds from the sale of coupons, gift certificates, or vouchers.
- Gross Sales excludes the amount of bona fide returns paid to customers and the amount of sales or use taxes actually paid to any governmental authority and the retail price of any coupons, gift certificates, and vouchers when they are redeemed.
- Cost of Goods Sold means the franchisees’ expenses for food, beverages, and paper goods.
- Gross Profit means Gross Sales less Cost of Goods Sold.
- Other Operating Expenses means the franchisees’ expenses for all other expenses related to the operation of the Chronic Tacos Restaurants (other than expenses for food, beverages, and paper goods), including labor and rent.
- EBITDA means the franchisees’ net earnings before interest expenses, taxes, depreciation, and amortization are subtracted.
- Chronic Tacos Restaurants operating in low population density areas will also have lower sales than locations in high population density areas. Your results will vary based on your regional demographic density, competitive factors, and your ability.
- Chronic Tacos Restaurants located outside of Southern California may also have lower sales than the 8 franchised Chronic Tacos Restaurants included in Part 1.