FDD Talk 2021: 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 2021 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 2021 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 2018, 2019, and 2020, based on Item 20 of the company’s 2021 FDD

• Section V – Presentation and analysis of Fuzzy’s Taco Shop’s financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:

• 2019, 2020, and 2021 Q1 average, median, lowest, and highest gross sales for the franchised and company-owned Fuzzy’s Taco Shop Traditional Restaurants that had been open and operating during the entirety of the applicable period

• 2019, 2020, and 2021 Q1 average, median, lowest, and highest food cost %, labor cost %, and occupancy cost % for the company-owned Fuzzy’s Taco Shop Traditional Restaurants that had been open and operating during the entirety of the applicable period

Section I – Background Information

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

Announces Jessica Wescott as Chief Operating Officer and Chief Financial Officer

1.  In mid-November 2020, Fuzzy’s Taco Shop announced Jessica Wescott as chief operating officer, in addition to her role as chief financial officer. Wescott was appointed as CFO in September 2019, and after a year of cross functionally working within the company and playing an integral role in the success of the brand in the face of the pandemic, the taco shop has added COO to her title.

2.  Prior to Fuzzy’s Taco Shop, Wescott’s experience included franchising and client-facing relationships where she focused on data-driven insights. She started her career in private wealth management, serving as the director of client relations for an investment advisory firm where she honed her skills for management of client relationships and true servant leadership.

3.  Her journey into the franchise world began when she joined MOOYAH Burgers, Fries & Shakes. During this time, she served across many verticals of the business, ending her tenure with the brand as the vice president of development and finance, leading the brand’s growth strategy.

4.  Wescott’s career with Fuzzy’s Taco Shop began in January of 2018 as the executive vice president of finance, where her responsibilities included strategic planning, finance, technology, and marketing. Drawing on her experience working collaboratively with all departments to implement brand-wide programs and processes, she streamlined how the Fuzzy’s team worked to be more effective and to drive results with a more analytical approach. Additionally, Wescott has added an enhanced level of accountability to the corporate-franchisee relationship by developing an annual strategic plan that is reported against quarterly to the Franchise Advisory Council.

5.  Wescott’s job doesn’t end at the corporate level. She sees herself in a leadership support role, and it doesn’t go unnoticed by franchisees. Since joining the Fuzzy’s Taco Shop team, she is touted for her open dialogue with individual franchisees. She estimates 30% of her day typically is spent talking to franchisees and believes this is one of the keys to success for the brand and its operators.

6.  North Texas Fuzzy’s Taco Shop franchisee Eddie White said, “As a franchisee, the role of CFO doesn’t necessarily affect us day-to-day, but the COO is extremely important because they deal with things that we touch and feel on a daily basis. One of the biggest benefits Jessica brings to the table is she has a very thoughtful way of processing things and coming up with the right answer. It’s clear to us she is someone who can help us grow and innovate and make sure we are making decisions to keep us relevant 10 years from now.”

7.  Fuzzy’s Tampa Bay, Florida franchisee Ian Lieberman also believes Wescott’s approach to her new role is positive for the brand. He said, “Since Jessica stepped into these roles, we’ve enjoyed her openness to feedback as well as the value she’s created simply from a transparency standpoint. Jessica is a believer in communication on all topics, whether that’s good or bad, she’s not afraid to be the bearer of the news, and from that standpoint it’s a lot easier to operate in a partnership.”

Launches Family Meals

8.  At the end of January 2021, Fuzzy’s Taco Shop launched Baja-inspired family meals. The taco shop’s Taco Family Meals offer generous portions of the guest’s choice of meat, sides, fixings and more, and the Chips & Queso Party Tray came out just in time for the Super Bowl.

9.  To celebrate the launch of the Family Meals, Fuzzy’s Taco Shop teamed up with Avocados From Mexico to offer guests free guacamole with the purchase of any Taco Family Meal or Chips & Queso Party Tray. The promotion was available Saturday, February 6 and Sunday, February 7.

10.  The Taco Family Meal is available in two sizes: regular (serves 4-6, $35) and large (serves 6-8, $50), and includes:

• Choice of two meats – shredded chicken, seasoned ground beef, spicy pork, or grilled veggies (fajita beef, fajita chicken, or shredded brisket are available for an additional charge);
• Choice of two sides – borracho beans, black beans, refried beans, cilantro-lime rice, Mix-Mex rice, chips, salsa, and Fuzzy’s famous queso;
• All fixings – tortillas, lettuce, tomatoes, shredded cheese, cilantro, feta, garlic sauce, Fuzzy’s Taco Shop Butt Burnin’ Hot Sauce.

Launches New Taqueria Concept

11.  In mid-March 2021, Fuzzy’s Taco Shop announced its new concept, Fuzzy’s Taco Shop Taqueria. The Taqueria encompasses everything fans have come to love about the brand with the same recipes, but will offer a slightly reduced menu in a smaller, to-go focused footprint. Fuzzy’s Taqueria will open its first location in Minneapolis, Minnesota, a new market for the brand.

12.  Plans for the new footprint began prior to the pandemic, as Fuzzy’s Taco Shop noticed a continued shift of dining to off-premise. Then, when the pandemic hit, it reinforced the need for a model that would allow flexibility for restaurant partners and new franchisees.

13.  Jessica Wescott, chief operating officer and chief financial officer of Fuzzy’s Taco Shop, said, “As real estate opportunities became available over the last year, we realized we didn’t want to limit our franchisees to the traditional Fuzzy’s model with larger square footage requirements.”

14.  A traditional Fuzzy’s Taco Shop unit is between 3,000-4,000 square feet, while the Fuzzy’s Taqueria will typically operate within 1,200-1,800 square-foot spaces. Wescott continued, “At the same time, we understood from a consumer perspective this new footprint needed to be branded differently. It was important to keep the overall Fuzzy’s vibe our guests have come to love and trust with our great food, cold drinks and Baja feel, but also make the Taqueria a little different to showcase the reduced menu and a more take-out driven focus.”

15.  Fuzzy’s first opportunity to test this model came when Minneapolis-based commercial real estate broker Peter Fitzgerald and tenured restaurant operator Ed Pittsley approached the brand with the perfect 1,100 square-foot location for a Fuzzy’s within North Loop in Minneapolis. Fitzgerald said, “Just as we were starting to get serious about looking for a location in the Twin Cities the pandemic hit, but we knew we wanted to bring Fuzzy’s to Minneapolis. We collaborated with the Fuzzy’s team to work on a concept that would fit really well in a post-pandemic environment, and that, of course, was the Taqueria.”

16. The goal of Fuzzy’s Taqueria’s simplified menu is to be operationally-friendly and easily executed in a strong off-premise market. The menu will feature Fuzzy’s most popular items, such as their famous queso and made-in-house guacamole and fire-roasted salsa, as well as main staples including Baja tacos, breakfast tacos, burritos, nachos, quesadillas, salads, traditional sides, and drinks. Additionally, margaritas and beer will be available at all Taqueria locations, with the option to take them to-go in the markets where it is legal to do so.

Company History

17.  Fuzzy’s Taco Shop was founded in 2001 by Paul Willis in Fort Worth, Texas near the campus of Texas Christian University. Willis’ menu featured tacos and cold drinks and the restaurant had a friendly and welcoming atmosphere. Fuzzy’s was a hit with the local college kids, but despite the restaurant’s success, Willis sold Fuzzy’s Taco Shop to father and son restaurateurs, Alan and Chuck Bush.

18.  The Bushes opened additional locations around Texas and in 2007, they began franchising the Fuzzy’s Taco Shop concept. To fuel the brand’s early growth, the Bushes primarily targeted areas near college campuses.

19.  Over the next decade, Fuzzy’s Taco Shop continued to grow around the United States and by 2016, there were 100 locations. That same year, the Bushes sold a 70% stake in Fuzzy’s Taco Shop to Atlanta-based private equity group NRD Capital Management. Today, there are Fuzzy’s Taco Shop locations across more than 17 states.

Entrepreneur’s Franchise 500

20.  Fuzzy’s Taco Shop ranked No. 249 on Entrepreneur’s 2021 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 2021 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 2021 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2018

• Outlets at the Start of the Year:  127
• Outlets at the End of the Year:  137
• Net Change:  +10

2019

• Outlets at the Start of the Year:  137
• Outlets at the End of the Year:  136
• Net Change:  -1

2020

• Outlets at the Start of the Year:  136
• Outlets at the End of the Year:  135
• Net Change:  -1

Company-Owned

2018

• Outlets at the Start of the Year:  7
• Outlets at the End of the Year:  10
• Net Change:  +3

2019

• Outlets at the Start of the Year:  10
• Outlets at the End of the Year:  10
• Net Change:  0

2020

• Outlets at the Start of the Year:  10
• Outlets at the End of the Year:  5
• Net Change:  -5

Section V – Financial Performance Representations (Item 19, 2021 FDD) and Analysis

• The data reported below reflects information for: (i) the 52-week annual period beginning December 31, 2018 and ending December 29, 2019 (the “2019 Fiscal Year”), (ii) the 53-week annual period beginning December 30, 2019 and ending January 3, 2021 (the “2020 Fiscal Year”), and (iii) the time period from January 4, 2021 to April 4, 2021 (the “2021 Fiscal Q1”).

• The information below pertains to all Traditional Restaurants that had been open and operating during the entirety of the 2019 Fiscal Year, 2020 Fiscal Year, and the 2021 Fiscal Q1, other than three Restaurants that were operating in non-traditional locations, and two Restaurants that were closed for more than 4 consecutive weeks during the reporting period.

• Of the 115 remaining Traditional Restaurants (“Reporting Units”), 112 were franchised Restaurants (“Franchised Reporting Units”) and 3 were company-owned Restaurants (“Company Reporting Units”). All Company Reporting Units were operated by an affiliate of Fuzzy’s Taco Shop (each a “Reporting Affiliate”).

• All Reporting Units are Traditional Restaurants. The numbers below are not intended to reflect the operations of a Taqueria Restaurant, which could be materially different than the numbers reported below, due to the smaller footprint and limited menu offered by Taqueria Restaurants.

• Other than as necessary to comply with governmental orders and safety guidelines, Fuzzy’s Taco Shop has not materially changed the operational standards for a Restaurant in response to the COVID-19 pandemic.

Part 1 – Franchised Gross Sales

• The data reported below reflects Gross Sales for Franchised Reporting Units for the 2019 Fiscal Year, 2020 Fiscal Year, and 2021 Fiscal Q1. The Gross Sales in 2021 Fiscal Q1 is reported on an annualized basis (by multiplying by 4).

2019 Fiscal Year

• Average:  $1,585,165
• Median:  $1,388,264
• Low:  $614,963
• High:  $4,189,191
• Number and Percent of Units Above Average:  37 / 33%
• Number of Weeks:  52

2020 Fiscal Year

• Average:  $1,341,697
• Median:  $1,170,498
• Low:  $470,855
• High:  $3,683,164
• Number and Percent of Units Above Average:  42 / 38%
• Number of Weeks:  53

2021 Fiscal Q1 (Annualized)

• Average:  $1,424,663
• Median:  $1,267,147
• Low:  $518,878
• High:  $3,837,442
• Number and Percent of Units Above Average:  44 / 39%
• Number of Weeks:  13

Part 2 – Company-Owned Gross Sales

• The data reported below reflects Gross Sales for Company Reporting Units for the 2019 Fiscal Year, 2020 Fiscal Year, and 2021 Fiscal Q1. The Gross Sales in 2021 Fiscal Q1 is reported on an annualized basis (by multiplying by 4).

2019 Fiscal Year

• Average:  $1,206,757
• Median:  $1,187,061
• Low:  $887,013
• High:  $1,546,196
• Number and Percent of Units Above Average:  1 / 33%
• Number of Weeks:  52

2020 Fiscal Year

• Average:  $1,182,142
• Median:  $1,060,824
• Low:  $1,015,651
• High:  $1,469,950
• Number and Percent of Units Above Average:  1 / 33%
• Number of Weeks:  53

2021 Fiscal Q1 (Annualized)

• Average:  $1,361,396
• Median:  $1,322,508
• Low:  $1,106,561
• High:  $1,655,120
• Number and Percent of Units Above Average:  2 / 67%
• Number of Weeks:  13

Part 3 – Company-Owned Operational Costs

• The following reflects Fuzzy’s Taco Shop’s own internally prepared cost data for the 2019 Fiscal Year, 2020 Fiscal Year, and 2021 Fiscal Q1 for Company Reporting Units.

• Fuzzy’s Taco Shop is not able to provide average operational costs for Franchised Reporting Units because it does not have reliable cost data for those Restaurants.

2019 Fiscal Year

Food Cost % of Gross Food Sales

• Average:  28.8%
• Median:  28.8%
• Lowest:  28.6%
• Highest:  29.2%
• Units With Lower Than Average Cost:  2 (66%)

Labor Cost % of Net Sales

• Average:  29.0%
• Median:  27.7%
• Lowest:  26.6%
• Highest:  35.1%
• Units With Lower Than Average Cost:  2 (66%)

Occupancy Cost % of Net Sales

• Average:  9.3%
• Median:  8.9%
• Lowest:  6.3%
• Highest:  12.1%
• Units With Lower Than Average Cost:  2 (66%)

2020 Fiscal Year

Food Cost % of Gross Food Sales

• Average:  28.0%
• Median:  27.9%
• Lowest:  27.8%
• Highest:  28.5%
• Units With Lower Than Average Cost:  2 (66%)

Labor Cost % of Net Sales

• Average:  26.9%
• Median:  26.9%
• Lowest:  24.8%
• Highest:  29.8%
• Units With Lower Than Average Cost:  1 (33%)

Occupancy Cost % of Net Sales

• Average:  9.5%
• Median:  9.5%
• Lowest:  5.5%
• Highest:  13.3%
• Units With Lower Than Average Cost:  2 (66%)

2021 Q1

Food Cost % of Gross Food Sales

• Average:  25.4%
• Median:  25.8%
• Lowest:  24.2%
• Highest:  25.9%
• Units With Lower Than Average Cost:  1 (33%)

Labor Cost % of Net Sales

• Average:  23.1%
• Median:  23.1%
• Lowest:  22.6%
• Highest:  23.8%
• Units With Lower Than Average Cost:  2 (66%)

Occupancy Cost % of Net Sales

• Average:  8.3%
• Median:  8.5%
• Lowest:  4.2%
• Highest:  12.9%
• Units With Lower Than Average Cost:  1 (33%)

• The Food Cost figure noted above was calculated by adding the total food costs (excluding alcohol) expended by each of the Reporting Affiliates during the applicable period and then dividing that number by the total sales (less alcohol and non-food merchandise sales) realized by each of the Reporting Affiliates during the applicable period.

• The Labor Cost figure noted above was calculated by adding the total hourly and salary payroll for each of the Reporting Affiliates during the applicable period and then dividing that number by the total sales (less discounts) realized by each of the Reporting Affiliates during the applicable period. The payroll amounts used to calculate the Labor Cost figure noted above include only wages paid and do not include payroll taxes, benefits, workers’ compensation, or other related payroll expenses. It also does not include an owner-operator salary.

• The Occupancy Cost figure noted above was calculated by adding the total occupancy costs (including rent, utilities, common area maintenance charges, and taxes) expended by each of the Reporting Affiliates during the applicable period and then dividing that number by the total sales (less discounts) realized by each of the Reporting Affiliates during the applicable period.

• The financial data figures noted above do not account for payment of any franchise fees, royalties, margins, or other investment costs and expenses which might impact your profitability. As such, this financial performance representation does not necessarily predict whether you will be profitable.

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