In this FDD Talk 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 2021 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 2021 FDD

• Section IV – Number of franchised and company-owned Taco John’s 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 Taco John’s financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:

• 2020 average, median, high, and low sales, by quartile, for the 293 franchised freestanding traditional Taco John’s Restaurants with drive-thru windows that reported sales to Taco John’s through its QuikServe Point of Sale System for all of calendar year 2020

• 2020 average, median, high, and low sales, by quartile, for the 27 franchised endcap traditional Taco John’s Restaurants with drive-thru windows that reported sales to Taco John’s through its QuikServe Point of Sale System for all of calendar year 2020

• 2020 average, median, high, and low sales, by quartile, for the 15 franchised Taco John’s Restaurants 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 2020

Section I – Background Information

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

Introduces Royalty Incentive Program for Prospective Franchisees

1.  In early December 2020, Taco John’s announced its 2021 development royalty incentive program for prospective franchisees. The new franchise incentives, which are available to franchisees who sign on to develop traditional freestanding units, include specific offers for 5+ unit area development agreements (ADA) and single-unit development deals.

2.  The limited-time offer is built for entrepreneurially driven individuals seeking investment opportunities in the high-growth quick-service restaurant sector, which has been powered by strong drive-thru and off-premise sales in recent months. Taco John’s in particular has seen same-store sales growth each month since May 2020.

3.  The single-unit incentive program applies only to unit franchisees committed to developing in 2021 and 2022. The 5+ unit ADA incentive applies to all stores that open in the first four years. Both programs give franchisees the opportunity to invest what would have been spent on royalties back into their restaurants. The standard Taco John’s royalty fee is 5% of net sales.

4.  Taco John’s is offering qualified candidates who sign a development deal the following incentives:

• 5+ unit ADA signed in 2021 will enjoy reduced royalties of 2% in year one, 3% in year two, and 4% in year three for all stores opened in the first four years.

• For stores opening in the first four years of the ADA, Taco John’s will make up to $10,000 available for local store marketing to spend during the first 120 days after opening.

• Single-unit development agreements signed in 2021 and with stores opening in 2021 will enjoy reduced royalties of 1% in year one, 2% in year two, 3% in year three, and 4% in year four.

• For stores opening in 2021, Taco John’s will make up to $10,000 available for local store marketing to spend during the first 120 days after opening.

• Single-unit development agreements signed in 2021 and with stores opening in 2022 will enjoy reduced royalties of 2% in year one, 3% in year two, and 4% in year 3.

Appoints New Chief Financial Officer

5.  In mid-February 2021, Taco John’s announced the appointment of Richard Bundy as its new chief financial officer. Bundy joins Taco John’s with more than 20 years of experience in the financial field. He began his career with NASA as a project resource analyst before accepting a role with the Albertson’s grocery chain as a financial analyst.

6.  Bundy then went on to the apparel industry, where he held a variety of leadership roles at retail brands such as Victoria’s Secret, Soma Intimates, and Chico’s. Most recently, Bundy served as chief financial offer for Christopher & Banks, where he was responsible for developing and executing the company’s financial strategy and overseeing all aspects of finance, accounting, distribution and logistics, internal audit, and real estate.

7.  As chief financial officer, Bundy will lead Taco John’s financial strategy, including accounting, business analysis, and financial planning. In addition, Bundy will oversee franchise development and human resources.

8.  Taco John’s CEO Jim Creel said, “We are very excited to have Richard join our leadership team. He is a seasoned executive who brings a wealth of knowledge and experience to Taco John’s. Richard’s proven track record of success includes an extensive background in leading finance teams in multi-store, high growth and turnaround retail environments. We’ve put an emphasis on expansion at Taco John’s, and we know Richard’s financial capabilities will be key in maintaining our business goals as we continue to grow.”

9.  Bundy said, “My family and I have been huge Taco John’s supporters for a long time. I’ve been visiting Taco John’s since college, so it’s safe to say I’m thrilled to join this brand. I’m really proud to become a part of a dynamic leadership team within a successful company. As Taco John’s gets ready for rapid expansion, I can’t wait to apply my business acumen to help the brand scale new heights.”

Introduces New Value Menu

10.  In mid-March 2021, Taco John’s launched its ValuEST Menu as the first real value menu, following a limited test in select markets the prior fall. Fans across the country can indulge in Taco John’s bold ValuEST Menu – with items priced at $1, $2, and $3.

11.  But this isn’t your average value menu, like other quick-service restaurants claim to have. Taco John’s $1, $2, $3 menu is defined by quality and everyday low prices, featuring new items made with premium ingredients like hand-cut sirloin steak, crispy bacon, guacamole, and all-white meat chicken, all packed with bigger, bolder, better flavors.

12.  The ValuEST Menu includes:

• $1 Chicken Snack Quesadilla – All-white meat grilled chicken and all-natural cheddar cheese are folded into a special flour tortilla.

• $1 Cinnamon Sugar Tortilla Chips – Crispy flour tortilla chips dusted with cinnamon and sugar.

• $2 Spicy Chicken & Potato Griller – All-white meat grilled chicken, Potato Olés, warm nacho cheese sauce, creamy chipotle sauce, and Super Hot sauce, grilled between a soft flour tortilla.

• $2 Chicken, Bacon, Guacamole Street Taco – All-white meat grilled chicken, crisp bacon pieces, guacamole, shredded cheddar cheese, and crisp shredded lettuce, wrapped in a soft tortilla made of corn and flour.

• $3 Sirloin Steak & Potato Griller – Hand-carved sirloin steak, Potato Olés, warm nacho cheese sauce, creamy chipotle sauce, and Super Hot sauce, grilled between a soft flour tortilla.

• $3 Cheesy Bacon Ranch Loaded Potato Olés – Potato Olés covered with warm nacho cheese sauce and creamy ranch dressing, topped with crisp bacon pieces and pickled jalapeño slices.

13.  Taco John’s Chief Marketing Officer Barry Westrum said, “We tested our ValuEST Menu a few months ago, and it confirmed what we all thought – that the world’s first true value menu is finally here. With high-quality ingredients and bold flavors offered at an exceptional price, Taco John’s ValuEST Menu is truly like none other. Typically, you have to spend more for good ingredients, or you spend less for lower quality, but at Taco John’s, you can finally get both. We’re thrilled to introduce our $1, $2, $3 menu systemwide and to give everyone a taste of one of our new menu items during launch week!”

Company History

14.  Taco John’s started out as a small taco stand called Taco House, which was opened in 1968 by John Turner in Cheyenne, Wyoming. At the time, Turner’s tacos and burritos were considered “exotic” by the people in Cheyenne and the taco stand was a huge hit. Cheyenne businessmen Harold Holmes and Jim Woodson, who had helped Turner start his taco stand, purchased the franchise rights to Turner’s business in 1969. In honor of Turner, Holmes and Woodson called the new business Taco John’s.

15.  Holmes and Woodson quickly opened more Taco John’s locations in the states near Wyoming. Taco John’s continued to expand around the Midwestern and Mountain regions of the U.S. and added items to its menu over the next few decades. One of the brand’s signature items is Potato Olés, which are bite-sized deep-fried potato nuggets coated with a proprietary blend of spices and seasonings.

16.  Taco John’s other claim to fame is that they supposedly invented the idea of Taco Tuesday. While no one knows for sure if Taco John’s really was the first to come up with the concept, the company owns the trademark for the name Taco Tuesday.

17.  Around 2004, Taco John’s began pushing national expansion. That same year, Taco John’s partnered with Good Times Burgers & Frozen Custard and Steak Escape to open co-branded restaurants. Today, Taco John’s has locations across 22 states, with many more in the pipeline.

Entrepreneur’s Franchise 500

18.  Taco John’s ranked No. 315 on Entrepreneur’s 2021 Franchise 500 list.

Section II – Estimated Costs

• Detailed estimates of Taco John’s franchise costs, based on Item 7 of the company’s 2021 FDD.

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

• 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 2021 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2018

• Outlets at the Start of the Year:  382
• Outlets at the End of the Year:  381
• Net Change:  -1

2019

• Outlets at the Start of the Year:  381
• Outlets at the End of the Year:  376
• Net Change:  -5

2020

• Outlets at the Start of the Year:  376
• Outlets at the End of the Year:  378
• Net Change:  +2

Company-Owned

2018

• Outlets at the Start of the Year:  10
• Outlets at the End of the Year:  11
• Net Change:  +1

2019

• Outlets at the Start of the Year:  11
• Outlets at the End of the Year:  11
• Net Change:  0

2020

• Outlets at the Start of the Year:  11
• Outlets at the End of the Year:  11
• Net Change:  0

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

Charts of Per Franchised Restaurant Average Sales

• Included in the charts below are all of the 335 franchised Taco John’s Restaurants with drive-thru windows that reported sales to Taco John’s through its QuikServe Point of Sale System for all of calendar year 2020.

• These charts include 4 Restaurants owned and operated, directly or indirectly, by people Taco John’s identifies in Item 2 of the Disclosure Document, which Taco John’s considers to be, and shows as, franchised Restaurants in Item 20.

Chart 1 – Average Sales of Freestanding Traditional Taco John’s Restaurants with Drive-Thru Windows During Calendar Year 2020

Top Quartile

• Number of Restaurants in Group:  74
• Average Sales:  $1,577,582
• Number and Percentage of Restaurants in the Sector That Met or Exceeded the Average Sales of the Sector:  30 (40.5%)
• High:  $2,756,070
• Median:  $1,493,886
• Low:  $1,237,757

Second Quartile

• Number of Restaurants in Group:  73
• Average Sales:  $1,115,704
• Number and Percentage of Restaurants in the Sector That Met or Exceeded the Average Sales of the Sector:  35 (47.9%)
• High:  $1,232,772
• Median:  $1,108,192
• Low:  $1,010,689

Third Quartile

• Number of Restaurants in Group:  73
• Average Sales:  $911,861
• Number and Percentage of Restaurants in the Sector That Met or Exceeded the Average Sales of the Sector:  37 (50.7%)
• High:  $1,009,420
• Median:  $915,279
• Low:  $799,906

Lower Quartile

• Number of Restaurants in Group:  73
• Average Sales:  $676,566
• Number and Percentage of Restaurants in the Sector That Met or Exceeded the Average Sales of the Sector:  33 (45.2%)
• High:  $799,619
• Median:  $665,251
• Low:  $396,091

Combined Average

• Number of Restaurants in Group:  293
• Average Sales:  $1,077,245
• Number and Percentage of Restaurants in the Sector That Met or Exceeded the Average Sales of the Sector:  125 (42.7%)

Chart 2 – Average Sales of Endap Traditional Taco John’s Restaurants with Drive-Thru Windows During Calendar Year 2020

Top Quartile

• Number of Restaurants in Group:  6
• Average Sales:  $1,329,607
• Number and Percentage of Restaurants in the Sector That Met or Exceeded the Average Sales of the Sector:  4 (66.7%)
• High:  $1,409,990
• Median:  $1,336,629
• Low:  $1,224,226

Second Quartile

• Number of Restaurants in Group:  7
• Average Sales:  $1,083,687
• Number and Percentage of Restaurants in the Sector That Met or Exceeded the Average Sales of the Sector:  3 (42.9%)
• High:  $1,203,188
• Median:  $1,075,069
• Low:  $1,003,225

Third Quartile

• Number of Restaurants in Group:  7
• Average Sales:  $891,801
• Number and Percentage of Restaurants in the Sector That Met or Exceeded the Average Sales of the Sector:  3 (42.9%)
• High:  $963,028
• Median:  $888,507
• Low:  $817,315

Lower Quartile

• Number of Restaurants in Group:  7
• Average Sales:  $600,550
• Number and Percentage of Restaurants in the Sector That Met or Exceeded the Average Sales of the Sector:  4 (57.1%)
• High:  $756,130
• Median:  $612,497
• Low:  $463,493

Combined Average

• Number of Restaurants in Group:  27
• Average Sales:  $963,330
• Number and Percentage of Restaurants in the Sector That Met or Exceeded the Average Sales of the Sector:  13 (48.1%)

Chart 3 – Average Sales of Taco John’s Restaurants in Convenience Stores or Travel Plazas with Drive-Thru Windows During Calendar Year 2020

Top Quartile

• Number of Restaurants in Group:  4
• Average Sales:  $1,243,518
• Number and Percentage of Restaurants in the Sector That Met or Exceeded the Average Sales of the Sector:  2 (50.0%)
• High:  $1,904,195
• Median:  $1,131,803
• Low:  $806,272

Second Quartile

• Number of Restaurants in Group:  4
• Average Sales:  $712,575
• Number and Percentage of Restaurants in the Sector That Met or Exceeded the Average Sales of the Sector:  2 (50.0%)
• High:  $756,520
• Median:  $708,677
• Low:  $676,426

Third Quartile

• Number of Restaurants in Group:  4
• Average Sales:  $582,817
• Number and Percentage of Restaurants in the Sector That Met or Exceeded the Average Sales of the Sector:  1 (25.0%)
• High:  $672,428
• Median:  $563,835
• Low:  $531,170

Lower Quartile

• Number of Restaurants in Group:  3
• Average Sales:  $486,627
• Number and Percentage of Restaurants in the Sector That Met or Exceeded the Average Sales of the Sector:  1 (33.3%)
• High:  $527,578
• Median:  $481,888
• Low:  $450,414

Combined Average

• Number of Restaurants in Group:  15
• Average Sales:  $774,368
• Number and Percentage of Restaurants in the Sector That Met or Exceeded the Average Sales of the Sector:  4 (26.7%)

• Taco John’s had a total of 378 franchised Taco John’s Restaurants in its system as of December 31, 2020.

• Of those, 9 Restaurants do not report their sales through Taco John’s QuikServe Point of Sale System, and 7 Restaurants that do report their sales through Taco John’s QuikServe Point of Sale System do not have drive-thru windows as part of their Restaurants. Because the restaurant models Taco John’s is offering under the Disclosure Document require the use of its approved QuikServe Point of Sale System and are expected to have a drive-thru window, Taco John’s did not include those Restaurants in these charts.

• Further, 27 of Taco’s John’s franchised Restaurants did not operate for the full 2020 calendar year, comprised of Restaurants that opened or closed permanently during 2020, were closed for part of the year due to remodeling, or were closed for more than a full calendar month due to COVID-19. None of the outlets that closed permanently in calendar year 2020 had been open for less than 12 months.

• Taco John’s also had a total of 11 company-owned Taco John’s Restaurants that are not included in these charts.

• “Sales” means the total receipts of the Restaurant, but does not include sales tax or equivalent taxes.

• The Taco John’s Restaurants included in these charts sell substantially the same products and services as the franchised Taco John’s Restaurants offered pursuant to the Disclosure Document.

• As of the start of calendar year 2020, the Taco John’s Restaurants included in these charts had been in operation for periods ranging from one year to 52 years.

• There is a large variation in the range of sales generated by Taco John’s franchisees during calendar year 2020. During calendar year 2020, sales by the Taco John’s Restaurants reported in these charts varied from a high of $2,756,070 to a low of $396,091.

Key Franchise Ratios, Comparables, Computations, and Analyses (Exclusive Content for Platinum Subscribers) ⬇️