In this FDD Talk post, you’ll learn the following:

• Section I – Background information on the Pancheros Mexican Grill franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Pancheros Mexican Grill 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 Pancheros Mexican Grill franchise, based on Items 5 and 6 of the company’s 2021 FDD

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

• 2020 average, median, high, and low gross sales for the 37 franchised, 23 affiliate-owned, and all 60 Pancheros Mexican Grill restaurants in operation for the entire three calendar years 2018 to 2020

• 2020 average, median, high, and low food costs and paper costs for the 25 affiliate-owned Pancheros Mexican Grill restaurants that were in operation for the full 12 months of 2020

• 2019 average, median, high, and low gross sales for the 32 franchised, 25 affiliate-owned, and all 57 Pancheros Mexican Grill restaurants in operation for the entire three calendar years 2017 to 2019

• 2019 average, median, high, and low food costs and paper costs for the 28 affiliate-owned Pancheros Mexican Grill restaurants that were in operation for the full 12 months of 2019

Section I – Background Information

13 Things You Need to Know About the Pancheros Mexican Grill Franchise

Innovates with Loyalty Program to Drive Record Sales and Customer Engagement

1.  At the beginning of June 2021, Pancheros Mexican Grill said that its loyalty program was driving record sales. As evidenced during a loyalty program promotion centered on Cinco de Mayo, Pancheros is mobilizing its cult-like following like never before. During the early-May marketing event, several of the brand’s stores more than doubled their sales compared to the previous year and set single-day revenue records. Loyalty program signups are now reaching all-time highs.

2.  Pancheros shared the results of its Cinco de Mayo campaign, a promotion rewarding customers with five times the amount of loyalty points for ordering on the Pancheros app. The results from early May come as Pancheros advances its innovative customer lifecycle marketing strategy, reinforcing its status as a leader in the fast-casual restaurant industry.

3.  Ryan Murrin, chief marketing officer of Pancheros Mexican Grill, said, “We’re wrapping up the first half of 2021 on a high note. Our franchisees and team are thrilled at the amount of growth in our loyalty program. During the past two years, we’ve revamped our app, reduced friction to ordering and repositioned our loyalty program as a central element to our marketing. Our goal has been to earn and keep a spot on our guests’ phones.”

4.  The results of that strategy have paid off; loyalty sales have increased 92 percent during the past two years and new members have increased by 90 percent. That growth and focus on loyalty helped propel the brand’s recent promotion during Cinco de Mayo to one of its most successful ever, resulting in a 125 percent increase in its week-over-week loyalty sales. Plus, the promotion led to a 135 percent increase in new loyalty signups and a 10 percent average check increase.

5.  “The hard work that’s gone into renewing our focus on our loyalty program is paying off, and it bodes well for the rest of the year. We’re excited to bring back loyalty program favorites like National Queso Day and the 12 Days of Pancheros,” added Murrin. “At the same time, we continue to work on the best app experience possible for our members, so we’re also working on improvements and enhancements. We want our loyalty program to be as useful and relevant to our fans as possible.”

Appoints New Director of Franchise Development

6.  In mid-June 2021, Pancheros Mexican Grill appointed Joe Gale as its new director of franchise development. Gale is leading the company’s franchise expansion strategy aimed at growing the Pancheros footprint in targeted U.S. regions.

7.  Born, bred and still living in Pancheros’ home Iowa City market, Gale brings more than 20 years of relevant restaurant industry experience to the position. He spent the past two-plus decades with Coca-Cola, guiding sales directly with franchise brands and restaurant franchise owners. Gale has cultivated strong relationships directly with large multi-unit franchise operators in more than 20 states, providing him with a strong footing for the role with Pancheros.

8.  “I have witnessed this amazing brand become a national leader in the fast-casual space being so close to it for so many years. I’ve always admired how Pancheros has carved out its place at the top of the category and I couldn’t be more proud to join the company,” said Gale, who freely admits that Pancheros has been his favorite restaurant to eat at since it first opened in the early 90s. “As a life-long Pancheros fan, I’m honored to be part of the team. I look forward to propelling growth in the near and long terms.”

9.  Building strong relationships and earning trust through a role like this is not new to Gale. Prior to Pancheros with Coca Cola, he managed sales relationships that included national and regional chains such as Dairy Queen, Arby’s, Popeyes, and IHOP. Gale’s addition to the Pancheros team comes at a very exciting time for the brand, as it continues to expand through new unit growth, including openings coming soon in Peoria and Moline, IL, Bismarck, ND, and Cherry Hills, NJ.

10.  Rodney Anderson, founder and CEO of Pancheros Mexican Grill, said, “Our future is bright with Joe joining our team because of his unique background and experience when it comes to building franchisee relationships. We’re excited to have him bring his sales background to our brand. He adds an expertise that stands to make a significant impact on our growth.”

Company History

11.  Pancheros Mexican Grill was founded in 1992 by Rodney Anderson in Iowa City near the University of Iowa. Rodney had just graduated from the University of Chicago and he felt that the students in Iowa would enjoy Chicago-style burritos. At the time, fast-casual Mexican food was not that common and Pancheros was an immediate hit with the students at the University of Iowa. Following the success of the first Pancheros, Anderson opened more locations in college towns around the Midwest.

12.  Over the next few years, Pancheros continued to grow and in 1998, the brand added tortilla presses to all of its locations so fresh tortillas could be made in-store daily. Pancheros started franchising in 2003. Pancheros has carefully and slowly grown its presence in the Midwest, but says it’s now ready to expand nationwide. Currently, there are Pancheros Mexican Grill restaurants across more than 13 states.

Entrepreneur’s Franchise 500

13.  Pancheros Mexican Grill did not rank on Entrepreneur’s 2022 Franchise 500 list.

Section II – Estimated Costs

• Detailed estimates of Pancheros Mexican Grill 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 Pancheros Mexican Grill’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:  43
• Outlets at the End of the Year:  39
• Net Change:  -4

2019

• Outlets at the Start of the Year:  39
• Outlets at the End of the Year:  43
• Net Change:  +4

2020

• Outlets at the Start of the Year:  43
• Outlets at the End of the Year:  43
• Net Change:  0

Company-Owned

2018

• Outlets at the Start of the Year:  27
• Outlets at the End of the Year:  28
• Net Change:  +1

2019

• Outlets at the Start of the Year:  28
• Outlets at the End of the Year:  28
• Net Change:  0

2020

• Outlets at the Start of the Year:  28
• Outlets at the End of the Year:  26
• Net Change:  -2

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

Part 1 – 2020 Gross Sales for All 60 Pancheros Restaurants Operating 2018-2020

• As of December 31, 2020, there were 60 Pancheros restaurants (37 franchised restaurants and 23 affiliate-owned restaurants that Pancheros operated under a license agreement and management agreement) in operation for the three calendar years 2018 to 2020.

• The following chart reflects the 2020 gross sales of all 60 restaurants (franchised and affiliate-owned) that were in operation the full three-year period 2018 to 2020.

All 60 Restaurants

• Average:  $1,173,492
• 11 (or 30%) franchised restaurants and 14 (or 61%) affiliate-owned restaurants met or exceeded this average.
• Median:  $1,077,736
• 13 (or 35%) franchised restaurants and 17 (or 74%) affiliate-owned restaurants met or exceeded this median.
• High:  $2,698,860
• Low:  $421,373

37 Franchised Restaurants

• Average:  $1,089,272
• 13 (or 35%) franchised restaurants met or exceeded this average.
• Median:  $927,476
• 19 (or 51%) franchised restaurants met or exceeded this median.
• High:  $2,698,860
• Low:  $421,373

23 Affiliate-Owned Restaurants

• Average:  $1,308,976
• 10 (or 43%) affiliate-owned restaurants met or exceeded this average.
• Median:  $1,245,764
• 12 (or 52%) affiliate-owned restaurants met or exceeded this median.
• High:  $2,256,024
• Low:  $613,648

• These financial performance figures do not reflect royalty fees, advertising fund contributions, operating expenses, or other costs or expenses that must be deducted from gross sales to obtain your net income or profit.

• In determining how relevant these affiliate-owned restaurants’ sales data may be to your situation, characteristics of affiliate-owned restaurants may differ substantially from the restaurant that you will operate depending on your previous experience, competition and demographics in your area, and length of time that affiliate-owned restaurants have operated as compared to your restaurant.

Part 2 – 2019 Gross Sales for All 57 Pancheros Restaurants Operating 2017-2019

• As of December 31, 2019, there were 57 Pancheros restaurants (32 franchised restaurants and 25 affiliate-owned restaurants that Pancheros operated under a license agreement and management agreement) in operation for the three calendar years 2017 to 2019.

• The following chart reflects the 2019 gross sales of all 57 restaurants (franchised and affiliate-owned) that were in operation the full three-year period 2017 to 2019.

All 57 Restaurants

• Average:  $1,188,950
• 10 (or 31 %) franchised restaurants and 16 (or 64%) affiliate-owned restaurants met or exceeded this average.
• Median:  $1,073,771
• 12 (or 38%) franchised restaurants and 17 (or 68%) affiliate-owned restaurants met or exceeded this median.
• High:  $2,591,281
• Low:  $421,279

32 Franchised Restaurants

• Average:  $1,108,719
• 10 (or 31 %) franchised restaurants met or exceeded this average.
• Median:  $926,301
• 16 (or 64%) franchised restaurants met or exceeded this median.
• High:  $2,591,281
• Low:  $421,279

25 Affiliate-Owned Restaurants

• Average:  $1,291,647
• 14 (or 56%) affiliate-owned restaurants met or exceeded this average.
• Median:  $1,332,710
• 13 (or 52%) franchised restaurants met or exceeded this median.
• High:  $2,097,627
• Low:  $529,761

• These financial performance figures do not reflect royalty fees, advertising fund contributions, operating expenses, or other costs or expenses that must be deducted from gross sales to obtain your net income or profit.

• In determining how relevant these affiliate-owned restaurants’ sales data may be to your situation, characteristics of affiliate-owned restaurants may differ substantially from the restaurant that you will operate depending on your previous experience, competition and demographics in your area, and length of time that affiliate-owned restaurants have operated as compared to your restaurant.

Part 3 – 2020 Food and Paper Costs for 25 Affiliate-Owned Pancheros Restaurants Operating Full 12 Months

• The following chart reflects the 2020 food and paper costs for the 25 affiliate-owned restaurants that Pancheros operates, that were in operation for the full 12 months of 2020. These 25 restaurants use a common back office system and common food cost calculation procedures.

• There are no franchised restaurants in this group.

Food Costs

• Average:  27.26%
• 14 (or 56%) of these 25 restaurants met or exceeded this average.
• Low:  23.78%
• High:  30.37%
• Median:  27.52%

Paper Costs

• Average:  2.93%
• 14 (or 56%) of these 25 restaurants met or exceeded this average.
• Low:  2.59%
• High:  3.27%
• Median:  2.96%

• The above costs do not include labor, rent, utilities, and other costs incurred by affiliate-owned restaurants.

• Franchised restaurants may incur additional costs that affiliate-owned restaurants do not have, including royalty payments, training expenses, and certain advertising fees.

Part 4 – 2019 Food and Paper Costs for 28 Affiliate-Owned Pancheros Restaurants Operating Full 12 Months

• The following chart reflects the 2019 food and paper costs for the 28 affiliate-owned restaurants that Pancheros operates, that were in operation for the full 12 months of 2019. These 28 restaurants use a common back office system and common food cost calculation procedures.

• There are no franchised restaurants in this group.

Food Costs

• Average:  25.84%
• 14 (or 50%) of these 28 restaurants met or exceeded this average.
• Low:  23.44%
• High:  29.72%
• Median:  25.74%

Paper Costs

• Average:  3.08%
• 11 (or 39%) of these 28 restaurants met or exceeded this average.
• Low:  2.48%
• High:  4.05%
• Median:  2.99%

• The above costs do not include labor, rent, utilities, and other costs incurred by affiliate-owned restaurants.

• Franchised restaurants may incur additional costs that affiliate-owned restaurants do not have, including royalty payments, training expenses, and certain advertising fees.

• Some restaurants have sold these amounts. Your individual results may differ. There is no assurance that you will sell as much.

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