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

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

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

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

• 2020 average unit volume, cost of goods sold, repairs & maintenance, labor, supplies, utilities, and EBITDAR (Earnings Before Interest, Taxes, Depreciation, Amortization, and Rent) for the top 20, middle 47, and bottom 20 of the 87 traditional Costa Vida Fresh Mexican Grill restaurants that operated in the United States for the entire year ending December 31, 2020

• 2020 average, median, highest, and lowest net sales for the 87 traditional Costa Vida Fresh Mexican Grill restaurants that operated in the United States for the entire year ending December 31, 2020

Section I – Background Information

11 Things You Need to Know About the Costa Vida Fresh Mexican Grill Franchise

Opens New Location in Idaho

1.  In late April 2021, Costa Vida Fresh Mexican Grill announced that it would be opening a new location in Blackfoot, Idaho. Keith Crockett and Richard Silcock are partners in the business. At the time of the announcement, the restaurant was being built from the ground up.

2.  Crockett said, “It’s an empty lot right now. We’ve got the footings poured and we’re pouring the floor right now. It’s a ground-up (project) with a drive-thru.” The drive-thru window is a unique feature for the new store. The Blackfoot location will also cater for weddings, graduations, and other occasions. “Small to big caters, we cover it all,” Crockett said.

3.  Aside from that, Crockett says customers can expect the same menu they’re familiar with at other locations, which includes sweet pork, chicken or beef, and black or pinto beans on any entree. Crockett and Silcock own another business that does interior decor work for Costa Vida locations throughout the country. The duo opened a Burley Costa Vida in June 2019. Crockett said they’ve had great success there and that increased his desire to open another location in a town of similar size.

4.  On a final note, Crockett added, “Corporate chains, a lot of times, look for the big cities. They’re looking for the whale instead of the fish. I think smaller towns just like Burley have a lot more to offer than what most corporations think. We’ve proven successful in Burley and with our demographic study of Blackfoot, we feel it needs and wants a Costa Vida and that’s why we chose it.”

Tennessee Franchise Sees an Uptick in Sales Amid Ongoing COVID-19 Pandemic

5.  In early April 2021, the Costa Vida Fresh Mexican Grill franchise in Spring Hill, Tennessee reported that it was thriving despite opening just a year earlier amid the ongoing COVID-19 pandemic. Tim Dene, Costa Vida of Spring Hill’s managing partner, said, “We are trying to give people a little escape. We want to help people to step away from the daily grind and offer them a fresh meal and feel like you might be at the beach.”

6.  Located within the Crossings of Spring Hill shopping center, Costa Vida first began serving customers in the midst of the COVID-19 pandemic starting in July 2020. Now, nearly a year since first opening, the operation has found stable footing with a steady flow of customers. Equipped with a drive through, business continued while keeping physical contact to a minimum. According to Dene, “It has been well received, and we are excited for the summertime. We have seen an uptick in sales. It’s looking good. We are excited.”

7.  With an interior that reflects the sunny California coast with tables that remind visitors of classic surfboards, Dene said the new restaurant offers a setting and menu that complements Tennessee’s warm summer months. “This is Mexican-inspired fresh food,” he added. “We make everything in-house, we don’t use freezers, and we are cooking fresh food and deluging it to customers everyday.”

8.  Owned and operated by three business partners who call Spring Hill home, Costa Vida’s Maury County operation marks the first introduction of the Utah-based franchise in Tennessee. Blake Haines, the franchise holder of the region’s Sonic Drive-In Restaurants, is also a partner. The restaurant is the first to open east of the Mississippi.

9.  Dene said, “It is a brand new concept to the area. We wanted our first one to be our home base, and it has worked out well for us. We felt most comfortable being somewhere to check the pulse of the restaurant and for people to go out and enjoy it.” Dene said that he and his business partners plan to open at least four more locations in Nashville and other areas in the South.

Company History

10.  Costa Vida Fresh Mexican Grill was started in 2003 by JD and Sarah Gardener in Layton, Utah. After returning from vacation in Cabo San Lucas, Mexico, the Gardeners wanted to bring fresh Mexican food to the people of Utah. The Gardeners wanted all the food to be made from scratch, including its tortillas, using only the freshest ingredients.

11.  Following the success of the first Costa Vida, the Gardeners started franchising in 2004. The first franchisees were Sean Collins and Dave Rutter. A few years later, Collins and Rutter purchased Costa Vida from the Gardeners after they successfully opened 13 franchise locations. One of the first things that Collins and Rutter did as the new owners of Costa Vida, was hire a team of franchise veterans to help them grow the company.

12.  In 2011, Abundant Brands merged its Bajio Mexican Grill chain into Costa Vida and rebranded its 16 units. Today, there are Costa Vida Fresh Mexican Grill restaurants across a dozen states and a few in Canada.

Entrepreneur’s Franchise 500

13.  Costa Vida Fresh Mexican Grill did not rank on Entrepreneur’s 2022 Franchise 500 list.

Section II – Estimated Costs

• Detailed estimates of Costa Vida Fresh 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 Costa Vida Fresh 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:  71
• Outlets at the End of the Year:  69
• Net Change:  -2

2019

• Outlets at the Start of the Year:  69
• Outlets at the End of the Year:  58
• Net Change:  -11

2020

• Outlets at the Start of the Year:  58
• Outlets at the End of the Year:  58
• Net Change:  0

Company-Owned

2018

• Outlets at the Start of the Year:  23
• Outlets at the End of the Year:  26
• Net Change:  +3

2019

• Outlets at the Start of the Year:  26
• Outlets at the End of the Year:  39
• Net Change:  +13

2020

• Outlets at the Start of the Year:  39
• Outlets at the End of the Year:  36
• Net Change:  -3

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

• This Item sets forth certain historical revenue and expense information for the 87 Costa Vida Restaurants in operation in the U.S. for the entire 12 months of 2020.

• In addition to the 87 U.S. locations that were open for all of 2020, a total of 4 new Restaurants were opened in the U.S. during 2020, of which 3 are franchised locations owned by non-affiliates of Costa Vida.

• The information related to these 87 U.S. franchise locations is based on monthly profit and loss statements provided to Costa Vida by its franchisees and has not been audited or otherwise verified by Costa Vida.

• Some outlets have sold this amount. Your individual results may differ. There is no assurance that you’ll sell as much.

Part 1 – Fiscal Year 2020 Financial Performance

• The following table represents average 2020 financial performance for 87 Restaurants that operated in the United States for the entire year ending December 31, 2020. While there were 94 Costa Vida restaurants operating as of December 31, 2020, seven Restaurants have not been included because they (i) did not operate in the United States, (ii) did not operate or did not have complete information for the entire year ending December 31, 2020, or (iii) are non-traditional restaurants.

• The data in Part 1 and Part 2 is grouped into three rows for the top 20, middle 47, and bottom 20 locations based on average sales performance.

Averages for Top 20

• Average Unit Volume (AUV):  $2,512,379
• EBITDAR:  $528,794
• COGS (% of AUV):  28.8%
• Repairs & Maintenance (% of AUV):  1.1%
• Labor (% of AUV):  25.3%
• Supplies (% of AUV):  2.1%
• Utilities (% of AUV):  1.8%
• EBITDAR (% of AUV):  21.0%

Averages for Middle 47

• Average Unit Volume (AUV):  $1,475,078
• EBITDAR:  $211,972
• COGS (% of AUV):  29.8%
• Repairs & Maintenance (% of AUV):  1.5%
• Labor (% of AUV):  28.4%
• Supplies (% of AUV):  2.6%
• Utilities (% of AUV):  2.6%
• EBITDAR (% of AUV):  14.4%

Averages for Bottom 20

• Average Unit Volume (AUV):  $766,266
• EBITDAR:  $9,080
• COGS (% of AUV):  30.2%
• Repairs & Maintenance (% of AUV):  1.9%
• Labor (% of AUV):  34.2%
• Supplies (% of AUV):  2.9%
• Utilities (% of AUV):  4.4%
• EBITDAR (% of AUV):  1.2%

Part 2 – COGS and Salaries Combined (% of AUV)

• Top 20:  54.1%
• Middle 47:  58.2%
• Bottom 20:  64.5%

Part 3 – Net Sales

• Data in Part 3 shows the amount of the highest and lowest Net Sales figures for any Costa Vida location, as well as the average across all locations.

• Highest:  $3,394,042
• Average:  $1,550,593
• Lowest:  $350,525
• Median:  $1,485,839

• All percentages given are a percentage of AUV.

• Variations in the sales levels of restaurants may occur due to the traffic where the restaurants are located, the populations and income of the immediate market area, the retail maturity in the area, the amount of competition in the area, and numerous other factors.

• AUV is the average annual Restaurant sales for the applicable stores in each category. AUV includes sales of all food, beverages, promotional items, net of sales taxes, discounts, and coupons.

• COGS includes all food, paper, and distribution costs less supplier rebates.

• Labor includes wages paid to all hourly and management employees working in the Restaurant. Your labor costs could vary depending on the prevailing wage rates in the area of the country in which a Restaurant is located and the specific labor laws.

• Repair & Maintenance costs include the cost of repair and maintenance of your facility and equipment.

• Supplies costs include costs for operational supplies (including small wares and janitorial supplies) and uniforms.

• Utilities include costs for telephone, water, gas, and electricity for the Restaurant.

• Restaurant EBITDAR equals Restaurant-level earnings before interest, income taxes, depreciation, amortization, and rent.

• No amounts have been included for expenses a franchisee will likely incur for owners’ salaries, interest and debt service, legal fees, and income taxes. You will likely have such expenses, and to the extent that a franchisee expects to incur such expenses, the franchisee’s overall expenses will be higher than those reflected in the table.

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