For Taco John’s restaurant, a bigger, bolder, and better opportunity comes with a steep price tag for investment. With the tagline, “The fresh taste of West-Mex”, this fast-casual chain serves Mexican cuisine in 380 stores across 22 states in the country.
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How much will it cost to open a Taco John’s?
You’ll spend $1,057,000 to $1,599,000 to operate this fast-casual restaurant. You’ll need a net worth of $1,000,000 and a liquid capital of $500,000 to make every day Taco Tuesday.
This fast-food brand has proven to be profitable as the top 25% of its location generated an average revenue of at least $1,570,000 at a 4.8% compound annual growth rate. Nonetheless, the ultimate question remains: Is the cost to open taco John’s still worth it? Read my perspective below.
Financial Requirements and Fees
Below is an overview of the financial requirements and fees that you need to understand before joining Taco John’s as a franchisee:
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|Financial Requirements and Fees
|$1,057,000 to $1,599,000
|Initial Franchise Fee
|$10,000 to $25,000
If you’re unfamiliar with the terms above, let me explain:
- Net worth refers to the value of all your assets in both financial and non-financial aspects.
- Liquid capital, on the other hand, refers to the amount of your on-hand cash that you can use anytime for your business ventures or investments.
- Total Investment is the total money you would need to spend to open a franchise and continuously run it.
As a of Taco John’s franchisee, you would need to invest $1,057,000 to $1,599,000. The total startup cost falls in line with similar concepts like El Pollo Loco. This explains the financial means of a million worth in assets and half a million worth of liquid capital for a franchise application to be considered.
Nonetheless, the good news Taco John’s does have a lower cost franchise fee. You only need to pay $25,000 to sign a franchise agreement that lasts for 20 years given that you’re a qualified applicant. If you’re already a Taco John’s franchisee, the initial franchise fee for subsequent locations would only cost $20,000. The fee for non-traditional locations like college campuses or airports the fee is only $10,000.
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Other than the mentioned fees above, you also need to pay ongoing fees like the royalty fee. For free-standing and end-cap locations this fee is 4% of your net sales. For non-traditional locations, it would comprise 6% of net sales. On the other hand, the advertising and marketing fee is worth 6% of net sales for traditional locations and 4% of net sales for non-traditional locations.
When did the first Taco John’s open?
In 1968, John Turner operated a small taco stand known as Taco House in Cheyenne, Wyoming, and immediately attracted customers in the locale with the interesting taste of the products of his chosen cuisine that appealed to both Generation X and Millennials.
On March 14, 1969, the first “Taco John’s” branded restaurant opened as they entered the world of franchising and got their brand renamed after the founder.
What is the net worth of Taco John’s?
As of 2021, the companies net-worth is $106.8 million dollars with its top 25% performing locations earning an average revenue of $1.57 million dollars.
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Franchising paved the way to the phenomenal success of Taco John’s. From a small taco stand, Taco John’s grew as one of the largest Mexican quick-service restaurant brands in America with nearly 400 stores in 23 states and more or less 8,000 employees (as of 2019).
Is Taco John’s in California?
Unfortunately, no. Well, not YET. California is among the 34 states that don’t have a single Taco John’s restaurant in their area. It’s only available in 22 states and the top three states with the most Taco John’s location are Nebraska (40 locations), Minnesota (59 locations), and Iowa (57 locations).
Though Cheyenne, Wyoming is the hometown of the restaurant, it’s only the third city with the most number of Taco John’s in the United States at only 5 locations. If you wanna go somewhere with a Taco John’s in nearly every corner of the place, you should consider visiting Sioux Falls, South Dakota because they have 9 locations there.
How Much Profit Does Taco John’s Franchisee Make Per Year?
Below is a brief analysis of the profit that a Taco John’s franchisee would make per year based on the performance of the restaurant brand in the market.
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|Company revenue/sales per year
|Number of Units
|At least 380 stores
|Average Gross Revenue per store
|$281,052 to $1,570,000
|Industry Average Profit Margin
|Projected Annual Profit per store
|$25,294.68 to $628,000
Taco John’s is a Mexican quick-service restaurant known for its bold flavors and fresh innovations. My personal favorite on the menu is “Six Pack and a Pound” offering. This includes six beef tacos and a pound of potato ole’s.
Taco John’s targets experienced entrepreneurs who can invest millions in their businesses. The lowest amount you can invest is $1,057,000 while the concept tops out at $1,599,000.
Unfortunately, the calculations showed that the amount a store can earn barely surpassed the capital. As of 2021, The system-wide sales of the restaurant reached $106,800,000. Currently, the brand has more than 380 stores in 22 states so that means each store may only earn $281,052 on average.
The top 25% performing locations of Taco John’s earns a gross revenue of $1,570,000 which is somewhere between the capital range. Given that the fast-food restaurant industry has only a 9% profit margin max, a franchisee can may only profit $25,294.68 per year after taxes, wages, rent, and all other expenses. This would be disappointing performance if you only operate one unit.
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In this section, I will explain the advantages and disadvantages of owning a Taco John’s franchise. I hope this will help you further decide if its potential for profitability is something you would look forward to in your investment.
- Iconic taste of Mexican cuisine – Taco John’s prepares its foods from scratch with only the top-quality and fresh ingredients, producing an iconic taste that appeals to the Generation X and Millennials. Their remarkable flavors are the reason why it managed to transform a single taco stand into a multi-million dollar franchise company. The early franchisers of this brand were also its customers who requested the owner to open an outlet in their area. In fact, in 1997, Paul Fisherkeller, the CEO of Taco John’s International at that time made sure that the taste of the products remained consistent throughout the chain. This was a wise move.
- Well-established demand in the market – a Taco John’s franchisee no longer has to worry about finding customers because the brand has a cult-like following in the Midwest. Taco John’s has three strong dayparts: People visit the outlet usually at lunch (36.98%) but they also prefer going there for dinner (26.17%). For people who love heavy breakfasts, they also dine in to fill their tummies early in the morning (9.47%). Also, did you know that they coined the iconic phrase Taco Tuesday?
- Strong support system – Taco John’s recognizes the importance of the franchisees in their growth and they have been actively involving them in the development of the brand. For first-time franchise owners, they offer 4-6 weeks of training from restaurant and franchise experts to make sure that you are equipped with the knowledge and skills needed to run the business. Taco John’s commitment is manifested from real estate and construction support to top-tier marketing strategies.
- Menu profitability – There’s a 9% profit margin of the restaurant industry. Fortunately, the taco shop concept operates at a higher-margin food cost level than most restaurants. You can expect to 43% margin on tacos. Of course, you’ll still need to cover the overhead of wages, royalty fees, and rent. But tacos overall are a profitable menu concept.
- Taste inconsistency – Although Fisherkeller ensured that the entire chain is consistent with the taste of the products they serve, Taco John’s not exempt from bad food reviews online. Fisherkeller’s strategy was only on the distribution process of the raw materials as well as the organization of the menu. The preparation sector was out of his control because the management of the store may vary in every location. It is important to uphold this value. As a franchiser owner this is something you should be concerned about.
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- Slogan Trademark issues – An eye-catching slogan is critical to the establishment of a brand and that is why Taco John’s has been fighting for the preservation of their iconic phrase Taco Tuesday. They struggled to uniquely own it as the exclusivity of its term reduced. They have to come up with another catchphrase that would really capture the image of the brand and patent it to protect its identity.
- Domestic and global expansion – Taco John’s only operates 22 states right now. As they welcome new franchisees in their community, they may introduce the brand to other states where they haven’t established a presence yet. So far, this restaurant is only prominent in the Midwest United States. I’ve been looking for a list of their global locations but it seems like they have not explored outside the country yet. Bottom line, there’s plenty of room for growth of this concept.
- Inclusivity of Target Applicants – Taco John’s ideal franchisee is a special person. They require people to have at least a million worth of assets and an extensive entrepreneurial experience, especially in the restaurant industry. They have been partnering with businessmen who are interested in multi-unit development and real estate as a part of their business model strategy. These ideals can be a bit intimidating especially to those who have never franchised before.
- Record of Poor Management Review – This threat does not necessarily represent the brand as a whole because it may vary depending on the quality of one’s managerial skill but the presence of the reviews indicating that Taco John’s have poor management may scare away future employees. Mismanagement is a threat to any restaurant franchise.
- Strong competitor’s brand presence – There’s a lot of competition when it comes to Mexican food. Off the top of my head you’ve got Chipotle, El Pollo Loco, Taco Bell, and of course the ma-and-pa taco shops. At some point these competing concepts will begin to cannibalize each other.
Is the Taco John’s Worth the Cost to Invest?
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The Taco John’s franchise is not for everyone. No franchise opportunity is! The corporate offices prefer to partner with entrepreneurs with a million worth of assets and proven themselves in the restaurant industry. Put in another way. They want franchisees with deep pockets and a track record of success.
Nonetheless, considering how massive the Mexican restaurant industry is and how well-established their reputation has been, Taco John’s could be worth investigating further. If you have what it takes to make it a Taco Tuesday, then this is your sign to get more information about the business by reviewing the Financial Disclosure Documents.