Taco Bell Franchise AUV, Costs & Profits (2023)

This article was updated with the 2023 Franchise Disclosure Document

With over 6,300 franchise-owned restaurants in the US, Taco Bell is one of the most famous fast food restaurant brand in the US, and the world as a whole. That may sound like an easy business as franchisees benefit from an unparalleled brand recognition and customer loyalty.

With an investment cost of $462,413 on average and annual sales of $1,650,000, Taco Bell does seem like a great franchise opportunity. But is this a profitable business? What about the investment payback, as in the time it takes to recoup your investment?

Should you invest in a Taco Bell franchise?

In this article we’re looking at how much you can realistically make with a Taco Bell franchise, how much it costs and whether it’s a good investment as a franchisee. Let’s dive in!

Key stats

Franchise fee$45,000
Royalty fee5.5%
Marketing fee4.25%
Investment (mid-point)$1,684,000
Average sales$1,339,000
Sales to investment ration.a.
Payback period[franchise_value_investment_payback]
Minimum net worth$1,500,000
Minimum liquid capital$750,000
Source: Franchise Disclosure Document 2023

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Taco Bell franchise: an introduction

Taco Bell is an American fast food chain restaurant business. It is a subsidiary of Yum! Brands, Inc. Taco Bell sells Mexican-inspired foods such as nachos, quesadillas, burritos, tacos, etc.

Taco Bell was founded in 1962 by Glen Bell, but Pepsi purchased the brand in 1978 and made it a division of Tricon Global Restaurants, which was later renamed as Yum! Brands, Inc.

The first franchisee store opened in 1964, and by 1967, Taco Bell opened its 100th restaurant.

In 2018, Taco Bell had 7,072 restaurants operating globally (Asia, Europe, the UK, Middle East, North America, and Oceana), of which, 93% of the locations are franchise-owned stores.

Taco Bell franchise: pros and cons

If you intend to open a Taco Bell franchise, you must be aware of its advantages and disadvantages that include:

The Pros:

  • Multiple franchise options: The franchisor grants its franchisees different franchise designs to make the most of the available real estate options, generate extra income streams, and offer excellent services. These include traditional units, in-lines, power pumpers, and Taco Bell Express.
  • Third-party financing: The franchisor offers its franchisees financing through third-party finance vendors for the franchise fee, startup costs, and ongoing costs.
  • Franchise training and support: The franchisor offers it’s franchisees comprehensive classroom and online training to help them establish and run their franchises successfully. It offers them growth strategies and operational training, as well as ongoing support and field operations.
  • Marketing and advertising: Taco Bell has dedicated marketing and advertising techniques to help franchisees promote their franchises and build customer loyalty. These include national media, regional advertising, web development, social media, etc.
  • Strong brand recognition: The franchisor is owned by Yum! Brands, which is popular worldwide and offers its franchisees a strong business concept to attract customers and upsell.
  • Site selection and development: The franchisor offers its franchisees site selection assistance to identify a suitable business location and construct their restaurants.

The Cons:

  • Not a passive investment opportunity: The franchise does not allow for absentee ownership. Franchisees must be active in the day-to-day decision-making and operations of their restaurants.
  • Not a home-based business: Taco Bell franchises cannot be operated from a vehicle or mobile unit. Franchisees are required to have an established office to operate their businesses.
  • No exclusive territory protection: The franchisor does not grant the franchisees the right to operate in a protected territory. Franchisees may face competition from other Taco Bell franchises or affiliated brands associated with the parent company.

How much do you need to invest?

The average investment to open a Taco Bell restaurant is $1,684,000, including the initial franchise fee of $45,000.

Of course, this estimated average may defer depending on many factors (e.g. format of the restaurant, location, etc.). For example, you will invest less for a Custom Facades than the Power Pumpers & In-Lines restaurant format.

FormatLowHighAverage
Traditional units$1,373,600$3,370,100$2,371,850
In-lines & end caps$575,600$1,415,100$995,350
Total$1,683,600
Source: Franchise Disclosure Document 2023

The investment amount does not only includes the initial franchise fee but also the other expenses a fast-food restaurant would need at the starting.

For example, design services fee, first month’s rent, architectural fees, equipment, decor, buildout and construction, business license, permits, and additional funds for 3 months are included in the initial investment amount.

Here’s a summary of the different costs you should pay for:

Type of ExpenditureAmount
Initial Franchise Fee$45,000
Opening costs$1,276,600 – $3,250,100
Grand opening$5,000
Operating expenses$47,000 – $70,000
Total$1,373,600 – $3,370,100
Source: Franchise Disclosure Document 2023

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What is the turnover of a Taco Bell franchise?

We estimate that a Taco Bell franchise makes $1,339,000 in sales per year on average. That’s an impressive number in regards to similar competitors in the quick-service restaurant industry.

Note that Taco Bell doesn’t provide the AUV of its franchised restaurants in its FDD. Instead, we had to estimate AUV by using the franchisor’s total royalty revenue as shown in the table below:

202020212022
Total royalty revenue$322,647,000$415,233,000$519,211,000
Royalty fee5.5%5.5%5.5%
Total revenue of all franchises$5,866,309,091$7,549,690,909$9,440,200,000
Number of franchises6,6796,8637,049
AUV$878,321$1,100,057$1,339,225
Source: Franchise Disclosure Document 2023

How profitable is a Taco Bell franchise?

As per our estimates, a Taco Bell franchise makes $259,000 in profits per year (19% EBITDA margin).

Note that Taco Bell doesn’t provide any detailed information about the financial performance of its franchises in its latest Franchise Disclosure Document. Instead we had to make assumptions which we have summarized below.

Profit and lossAmount% sales
Sales$1,339,225100%
COGS$(334,806)25%
Gross Profit$1,004,41975%
Labor$(388,375)29%
Royalty fee$(73,657)6%
Marketing fee$(56,917)4%
Occupancy$(66,961)5%
Other OpEx$(160,707)12%
EBITDA$257,80119%
Source: Estimates

Is a Taco Bell franchise a good investment?

We estimate Taco Bell has a 8 years payback period, which is very good for the quick-service restaurant industry.

In other words, it takes franchisees and their investors on average 8 years to recoup the initial investment they put down upfront.

Note that this is based on our own profit estimates as well as the average AUV of all franchises. As such, there is no guarantee your Taco Bell franchised restaurant performs as well.

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Disclaimer

Disclaimer: This content has been made for informational and educational purposes only. We do not make any representation or warranties with respect to the accuracy, applicability, fitness, or completeness of the information presented in the article. You should not construe any such information or other material as legal, tax, investment, financial, or other professional advice. Nothing contained in this article constitutes a solicitation, recommendation, endorsement, advertisement, or offer to buy or sell any franchises, securities, or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the franchise and/or securities laws of such jurisdiction.

All content in this article is information of a general nature and does not address the detailed circumstances of any particular individual or entity. Nothing in the article constitutes professional and/or financial and/or legal advice, nor does any information in the article constitute a comprehensive or complete statement of the matters discussed or the law relating thereto. You alone assume the sole responsibility of evaluating the merits and risks associated with the use of any information or other content in this article before making any decisions based on such information or other content.

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