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 fee | 5.5% |
| Marketing fee | 4.25% |
| Investment (mid-point) | $1,684,000 |
| Average sales | $1,339,000 |
| Sales to investment ratio | 0.8x |
| Payback period | 8 years |
| Minimum net worth | $1,500,000 |
| Minimum liquid capital | $750,000 |
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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:
Pros
- Taco Bell is a well-known and respected brand, which can help to attract customers to the franchise
- Taco Bell provides support to its franchisees, including marketing and training assistance, which can help to improve the chances of success for the franchise
- Absentee ownership is allowed even though technically the franchisor requires hands-on operation from the franchisee. This means, a Taco Bell franchise can be your passive investment which you can engage in other activities
Cons
- As a franchisee, you will be required to follow the policies and procedures set by the parent company, which can limit your ability to make decisions about the operation of your franchise unlike some other franchise opportunities
- At 5.5%, the ongoing royalty fee is rather high. Additionally, there is an ongoing advertising fee of 4.25% which you must take into account
- The franchise fee is also on the higher end at $45,000
- Taco Bell requires each franchisee to have 25 employees, which means that the overhead cost is higher than normal
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.
| Format | Low | High | Average |
|---|---|---|---|
| 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 |
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 Expenditure | Amount |
|---|---|
| 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 |
Taco Bell Franchise Business Plan
All the stats: startup costs, profits, breakeven, etc.
5-year financial projections built with the FDD
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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:
| 2020 | 2021 | 2022 | |
|---|---|---|---|
| Total royalty revenue | $322,647,000 | $415,233,000 | $519,211,000 |
| Royalty fee | 5.5% | 5.5% | 5.5% |
| Total revenue of all franchises | $5,866,309,091 | $7,549,690,909 | $9,440,200,000 |
| Number of franchises | 6,679 | 6,863 | 7,049 |
| AUV | $878,321 | $1,100,057 | $1,339,225 |
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 loss | Amount | % sales |
|---|---|---|
| Sales | $1,339,225 | 100% |
| COGS | $(334,806) | 25% |
| Gross Profit | $1,004,419 | 75% |
| Labor | $(388,375) | 29% |
| Royalty fee | $(73,657) | 6% |
| Marketing fee | $(56,917) | 4% |
| Occupancy | $(66,961) | 5% |
| Other OpEx | $(160,707) | 12% |
| EBITDA | $257,801 | 19% |
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.
Taco Bell Franchise Business Plan
All the stats: startup costs, profits, breakeven, etc.
5-year financial projections built with the FDD
Excellent 4.8/5 based on 70 reviews
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.
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