Taco Bell is one of the leading fast-food restaurants focusing on Mexican-American cuisine with a menu that includes tacos, burritos, quesadillas, nachos, and more. The company has 7,100 locations operating across more than 25 countries.
How much will it cost to open a Taco Bell franchise in your town? Expect to invest $1.5 million on the low-end to $3 million per location to go into business with Taco Bell. You’ll also need liquid capital of at least $360,000 and a net worth of $1.5 million to be considered.
Explore for company analysis below Taco Bell to fully understand the costs, fees, and what you can expect life to be like as a franchisee. Check out our franchise quiz to find out if Taco Bell is the right choice for you.
- Financial Requirements and Fees
- Average Sales / Revenue per Year
- Taco Bell Franchise Facts
- Average Profit
- Advantages of Taco Bell Franchise
- Challenges of Taco Bell Franchise
Financial Requirements and Fees
Here is a basic table of what you can expect to invest with Taco Bell. Take note that these numbers are only a base value for what you will need and there may be additional fees and costs to opening a Taco Bell franchise.
|Fees/ Expenses||Financial Amount|
|Liquid Capital||$360,000 – $750,000|
|Net Worth||$1.5 million|
|Total Investment||$1.2 million – $2.6 million|
|Franchise Fee||$25,000 – $45,000|
Here’s a further breakdown of what the costs are to begin your start-up franchise with Taco Bell.
|Name of Fee||Low||High|
|Application & Background Check Fee (per person)||$350||$600|
|Initial Franchise Fee||$25,000||$45,000|
|First Unit Construction Services||$22,250||$27,250|
|Optional Real Estate Services||$0||$37,250|
|Permits, Licenses, Security Deposits||$74,000||$74,000|
|Grand Opening Expense||$5,000||$5,000|
|Additional Funds – 3 months||$40,000||$60,000|
This is another table detailing the other types of fees you might encounter as a franchise owner throughout the year, which includes their franchise fee or some might call their royalty fee.
There are also other expenses such as training people and other miscellaneous things such as lawyers and insurance.
|Type of Fee||Amount|
|Grand Opening Expense||$5,000 to be spent by franchisees for advertising and promoting the opening of the unit.|
|Period Franchise Fee||5.5% of the unit’s gross sales.|
|Period Marketing Fee||4.25% of the unit’s gross sales.|
|Late Charges||The lesser of 18% per annum or the highest rate permitted by New York law, plus the then-customary administrative charge.|
|Back of House (BOH) & Support Services||$2,034 per year.|
|Front of House (FOH) & Support Services||$1,590 per year.|
|All Access Fee||$1,500 per year.|
|Additional Trainee Fee||$350 per person.|
|Training Materials||As established by the franchisor.|
|Cost of Audit of the Franchisee’s Books||Any and all costs incurred in connection with the inspection or audit, including reasonable accounting and legal fees.|
|Transfer Fee||A transfer of all or a portion of the franchisee’s interest in any unit is subject to a transfer fee. Minimum fees are listed below and are subject to increase for costs incurred by the franchisor, including but not limited to outside counsel fees, in connection with reviewing and effecting the transfer.
– 3rd party (non-private equity) transfers: 1-5 units: $7,500/unit; 6 or more units: $1,500/unit- 3rd party transfers involving private equity: Greater of non-private equity transfer fee or $150,000
– Entity restructures: $2,500 total unless changes to the franchise agreements are required, in which case the transfer fee shall be the third party transfer fee.
Additionally, unique or complex restructures may necessitate a higher fee.
Reimbursement of Insurance Expense
|Actual cost of insurance.|
|Successor Fees||For Traditional Units and Power Pumpers, the greater of $22,500 or 1/2 of the current initial franchise fee. For Power Pumpers, In-Lines and End-Caps, the greater of $12,500 or 1/2 of applicable then-current initial franchise fee. Additionally franchisees will be required at their expense to complete an offset, scrape/rebuild, or major remodel of the Unit as a condition to obtaining successor agreement.|
|Extension Fee||$750 for a 3 month extension; $2,250 for a 6 -month extension plus $1,000 for each additional month beyond 6 months.|
|De-Identification Costs||Actual cost of de-identifying unit.|
|Attorneys’ Fees||Prevailing party in any litigation is entitled to reasonable attorneys’ fees and costs paid by the other party. Outside counsel fees may also be due in connection with review and approval of a transfer of interest.|
|Liquidated Damages||If the Franchise Agreement is terminated for certain specified reasons, franchisees must pay liquidated damages equal to the greater of 11% of the unit’s gross sales for the last 12 months of operation or $100,000.|
|Development Fee (Development Agreement)||If franchisees purchase existing Units from the franchisor and enter into a Development Agreement, and fail to timely open required Units, they must pay Taco Bell $45,000 and periodic payments of $4,231 until the actual opening date of each new unit or 10 years from the missed opening date, whichever first occurs.|
Financing isn’t available directly with Taco Bell or Yum! Brands, but they’ll be able to refer you to get financial assistance from third-party vendors and organizations.
Average Sales / Revenue per Year
The average per unit revenue for a Taco Bell is $1.5 million in annual sales. System-wide sales of all stores is $6.9 billion. Each year the chain serves over 2 billion customers.
Taco Bell placed 6th for the top quick-service restaurants in terms of the average annual sales. Between 80% – 90% are operated by franchisees.
Taco Bell Franchise Facts
|Incorporated Name:||Taco Bell Franchisor, LLC|
|Industry||Quick Food Services|
Taco Bell headquarters is located in Irvine, California and they’re a subsidiary of Yum! Brands, who also owns Pizza Hut and KFC. Yum! Brands is a leader in multi-branding, which excels in providing customers with a variety of options and services.
Taco Bell first started back in the 1940s as Bell’s Drive-in, which was hot dog stand believe it or not. Eventually, it became another food stand with hamburgers and hot dogs. In the 1950s, it expanded to two taco stands that were named Taco Tia, eventually leading to El Taco. The first Taco Bell opened in 1962 and continually expanded since then.
How Much Profit Does Taco Bell Actually Make?
The profit margin for Taco Bell franchise owners is 90,000 as an annual salary. This is a pretty decent profit as a quick-service food restaurant owner, however, they still do get affected by lots of fees from the Taco Bell Corporation.
The location of the franchise is located is a big factor in how much profit you can expect to bring in. Taco Bell has 4 types of units that franchise owners have the ability to operate and manage.
Not Sure What Franchise to Start? Take Our 7-Minute Franchise Business Quiz!
The first one is the traditional unit. These units are usually free-standing and permanent buildings. Most of them contain a drive-thru and are most often the Taco Bells that you see everywhere.
The next type is the inline unit. They’re able to be a part of outlets where a lot of potential customers may be. Historically, these locations have operated successfully in shopping malls or airports.
Power pumpers or locations where Taco Bell shares facilities with gas stations and convenience stores are another great method for them to generate revenue. The last type would be an express unit with a limited menu because they’re typically smaller in size, stand-alone, and in large buildings.
These distinct store options offer flexibility in how you want to run your franchise and where it’ll be located. If you’re in a traffic-heavy area with no competition nearby, you’ll be on the top earnings end of the Taco Bell franchises. It is also important to note that heavier trafficked stores may need additional staff and equipment that can cut profitability.
Advantages of Taco Bell Franchise
Taco Bell has some appealing advantages that many other fast-food concepts can’t offer. For example, Taco Bell has partnerships with Grubhub, Lyft, and Forever 21. This expands their marketing potential and keeps up to date with how consumers are getting their food.
In addition, being a subsidiary of Yum! Brands, they’re backed with lots of resources for training, business management, equipment renting, marketing support, and the list goes on. Being aligned with a powerhouse like Yum! Brands may open doors for you to open other franchises as well.
Related Reading: What’s the Total Cost (w/ Fee’s) to Open a McDonald’s Franchise?
They also have an extensive training regime that lasts for a minimum of 7 weeks. This will thoroughly prep franchise owners to efficiently and properly run their franchise with the least problems and understand the business. Even for those that are unfamiliar with running a business, Taco Bell provides adequate training.
Furthermore, Taco Bell focuses on Mexican-American cuisine and that is a great niche for a quick-service restaurant since a majority of the competition are sandwiches and fries. The burritos, nachos, and quesadillas offer a different taste and variety for customers. The profit margin on these foods are consistently strong.
Taco Bell also has creative menu options and frequent promotions as well so the food that they sell can adapt to what’s popular with consumers. They also make changes to their menu constantly to keep up with new trends and keep customers coming back for more. They have fan favorites and certain beverages that you can’t find anywhere else like Baja Blast from Mountain Dew.
- Partnerships with big organizations.
- Supported by a creative and effective marketing team.
- Niche food that offers diversity and creative flavors.
- Great Profit Margin.
- Menu changes to keep customers interested.
Challenges of Taco Bell Franchise
Being a part of the quick-service restaurant franchise does come with some challenges and obstacles.
The first thing to call out is the high initial investment. This is no small investment compared to other rising food concepts. You’ll need to invest between $1 million and maybe to $2 million depending on where your franchise is located. They also have a royalty fee that’s over 5%, which is more than a majority of what other franchises charge.
Taco Bell headquarters also expects franchise owners to be on the front lines and working hands-on in their shops, so expect to be actively participating in the day-to-day business operations.
Related Reading: What’s the Real Cost (w/ Fees) to Open a Jersey Mike’s Franchise?
Their interview process is quite rigorous as well. Even though the the company offers training on how to manage the business and run the store, Taco Bell still expects people with experience in prior restaurant management experience. They’re not looking to train someone from the ground up to be a part of their franchise network. They want proven veterans in the field!
There isn’t any protection for territory arrangements either, which means you might be put in a place that may already have a Taco Bell nearby. This can be frustrating as the owner of a successful franchise location who has sales eaten away by their own concept.
- A bit high of a financial requirement.
- Tough interview process.
- No territory protection.
Is the Taco Bell Franchise Best for you?
Entering a franchise network is a big deal. It requires investment in your time and effort, money, and more. Before you decide to create a Taco Bell Franchise, let’s take a look at the main things to consider.
Taco Bell’s ideal franchise owner has to have had prior experience managing or working in a restaurant, or they have experience working with branding or franchises. You’d have to be working hands on as well in your store. The company expects you to be there for the day to day operations. If this doesn’t match your goals, don’t apply!
Related Reading: How Much Does It Really Cost (w/ Fees) to Open a KFC Franchise?
Other than that, you’ll need decent finances to afford their initial set up package and be prepared for their fees.
On the other hand, Taco Bell does have a great profit margin with franchise owners making around $90,000 annually on average, which is a decent salary range. They rank high for the top selling quick service restaurants. Their speciality of Mexican-American cuisine also offers a change in taste in comparison. Once you get over the initial hurdle and you can manage the fees, you’ll be off on a steady roadmap for success if you follow the plan. You can learn more about Taco Bell franchise opportunities domestically and internationally at their corporate website.