Operations

Taco John's a growing QSR player in Mexican segment

Taco John's has 375 units, of which seven are corporate owned. With a new store design, savvy multi-unit franchisees and a winning corporate team, the brand might just be coming to a town near you.

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June 12, 2023 by Mandy Wolf Detwiler — Editor, Networld Media Group

In the Mexican QSR segment, there aren't many players in the big leagues. That's what has Minneapolis, Minnesota-based Taco John's on a roll. With a svelte new store design and an eye on growth, the legacy brand is here to play.

Taco John's was founded in 1969 in Cheyenne, Wyoming, when a couple of businessmen who knew nothing about the restaurant business decided they wanted to start selling tacos at an annual week-long festival. They decided to build a taco shop and were successful before deciding to franchise.

In the first 30-35 years of development, the approach was to enter small markets with independent franchisees in the upper Midwest. Restaurants were built as modular trailers, put on railcars and shipped to rural markets in Nebraska, Minnesota and Iowa.

The company is still family owned, according to Brooks Spiers, VP of franchise development at Taco John's. The bulk of the brand's home offices were recently relocated from Cheyenne to Minneapolis, Minnesota, and a brand-new support center was built. The reason for the move, Spiers said, is that about half of Taco John's locations sit within a six-hour radius of Minneapolis.

"Slowly over the years we've started to expand into new markets and I think the biggest push was about four years ago," Spiers said. "We rolled out a brand-new prototype. A much better-looking, younger-looking, cooler-looking building. We have announced a major remodel plan and we're currently remodeling all of our franchise locations throughout the country with a new look."

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Spiers said there's also been a push to partner with sophisticated, multi-unit operators and those franchisees who can buy a territory and build multiple locations. Taco John's has also moved out of the upper Midwest into more states across the country.

Today, Taco John's has 375 units, of which seven are corporate owned. Two corporate stores were constructed in Minneapolis last year, and they're "moving in that direction," Spiers said, "but our focus has always been supporting franchisees and not necessarily running a large group of corporate locations."

The plan is to add two to three corporate locations over the next few years.

New store design

Taco John's Drive-Thru Ole', its latest store design, was released during the heart of COVID, and it's an all-drive-thru model designed for convenience and speed. Drive-thru accounted for 70% of the brand's business before COVID, and Taco John's had to convert 100% of their restaurants to drive-thru during the pandemic.

Drive-Thru Ole' has just 1,100 square feet of space and is half the cost of a traditional Taco John's store. It requires half the amount of land, significantly less employees and is half the cost to build. Eighty-three percent of Taco John's food is consumed outside of the restaurant, Spiers said, "so we're able to capture a large bulk of our sales at a fraction of the cost to build a restaurant."

The smaller units open up smaller markets for the brand and makes it easier to find real estate in cost-prohibitive markets. They can go in and buy a third or a half of an acre and build a restaurant that's roughly 1,100 square feet for half the cost of a traditional store.

The units are built by Extreme Cubes out of Las Vegas. The building is customized in their warehouse and shipped via truck. It's already cut out with HVAC, electrical, plumbing and a hood. The building is then put together on the site, the equipment is installed, the building is painted and it's ready for a grand opening.

Two are open in small towns in South Dakota, "and they are exceeding all expectations we ever had from a revenue standpoint," Spiers said. "When we look at small town America, it's a lot different today than it was 20 or 30 years ago. People eat out all the time and there's so much more disposable income in small markets, but you don't have the plethora of restaurants that you do in larger markets. So, we think these small markets have a demand for good food and there's not a lot of competition."

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Competition

In the QSR space, Taco Bell and Del Taco are competitors, "but the Mexican QSR space is unique in that it's the only space in the entire food sector that doesn't have multiple large players," Spiers said. "If you look at burgers, there's four or five large players, with pizza there's four or five. But if you look at Mexican QSRs, it's Taco Bell and then it's us aiming for that second spot to be the No. 2 player in size."

Spiers said what differentiates Taco John's from other brands in the segment is that a lot of its food is fresh. For instance, tortilla shells are fried every day in stores and steak is cut fresh daily, "which leads to a fresher, better product than our competition."

As the brand grows, it's able to maintain continuity because the franchisees who have joined the brand are large, multi-unit operators of other brands. Spiers said a year ago, Taco John's snagged the largest Wendy's franchisee in the country to build 50 locations. It also brought in a large Popeyes and Burger King franchisee to build another 15 units.

"We're bringing in sophisticated operators who have a lot of skill sets," Spiers added. "They also understand that just because they're successful and they've been successful at running other brands that they still have to follow our systems and processes … and be more focused on growth versus recreating the wheel and alter things that we've been successful with for the last 53 years at and running great restaurants."

Growth

Taco John's plans to open 22-25 locations in 2023, with eight already open. There are another 20-25 units expected to open in 2024. A first location in Kentucky will open in June with another two more scheduled to open next year, and Ohio is also a growth market, with one open and another three to five units expected in both Cincinnati and Dayton. That same group is eyeing Southern Indiana. Three Taco John's have opened in Clarksville, Tennessee, with another three in Michigan. Six have opened in Milwaukee.

Finding real estate has been one of the biggest challenges for the brand. "Trying to find a piece of dirt that economically makes sense to build a restaurant" has been challenging, Spiers said. "Once you find the dirt, it's finding a general contractor. While things are easing up, it's still a tough market to find GCs. It's still a tough market to get concrete (and) lumber. We've actually run into a lot of problems recently just having the city having a tough time just being able to hook up power to our buildings."

Once a new restaurant is open, staffing continues to be challenging as it is for many in the restaurant industry. Taco John's is starting to take advantage of some new hiring apps, including an AI version with a simple text back and forth with a potential employee. "What does the newer employee want and how can we hold on to them as long as we can?" Spiers said.

Spiers said he doesn't think the brand is growing too big too fast because of the quality of the franchisees who have joined the system. They're trained on how to run Taco's John's systems, but don't have to be taught how to run great restaurants, as they're all multi-unit operators of other brands.

About Mandy Wolf Detwiler

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Mandy Wolf Detwiler is the managing editor at Networld Media Group and the site editor for PizzaMarketplace.com and QSRweb.com. She has more than 20 years’ experience covering food, people and places.
 
An award-winning print journalist, Mandy brings more than 20 years’ experience to Networld Media Group. She has spent nearly two decades covering the pizza industry, from independent pizzerias to multi-unit chains and every size business in between. Mandy has been featured on the Food Network and has won numerous awards for her coverage of the restaurant industry. She has an insatiable appetite for learning, and can tell you where to find the best slices in the country after spending 15 years traveling and eating pizza for a living. 

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