Cafe Rio Mexican Grill began in southern Utah and has grown into a well known Mexican meals restaurant with over 150 places all through the USA. This Mexican grill is thought for recent, by no means frozen components, scrumptious meals, and a traditional Tex-Mex aesthetic that makes you’re feeling at dwelling. The menu consists of burritos, wraps, tortillas, enchiladas, tortilla chips, salsa and queso.
This restaurant provides franchising alternatives to the suitable buyers, however is investing in Cafe Rio a win? This text covers all the things about this Tex-Mex franchise, together with the Cafe Rio vs. Costa Vida lawsuit. Right here, we talk about the prices, charges, and challenges of operating a Cafe Rio location. To be matched with a franchise alternative that matches your pursuits and price range, take our 7-minute quiz.
What Is Cafe Rio?
Cafe Rio is a Textual content-Mex restaurant specializing in Northern Mexico and Southern Texas recipes with among the surrounding space’s distinct flavors for good measure. This chain began in 1997 by founders Steve and Patricia Stanley. The couple dedicated themselves to offer genuine, high-quality meals, and that dedication has held robust ever since.
Whereas Cafe Rio got here beneath new house owners in 2004 and altered palms a number of occasions within the following years, their dedication to recent meals remained the identical. Recipes are ready every day, which means there’s no frozen, reheated or pre-made meals at this Mexican Grill.
Franchise Details
Cafe Rio could have began in Utah, however this restaurant has expanded to 157 places since December 2022, with a number of eating places making their approach to the East Coast. Utah nonetheless boasts essentially the most eating places at 49, however Arizona is available in at an in depth second with 46.
Franchise Details
| Yr Based: | 1997 |
| Complete Models: | 157 |
| Business: | Meals and Beverage |
Is Cafe Rio Mormon Owned?
As a result of Cafe Rio is a franchise, the percentages of a person location being owned and run by members of The Church of Jesus Christ of Latter-Day Saints (LDS Church or Mormon Church, extra generally) is comparatively excessive. Whereas the enterprise does have roots in Utah, it doesn’t disclose any ties on to the LDS Church, nor does its latest proprietor, Freeman Spogli & Co., disclose any LDS Church affiliations.
Whereas one founding father of Freeman Spogli & Co. has been a fundraiser for conservative political teams over time this doesn’t imply the corporate is carefully affiliated with the Mormon Church. There are at present no direct ties between the LDS church and Cafe Rio that we will discover apart from its location in Utah and recognition among the many locals, which is a purely tangential connection at finest.
Is Cafe Rio greater than Costa Vida?
Cafe Rio and Costa Vida obtained their begin in Utah inside six years of one another, with Cafe Rio opening in 1997 whereas Costa Vida opened in 2003. Whereas one may argue whether or not or not these eating places serves really genuine Tex-Mex delicacies, their disagreements got here to a head in 2005. First, cafe Rio sued Costa Vida (then Costa Azul) for all the things from recipe theft and structure stealing to diner card idea theft. Whereas the businesses settled the lawsuit privately, this drummed up the idea of a rivalry between the 2 eating places that stick with it domestically by way of their buyer base.
Costa Vida is a barely smaller franchise than Cafe Rio, with solely 100 places. Whereas each eating places provide Mexican-styled meals, Costa Vida lives as much as its title and leans towards a seashore aesthetic, providing tropical drinks alongside traditional Tex-Mex meals. In the meantime, Cafe Rio sticks extra to a Rex-Mex aesthetic by way of and thru, specializing in burritos and wraps.
Typically, the 2 franchises are of comparable measurement and recognition in Utah, and the competitors stems from them occupying the identical meals and beverage area of interest.
Who Owns Cafe Rio?
Whereas the former president of Burger King purchased Cafe Rio’s authentic 6 places, turning it into the franchise we all know at present, Burger King doesn’t personal the franchise. As an alternative, Cafe Rio’s majority shareholder as of 2016 is Freeman Spogli & Co., a personal fairness agency. However, in fact, since many places are a part of franchise agreements, particular person franchise places are owned and operated by franchisees.
Freeman Spogli & Co. doesn’t personal Burger King however has held inventory in different massive corporations, together with PETCO and El Pollo Loco. Cafe Rio was not the primary restaurant acquired by this fairness agency and is unlikely to be the final, as the corporate has a formidable record of investments.
Monetary Necessities and Charges
Now that we’ve coated the fundamentals of Cafe Rio let’s dive into the monetary necessities and costs related to franchising one in every of their places. Remember the fact that Cafe Rio doesn’t simply present this data to non-franchise candidates, so it’s a good suggestion to evaluation the up to date phrases earlier than making any monetary settlement or signing a contract.
Let’s cowl the bottom monetary necessities, charges, and common investments that go into beginning a Cafe Rio from the bottom up.
Monetary Necessities
| Liquid Capital: | N/A |
| Web Value: | N/A |
| Complete Funding: | $659,500 to $1,025,000 |
| Franchise Charge: | $30,000 |
As a result of Cafe Rio is just not forthcoming about their franchise settlement to non-franchisees, the record of necessities for franchise approval is restricted. Whereas the liquid capital and internet price required to begin a Cafe Rio location are unknown, the common price of making a single restaurant is between $659,500 to $1,025,000. This price consists of the $30,000 franchise price, which is concerning the common for eating places on this class.
Do not forget that the entire funding relies upon primarily on exterior components and should not embrace issues like actual property buy and approval or furnishings and signage for every location. When approaching franchise prices, it’s finest to estimate larger somewhat than decrease for preliminary investments, as this permits for a margin of security on both facet of your preliminary funding.
Further Charges
| Commercial Charge: | 2% |
| Royalty Charge: | 6% |
As famous above, Cafe Rio doesn’t present data on their franchise charges to non-approved buyers, which means there are seemingly extra charges than the usual commercial and royalty price. Usually, 5% to 7% is a typical royalty price for a restaurant franchise, placing Cafe Rio securely within the center. Nonetheless, keep in mind that the two% further commercial price brings this complete proportion to eight% of complete earnings. Whereas promoting advantages what you are promoting, this could considerably influence your backside line.
It is best to count on further charges for a degree of sale system (POS), coaching, supplies, stock necessities, and yearly conventions, ought to the settlement require these things. Whereas concrete numbers on these matters aren’t out there for Cafe Rio, they’re widespread amongst franchises, particularly restaurant franchises, and are price contemplating in your closing price range.
Common Gross sales / Income per Yr
| Systemwide Annual Gross sales: | $273,000,000 in 2020 |
| Common Annual Gross sales per Unit: | $2,000,000 in 2017 |
| Common Franchisee Revenue: | N/A |
As a result of there’s no more data to work with, we can’t instantly examine the cost-benefits of beginning a Cafe Rio. Nonetheless, a fast take a look at their common annual gross sales and income may give some perception into the corporate. In an interview in 2022, Cafe Rio CEO Steve Vaughan famous that 20% of the corporate’s gross sales come from digital orders, outlining the significance of their to-go and order on-line options.
Essentially the most up-to-date revenue report for the corporate is from 2020 and lists earnings at over $273 million. For comparability, in 2021, Costa Vida made solely $112 million in earnings. So whereas a direct competitors comparability places Cafe Rio forward, with out extra details about the common yearly price of proudly owning and working a Cafe Rio location, it’s arduous to make a particular assertion on the funding price of a Cafe Rio location.
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Buyers trying into this franchise ought to evaluation all phrases and circumstances carefully and take the time to calculate every location’s common price and revenue relying on their age, recognition, location, and native competitors. The extra monetary data you could have earlier than investing in a franchise, the higher you’re ready for the sudden.
How A lot Revenue Do Cafe Rio Franchisees Make Per Yr?
Cafe Rio has a rewards program.
Whereas a tough estimate of annual gross sales per unit involves $2 million or extra in 2017 foreign money, since we don’t know each price, we can’t calculate how a lot yearly revenue every franchise proprietor makes. Nonetheless, if we work off solely the royalty and promoting price and examine it to the annual unit gross sales, every unit sends $160,000 of its earnings again to the franchise proprietor. This assumes the royalty and advertising charges are the one direct percentages despatched again to the corporate.
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In fact, it’s implausible the remaining cash goes on to the franchise proprietor. On high of this, the common earnings for a franchise proprietor range relying on the franchise, the age of the restaurant, and extra exterior components. With such restricted data, it’s tough to inform if Cafe Rio is a quick turnaround funding or takes for much longer to show a revenue, just like our evaluation of IHOP.
Benefits of Cafe Rio
A number of the benefits of franchising with Cafe Rio embrace the next:
- Recent Substances: Cafe Rio prioritizes high-quality meals, which means buyer satisfaction is one in every of its high priorities. This high quality promise seemingly signifies their suppliers are well-vetted, which is an actual plus for any restaurant proprietor.
- Model Reputation: Cafe Rio is extremely widespread in Utah and the encircling states, which means the model carries its recognition to new places. Whereas not each location has the identical pull, Cafe Rio’s model id packs weight within the Tex-Mex trade.
- Native Rivalry: Whereas there’s such factor as unhealthy press, Cafe Rio vs. Costa Vida carries on as an area debate about one of the best place to get Mexican meals. By taking part in off this pleasant competitors, Cafe Rio continues to outpace Costa Vida in product sales numbers, which means the competitors is just not hurting their earnings.
- Common Royalty Charges: Though there isn’t a direct details about different charges related to franchising a Cafe Rio location, the 6% royalty price is effectively throughout the averages for this franchise, which means you’re not spending an extreme sum on royalties proper out the gate.
Challenges of Cafe Rio
Cafe Rio comes with its challenges as a franchise possibility, together with:
- Restricted Data: Even with a wealth of on-line details about the corporate, Cafe Rio is kind of guarded about their franchisee necessities. From liquid funds and internet price to hidden charges and extra prices, there’s a void of knowledge that might decide if this franchise is definitely worth the funding.
- Native Enchantment: Cafe Rio performs effectively in its dwelling territory. Nonetheless, establishing a brand new Cafe Rio in Utah will increase competitors throughout the model, and shifting out to a different state means much less buyer energy to jumpstart a brand new franchise location. So whereas the native enchantment has its upsides, it could successfully restrict new restaurant places.
- Recent Recipes: Whereas recent components and recent recipes sound like a unbelievable promise, that signifies that each member of your crew must know the way to put together fundamental recipes, and should you run out throughout a rush, you must make the components from scratch, no saved backups or frozen rooster to save lots of you throughout the lunch rush. This could stress franchisees with restricted restaurant expertise or these used to shelf-stable stock related to quick-service eating places.
Is Cafe Rio Proper for You?
Whereas Cafe Rio could boast model id in Utah and the encircling areas, the restaurant lacks concrete data for potential franchisees. Nonetheless, the data offered does present common prices in comparison with different eating places in the identical class. Nonetheless, with out correct data on prices, charges, and common annual franchisee earnings, it’s tough to evaluate the worth of a Cafe Rio location.
As with all franchise, funding requires analysis. With Cafe Rio, one of the best plan of action is to learn the phrases of their newest franchise settlement carefully and examine it with different franchises in the identical area of interest, comparable to different restaurant franchises, with extra data out there.
Are you interested by studying extra about franchising a restaurant or different enterprise? Take a look at another franchises like Taco John’s on our website to learn how Cafe Rio compares throughout the board.
