Taco Cabana Logo

Taco Cabana

Taco Cabana Franchising, Inc.
https://www.tacocabana.com
1-877-FTC-HELP
1077 Central Parkway, Suite 600, San Antonio, Texas 78232

Initial Investment Range

$1,266,500 to $2,776,200

Franchise Fee

$25,000 to $85,000

The franchisee will operate a restaurant under the name “Taco Cabana” which features premium quality traditional Mexican-style food, including tacos, fajitas, burritos, flautas and other food and beverage items.

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Taco Cabana March 25, 2025 FDD Risk Analysis

Free FDD Library AI Analysis Date: July 16, 2025

DISCLAIMER: Not Legal Advice - For Informational Purposes Only. Consult With Qualified Franchise Professionals.

1

Franchisor Stability Risks

Start Here
Total: 10
3
4
3

Disclosure of Franchisor's Financial Instability

High Risk

Explanation

The franchisor, Taco Cabana Franchising, Inc. (TCFI), is a recently formed entity (Jan 2023) and is financially dependent on its parent. Critically, its financial statements explicitly note that TCFI receives management and operational services from an affiliate but has not recorded any expense for them. This means the stated profitability is not representative of its true financial condition as a standalone business, posing a significant risk to its ability to support you long-term.

Potential Mitigations

  • An accountant's assistance is crucial to analyze the franchisor's financials and assess the potential impact of the unrecorded affiliate service costs.
  • A discussion with your attorney is necessary to understand the legal implications of contracting with a financially dependent entity.
  • Engaging a business advisor can help evaluate if the franchisor's support structure is sustainable given this financial arrangement.
Citations: Item 1, Item 21, Exhibit E (Notes to Financial Statements)

High Franchisee Turnover

Low Risk

Explanation

This risk was not identified in the FDD package. The data in Item 20 shows a static franchised system with no turnover in the last three years and a small net decline in company-owned stores. High turnover can be a red flag indicating systemic problems, franchisee dissatisfaction, or lack of profitability. Constant monitoring of system health through communication with other franchisees is important for any franchise investment.

Potential Mitigations

  • You should discuss the static nature of the franchise system and the decline in company stores with your business advisor.
  • It is valuable to ask current franchisees about their satisfaction and profitability during your due diligence calls.
  • Your accountant can help you model different scenarios to understand the financial implications if the system were to experience future instability.
Citations: Item 20

Rapid System Growth

Medium Risk

Explanation

The franchisor is a new entity that has been franchising since March 2023 and has not sold any new franchises. While its parent company and management are experienced, rapid growth could strain its ability to provide adequate site selection, training, and operational support. The franchisor's own financial statements do not reflect the full cost of its support infrastructure, which creates uncertainty about its capacity to scale support effectively if growth accelerates.

Potential Mitigations

  • A business advisor can help you question the franchisor about their specific plans to scale support services in line with future growth.
  • You should speak with the existing legacy franchisees to gauge their view on the franchisor's current support capabilities.
  • An accountant should review the parent company's resources to assess if they can adequately backstop a rapid expansion.
Citations: Item 1, Item 11, Item 20, Item 21

New/Unproven Franchise System

High Risk

Explanation

The franchising entity, TCFI, was formed in January 2023 and has never operated a Taco Cabana restaurant itself. While the brand is long-established and management is experienced in the industry, you are contracting with a new, unproven franchisor entity. This structure presents risks related to the franchisor's ability to provide effective support, as its own operational track record as a franchisor is nonexistent and it relies entirely on affiliates.

Potential Mitigations

  • A thorough review of the management team's direct experience in franchising with a business advisor is essential.
  • Speaking with the system's few existing franchisees about the quality of support under this new corporate structure is crucial.
  • Your attorney should analyze the specific obligations of the new franchisor entity versus its more experienced affiliates.
Citations: Item 1, Item 2, Item 20, Item 21

Possible Fad Business

Low Risk

Explanation

This specific risk was not identified in the FDD package. The Taco Cabana concept, focused on Mexican-style fast-casual food, is part of a well-established and durable segment of the restaurant industry. A fad business, in contrast, is typically tied to a new or fleeting trend that lacks staying power, which could jeopardize a long-term investment. This does not appear to be the case here.

Potential Mitigations

  • It is still prudent to conduct independent market research with a business advisor to confirm long-term consumer demand in your specific area.
  • You can evaluate the franchisor's plans for menu innovation and concept evolution to ensure it remains competitive.
  • Discussing the brand's resilience and history with long-standing franchisees can provide additional comfort.
Citations: Not applicable

Inexperienced Management

Medium Risk

Explanation

While the individual managers listed in Item 2 have extensive experience in the restaurant industry, the franchisor entity itself, TCFI, has no experience operating Taco Cabana restaurants. It was formed in 2023 for the purpose of franchising. This creates a risk that the entity providing you with support and guidance lacks direct, hands-on operational expertise, even though its personnel may have it from other roles.

Potential Mitigations

  • You should ask the franchisor direct questions about how the operational experience of its affiliate's employees translates into direct support for you.
  • During due diligence calls, it would be beneficial to ask existing franchisees about the quality and expertise of the support staff they interact with.
  • Your business advisor can help assess whether the management structure is effective or creates potential communication gaps.
Citations: Item 1, Item 2

Private Equity Ownership

Medium Risk

Explanation

This risk was not identified in the FDD package. The franchisor, TCFI, is disclosed as a wholly owned subsidiary of Taco Cabana, Inc. The ultimate control appears to be with Yadav Enterprises, a large, privately-held franchisee organization. While not a typical private equity fund, this structure can still present similar risks where decisions may prioritize the parent company's objectives over individual franchisee health. The core risk is present.

Potential Mitigations

  • Researching the history and reputation of Yadav Enterprises with other brands they operate is advisable.
  • A discussion with your attorney is important to understand how the parent company's control could impact your franchise agreement.
  • During franchisee calls, asking about any changes in system direction or support levels since this ownership structure was implemented can provide insight.
Citations: Item 1, Item 2

Non-Disclosure of Parent Company

High Risk

Explanation

This risk is present. The franchisor (TCFI) is a subsidiary of its parent, Taco Cabana, Inc., and the parent's financial statements are not provided. The franchisor's own financials explicitly state it is dependent on the parent for support and that its expenses for affiliate-provided services are not recorded. This lack of complete financial disclosure from the ultimate controlling entities obscures the true financial health and stability of the organization you are depending on for support.

Potential Mitigations

  • Your accountant should carefully analyze the franchisor's financials and the related-party notes to understand the level of dependency.
  • It is important to ask your attorney whether, given the circumstances, the parent's financials should have been included under franchise rules.
  • A business advisor can help you assess the risk of relying on an entity whose financial viability is not fully transparent.
Citations: Item 1, Item 21, Exhibit E

Predecessor History Issues

Medium Risk

Explanation

This risk appears to be present. Item 1 identifies Taco Cabana, Inc. (TCI) as both a parent and a predecessor. However, the FDD provides limited detail about the operational or financial history of the system under TCI before the new franchising entity was created in 2023. A lack of comprehensive history about a predecessor can obscure past challenges, such as prior franchisee turnover or litigation that may no longer meet disclosure timeframes.

Potential Mitigations

  • Your attorney should carefully review the predecessor information that is provided and question any ambiguities.
  • You can conduct independent research into the history of the Taco Cabana brand and TCI's past performance.
  • Asking the existing long-term franchisees about their experience under the predecessor entity can provide valuable historical context.
Citations: Item 1

Pattern of Litigation

Low Risk

Explanation

This specific risk was not identified in the FDD package. Item 3 states that no litigation is required to be disclosed. The absence of disclosed lawsuits, particularly those initiated by franchisees alleging fraud or misrepresentation, is a positive indicator. However, this does not guarantee a dispute-free history, as some disputes may not meet the criteria for disclosure.

Potential Mitigations

  • It is still prudent to ask current and former franchisees about their experiences with disputes, whether formal or informal.
  • Your attorney can conduct public record searches for litigation involving the franchisor or its affiliates as part of due diligence.
  • A business advisor can help you assess the overall health of the franchisor-franchisee relationship through discussions with existing operators.
Citations: Item 3
2

Disclosure & Representation Risks

Total: 15
5
3
7

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

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3

Financial & Fee Risks

Total: 10
4
3
3

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

4

Legal & Contract Risks

Total: 16
5
7
4

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

5

Territory & Competition Risks

Total: 5
4
1
0

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

6

Regulatory & Compliance Risks

Total: 10
5
3
2

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

7

Franchisor Support Risks

Total: 4
1
3
0

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

8

Operational Control Risks

Total: 12
5
6
1

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

9

Term & Exit Risks

Total: 18
8
5
5

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

10

Miscellaneous Risks

Total: 2
1
1
0

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.