Case Scenario: Wahoo's Fish Taco: A Moderate-Growth Yet Highly Successful Franchise Organization
Wahoo's Fish Taco is a franchise organization that offers Mexican food mixed with Brazilian and Asian flavors. It is a "fast-casual" restaurant that was founded in Costa Mesa, California, in 1988 by Chinese-Brazilian brothers Eduardo Lee, Mingo Lee, and Wing Lam, who mixed traditional Chinese and Brazilian flavors with dishes they encountered traveling in Mexico. The first Wahoo's Fish Taco restaurant was launched to combine the brothers' love for surfing and food. Wahoo's is now just over 25 years old and has about 60 locations, located in California, Texas, Colorado, nevada, nebraska, and Hawaii. It's known for its specialty charbroiled fish, steak, and chicken tacos and burritos. Although it's been very successful, it couldn't be characterized as a "rapid growth" franchise system. Instead, the founders have elected to make Wahoo's Fish Taco a relatively slow growth system, focusing on branding and service quality rather than rapid growth. This philosophy has been an entrenched part of the way Wahoo's Fish Taco has done business since the beginning. It started with a single restaurant in 1988; the second unit was added only when the founders had saved enough money to build it debt free.
This pattern has characterized the company's growth. Early on, it only added one new restaurant a year, then two, then three, and so on. Despite its success, it has averaged only about 2.5 restaurants per year since its founding. For many years, the company only sold franchises to people the founders personally knew and trusted. Wahoo's pace of expansion has picked up some in recent years, but not dramatically. Its brand has been built around its enthusiasm for surfing and other extreme sports. More than half of its restaurants are in California, and its locations in other states are largely in college towns or "hip" communities. The company does not have international locations, although there are some indications that it plans to expand to Japan. Along with its staple dishes, Wahoo's Fish Taco offers many vegetarian and vegan options, such as tofu, banzai veggies, and brown rice. Its restaurants are very attractive inside and out, and offer a relaxed environment with a definite "surfer" feel. Buying a Wahoo Fish Taco franchise requires a major financial commitment. The initial franchise fee is $35,000. The ongoing royalty is 5 percent of gross sales plus an additional 2 percent for marketing. The cost to build a Wahoo Fish Taco restaurant runs from $425,000 to $715,000 depending on location, size of restaurant, landscaping, and local ordinances.
Questions for Critical Thinking
1. What are the advantages and disadvantages of Wahoo's Fish Taco's slow growth philosophy of franchise expansion?
2. Spend some time looking at Wahoo's Fish Taco's website, focusing particularly on its menu and its store layout. Do you think the business is well positioned or poorly positioned to take advantage of current trends in the types of restaurants that are doing well and in light of today's food preferences? Explain your answer.
3. To what degree do you think Wahoo's Fish Taco has been too conservative in its expansion?
4. Spend some time studying the cost of becoming a Wahoo's Fish Taco franchisee compared to similar franchise organizations. Is the cost of acquiring and owning a Wahoo Fish Taco franchise on the high end, in the middle, or on the low end compared to its closest competitors? To what degree do you believe your answer has affected Wahoo's pace of growth?