In this FDD Talk post, you’ll learn the following:
- Section I – Background information on the Qdoba Mexican Eats franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a Qdoba Mexican Eats franchise, based on Item 7 of the company’s 2018 FDD
- Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Qdoba Mexican Eats franchise, based on Items 5 and 6 of the company’s 2018 FDD
- Section IV – Number of franchised and company-owned Qdoba Mexican Eats outlets at the start of the year and the end of the year for 2015, 2016, and 2017, based on Item 20 of the company’s 2018 FDD
- Section V – Presentation and analysis of Qdoba Mexican Eats’ financial performance representations, based on Item 19 of the company’s 2018 FDD, including information on the:
- 2017 average net sales for the 258 franchised Qdoba Mexican Eats restaurants that were open and operating for at least the last 3 years and that were open the entire fiscal year ending October 1, 2017
- 2017 average gross sales, promotions, net sales, cost of sales, salaries and benefits, other operating expenses, depreciation and amortization, occupancy costs, royalty fee, advertising fee, operating margin, and EBITDA for the 300 company-operated Qdoba Mexican Eats restaurants that were open and operating for at least the last 3 years and that were open the entire fiscal year ending October 1, 2017
- 2017 average, median, high, and low net sales for the 13 company-operated non-traditional Qdoba Mexican Eats units in airports, military venues, universities, and others (separately stated) that were open and operating for at least the last 3 years and that were open the entire fiscal year ending October 1, 2017
- 2017 average, median, high, and low net sales for the 37 franchised and licensed non-traditional Qdoba Mexican Eats units in airports, military venues, universities, and others (separately stated) that were open and operating for at least the last 3 years and that were open the entire fiscal year ending October 1, 2017
Section I – Background Information
13 Things You Need to Know About the Qdoba Mexican Eats Franchise
Parent Company Jack in the Box Sells Qdoba for $305 Million
1. In December 2017, Jack in the Box, the parent company of Qdoba Mexican Eats, announced that it had sold Qdoba to publicly traded investment group Apollo Global Management for about $305 million. Months before the sale, Jack in the Box said that it was considering strategic options for Qdoba (which had been struggling with fast-casual competition as well as higher labor expenses), including a possible sale. The deal with Apollo Global Management was expected to close by April 2018.
2. Lance Milken, a senior partner at Apollo, said in a statement, “We are extremely excited to be acquiring Qdoba and look forward to working with the management team, employees and franchisees to continue building the Qdoba brand. We are firmly committed to Qdoba’s continued growth as a leading fast-casual restaurant operator.”
3. Jack in the Box noted that although Qdoba’s fiscal-year sales equaled more than $820 million, the brand has stumbled in recent quarters. Sales at Qdoba stores open at least a year fell 1.4% in the 2017 fiscal year, including a 3% drop for company-owned locations. The trend worsened in the fourth quarter, with company-owned same-store sales down 4% and overall same-store sales down 2.1%.
4. Jerry Rebel, chief financial officer of Jack in the Box, Inc., said that a 50% increase in avocado prices affected Qdoba’s fourth-quarter performance. Analysts said that the company needs to convert more company-owned locations into franchises.
Franchisees Announce Formation of Franchisee Association
5. At the end of June 2017, franchisee leaders from the Qdoba Brand Advisory Council announced the formation of the Qdoba Franchisee Association (QFA). It will be an independent organization that will serve the franchisee community by focusing on mutually beneficial solutions to protect and enhance the Qdoba Mexican Eats brand. The QFA will be governed by a five-person board of directors, including chairman Ron Stokes, vice chairman Michael Scott, secretary/treasurer Stan Kramer, Randy Key, and Will Charbonnet Jr.
6. Some of the QFA’s goals include focusing on advocacy with the franchisor; facilitating education and best practice sharing amongst the franchisee community; and providing access to group insurance plans and other back-office solutions for its members. Chairman Stokes said the QFA plans to provide franchisee leadership and have a voice in continuing to grow the Qdoba brand in all aspects of the business whether it be in marketing, operations, technology, or development.
7. Additionally, QFA has hired attorney W. Michael Garner of Garner & Ginsburg, P.A. to serve as the association’s legal counsel, and Elevanta, LLC to manage the day-to-day operations of the association.
Brings Back Previous Summer Favorite, Fire-Roasted Shrimp
8. In early February 2018, Qdoba Mexican Eats announced the return of fan favorite Fire-Roasted Shrimp. The limited menu item was first launched over the summer of 2017 and showcases shrimp marinated in citrus and chile pepper flavors that is available as a create-your-own entrée option or as a new dish, Fire-Roasted Shrimp and Guac Burrito. The burrito features zesty Fire-Roasted Shrimp, cilantro lime rice, black beans, freshly-made guacamole, and pico de gallo, all wrapped in a warm flour tortilla.
9. In addition to the Fire-Roasted Shrimp, Qdoba also brought back its Cilantro Chimichurri for a limited time. Qdoba’s spin on Chimichurri, which is a traditional Argentinian sauce that’s usually made with parsley, uses cilantro instead.
10. Qdoba Mexican Eats was founded in 1995 by Anthony Miller and Robert Hauser in Denver, Colorado under the name Zuma Fresh Mexican Grill. Miller and Hauser met each other while Miller was an investment banker with Merrill Lynch and Hauser was working at Le Cirque restaurant. Hauser developed most of Zuma’s recipes and made them healthier than traditional Mexican fare by replacing animal fats with vegetable oils and using fresh herbs and vegetables as often as possible. During its first year of business, Zuma was an immediate success and its revenues exceeded $1,500,000.
11. In 1997, Zuma changed its name to Z-Teca Mexican Grill because of a lawsuit from another restaurant using the name Zuma in Boston. That same year, the company started franchising and expanding the chain outside of Colorado. The brand went through one more name change after more lawsuits from Z’Tejas Southwestern Grill in Arizona and Azteca in Washington state. To overcome these problems, the name Qdoba was invented in 1999 by ad agency Heckler Associates.
12. Around early 2003, Jack in the Box acquired Qdoba Mexican Grill for $45 million. Qdoba initiated rebranding efforts in 2015 and slightly tweaked its name to Qdoba Mexican Eats and restyled its logo. In late December 2017, Jack in the Box sold the Qdoba chain for about $305 million to publicly traded investment group Apollo Global Management. Today, there are over 700 Qdoba Mexican Eats locations across the United States and Canada.
Entrepreneur’s Franchise 500
13. Qdoba Mexican Eats ranked at No. 297 on Entrepreneur’s 2018 Franchise 500 list.
Section II – Estimated Costs
- Please click here for detailed estimates of Qdoba Mexican Eats franchise costs, based on Item 7 of the company’s 2018 FDD.
Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees
- Please click here for detailed information on Qdoba Mexican Eats’ initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2018 FDD.
Section IV – Number of Franchised and Company-Owned Outlets
- Outlets at the Start of the Year: 328
- Outlets at the End of the Year: 339
- Net Change: +11
- Outlets at the Start of the Year: 339
- Outlets at the End of the Year: 332
- Net Change: -7
- Outlets at the Start of the Year: 332
- Outlets at the End of the Year: 341
- Net Change: +9
- Outlets at the Start of the Year: 310
- Outlets at the End of the Year: 322
- Net Change: +12
- Outlets at the Start of the Year: 322
- Outlets at the End of the Year: 367
- Net Change: +45
- Outlets at the Start of the Year: 367
- Outlets at the End of the Year: 385
- Net Change: +18
Section V – Financial Performance Representations (Item 19, 2018 FDD) and Analysis
Part 1 – Franchised Qdoba Restaurants – Historical Average Net Restaurant Sales
- The following figures represent the average net restaurant sales for certain franchised Qdoba restaurants.
- The information is based on unaudited information for 258 franchised restaurants that were open and operating for at least the last 3 years and that were open the entire fiscal year reported.
- Qdoba excluded information for 78 franchised Qdoba restaurants because they were not open for 3 years or were not open the entire fiscal year (61 units) and non-traditional franchised Qdoba restaurants (17 units).
- Qdoba uses franchised restaurants that have been open 3 years or more because, in Qdoba’s experience, it takes a number of years for sales to mature at new restaurants, particularly in new markets.
- The data covers all applicable franchised restaurants for the fiscal year ending October 1, 2017.