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 2019 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 2019 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 2016, 2017, and 2018, based on Item 20 of the company’s 2019 FDD
- Section V – Presentation and analysis of Qdoba Mexican Eats’ financial performance representations, based on Item 19 of the company’s 2019 FDD, including information on the:
- 2018 average net sales for the 260 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 September 30, 2018
- 2018 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 303 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 September 30, 2018
- 2018 average, median, high, and low net sales for the 9 company-operated non-traditional Qdoba Mexican Eats units in 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 September 30, 2018
- 2018 average, median, high, and low net sales for the 22 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 September 30, 2018
Section I – Background Information
17 Things You Need to Know About the Qdoba Mexican Eats Franchise
Appoints New CEO and CFO
1. In mid-May 2018, Qdoba Mexican Eats named Keith Guilbault as chief executive officer and restaurant industry veteran Susan Daggett as chief financial officer, following its March 2018 acquisition by funds managed by affiliates of Apollo Global Management, LLC.
2. Guilbault previously served as Qdoba’s brand president and chief operating officer since 2016 under Jack in the Box’s ownership, overseeing approximately 740 restaurants. Prior to leading the Qdoba brand, Guilbault held a series of executive leadership positions at Jack in the Box, rising to senior vice president and chief marketing officer in charge of branding, traditional and digital communications, product development, menu management, social engagement, and public relations.
3. Lance Milken, senior partner at Apollo, said, “Keith has been instrumental in helping to guide Qdoba through the Brand’s sale and transition into an independent company. We look forward to working with Keith, and believe he is ideally suited to lead Qdoba’s outstanding management team, employee base, and group of franchises as the Company continues to bolster its position as a market-leading Brand.”
4. Daggett, Qdoba’s new chief financial officer, has more than two decades of financial experience in the restaurant industry, most recently at Noodles & Company, where she served as interim chief financial officer since June 2017 and vice president of finance since August 2016. She also held executive roles at Pinnacle Restaurant Group, Inc., Einstein Noah Restaurant Group, Inc., and Arby’s Inc.
5. Guilbault said, “Susan brings a wealth of knowledge and technical expertise that will greatly benefit Qdoba as we move forward. I believe her proven track record as a visionary leader who successfully guided the financial and accounting operations of other large restaurant organizations makes Susan a natural fit for the role.”
Testing Impossible Brand Plant-Based Protein
6. In early February 2019, Qdoba Mexican Eats announced that it was testing Impossible at select restaurants in Michigan. Unlike anything diners can get anywhere else, Qdoba’s version of this plant-based protein is seasoned in-restaurant with a blend of tomatoes, garlic, smoked chiles, and paprika, all mixed with diced red onions. The result is a product that is savory, slightly smoky, and delicious.
7. Jill Adams, senior vice president of marketing for Qdoba, said, “Launching this test is an exciting milestone for Qdoba as we experiment with options for our customers’ evolving dietary preferences, especially for those looking for a meatless option. Our culinary team used Impossible as a starting point and added their own flavorful twist to create a product that guests can only get at Qdoba.”
8. Customers at select Qdoba restaurants in Michigan can create their own meal with Impossible for a limited time only. Diners will also have the option to order two signature Qdoba entrées made with Impossible:
- Qdoba Impossible Bowl – Cilantro-lime white rice and black beans are layered with 3-Cheese Queso, pico de gallo, guacamole, and seasoned Impossible.
- Qdoba Impossible Burrito – Wrapped in a warm corn tortilla, Impossible is enhanced with red onions, cilantro, and salsa verde.
9. According to David Lee, COO and chief financial officer of Impossible Foods, Inc., “Impossible tastes and cooks like beef, but is made of plants. Mixed with the seasoning and ingredients made in-house at Qdoba, the team has created a really delicious option. With 60 percent of U.S. consumers trying to cut back on meat-based products, we know Qdoba’s unique take on our popular plant-based protein will be a huge success in the Michigan market.”
Launches Spiciest Menu Item to Date
10. At the beginning of August 2018, Qdoba Mexican Eats launched its spiciest menu item yet, Chicken Diablo Nachos. Qdoba’s new Chicken Diablo Nachos are topped with three of Qdoba’s hottest ingredients: in-house pickled jalapeños, extra spicy habanero salsa, and Qdoba’s signature Queso Diablo. Layered underneath, the nachos are also made with in-house fried tortilla chips, grilled adobo chicken, freshly diced pico de gallo, and a light drizzle of sour cream.
11. According to Jill Adams, vice president of marketing for Qdoba, “Not for the faint of heart, our Chicken Diablo Nachos are guaranteed to bring the heat. Our culinary team hand-picked each ingredient based on how they thought the flavors would come together and satisfy the spiciest of cravings. These Chicken Diablo Nachos do just that – the heat is undeniable, but the grilled chicken and fresh pico de gallo creates the right balance to bring out the nachos’ delicious flavor.”
12. Qdoba Mexican Eats was founded in 1995 as Zuma Fresh Mexican Grill by Anthony Miller and Robert Hauser in Denver, Colorado. Hauser, who was a chef working at the famous Le Cirque restaurant at the time, developed most of Qdoba’s recipes using healthy and fresh ingredients wherever he could. The first Qdoba location was an immediate success with first-year revenues exceeding $1,500,000.
13. In 1997, when franchising began, the company changed its name to Z-Teca Mexican Grill because of a lawsuit from another restaurant using the Zuma name in Boston and confusion caused by the similar-sounding ZuZu Handmade Mexican Grill.
14. In exchange for a large stake, Western Capital and other investors gave the company a large infusion of capital in early 1998 to allow the company to open 25 new locations and nearly triple its size. That same year, Gary Beisler was hired to replace Miller as president and chief operating officer while Miller remained as chief executive officer. By the end of the 1990s, there were 49 Z-Teca locations in 19 states.
15. Unfortunately, Z-Teca was once again sued – this time by Z’Tejas Southwestern Grill in Arizona and Azteca in Washington state, and the company had to change its name again. To avoid any future litigation, the company hired ad agency Heckler Associates, who came up with the unique name Qdoba.
16. The company continued to grow in the early 2000s and in 2003, Jack in the Box paid $45 million in cash to obtain the Wheat Ridge-based Qdoba from ACI Capital, Western Growth Capital, and other private investors. In late 2017, Jack in the Box sold Qdoba to Apollo Management Group for $305 million. Today, there are Qdoba Mexican Eats locations across the United States and Canada.
Entrepreneur’s Franchise 500
17. Qdoba Mexican Eats ranked No. 310 on Entrepreneur’s 2019 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 2019 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 2019 FDD.
Section IV – Number of Franchised and Company-Owned Outlets
- 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: 341
- Outlets at the End of the Year: 362
- Net Change: +21
- 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
- Outlets at the Start of the Year: 385
- Outlets at the End of the Year: 389
- Net Change: +4
Section V – Financial Performance Representations (Item 19, 2019 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 260 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 95 franchised Qdoba restaurants because they were not open for 3 years or were not open the entire fiscal year (60 units) and non-traditional franchised Qdoba restaurants (35 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 September 30, 2018.