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 2020 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 2020 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 2017, 2018, and 2019, based on Item 20 of the company’s 2020 FDD
- Section V – Presentation and analysis of Qdoba Mexican Eats’ financial performance representations, based on Item 19 of the company’s 2020 FDD, including information on the:
- 2019 average net sales for the 239 franchised Qdoba Mexican Eats restaurants that were open and franchised-operated for at least the last 3 years and that were not closed greater than 7 operating days in the entire fiscal year ending September 29, 2019
- 2019 average gross sales, promotions, net sales, cost of sales, salaries and benefits, other operating expenses, occupancy costs, royalty fee, advertising fee, operating margin, and EBITDA for the 301 company-operated restaurants that were open and company-operated for at least the last 3 years and that were not closed greater than 7 operating days in the entire fiscal year ending September 29, 2019
- 2019 average, median, high, and low net sales for the 11 company-operated non-traditional Qdoba Mexican Eats units in military venues, universities, and others (separately stated) that have been open three or more years as of the fiscal year ending September 29, 2019
- 2019 average, median, high, and low net sales for the 35 franchised and licensed non-traditional Qdoba Mexican Eats units in airports, military venues, universities, and others (separately stated) that have been open three or more years as of the fiscal year ending September 29, 2019
Section I – Background Information
17 Things You Need to Know About the Qdoba Mexican Eats Franchise
Provides Financial Relief to Franchisees with Royalty Deferral Program
1. Near the end of March 2020, Qdoba Mexican Eats announced that the company was committed to helping its franchise owners navigate the COVID-19 pandemic by offering a royalty deferral program for eight weeks, effective immediately. The move will enable Qdoba franchisees to protect cash flow during these unprecedented times where restaurants are adhering to the CDC guidelines for social distancing and the U.S. government’s mandate for dining room closures.
2. Above all, Qdoba is looking out for its franchise owners across North America and is taking the necessary precautions to keep both the community and its people safe, while also moving business forward. According to Keith Guilbault, CEO of Qdoba Mexican Eats, “Qdoba understands the plight of our franchisees during these unprecedented times, and we are committed to supporting our local business owners in any way we can. Our focus with every decision is to be in the best position possible to address this downturn and continue to be a dependable choice for our guests.”
3. Responding rapidly to the market conditions, Qdoba has begun hosting daily webinars with its franchisees to keep lines of communication open. The company has also moved to limited-contact ordering, including digital ordering through Qdoba.com or the Qdoba app, in-restaurant to-go ordering, and delivery via its third-party providers in response to the current environment.
4. Guilbault added, “We pride ourselves on being a franchisor of choice, and this means open lines of communication and being responsive to what our franchisees need. We don’t take this situation lightly and feel that all of the small business owners within our network are counting on us to have their back and do what’s right.”
Opens New Headquarters
5. At the beginning of June 2019, Qdoba Mexican Eats announced that it was choosing to stay and invest in San Diego, California by opening its new headquarters in the AMP&RSAND office complex. Named “Qdoba Flavor Central,” the headquarters will also serve as a hub for the culinary team to create and test menu innovations.
6. Keith Guilbault, CEO of Qdoba Mexican Eats, said, “The Qdoba team is excited to call ‘America’s Finest City’ our official home. During the search for our new office, we knew we wanted to stay in San Diego and diligently sought out a space that reflects our collaboration-centric culture. The AMP&RSAND is a perfect fit.”
7. Formerly occupied by The San Diego Union-Tribune, Qdoba’s new headquarters is located at 350 Camino De La Reina. The office features exposed brick, concrete pillars, and 14 feet of floor-to-ceiling glass windows. Qdoba employees will be able to enjoy building amenities, including a fitness studio, on-site café, and 40,000-square-feet of outdoor communal space.
8. Guilbault added, “We have an energetic, engaged team that needed a work space to facilitate our rapid growth. Two years ago, we were a team of 40, but since our acquisition by funds affiliated with Apollo Global Management, LLC (NYSE: APO), we now employ approximately 125 dedicated team members locally in San Diego.”
9. CBRE Group, a large commercial real estate services and investment firm, represented the AMP&RSAND and Hughes Marino represented Qdoba in the site selection, negotiation, and project management of the remodeled space. The Casey Brown Company repurposed this property into a creative office campus and the Qdoba workspace was designed by SCA Architecture.
Teams Up with No Kid Hungry in Fight to End Childhood Hunger
10. In early September 2019, Qdoba Mexican Eats teamed up with No Kid Hungry for the third year in a row to help end childhood hunger in the United States. Throughout the month of September, Qdoba customers could donate $2 to No Kid Hungry at participating locations and in return received a coupon for a free order of chips and queso with the purchase of an entrée on a later visit (valid until October 6).
11. Jill Adams, vice president of marketing for Qdoba, said, “No Kid Hungry’s mission is close to our hearts so we’re proud to be joining forces again on such a meaningful program. One in six kids in the United States lives with hunger; that’s simply unacceptable. Our goal this year is to raise $200,000, which can provide up to 2 million meals. Please come dine with us during September and support the cause. Together we can reach the goal and make a difference in so many children’s lives.”
12. More than 12 million children in the United States live in “food insecure” homes, which means that their households don’t have enough food for every family member to lead a healthy life. No Kid Hungry is working to end childhood hunger through effective programs that provide kids with the food they need. Funds raised through No Kid Hungry support federal nutrition programs such as the school breakfast program, the summer meals program, and the after-school meals program.
13. Diana Hovey, senior vice president of Share Our Strength, the organization behind the No Kid Hungry campaign, said, “We’re so grateful to have the support of Qdoba in our mission to end childhood hunger in the United States. With a $2 donation, each Qdoba customer is providing up to 20 meals for children in need. Qdoba has been an amazing ongoing partner and we look forward to another successful year working together to end childhood hunger!”
14. Qdoba Mexican Eats (formerly Qdoba Mexican Grill) traces its history back to 1995 when Anthony Miller and Robert Hauser opened a restaurant called Zuma Fresh Mexican Grill in Denver, Colorado. Hauser was responsible for developing most of Qdoba’s recipes. He designed the menu to be healthier by replacing the use of traditional animal fats with vegetable oils and tried to use more fresh vegetables and herbs when he could. The first Qdoba restaurant was a hit and there were often long lines of customers around dinnertime.
15. In 1997, the company’s name was changed from Zuma to Z-teca because of a lawsuit from another restaurant with the Zuma name. That same year, Hauser and Miller started franchising. Z-teca also did not stick because the same thing happened. Finally, the brand decided on Qdoba, a completely made up word, to avoid any future lawsuits.
16. Over the next few years, Qdoba continued to open both company-owned and franchised restaurants around the country. In 2003, Jack in the Box paid $45 million in cash to obtain Qdoba from ACI Capital, Western Growth Capital, and other private investors. Jack in the Box ran Qdoba until 2017, when Qdoba was sold to a consortium of funds led by Apollo Global Management. In addition to the Qdoba Mexican Eats locations across the U.S., there are a few locations in Canada.
Entrepreneur’s Franchise 500
17. Qdoba Mexican Eats ranked No. 152 on Entrepreneur’s 2020 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 2020 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 2020 FDD.
Section IV – Number of Franchised and Company-Owned Outlets
- 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: 363
- Net Change: +22
- Outlets at the Start of the Year: 363
- Outlets at the End of the Year: 380
- Net Change: +17
- 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
- Outlets at the Start of the Year: 389
- Outlets at the End of the Year: 350
- Net Change: -39
Section V – Financial Performance Representations (Item 19, 2020 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 239 franchised restaurants that were open and franchised-operated for at least the last 3 years and that were not closed greater than 7 operating days in the entire fiscal year reported.
- Qdoba excluded information for 106 franchised Qdoba restaurants because they were not open and franchised-operated for 3 years or were closed greater than 7 operating days in the fiscal year (83 excluded for not being open or franchised-operated for 3 years and 23 excluded for being closed greater than 7 operating days) 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 29, 2019.