Qdoba Mexican Eats is a fast-casual Mexican-themed restaurant. Qdoba offers a wide variety of menu options that range from burritos to Tacos and Quesadillas. All menu items are made to order and are in a tiered pricing structure giving customers flexibility. Most Qdoba locations also offer catering services, which helps expand revenue streams. Customers can also place online mobile ordering through the corporate-operated App and website.
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Qdoba Franchise
Qdoba is a subsidiary company of Quidditch Acquisition, a Delaware Corporation, that acquires and operates restaurant chains. The Qdoba directors are from a variety of investors and food service professionals. Anthony Miller and Partner Robert Hauser first started Qdoba in 1995 in Denver Colorado. Miller was a financial professional at Merrill Lynch and Hauser was in culinary school. They pooled their resources together to start Zuma Fresh Mexican Grill, which later turned into the Qdoba.
Today Andrew Jhawar serves as the Chairman of the Board and is a Senior Partner at Apollo Management. He has also served in pivotal roles in other major companies such as Michaels. At the end of 2021, Qdoba had a total of 739 outlets. 333 of these locations are corporate-owned, and 406 are franchises.
How is Qdoba Positioned in the Food and Beverage Industry?
The industry average royalty fee is 5.3% and 2.3% for the marketing fee. Furthermore, there is a 15.5% growth rate in food and beverage. This is the largest sector in the franchise world as it makes up 36% of all franchises. The industry is broad and you can expect to pay $3,000 for a small kiosk up to $6,732,615 for a full-service restaurant. Food and beverage franchises also make up over 5% of the entire U.S. Gross Domestic Product.
Qdoba itself charges a 5% royalty fee, 1.25% marketing fee, and 1.75% local marketing fee. This means that Qdoba’s primary fees are on par with industry trends. To open a Qdoba location you must expect to pay between $252,800 to $816,700 for a non-traditional and $476,800 to $1,096,700 for a traditional. By comparison, the leading competitor Chipotle, which does not franchise, would cost between $800,000 to $2,000,000 if you were to open a franchise. Additionally, Chipotle currently operates 2,768 restaurants making the Mexican fast-casual space very competitive.
How Much is a Qdoba Franchise?
The initial company franchise fee is $30,000 and must be paid upfront.
Qdoba Franchise Cost?
While Qdoba is less expensive to open than leading competitor Chipotle it is one of the more expensive Mexican-themed restaurant franchises. Rusty Taco, a smaller chain, costs between $532,000 – $897,000 to open. Meanwhile, Taco Bell, another national competitor, costs between $253,000 – $590,0000 to open. Qdoba, while an expensive franchise, has national brand recognition and is still fairly priced within Food and Beverage.
Once again, you can expect to pay between $252,800 to $816,700 to open a non-traditional Qdoba and $476,800 to $1,096,700 for a traditional location.
Estimated Initial Investment
Estimated Initial Investment
| NON-TRADITIONAL Qdoba Restaurant | ||
| Type of expediture | Amount | Method of payment |
|---|---|---|
| Franchise Fee | $15,000 | Lump Sum |
| Development costs: plans,legal fees, permits | $10,000–$50,000 | As incurred |
| Leasehold improvements | $75,000-$300,000 | As arranged |
| Furnishings, fixtures and equipment | $83,000-$200,000 | As arranged |
| Signage | $8,000-$25,000 | As arranged |
| IT and other Systems | $21,300-$33,700 | As arranged |
| Opening inventory | $5,000-$10,000 | As arranged |
| Travel and living expenses while training | Varies | As incurred |
| Miscellaneous pre-opening expenses | $5,000-$15,000 | As arranged |
| Grand opening advertising(at traditional sites) | $0-$5,000 | As arranged |
| Insurance | $5,000–$10,000 (excluding several types of coverage) | As incurred |
| Liquor license | Varies depending on location | As arranged |
| Real property lease/purchase costs(12) | Varies depending on location | As arranged |
| Business licenses, health permits and similar permits | $500-$3,000 (Varies depending on location) | As arranged |
| Additional funds-3months | $25,000-$150.000 | As arranged |
| TOTAL ESTIMATED COST(excluding real property and liquor license costs) | $252,800–$816,700 | |
| TRADITIONAL Qdoba Restaurant | ||
| Type of expediture | Amount | Method of payment |
| Franchise Fee | $30,000 | Lump Sum |
| Development costs: plans,legal fees, permits | $10,000–$50,000 | As incurred |
| Leasehold improvements | $180,000-$400,000 | As arranged |
| Furnishings, fixtures and equipment | $185,000-$320,000 | As arranged |
| Signage | $5,000-$50,000 | As arranged |
| IT and other Systems | $21,300-$33,700 | As arranged |
| Opening inventory | $5,000-$10,000 | As arranged |
| Travel and living expenses while training | Varies | As incurred |
| Miscellaneous pre-opening expenses | $5,000-$15,000 | As arranged |
| Grand opening advertising(at traditional sites) | $5,000-$25,000 | As arranged |
| Insurance | $5,000–$10,000 (excluding several types of coverage) | As incurred |
| Liquor license | Varies depending on location | As arranged |
| Real property lease/purchase costs(12) | Varies depending on location | As arranged |
| Business licenses, health permits and similar permits | $500-$3,000 (Varies depending on location) | As arranged |
| Additional funds-3months | $25,000-$150.000 | As arranged |
| TOTAL ESTIMATED COST(excluding real property and liquor license costs) | $476,800-$1,096,700 | |
Franchise Requirements
Franchisees must have a minimum net worth of $100,000. If an individual lacks this they must negotiate terms that will meet the proper financing obligations. Franchisees must also be prepared to pay a renewal fee of $5,000 or 15% of the current franchise fee. Additionally, all potential franchisees must not have or be facing any criminal or civil charges. All Qdoba’s must participate in the rewards programs and purchase all company-mandated technologies and ingredients.
Ongoing Fees:
Royalty Fee: 5%
Marketing Fee: 1.25%
Local Marketing Fee: 1.75%
POS: $20,000 – $30,000 and then ongoing software fees.
How Much Do Qdoba Franchise Owners Make?
Traditional
A Qdoba Franchise owner of a traditional location can expect an EBITDA of roughly $171,251 annually as that is the company’s median EBITDA for their 333 locations. It is important to remember that these are for company-owned locations meaning franchisees may have an EBITDA slightly above or below this median. The median net sales for a traditional location is $1,260,746. The low is $717,563 and the high is $1,855,210.
Non-Traditional
The top quartile of Qdoba‘s median revenue for non-traditional locations is $1,359,325, and the bottom quartile is $159,908. The median across all non-traditional Qdoba franchises is $672,518. All non-traditional franchisees should hopefully expect annual revenue somewhere between this range.
Historical Average Sales, Selected Costs and Operating Results
| (for 288 Company Operated Restaurants for 12-month period ending October 3, 2021) | ||||||
|---|---|---|---|---|---|---|
| REVENUES | Average | % of Net Sales | Number and % of Restaurants Attaining or Exceeding Average | Medium | Low | High |
| Restaurant Sales | $1,332,690 | 103.2% | 137/288 (47.6%) | $1,297,516 | $70,987 | $3,018,678 |
| Less: Promotions | $40,879 | 3.2% | 122/288 (42.4%) | $36,702 | $938 | $135,178 |
| Net Restaurant Sales | $1,291,811 | 100.0% | 137/288 (47.6%) | $1,260,814 | $70,049 | $2,883,500 |
| RESTAURANT COST OF SALES | ||||||
| Cost of Sales | $383,463 | 29.7% | 131/288 (45.5%) | $369,690 | $17,641 | $805,942 |
| Salaries and Benefits | $384,373 | 29.8% | 134/288 (46.5%) | $375,431 | $73,509 | $708,090 |
| Other Operating Expenses | $203,102 | 15.7% | 136/288 (47.2%) | $200,346 | $90,716 | $315,856 |
| Occupancy Costs | $129,393 | 10.0% | 119/288 (41.3%) | $120,839 | $25,795 | $241,929 |
| Royalty Fee | $64,591 | 5.0% | 137/288 (47.6%) | $63,041 | $3,502 | $144,175 |
| Advertising Fee | $38,754 | 3.0% | 288 (47.6%) |
$37,824 | $2,101 | $86,505 |
Total Cost of Revenues |
$1,203,675 | 93.2% | 135/288 (46.9%) | $1,167,171 | $213,264 | $2,302,496 |
| Proforma Franchise EBITDA | $1,203,675 | 93.2% | 135/288 (46.9%) | $1,167,171 | $213,264 | $2,302,496 |
| Add Back Royalty Fee | $64,591 | 5.0% | 137/288 (476%) | $63,041 | $3,502 | $144,175 |
| Add Back Advertigins Fee | $38,754 | 3.0% | 137/288 (47.6%) | $37,824 | $2,101 | $86,505 |
| Company EBITDA | $191,481 | 14.8% | 131/288 (45.5%) | $171,253 | ($360,253) | $1,027,088 |
These figures for Company-Operated Restaurants have not been audited.
| Franchisee-Operated Restaurant Quartiles | Average Net Sales | Number and % of Restaurants Attaining or Exceeding Average Net Sales | Median Net Sales | Lowest Net Sales | Highest Net Sales |
|---|---|---|---|---|---|
| Top Quartille | $1,998,222 | 28/71 (39.4%) | $1,855,210 | $1,598,936 | $4,553,691 |
| 2nd Quartille | $1,404,324 | 34/70 (48.6%) | $1,402,645 | $1,260,746 | $1,598,420 |
| 3rd Quartille | $1,101,779 | 34/70 (48.6%) | $1,098,845 | $953,654 | $1,259,059 |
| Bottom Quartille | $697,960 | 39/70 (55.7%) | $717,563 | $254,243 | $937,842 |
| Total | $1,303,054 | 125/281 (44.5%) | $1,260,746 | $254,243 | $4,553,691 |
Return on Investment Analysis
| Initial Investment (midpoint) | %Profit margin of average franchise sales | Estimated Profits | Time to recoup the investment |
|---|---|---|---|
| Traditional | |||
| $786,750 | 10% | $129,751.60 | 8.06 Years |
| 15% | $194,627.40 | 6.04 Years | |
| 20% | $259,503.2 | 5.03 Years | |
| 13.1985% | $171,253 | 6.59 Years | |
| Non-Traditional | |||
| $534,750 | 10% | $67,251.80 | 9.95 Years |
| 15% | $100,877.70 | 7.30 Years | |
| 20% | $134,503.60 | 5.97 Years | |
| 13.1985% | $88,762.28 | 8.02 Years | |
Qdoba Income Statement (Cash Flows and Financial Statements)
QUIDDITCH ACQUISITION, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
| (in thousands) | Year Ended October 3, 2021 | Year Ended September 27, 2020 | Year Ended September 29, 2019 |
|---|---|---|---|
| Cash flows from operating activities: | |||
| Net losses | $(30,149) | $(74,615) | $(20,267) |
Adjustments to reconcile net losses to net cash (used in) provided by operating activities: |
|||
| Depreciation and amortization | 17,989 | 19,777 | 20,761 |
| Amortization of favorable and unfavorable leases | (586) | (411) | (1,531) |
| Amortization of deferred financing costs and discount on term loan | 3,110 | 2,714 | 2,533 |
| Deferred income taxes | 110 | (7,693) | (6,798) |
| Share-based compensation of property and equipment | 300 | 372 | 446 |
| Losses on disposition of property and equipment | 1,140 | 911 | 1,868 |
| Impairment of goodwill | — | 13,090 | — |
| Impairment of tradename | — | 24,000 | — |
| Impairment of long-lived assets and other charges, net | 9,755 | 16,468 | 15,884 |
Changes in operating assets and liabilities: |
|||
| Accounts and other receivables | (1,138) | 1,746 | (1,348) |
| Inventories | (422) | 158 | 316 |
| Prepaid expenses and other current assets | (3,273) | (476) | (212) |
| Due to Jack in the Box | — | (205) | (4,120) |
| Accounts payable | 6,399 | 1,969 | 946 |
| Accrued liabilities | (6,503) | 7,814 | 7,031 |
| Other assets and long-term liabilities | (3,248) | 2,291 | 1,100 |
| Cash flows (used in) provided by operating activities | (6,516) | 7,910 | 16,609 |
| Cash flows from investing activities: | |||
| Purchases of property and equipment | (16,153) | (14,345) | (18,189) |
| Proceeds from the sale of property and restaurant | 1,239 | 911 | 1,797 |
| Acquisition of restaurants, net of cash acquired | — | — | (3,355) |
| Other | 44 | 589 | 259 |
| Cash flows used in investing activities | (14,870) | (12,845) | (19,488) |
Cash flows from financing activities: |
|||
| Proceeds from issuance of debt | — | 53,450 | — |
| Proceeds from revolving credit facility | — | 34,000 | — |
| Repayment of revolving credit facility | — | (34,000) | — |
| Principal repayments on debt | (2,866) | (12,201) | (1,713) |
| Payment of deferred financing costs | — | (1,379) | (76) |
| Cash flows (used in) provided by financing activities | (2,866) | 39,870 | (1,789) |
| Net (decrease) increase in cash and cash equivalents | (24,252) | 34,935 | (4,668) |
| Cash and cash equivalents at beginning of period | 53,311 | 18,376 | 23,044 |
| Cash and cash equivalents at end of period | $29,059 | $53,311 | $18,376 |
QUIDDITCH ACQUISITION, INC. NOTES ON CONSOLIDATED FINANCIAL STATEMENTS
| AS Reported | Adjustments for Prior Revenue Recognition Standards | Amounts Under Previous Standards | |
|---|---|---|---|
Revenues: |
|||
| Company restaurant sales | $424,962 | $(135) | 424,827 |
| Franchise revenue | 21,560 | 272 | 21,832 |
| Franchise advertising contributions | 5,168 | (5,168) | — |
| Other | 3,369 | (1,824) | 1,545 |
Total revenues |
445,059 | (6,855) | 448,204 |
Operating costs and expenses, net: |
|||
| Company restaurant costs: | |||
| Food and packaging | 126,745 | (103) | 126,642 |
| Payroll and employee benefits | 127,966 | — | 127,966 |
| Occupancy and other | 111,469 | — | 111,469 |
| Total company restaurant costs (excluding depreciation and amortization) | 366,180 | (103) | 366,077 |
| Pre-opening costs | 160 | — | 160 |
| Depreciation and amortization | 17,989 | — | 17,989 |
| Franchise advertising expense | 5,168 | (5,168) | — |
| Selling, general and administrative expenses | 58,707 | (2,269) | 56,438 |
| Impairment of long-lived assets and other charges, net | 11,341 | (83) | 11,258 |
| Transaction and transformation-related costs | 800 | — | 800 |
Total operating costs and expenses, net |
460,345 | (7,623) | 452,722 |
| Losses from operations | (5,286) | 768 | (4,518) |
| Interest expense, net | 24,618 | — | 24,618 |
| Losses from continuing operations and before income taxes | (29,904) | 768 | (29,136) |
| Income tax expense | 221 | — | 221 |
| Losses from continuing operations | (30,125) | 768 | (29,357) |
| Losses from discontinued operations, net of income taxes | (24) | — | (24) |
| Net losses | $(30,149) | $768 | $(29,381) |
Observations
The most significant cost that Qdoba faces is the depreciation of its restaurants, given the expense of replacing appliances, as well as other major restaurant expenses, company-owned locations face large expenses. Franchisees must be prepared to incur these costs as well.
How many Locations have Opened and Closed?
Systemwide Outlet Summary for Years 2019—2021
| Outlet type | Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|---|
| Franchised | 2019 | 363 | 380 | +17 |
| 2020 | 380 | 397 | +17 | |
| 2021 | 397 | 406 | +9 | |
| Company-Owned | 2019 | 389 | 350 | -39 |
| 2020 | 350 | 344 | -6 | |
| 2021 | 344 | 333 | -11 | |
| Total Outlets | 2019 | 752 | 730 | -22 |
| 2020 | 730 | 741 | +11 | |
| 2021 | 741 | 739 | -2 |
Conclusion
Qdoba Mexican eats while an expensive franchise is an excellent investment opportunity. It competes in a tight space, but already has national distribution and brand recognition. The company itself operates over several hundred locations allowing them to provide the necessary experience to get off the ground. Additionally, the traditional restaurants you can expect a return on your investment in 4.60 years and non-traditional in 6.02 meaning that these franchises have a history of generous returns.
