Financing

Once 'orphaned,' Qdoba's new parent sees much whitespace for growth

John Cywinski hints going public could be in the Mexican fast-casual's future if the revitalization strategy comes to fruition as planned.
Qdoba
Qdoba expects to hit 800 units this year. | Photo: Shutterstock

A year into his role at the helm of the company that is working to put the Qdoba brand on a growth path, John Cywinski is already hinting that the No. 2 Mexican fast casual could go public at some point.

At the ICR Conference in Orlando, Fla., on Wednesday, Cywinski walked through the revitalization strategy for Qdoba, noting that it’s no coincidence that his background—and that of CFO Mel Tucker—is with public companies. “So leave that where you will,” he said.

Cywinski’s resume, of course, previously held leadership positions at Applebee’s and, before that, KFC.

Tucker—who is not the former Michigan State coach, as Cywinski enjoyed pointing out—was previously CFO of companies like Ideal Image (which had explored an IPO), Genesco and PetSmart.

Now owned by Butterfly Equity, Modern Restaurant Concepts is the parent to the 750-unit Qdoba and the 29-unit Modern Market Eatery brands.

Qdoba had had two owners before Butterfly. It was most recently held by affiliates of the investment firm Apollo. There, Cywinski said the brand had been “orphaned.”

“We were a fly on an elephant’s ass,” he said, though even with the “wrong ownership group and the wrong management team,” it still generated positive comp sales.

Now Cywinski is applying his fondness for an asset-light, heavily franchised model to Qdoba, along with some pruning of the legacy system.

In 2023, Qdoba saw a net gain of 14 units (34 were opened, while 20 were closed). This year, another 50 are expected to open, followed by 75 in 2025. By the year 2027, Qdoba will surpass 1,000 units, about 90% of which will be franchised, he said.

Franchise demand has been so strong, Cywinski said, “They want to acquire the 165 we own, but we want to hold onto those for a couple of years, because they are valuable to us.”

Next year, Qdoba will start marketing nationally, he said. The franchisee contribution to the advertising fund will increase to 3.25%, from 2.25% currently. And the chain has hired Leo Burnett Advertising as the agency of record, a company that has done a lot of work with McDonald’s and many other global brands.

“This is a significant lever for us when we begin nationally marketing this brand,” Cywinski said.

Qdoba in 2023 has an average unit volume of $1.6 million, and Cywinski predicted it would hit $1.7 million this year at company-owned units.

The company is investing about $30 million in remodels. About 85 company-owned units will be redone this year. Upgrades include a shift to digital menu boards, which will make it easier to change prices when needed, Tucker noted.

The chain is also relaunching its app and website, along with the loyalty program. Last year, Qdoba hired Prashant Budhale as chief technology officer. He previously headed the tech team at Sonic Drive-In.

Fundamentally, Cywinski sees Qdoba in a unique position as the No. 2 Mexican fast-casual brand. The more-than 3,000-unit Chipotle may lead the segment, but Chipotle doesn’t franchise. Qdoba offers franchise operators to get into the “sweet spot” that is Mexican fast casual.

“We have tremendous white space, knowing that Chipotle has 3,000-plus restaurants and we only have 750,” Cywinski said. “So the good news for us is we have tremendous demand internally from our existing franchisees to grow and acquire. And we have demand from those who operate in casual dining and QSR who want to get into Mexican fast casual.”

 

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