Operations

Qdoba is betting on franchising to double its unit count

The No. 2 Mexican fast casual has a long way to go to get close in size to arch rival Chipotle, but Qdoba is refranchising in a shift to the asset-light model.
Qdoba restaurant exterior
Qdoba is about 80% franchised currently. |Photo courtesy of Qdoba.

Qdoba Mexican Eats is doubling down on franchising with plans to double in unit count.

The fast-casual chain, which was acquired by Butterfly Equity last year and merged with the now multi-brand group Modern Restaurant Concepts (MRC), has set the goal of doubling its 750-unit count over the next decade. The chain expects 40 new restaurants to open this year, with 60 planned for 2024 and more than 80 starting in 2025 and each year going forward.

“Qdoba is an exceptionally well-positioned brand in one of the most attractive restaurant categories,” said John Cywinski, MRC’s CEO, in a statement on Wednesday. “We possess long-standing momentum, strong unit economics, a compelling operating model, an extraordinarily passionate guest following, and significant untapped geographic potential.”

It’s not surprising that Cywinski is looking to franchisees to grow the brand. He previously led Applebee’s, an almost entirely franchised brand that has long advocated the asset-light model.

Now the San Diego-based chain, which is about 80% franchised, is “aggressively accelerating” new restaurant development with both the brand’s 85 existing franchisees and new operators with the goal of sustaining a 10% annual growth rate, Cywinski said.

Part of that plan involves refranchising.

The company said Qdoba recently sold 77 company-owned restaurants to its largest franchisee: North Fork Fresh Mex, which operates 97 Qdoba units in Missouri, Illinois, Indiana, Kentucky and Virginia.

North Fork has also committed to build 73 restaurants over the next seven years, the company said.

Jacob Stauffer, North Fork’s co-owner, said in a statement that the agreement will provide a tremendous opportunity to both expand the business and benefit team members.

“We’ve seen great success since aligning with Qdoba years ago and know the brand provides a distinct business advantage as we tackle important yet underserved markets in the months ahead,” Stauffer said.

Qdoba has posted 10 consecutive quarters of positive same-store sales growth—though the privately held company did not reveal those numbers. The chain’s average unit volume is $1.6 million, which is an improvement over the AUV of $1.25 million for Qdoba reported by sister brand Technomic for fiscal 2022. Last year, Qdoba also had 733 units, which was a decline from 739 the prior year.

Qdoba is the nation’s second-largest fast-casual Mexican chain, but still a distant competitor to the 3,200-unit Chipotle Mexican Grill, which is gunning to reach 7,000 units in North America. Chipotle opened 47 units during the June 30-ended second quarter and expects to see 255 to 285 new restaurants open this year, all of which are company owned and most of which will include a drive-thru.

Chipotle also boasted average restaurant sales of $2.9 million for the quarter, which is nearing twice the AUV Qdoba is currently reporting.

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