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Qdoba Franchise Cost Worth Owner Profits? (2023)

Written by: Tyler Morris
Last Updated by Marina Longo: January 18, 2023
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This article is based on its 2022 FDD

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.

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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.

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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.

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