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A Look at Qdoba Mexican Eats’ Business Model

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Jan. 20 2016, Updated 12:06 p.m. ET

Qdoba Mexican Eats’ business model

In 2003, when Jack in the Box (JACK) acquired Qdoba Mexican Grill for $45 million, Qdoba was operating 85 outlets with a total revenue of $65 million. Since then, the company has grown to reach a restaurant count of 661, with 322 company-owned restaurants and 338 franchisee-owned restaurants. Qdoba’s overall revenue rose from $185 million in 2011 to $395 million in 2015, an increase of 105%. In October 2015, the brand name was changed to Qdoba Mexican Eats.

Similar to the Jack in the Box brand, Qdoba has three main revenue streams: company-owned restaurant sales, franchise rental revenue, and franchise royalties and others.

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Revenue from company-owned restaurant sales

The revenue from this segment rose from $169 million in 2011 to $374 million in 2015, an increase of 121.7%. The rise in sales is largely due to an increase in the number of company-owned restaurants, from 245 in 2011 to 322 in 2015, and an increase in same-store sales.

Franchise royalties and others

The company charges royalty fees of 5% of a franchisee’s total sales. The revenue from this segment has risen from $19 million in 2011 to $21 million, an increase of 9.1%. The increase is due to an increase in same-store sales.

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Franchise rental revenue

In 2015, the revenue from this segment was $0.2 million, an increase of 245% from its 2011 revenue. The revenue from this segment does not have a significant impact on Qdoba Mexican Eats’ total revenue.

Peer comparison: Revenue growth

From October 2014 to September 2015, Chipotle Mexican Grill (CMG) recorded a total revenue of $4.6 billion, an increase of 17.8% from the $3.9 billion the company recorded in the previous year. During the same period, Panera Bread’s (PNRA) overall revenue rose from $2.4 billion to $2.5 billion, an increase of 4%. Overall, revenue from both of Jack in the Box’s brands has decreased, from $1.6 billion in 2011 to $1.5 billion in 2015, a decline of 5.7% in five years.

The Consumer Discretionary Select Sector SPDR ETF (XLY), which invests about 10% of its portfolio in restaurant stocks, has 4.8% of its portfolio invested in McDonald’s (MCD) and 3.8% invested in Starbucks (SBUX).

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