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Qdoba
How much does Qdoba cost?
Initial Investment Range
$236,500 to $1,299,000
Franchise Fee
$20,000 to $40,000
Qdoba Franchisor LLC grants franchises for the operation of quick-service or fast-casual Mexican restaurants under the service mark Qdoba®, and variations on that mark.
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Qdoba June 16, 2025 FDD Risk Analysis
Free FDD Library AI Analysis Date: August 19, 2025
DISCLAIMER: Not Legal Advice - For Informational Purposes Only. Consult With Qualified Franchise Professionals.
Franchisor Stability Risks
Start HereDisclosure of Franchisor's Financial Instability
High Risk
Explanation
The franchisor, Qdoba Franchisor LLC (Qdoba), is a newly formed entity for a securitization transaction. The entity providing operational support, Qdoba Restaurant Corporation (QRC), shows significant, consecutive net losses in its audited financials ($20.2M in FY2024; $21.9M in FY2023) and has a large accumulated deficit. This financial weakness in the operational manager, despite guarantees from parent companies, could impact its ability to provide robust, long-term support and invest in the system's growth.
Potential Mitigations
- An experienced franchise accountant should analyze the complete, multi-part financial statements and the complex corporate structure.
- Discuss the practical implications of the securitization structure and the manager's financial health with your franchise attorney.
- A business advisor can help you assess how the manager's financial performance might affect day-to-day support and brand development.
High Franchisee Turnover
Medium Risk
Explanation
Item 20 data shows a pattern of franchisee exits classified as "Ceased Operations Other Reasons" (9 in FY2024, 13 in FY2023), which is a vague category. While the overall percentage is not extreme, the absolute numbers combined with the large number of company stores being sold to franchisees (refranchising) indicate a system in significant flux. This transition could present both opportunities and risks related to system stability and support consistency.
Potential Mitigations
- It is crucial to contact a significant number of former franchisees listed in Item 20, especially those who 'ceased operations,' to understand their reasons for leaving.
- Your accountant can help analyze the turnover tables to calculate the effective churn rate over the past three years.
- During discussions with current franchisees, a business advisor can help you formulate questions about the impact of the refranchising strategy on the system.
Rapid System Growth
Medium Risk
Explanation
The system has experienced very rapid growth in franchised units, increasing from 406 to 613 in three years, largely through the sale of company-owned stores. While this indicates demand, such rapid expansion can strain a franchisor's ability to provide adequate site selection support, training, and ongoing operational assistance to all units, potentially diluting the quality of support you receive as a new franchisee.
Potential Mitigations
- In discussions with the franchisor, inquire specifically about how they have scaled their support staff and systems to manage this growth.
- Contacting franchisees who opened during this high-growth period can provide insight into the quality of support they received.
- A business advisor can help you evaluate whether the franchisor's infrastructure appears capable of sustaining this pace of expansion.
New/Unproven Franchise System
High Risk
Explanation
The franchisor entity, Qdoba Franchisor LLC, was recently formed (September 2023) as part of a complex securitization transaction. While the operational brand and its management have extensive history, you would be contracting with this new, legally distinct entity. Its primary purpose is to facilitate a financial transaction, which could create priorities that differ from those of a traditional franchisor. The long-term effects of this specific corporate structure on franchisees are not yet fully established.
Potential Mitigations
- A franchise attorney should explain the full legal and practical implications of contracting with a special purpose entity created for securitization.
- Investigating the track record of the parent private equity firm, Butterfly Equity LP, with other franchise brands can provide valuable context.
- Your accountant should review the financial obligations this new entity has to its investors and how that might impact operational decisions.
Possible Fad Business
Low Risk
Explanation
This risk was not identified in the FDD Package. The Qdoba brand has been in operation since 1995 and is well-established in the fast-casual restaurant industry. A fad business risk is more common with new concepts tied to a potentially short-lived trend. However, all restaurant concepts are subject to changing consumer tastes and economic conditions, which requires ongoing innovation.
Potential Mitigations
- A business advisor can help you conduct independent market research to assess the long-term consumer demand for the fast-casual Mexican food segment in your specific area.
- Reviewing the franchisor's history of menu innovation and adaptation can provide insight into their ability to stay relevant.
- Your financial projections, prepared with an accountant, should consider potential shifts in consumer preferences over the life of the franchise.
Inexperienced Management
Low Risk
Explanation
This risk was not identified in the FDD Package. The management team detailed in Item 2 consists of individuals with extensive executive experience in the restaurant and franchise industries at large, well-known brands like Applebee's, Dine Brands, Little Caesars, and Inspire Brands. However, it is important to note that the operational manager, QRC, has reported net losses, which could impact its ability to retain top talent long-term.
Potential Mitigations
- A business advisor can help you research the professional reputations and track records of the key executives listed in Item 2.
- When speaking with current franchisees, it is useful to ask about their direct experiences with the management team's leadership and support.
- An accountant should review the company's financial statements to assess if compensation levels are sustainable given the manager's financial performance.
Private Equity Ownership
Medium Risk
Explanation
Qdoba is indirectly owned by investment funds managed by affiliates of Butterfly Equity LP, a private equity firm. Private equity ownership can introduce a focus on maximizing short-term investor returns, which may not always align with the long-term health of franchisees. This could potentially manifest as increased fees, pressure to use specific vendors, or a sale of the entire system, creating uncertainty for your long-term investment.
Potential Mitigations
- It is wise to have your attorney review any clauses in the Franchise Agreement that relate to the sale or assignment of the franchise system.
- A business advisor can help you research the private equity firm's reputation and its track record with other franchise brands in its portfolio.
- Discussing any observed changes in system strategy or support levels since the acquisition with current franchisees can be very insightful.
Non-Disclosure of Parent Company
Low Risk
Explanation
This risk was not identified in the FDD Package. The FDD clearly discloses the complex parent and affiliate structure, including Qdoba Funding Holdco LLC and Quidditch Acquisition, Inc. Audited financial statements and guarantees for these relevant parent entities are provided in the exhibits as required, allowing for a more complete, albeit complex, assessment of the overall organization's financial health.
Potential Mitigations
- A franchise attorney should be engaged to diagram and explain the complex corporate structure and the flow of obligations and guarantees.
- Ensure your accountant reviews the financial statements for all disclosed parent and affiliate entities, not just the direct franchisor.
- Clarifying which entity is responsible for specific support obligations versus which holds the debt is a key task for your attorney.
Predecessor History Issues
Low Risk
Explanation
This risk was not identified in the FDD Package. Item 1 provides a detailed history of the franchisor's predecessors, including Qdoba Restaurant Corporation (QRC), and their prior ownership history involving entities like Jack in the Box, Inc. and Apollo Global Management, Inc. The FDD is transparent about the recent Securitization Transaction and the change in the franchisor entity, providing a clear lineage of the brand's operational history.
Potential Mitigations
- Your attorney can help you understand the implications of the transfer of assets from the predecessor, QRC, to the new franchisor entity.
- Speaking with long-term franchisees about their experiences under previous ownership structures can provide valuable context.
- A business advisor can help you research the public history of the predecessors for any additional relevant information.
Pattern of Litigation
High Risk
Explanation
Item 3 discloses two significant litigation cases involving franchisees. In one settled case, the franchisor paid the franchisee $600,000 and provided a royalty reduction to resolve claims of fraud and breach of contract. Another recent case is pending where former franchisees allege wrongful termination. This pattern suggests potential underlying issues in the franchisor's relationships with its franchisees or in its operational and contractual practices, representing a significant risk.
Potential Mitigations
- A franchise attorney must carefully analyze the nature, allegations, and outcomes of the litigation disclosed in Item 3.
- It is advisable to discuss these litigation patterns with current and former franchisees to understand the context from their perspective.
- Considering the fraud allegations in the settled case, a thorough due diligence process guided by your attorney and accountant is essential.
Disclosure & Representation Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
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Financial & Fee Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
Legal & Contract Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
Territory & Competition Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
Regulatory & Compliance Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
Franchisor Support Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
Operational Control Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
Term & Exit Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
Miscellaneous Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
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