Qdoba Logo

Qdoba

Qdoba Franchisor LLC
https://www.qdoba.com
1-858-766-4900
350 Camino De La Reina, Suite 400, San Diego, California 92108

Initial Investment Range

$236,500 to $1,294,000

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 December 20, 2024 FDD Risk Analysis

Free FDD Library AI Analysis Date: July 16, 2025

DISCLAIMER: Not Legal Advice - For Informational Purposes Only. Consult With Qualified Franchise Professionals.

1

Franchisor Stability Risks

Start Here
Total: 10
3
3
4

Disclosure of Franchisor's Financial Instability

High Risk

Explanation

The financial statements for the entity managing the franchise system, Quidditch Acquisition, Inc., show significant net losses for the past two fiscal years ($20.2 million in FY2024 and $21.9 million in FY2023). While the new franchisor entity shows a profit, its operations are dependent on this manager. This pattern of losses in the managing entity could potentially impact the resources available for franchisee support, system development, and overall brand health, representing a considerable risk to you.

Potential Mitigations

  • A thorough review of all provided financial statements, including footnotes, by an experienced franchise accountant is essential to assess the franchisor's stability.
  • Discuss with your financial advisor the potential implications of the manager's historical losses on the long-term support and services you will receive.
  • Your attorney should clarify the legal and financial relationship between the franchisor, its manager, and any guarantors to understand where ultimate responsibility lies.
Citations: Item 21, Exhibit A

High Franchisee Turnover

Low Risk

Explanation

This risk was not identified in the FDD package. An analysis of the franchisee turnover data in Item 20 for the past three fiscal years does not indicate an unusually high rate of terminations, non-renewals, or other cessations of business. Low turnover can suggest a relatively stable and satisfied franchisee base. However, you should still conduct your own due diligence by speaking with current and former franchisees.

Potential Mitigations

  • It is still wise to discuss the franchisee turnover rates disclosed in Item 20 with your business advisor to understand the context behind the numbers.
  • Contacting a sample of current and former franchisees from the lists in Exhibit D is a crucial step your attorney can help you prepare for.
  • An accountant can help you compare the system's churn rate to any available industry benchmarks for a more complete picture.
Citations: Not applicable

Rapid System Growth

Medium Risk

Explanation

The franchise system is in a phase of rapid growth, expanding from 447 to 613 franchised units in the last two years, largely through refranchising company-owned stores. While growth can be positive, such a rapid increase in the number of franchisees places significant strain on a franchisor's support infrastructure. You may find that resources for training, site selection, and operational support are stretched thin, potentially affecting the quality and timeliness of the assistance you receive.

Potential Mitigations

  • Inquire with the franchisor about their specific plans to scale their support staff and infrastructure to match the pace of franchise growth.
  • Speaking with franchisees who opened recently versus several years ago can provide your business advisor with insight into whether support quality has changed.
  • Your accountant should review the franchisor's financials in Item 21 to assess if investment in support infrastructure is keeping pace with expansion.
Citations: Item 20, Table 1

New/Unproven Franchise System

High Risk

Explanation

The franchisor entity, Qdoba Franchisor LLC (Qdoba), was formed in September 2023 and began franchising in November 2023 as part of a securitization transaction. While the Qdoba brand is mature, your direct contractual partner is a new legal entity with a limited operating history and its own financials. This structure, separating the brand from the new franchising vehicle, introduces complexities and risks related to the franchisor's ability to establish its own stable track record of support and performance.

Potential Mitigations

  • An attorney should carefully evaluate the legal structure, including the management agreement with the predecessor and any financial guarantees from parent entities.
  • Your accountant must scrutinize the financials of the new franchisor entity and any guarantors to assess its capitalization and financial viability.
  • A business advisor can help you weigh the risks of contracting with a new legal entity, even if the brand itself is well-established.
Citations: Item 1, Item 21

Possible Fad Business

Low Risk

Explanation

This risk was not identified in the FDD package. The Qdoba brand has operated since 1995 and is a well-established player in the fast-casual Mexican restaurant industry. The business model is not based on a recent or fleeting trend, demonstrating long-term consumer demand. Therefore, the risk of the business being a short-lived fad appears low. The primary risks are related to its current financial and legal structure rather than the viability of the core concept.

Potential Mitigations

  • Your business advisor can help you research the long-term stability and growth trends of the fast-casual Mexican food sector.
  • Discuss the brand's strategies for innovation and staying relevant with current franchisees and your business advisor.
  • An accountant can help you analyze how the mature brand's performance might be affected by current economic conditions.
Citations: Item 1

Inexperienced Management

Medium Risk

Explanation

This risk appears to be partially mitigated. While the franchisor entity itself is new, the management team listed in Item 2 has extensive experience in the restaurant industry and with other major franchise systems like Applebee's, Dunkin', and Little Caesars. This experience could provide stability and knowledgeable support. However, the risk remains that this experienced team must operate within the new, complex securitization structure, which could present unique challenges that are different from their prior roles.

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, specifically ask about their direct interactions with and the effectiveness of the current management team.
  • Your attorney should help you understand how the management agreement between the franchisor and its related operating company might impact management's autonomy.
Citations: Item 2

Private Equity Ownership

Medium Risk

Explanation

The franchisor is indirectly owned by investment funds managed by Butterfly Equity LP, a private equity firm. This ownership structure may create a focus on maximizing short-term financial returns for investors, which could potentially conflict with the long-term health of the franchise system. Decisions regarding fees, support levels, and required spending might be influenced by the private equity firm's investment horizon and exit strategy, which could be a risk for your long-term investment.

Potential Mitigations

  • It is wise to research the private equity firm's history and reputation for managing other franchise brands with your business advisor.
  • Talking to franchisees about any changes in franchisor behavior or priorities since the acquisition can provide valuable insight.
  • Your attorney should analyze any clauses in the Franchise Agreement that relate to the sale or assignment of the franchise system.
Citations: Item 1

Non-Disclosure of Parent Company

Low Risk

Explanation

The FDD discloses a complex parent structure involving Qdoba Franchisor LLC, Qdoba Funding Holdco LLC, and Quidditch Acquisition, Inc. Financials are provided for the parent entities, and a guaranty of performance is provided by Qdoba Funding Holdco LLC. The structure appears to be fully disclosed as required. However, the complexity of this multi-layered, securitized structure itself is a significant risk that warrants careful review by your professional advisors to understand the flow of funds and responsibilities.

Potential Mitigations

  • Have your franchise attorney carefully map out the corporate structure and the flow of obligations and guarantees between the various entities.
  • Your accountant should analyze the financial statements of all provided parent and affiliate entities to assess the overall financial health of the consolidated enterprise.
  • Ask your attorney to confirm the strength and enforceability of the guaranty provided by the parent company.
Citations: Item 1, Item 21, Exhibit A

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 outlines the chain of ownership through Jack in the Box, Inc., Apollo Global Management, and Butterfly Equity LP. The information appears to be transparent and allows a prospective franchisee to understand the brand's lineage. The primary risk is not a lack of disclosure, but the implications of this complex history and the new securitization structure.

Potential Mitigations

  • A franchise attorney should review the predecessor history for any red flags that might carry over to the new entity.
  • Use the predecessor information as a guide when conducting due diligence and speaking with long-term franchisees.
  • A business advisor can help you research public information about the brand's performance under its previous owners.
Citations: Item 1

Pattern of Litigation

High Risk

Explanation

Item 3 discloses two significant litigation cases. In one case, the franchisor's predecessor settled with a franchisee for $600,000 and other concessions to resolve claims of improper termination. In another pending case, former franchisees are suing for breach of contract and unfair business practices related to their termination. This pattern of litigation involving disputes over termination and business practices with franchisees could indicate an aggressive or potentially problematic relationship between the franchisor and its network.

Potential Mitigations

  • A franchise attorney should carefully review the details of the litigation disclosed in Item 3 to understand the nature of the disputes.
  • Discussing these litigation cases with current and former franchisees may provide additional context and insight into the franchisor's conduct.
  • It is important to consider this litigation history as an indicator of potential future conflicts when evaluating the franchise relationship.
Citations: Item 3
2

Disclosure & Representation Risks

Total: 15
3
4
8

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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3

Financial & Fee Risks

Total: 10
4
6
0

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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4

Legal & Contract Risks

Total: 16
5
7
4

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

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5

Territory & Competition Risks

Total: 5
2
3
0

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.

6

Regulatory & Compliance Risks

Total: 10
4
5
1

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.

7

Franchisor Support Risks

Total: 4
1
2
1

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.

8

Operational Control Risks

Total: 12
3
6
3

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.

9

Term & Exit Risks

Total: 18
7
8
3

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.

10

Miscellaneous Risks

Total: 2
2
0
0

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.