Qdoba Cooking Up Growth in Fast-Casual Restaurant Sector

An economic recession, or at least a sluggish recovery, isn't exactly an ideal time for aggressive restaurant expansion, but one nationwide Mexican chain isn't shying away from new opportunities.

Qdoba Mexican Grill has been growing its network of franchises nationwide and in Wisconsin. There now are 500 Qdoba restaurants in 43 states and the District of Columbia, and all feature what the franchise calls an "artisan" Mexican kitchen where customers can have a fast, handcrafted meal — handcrafted at the customer's direction — with ingredients prepared within view of diners.

The concept is known as fast-casual, and it's the calling card of franchises like Qdoba and Chipolte Mexican Grille, which probably is Qdoba's chief competitor. Todd Owen, vice president of franchise development for Qdoba, said the increasingly popular concept is a prime reason why expansion is possible in this economic environment, and why the amount of dollars that it pulls out of respective markets continues to grow. In the fiscal fourth quarter, Qdoba's same-store sales grew 5.6%, due in part to increased spending by consumers in the fast-casual segment.

"We've got the benefit of being in right place in the right time in a sector of the restaurant industry that's probably the fastest-growing segment of the restaurant business," Owen said. "That fusion between the quality of a casual dining operation and yet still providing aspects of fast food, which the customer appreciates, is kind of where we land."

In terms of franchisees, Qdoba looks for something, too. Area Qdoba operators Ron Stokes, COO for the Milwaukee-based Roaring Fork Restaurant Group, and Michael Pranke, who has a real estate background, recently opened their newest Qdoba Mexican Grill restaurant in Madison, which is their sixth in the region.

In Owen's view, they fit the selective Qdoba bill. "In larger metro areas, we're certainly focused on being very selective with franchisees," said Owen, who also has worked for Taco Bell. "That's not just lip service in the sense that we believe in a market penetration strategy, and that the coordination of a financially capable operation by a savvy business group has been a more successful strategy for us to penetrate larger markets, and build market share and brand awareness, rather than playing off the one-at-a-time approach and build out the market with an operator strategy."

Qdoba will do single-unit franchising in smaller markets, where perhaps the local business person is a good fit, but Owen described Pranke and Stokes as very mobile people who have been in business in the area for a long time, "and obviously that was a fit as well."

"In general, franchising as a business model tends to attract a lot of very smart, hard-working people that are ready to make the transition into one more entrepreneurial world," he said. "It does not come without risk, but sometimes people get comfortable working for a corporation, and franchising allows them to think about what they really want to do. Restaurants might be one of those things people really have a passion for."

Stokes brings the leadership of a restaurant executive who, as a member of a franchise advisory council, was elected by franchise peers to represent them and a small group of other franchises to provide feedback to the franchisor about the direction of the restaurants.

Stokes, a Cardinal Stritch graduate, has served in various capacities with Yum Brands, the parent of Taco Bell, Pizza Hut, and others. He calls fast-casual a great segment in the restaurant industry, yet he's not cavalier about locating new restaurants or the metrics required to support the decision.

"Typically, it's the density within a one- to two-mile area of the proposed site," he explained. "We have certain demographic characteristics that we look for. Secondly, we look for co-tenancy, whether it's retail or restaurant co-tenancy. We're primarily a lunch-driven occasion, and so the working daytime population within the area we are considering is very important.

"And finally, just economic considerations that involve site-specific variables. I'm talking in terms of the real estate component."

Qdoba was founded in Denver in 1995, and is a wholly owned subsidiary of Jack in the Box Inc. It is not only trying to achieve brand distinction, it is going through a brand evolution as its newer restaurants have a new design, look, and feel to dining areas. That carries through to the types of tables, chairs, lighting, room configuration, menu boards, and the music its plays.

Menu innovation comes from the corporate office due to the benefit of consistency that customers expect at each restaurant location.

When a customer enters a restaurant, Stokes said their experience should include fresh food made right in front of them, and the ability to direct employees to build their own variety of burrito, taco, quesadilla, or nachos.

Like Owen, he makes no apologies for Qdoba's aggressive expansion strategy, citing new locations in Madison, Whitewater, Vernon Hill, Ill., and near Mitchell International Airport in Milwaukee. "We're a growth oriented company," he stated. "We're just very bullish on the brand and the future of the brand. Even though we've gone through and still are in a little bit of an economic pinch, we think we're positioned correctly from a price perspective and from a quality perspective.

"It allows us to appeal to a wide range of customers that are sensitive about price but don't want to give up the quality component — people who are still going to eat out."

Ed Janikowski, regional manager of the Qdoba Mexican Grill Restaurants in Madison, spoke of the restaurant's broad appeal. The Madison locations are on Park Street, State Street, University Avenue, Mineral Point Road, Fitchburg, and East Towne Mall.

The Park Street facility, the only area Qdoba that serves for 24 hours, including breakfast, attracts a mix of university students, local hospital employees and visitors, and area residents.

Janikowski has worked with fast food franchises like McDonald's, full service restaurants like Applebee's, and now in the fast-casual realm with Qdoba.

"We're a growing franchise," he noted, "and we will grow where the opportunity presents itself."

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