Qdoba moves to close 67 stores companywide

A survey that identified a host of underperforming Qdoba Mexican Grill locations across the company’s footprint has resulted in a decision by its parent company to close 67 stores, more than 10 percent of all Qdoba restaurants. However, one co-owner of the Springfield-area franchisee says revenues at their stores are up, and they plan to add a handful of new locations in Missouri and Oklahoma during the next year.

Randy Allen, co-owner of Burrito Concepts LLC, which operates 13 Qdoba locations, including four in Springfield, said all the announced closures would be at corporate-owned stores.

“Our locations continue to grow in revenue. They continue to do well. We have no intentions to close at all. In fact, we have four letters of intent scattered throughout our market for new locations that we would hope to get open in the next 12 months,” Allen said, adding that under Burrito Concepts’ franchise agreement, it can’t be forced to close stores based on poor revenue performance.

Qdoba’s parent company, Jack in the Box Inc. (Nasdaq: JACK), announced June 17 it would make closures to the Denver-based fast-casual chain by September. The Qdoba system comprises 647 restaurants, 340 of which are corporate-operated.

The decision to close nearly 70 stores was prompted by a comprehensive unit-level analysis of key performance metrics.

“We’ve looked at a number of factors related to the operations of the restaurants – things like sales trends, cash flows, as well as a very thorough site evaluation from a real estate perspective. We considered brand awareness, the competitive environment and our density in the market,” said Qdoba spokesman Brian Luscomb.

Luscomb declined to disclose if any company stores in Missouri would close. Qdoba, he said, has 31 locations in the Show-Me State, with 25 company stores – all in the St. Louis metropolitan area.

The announcement comes after Qdoba’s revenues dropped 3 percent in the quarter ending April 14 to $355.6 million from $366.5 million in the same quarter of 2012. Earnings from company operations dropped by one-third to $22.3 million from $33.5 million.

While it is closing a significant portion of its locations, Qdoba has plans in place to add new stores. It expects to open more than 70 locations in fiscal 2013, 40 of which would be corporate restaurants.

As a result of the closures, the company estimates it will incur pre-tax charges during the current fiscal year of roughly $40 million, including an estimated $28 million in noncash charges and $12 million in charges related to employee severance and cash lease obligations.

Allen said while Qdoba may be having some issues with its stores in other markets, Springfield-area locations are not part of the problem.

“We will continue to build,” Allen said, adding Burrito Concepts is close to signing a letter of intent at a site for its 18th location.

Burrito Concepts, owned by Allen and Wayne Morelock and Kenny Ross and operating under the umbrella of Morelock-Ross Cos., opened its first Qdoba in 2004. The franchisee was listed among Springfield Business Journal’s 2012 Dynamic Dozen for three-year revenue growth. Its 2011 revenues were $10.1 million, up 33 percent compared to 2009. Allen said revenues continue to climb at a steady pace, but declined to disclose 2012 increases or 2013 projections.

Currently, the franchisee operates stores in Springfield, Joplin, Fayetteville and Rogers, Ark., and Tulsa and Stillwater, Okla. Burrito Concepts plans to add stores in Branson and Tulsa and Bixby, Okla. Allen said the franchisee is the only Qdoba operator in southwest Missouri, northwest Arkansas and northeast Oklahoma.