Qdoba emerges from the shadow of Chipotle

by Monica Watrous
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The fast-casual chain recently added smothered burritos to its permanent menu.

ORLANDO, FLA. — As executives describe it, Qdoba Mexican Grill has been “under the shadow of Chipotle.” With more than 600 units, the Denver-based fast-casual restaurant chain is at the center of rebranding efforts with the goal of carving a new niche in the fresh-mex marketplace.

“When you come into the market as a No. 2 player and you are essentially a ‘me, too’ brand, it is very difficult to generate or accelerate growth,” said Lenny Comma, chairman and chief executive officer of parent company Jack in the Box Inc., in a Jan. 12 presentation at the ICR XChange in Orlando. “And that is really the reason to put this much effort into differentiating that brand.”

A key component of transformation plans is menu innovation. In December, the chain added to its core menu a line of smothered burritos, containing layers of rice, beans, cheese and meat topped with a choice of tangy verde sauce, bold red chile sauce or smoky chipotle cream sauce.

“What smothered burritos does for us is really allow us to play into the taste and flavor and the craft of the food,” said Tim Casey, president of Qdoba Restaurant Corp. “If you think about a burrito, a burrito looks like a burrito in any chain. The smothered burrito allows us to bring flavor forward and bring forth some really craveable smothering sauces.

“It also allows us to drive the day part past just lunch. It is a beautiful evening day part entree.”

Other new items have included a limited-time Mango Mojo menu, featuring a salad, nachos and a burrito topped with spicy mango salsa and a sweet red chili sauce tossed with chunks of fresh mango.

“We have some things coming down the road,” Mr. Casey said. “Early summer we have some really exciting things happening to really build on what we are seeing from the guest and how well they are responding to this idea of Qdoba being the flavor innovator and bringing innovative flavors to them in the Qdoba concept.”

To create more distinction from other burrito chains, Qdoba also recently stopped surcharging for such ingredients as guacamole and queso.

“At the beginning of this year, we put in place the new value proposition to the guest which essentially simplified the menu, simplified the pricing and gave the consumer the opportunity to choose what goes into their burrito without feeling nickeled and dimed,” Mr. Comma said. “And all early indications from that have been very positive.”

Posting a 6% increase in same-store sales during the recent fiscal year, Qdoba is viewed by the company as a growth engine that is fueled by the “cash cow” of Jack in the Box. Asked about the possibility of a spin-off, executives expressed confidence in the long-term growth of the brand and its value creation for shareholders. A split would be a “short-term play,” Mr. Comma said.

“We are feeling good about the sales that we have been able to achieve in the last year, and we are feeling optimistic about the year going forward,” he said.
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