Apollo to Buy Qdoba in $305MM Deal

Jack in the Box agreed to sell its fast-casual Qdoba Restaurant to Apollo Global Management in a $305 million deal.

San Diego-based Jack in the Box said the cash deal covers more than 700 owned and franchised restaurants and is expected to close by April 2018.

New York-based Apollo also owns Irving, TX-based CEC Entertainment, parent to the Chuck E. Cheese’s and Peter Piper Pizza dining-arcade brands.

Jack in the Box announced earlier this year it was considering strategic options for Qdoba. The brand’s systemwide same-store sales fell 2.1% in the fourth quarter ended October 1, including a 4% slide at company-owned locations.

At the end of that “robust process,” said Lenny Comma, Jack in the Box CEO and chairman, in a statement, “our board of directors has determined that the sale of Qdoba is the best alternative for enhancing shareholder value and is consistent with the company’s desire to transition to a less capital-intensive business model.” Jack in the Box is predominantly franchised.

Comma said Jack in the Box acquired Qdoba in 2003, when it had 85 locations in 16 states with $65 million in systemwide sales.

“Over the past 14 years, net units have grown at a compound annual growth rate of 16%,” Comma said. The brand now has units in 47 states, the District of Columbia and Canada, and system-wide sales of more than $820 million in fiscal 2017.

Lance Milken, a senior partner at Apollo, said, “We are extremely excited to be acquiring Qdoba and look forward to working with the management team, employees and franchisees to continue building the Qdoba brand.”

The Kennesaw, GA-based Qdoba Franchisee Association said it supported the proposed sale.

“We believe this decision will foster hope and excitement, along with growth potential, among the franchisee community,” said Ron Stokes, who chairs the group and franchises 56 units, in a statement. The QFA was formed in June to represent the franchise owners.

“QFA is excited to work with such a diverse company as Apollo Global,” Stokes said. “We look forward to a collaborative partnership and are optimistic about the opportunities available through the international company.”

Jack in the Box’s fourth-quarter profit declined more than 6%, to 97 cents a share, in the fourth quarter and revenue fell nearly 15% to $338.7 million. Jack in the Box same-store sales fell 1% in the quarter.

Morgan Stanley and Gibson, Dunn & Crutcher advised Jack in the Box in the deal. Apollo was advised by Morgan, Lewis & Bockius; Paul, Weiss, Rifkind, Wharton & Garrison; Deutsche Bank Securities; and PJ Solomon.

Jack in the Box has more than 2,200 restaurants in 21 states and Guam.

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