Reporter's Notebook

Don't expect a Qdoba spinoff anytime soon

Now that Qdoba is reporting strong same-store sales and unit growth again, speculation has intensified that its parent company, Jack in the Box Inc., should spin the burrito chain in an IPO.

And this sure would be a good time to do that. As we’ve reported numerous times, newly public companies are getting ridiculous valuations. Investors are itchy to put money into another Chipotle. And, well, Qdoba is rather close — at least in the fact that it sells fast casual burritos.

But don’t expect a spinoff anytime soon, at least according to Jack in the Box CEO Leonard Comma.

Speaking at the ICR XChange consumer conference in Orlando on Monday, Comma said that investors are giving Jack in the Box enough credit for Qdoba’s growth to keep the company from having to consider an option like a spinoff.

“What’s happened in the last six months is, we’ve been widely recognized for the value the Qdoba brand is bringing to bear,” Comma said. “If it didn’t, we’d have reason for concern. But the marketplace recognizes the value the Qdoba brand brings.”

Indeed, Jack in the Box was the second highest performing restaurant chain on Wall Street in 2014, with its stock price growing nearly 60 percent. Much of that has been a growing enthusiasm for Qdoba. The chain’s same-store sales in its fiscal fourth quarter, ending September 29, rose 7.7 percent. Those sales rose 6 percent for the full fiscal year.

Comma said that keeping Jack in the Box and Qdoba under the same corporate umbrella provides a good long-term solution. Jack in the Box provides cash to enable Qdoba to grow rapidly. The 600-unit Qdoba “is the growth vehicle,” he said. “It’s being fueled by the cash cow.” He said that a spin-off of Qdoba would be a “short-term solution.”

Still, executives did note at ICR that Qdoba has been working to differentiate itself in the market under the brand’s president, Tim Casey. That’s been a key component in the brand’s recent success, Comma said.

“We want it to be a significant growth vehicle for the company,” Comma said. “But it’s caught under the shadow of Chipotle. It’s not a bad shadow. But when you come into the market as the No. 2 player, it’s difficult to accelerate or generate growth. It’s the reason we put so much effort into differentiating that brand.”

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