Butterfly Equity, a Los Angeles-based private equity firm, announced Tuesday an agreement to purchase QDOBA, the country’s largest franchisor in the Mexican fast casual segment.
Terms of the deal were undisclosed. King Street Capital Management, a global alternative asset manager, is investing alongside Butterfly.
As part of the transaction, the chain will join better-for-you platform Modern Restaurant Concepts, which also operates Modern Market Eatery and Lemonade. When the merger finalizes in Q3, Modern Restaurant Concepts will oversee roughly 800 locations in nearly every state and employ almost 18,000. Leadership believes there’s enough whitespace for more than 3,000 units across all three brands. QDOBA has nearly 750 stores across North America, 450 of which are franchised. Modern Market has nearly 30 outlets across four states while Lemonade has roughly 20 units in California.
QDOBA CEO Keith Guilbault will remain with the brand and join Modern Restaurant Concepts CEO Rob McColgan as co-chief executive.
“QDOBA is an iconic brand whose reach will help us bring Modern Market and Lemonade to new consumers and franchisees around the country, particularly as we begin our own franchising journey,” McColgan said in a statement. “We’re thrilled to welcome the QDOBA team to the Modern Restaurant Concepts family and believe that together we can build something truly differentiated in the restaurant space.”
The fast casual has exchanged multiple hands in its 27-year history. In 1998, Western Growth Capital and other investors purchased a large stake in the company, giving it the proper capital to grow. Five years later, the group sold QDOBA—which had 85 restaurants at the time—to Jack in the Box for $65 million. In 2018, the burger brand turned QDOBA over to Apollo Global Management for $305 million.
“We are proud to have supported QDOBA’s business transformation under our fund’s ownership, solidifying its position as the number one Mexican fast-casual franchisor in North America,” Apollo partner Itai Wallach said in a statement. “We are confident QDOBA will continue on its growth trajectory as part of the Modern Restaurant Concepts platform and that the talented team will be a valuable asset to the combined platform in its exciting next phase.”
QDOBA will enter its new ownership primed for expansion. Earlier this year, the chain announced a 30-unit franchise agreement—the largest in company history—to grow in South Florida over the next 10 years. That news came after the brand inked 60 franchise commitments in 2021. The company has a pipeline of roughly 300 franchised restaurants that should open in the next five years.
For QDOBA, the ultimate goal is to reach 2,000 restaurants through a mixture of new and existing operators and corporate development. Chief development officer Jim Sullivan said the plan is to open 60 units in 2022 and then start debuting 100 to 120 stores annually in the next several years.
Future sister concept Modern Market is at the start of its franchise journey. It’s first multi-unit agreement calls for more than 40 locations across seven states.
“We are incredibly excited to partner with Butterfly in the next phase of QDOBA’s journey alongside Modern Market and Lemonade,” Guilbault said in a statement. “We’ve only scratched the surface of QDOBA’s potential to date and Butterfly’s food focus will strengthen our ability to grow and deliver great food to our loyal customers.”
Butterfly was advised by Kirkland & Ellis LLP on legal matters in connection with the transaction. QDOBA and Apollo Funds were advised by Deutsche Bank, Credit Suisse, and Morgan, Lewis & Bockius LLP.