Please ensure Javascript is enabled for purposes of website accessibility

Jack in the Box Pushes Qdoba Out of the Box

By Motley Fool Staff - Dec 22, 2017 at 11:10PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The fast-food company sold its Mexican chain to private equity firm Apollo Global.

In this segment of the Market Foolery podcast, host Mac Greer, Total Income's Ron Gross, and Million Dollar Portfolio's Jason Moser reflect on a fast-food divorce: Jack in the Box (JACK 1.99%) has decided to get out of fast-casual Mexican, and Apollo Global (APO) was there to help, offering $305 million for the Qdoba chain. Is this a smart move for Jack? Did the buyer overpay for this value meal?

A full transcript follows the video.

This video was recorded on Dec. 19, 2017.

Mac Greer: Guys, Jack in the Box selling Qdoba, the fast-casual Mexican chain. They're selling Qdoba to the investment firm Apollo Global for $305 million. Ron, shares of Jack in the Box over the last two and five years have beaten the market and done well. The last year ...

Ron Gross: Not so much.

Greer: Qdoba not doing so well. Do you like this deal?

Gross: I like the deal for Jack. I think it's great to get rid of it. I'm surprised that Apollo -- I guess they would want it, but $305 million is a good deal for Jack, I think. They bought it back in 2003 for $45 million. They've certainly expanded it from 85 locations up to 700. It was working for a while, right up until it kind of stopped working and the concept kind of soured. I think. Great for them to focus on their namesake brand, Jack in the Box, which, by the way, are primarily franchised, where Qdoba is much less franchised. So I think it's a better business model to focus on the franchise Jack in the Box restaurants, get rid of Qdoba, take the cash.

Greer: Jason?

Jason Moser: Yeah, I think it just goes to speak to how difficult the restaurant business really is. It seems like a lot of Jack in the Box's success was because of strong performance from Qdoba over the past few years. It's competitive, obviously. There's a little concept out there called Chipotle that seems to occupy some of the space. And that's a much bigger concept. I think you said Qdoba has around 700 stores, Chipotle has somewhere around 2,300. And they're looking for a new CEO that could very well light a fire under that business. So, I think it's probably as good a time as any for them to unload it.

Jason Moser owns shares of Chipotle Mexican Grill. Mac Greer owns shares of Chipotle Mexican Grill. Ron Gross has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Chipotle Mexican Grill. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Jack in the Box Inc. Stock Quote
Jack in the Box Inc.
$93.20 (1.99%) $1.82
Apollo Global Management, LLC Stock Quote
Apollo Global Management, LLC

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.