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Louisville-area Qdoba franchisees sell Ky., Ind., Tenn. stores to parent company

by Steve Coomes

We’d love to call this breaking news because, well, we’re the only ones writing about it.

But the fact is, ZT of Louisville sold its 25 Qdoba franchised units back to its Wheat Ridge, Colo., corporate parent a few months ago for an undisclosed sum.

(A 26th store located on Blankenbaker Pkwy., was under construction when the deal was consummated.)

ZT chairman Michael Grisanti went public with the information during a recent speech at a St. Xavier alumni breakfast centered on entrepreneurism. However, when asked for more information on the subject, Don Doyle, operating partner for the franchise group, declined to comment in detail, asking that Qdoba corporate’s confirmation of the matter stand as the record.

“Qdoba corporate did acquire the ZT of Louisville restaurants in Louisville, Lexington and Nashville a couple of months ago,” Qdoba spokesperson Lauren Preston wrote in an email. “The change came after Don (Doyle) decided he wanted to retire.”

Doyle is 65, which makes the retirement story sound reasonable.

Suffice it to say, it’s likely ZT of Louisville got an offer it couldn’t refuse. According to stories I’ve written about Qdoba and Doyle for Nation’s Restaurant News, ZT’s stores are among the chain’s top performers.

In sales back to a parent company, wide-margin, high-revenue franchise stores commonly earn a premium multiple on EBITDA, but since that multiple ranges widely these days—from 1 to 5 percent for restaurants—it’s difficult to guess what ZT got, especially since we don’t know those stores’ sales numbers.

It’s fair to assume, however, that well capitalized, smart and proven operators like Doyle (former president of KFC and former CEO of Rally’s Hamburgers) and Grisanti (former president of Grisanti Inc. [Casa Grisanti, Mama Grisanti, Sixth Avenue] and Grisanti Casual Italian Restaurant, and current Papa John’s franchisee) made out well in the transaction.

This isn’t the first time ZT got an offer to sell its stores. The Jack in the Box hamburger chain bought Qdoba in 2003 and approached ZT about a sale, but ZT declined.

Not only was it doing well on its own, the group had more stores contracted for development and saw greater potential upside by staying in the game.

When Jack in the Box came back this year, ZT took the deal — whatever it was.

More back story: Doyle and Grisanti, along with some silent partners, gave the brand its start in this market in 1998 under the banner of ZTeca, a burrito concept Grisanti discovered while traveling out west.

A copyright infringement case forced the brand’s name change to Qdoba several years later, but the brand motored along while competitors Chipotle Mexican Grill and Moe’s Southwest Grill grew similarly.

Today, segment-leading Chipotle has 1,300 stores (generating $2.3 billion in sales) to Qdoba’s 600 stores. Moe’s has faded in recent years and now has about 400 units.

Curiously, Chipotle has placed units as close to Louisville as Erlanger and Lexington, but it’s never entered the Commonwealth’s largest market. In unrelated interviews with Chipotle representatives, all said, predictably, that Qdoba’s dominance of the Louisville market wasn’t keeping the brand from coming here, that it was only a matter of time before its cautious expansion strategy would allow that to happen.

In April, Chipotle announced it was looking at a site next to the Hyatt Regency Hotel in downtown, but no official word yet on when that unit might open.

Did that encourage ZT’s principals to sell sooner than later? Hard to say since no one will talk about it.

But given the timeline as we know it, Qdoba had long had its offer on the table before Chipotle made public its intentions to operate here. So likely not.

Bottom line: Congrats ZT. A lot of hard work has paid off.

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