Butterfly Equity announced that it closed a $527 million fund to spur the growth of Qdoba Mexican Eats, the fast-casual franchise that the Beverly Hills private equity firm purchased in 2022.
A subsidiary of New York-based Apollo Global Management led the transaction along with an array of new and existing investors, Butterfly said in a statement. That includes Painswick Capital, a firm established in 2024 by former AEA Investors Chairman and Chief Executive John L. Garcia.
Butterfly, which purchased San Diego-based Qdoba from Apollo, said the fund will provide existing shareholders liquidity. It will also strengthen “the company’s capital structure and provides a clear runway to achieve its next phase of growth and value creation.”
Since its acquisition, Butterfly launched into plans to transition Qdoba into a “high-growth and asset-light operator.” Qdoba has dubbed itself as being the No. 1 Mexican fast-casual franchisor in North America with 800 locations and nearly $1.3 billion in sales throughout its company-owned and franchised restaurants.
“We are proud of the success that Qdoba has achieved since our original investment, but we are even more thrilled to double down on our partnership” in this next phase, said Adam Waglay, Butterfly’s co-founder and co-chief executive.
He added: “Mexican fast-casual remains one of the highest growth and most attractive categories within the broader restaurant sector, and we are excited to continue backing the category-leading franchisor for years to come.”
‘Best-kept secret’
Qdoba Chief Executive John Cywinski said he expects Qdoba would double its sales revenue systemwide over the next five years.
“Qdoba is the best-kept secret in the restaurant industry,” Cywinski said. “With mid-single digit comp sales in each of the past three years and projected 10% annual new unit growth, Qdoba is now one of the fastest growing national restaurant brands in America.”
In March, Qdoba announced it planned to open 33 new locations – some of which will located at universities, military bases and airports. Qdoba also reported that it made a 6.1 % gain in comparable store sales in its 2023 fiscal year, and a gain of 7.7% in comparable store sales for its 2024 fiscal year.
Qdoba also touted that it ranks as the second-largest restaurant chain for the Mexican fast-casual category – a market that will continue to grow, said Mike Murphy, founder and chief executive of Los Feliz-based BrandIQ.
“Historically, the only way to get Mexican food was at a full-service restaurant, or at the opposite end of the restaurant spectrum, fast food like Taco Bell and Del Taco,” Murphy said. “There was nothing in the middle.”
Qdoba’s competitors include Chipotle Mexican Grill Inc. and Cafe Rio Inc. Suburban areas and smaller cities are potential opportunities for continued growth in the fast casual Mexican restaurant sector, Murphy said.
“Sustainable growth will come from those Mexican fast casual chains that do three things: focus on menu strategies and food innovation that are driven by consumer preference, delivering an experience that is more enjoyable, inviting and comfortable, and offering improvements in convenience and technology,” Murphy said. “The chains that put their customers’ needs first, will win when it comes to growth.”
Deals in the making
Butterfly has been on a roll with its deals. In July, the firm announced that Generous Brands, a company within the Butterfly portfolio, planned to acquire the Health-Ade kombucha beverage brand.
Wall Street Journal reported the deal cost Generous $500 million. Butterfly and Generous brands forecast that Health-Ade is forecasted to take in nearly $1 billion in sales.
The U.S. market for kombucha drinks has been on an upward trajectory. In 2024, kombucha drinks generated nearly $1.26 billion in sales, an uptick from $1.25 billion in 2023, according to New York consultancy Beverage Marketing Corp.
