Boxed In: Jim Cramer Be Damned, Qdoba Is Not Running For The Border

Every venture capitalist and investor has heard one of these classic, hype-inducing pitch lines before:

  1. This is the next (insert name of successful company)
  2. We are the (insert name of successful company) of (different industry)

Well, if you are selling burritos, then it’s all about being the next Chipotle (CMG). That was the buzz surrounding the 2012 Fiesta Group (FRGI) spinoff from Carrol’s (TAST) and it’s being used during the push for a Qdoba Mexican Grill spinoff from Jack In The Box (JACK). Don’t expect such a move to happen anytime soon though as JACK’s CEO Leonard Comma, speaking at an industry conference this week, said a spinoff is not in the works right now, despite the company breaking out same store sales and unit growth for the fast growing Qdoba. The casual dining spot generated +7.7% increase in same store sales in Q4 (ending 9/29) 2014 and also witnessed solid yearly sales growth.

According to Mr. Comma, the overall company is getting enough credit for housing the fast growing chain so there is no strong impetus to set it free. That idea is somewhat borne out by Jack in The Box’s strong stock performance and chops at one of the most basic spinoff arguments that the sum of the parts are worth more than the whole. Additionally, Mr. Comma thinks that keeping the two together under the same umbrella is a good long term plan as the more mature restaurants can provide the necessary cash in order to fuel the rapid, cash-guzzling expansion of the faster growing brands.

Back in September, JACK’s stock popped due to heavy spinoff or IPO speculation and even CNBC’s Jim Cramer supported the idea of setting Qdoba free in order to maximize value. While the idea seems to be on ice for now, given the persistent rumors and the recent favorable trends for pursuing spinoffs, it wouldn’t be a surprise to see something happen here further down the line.

Disclosure: Author holds no position in any stock mentioned.