Exhibit 4 provides a glimpse of the seg-
ment as of the end of 2004.
In addition to the problems that parts of
the segment were having in 2004, the fran-
chising systems were also having issues.
Rubio’s in particular had hoped to open
dozens of franchised units in the western
states over the period 2002-2004. But only a
handful of the proposed units opened, and
sales in these units were sluggish. Even fish
tacos were not selling well. One Rubio’s fran-
chisee defaulted in just months. The compa-
ny halted its franchising efforts at that
point—before things got worse.
“We outgrew ourselves. We thought we
had a prototype such that we could just fran-
chise it, but it wasn’t working,” Ralph Rubio
concluded.
Scott Shane of Case Western Reserve
University said, “It’s definitely possible to kill
off a good concept by trying to grow too
fast. Any franchisor has to be especially care-
ful in the beginning to evaluate growth. If
you are not making money at a single outlet,Rubio’s Restaurants, Incorporated (C) Troubles and Turmoil 2006 469Gary Dollarhyde, consultant and former
CEO of Baja Fresh Mexican Grill
Tony Brenner, analyst, Roth Capital
Partners
Julie Stewart, former Taco Bell executive,
current CEO of IHOP Corp.
There is significant competition from Baja Fresh, Chica
Grill, Moe’s Southwest, and Sharky’s to name a few.
“The big brands have returned in the past year and a
half.” Subway and Quiznos are “nipping away at quick
casual too.”“Rubio’s is still a regional company, and I think they
have to work on expanding the concept outside
southern California.” But “[the menu] is something that
Rubio’s needed to make itself more portable.”“I thought her qualities were unique and unusual.” She
“had to manage, lead, and think outside the box to get
ordinary people to do extraordinary things. She’s done
a nice job of working with the founder, which is never
easy, and driving the business along and helping re-
engineer the brand.”EXHIBIT 3 Sample CommentsSOURCE: Lisa Bertagnoli, “Revving Up Rubio’s,” Chain Leader, October 1, 2004. Retrieved from the Web September 20,Chipotle
Baja Fresh
Rubio’s
Qdoba
Moe’s
La Salsa
Taco Del Mar42.7
25.5
5.9
33.1
86.8
13.1
8.3$321.0
312.5
130.2
86.7
71.0
70.5
26.0305
283
148
126
105
100
7231.5
34.8
3.5
48.2
111.0
1.0
10.8**%* %2003 U.S. Sales
(in millions)Percent Change
from 20022003 U.S.
StoresPercent. Change
from 2002*EstimatedSOURCE: “Technomic Inc.” From Steven Gray, “Wendy’s Stumbles with Baja Fresh,” The Wall Street Journal, January 4, 2005: B7.EXHIBIT 4 Mexican Fast-Casual Segment