While authenticity offers District Taco a way to compete with other chains, the brand has embraced a wider range of dayparts. District Taco serves breakfast, with opening times falling between 7 a.m. and 10 a.m. Breakfast tacos have come to account for about 10% of its sales, Hoil said.

District Taco is primarily partnering with experienced franchisees that have other brands in their portfolios and want to diversify their holdings. In terms of real estate, the company is trying to balance between affordability and location.

The brand wants to grow in suburban areas, where it can cultivate an organic connection with customers through partnerships with colleges, sports teams and other local institutions.

Hoil said it might take the company about 15 years to become a truly national force. The chain has signed development agreements for at least 71 units, and has stores open in Washington, D.C., Virginia, Maryland, Pennsylvania and New Jersey, and plans to open a unit in Orlando, Florida.

Qdoba’s cash offer speeds up development

In June, Qdoba announced it would offer a $100,000 cash incentive for franchisees who undertake and complete new units by September 2026.

The chain’s units often take 12 to 15 months to complete, if they’re moving into endcap or inline spaces, meaning a fair number of franchisees may end up getting the cash bonus, said Jeremy Vitaro, Qdoba’s chief development officer.

“We'd like to be opening net 100 units per year in just a few years. So we're building towards that,” Vitaro said.

One benefit of franchising, Vitaro said, is the partnership between local operators and larger brands.

“You're gonna get great folks with local power and knowledge in their market,” Vitaro said. “They can tap into a network to hire people, to develop units, to do local store marketing. They're involved in their communities. Those are our ideal franchisees.”

To strengthen the brand, Qdoba is investing in remodeling 80 of its 165 company-owned stores this year, though Qdoba may ultimately sell some to franchisees, Vitaro said.

The remodel is about “bringing the restaurants up to speed,” for the future, Vitaro said.

Part of that future is a shift in Qdoba’s real estate preferences, including smaller stores between 1,800 and 2,000 square feet compared to its average 2,500 square feet. This aligns with strategy changes underway at a great many brands, like Potbelly, Panera and Sweetgreen that have developed smaller formats and prototypes in recent years.

Qdoba’s real estate strategy differs from Chipotle’s by not heavily emphasizing digital pickup lanes, Vitaro said.

The proportion of Qdoba stores with digital pickup lanes will increase gradually over time, Vitaro said, but they are not the keystone of the brand’s development. Much of Qdoba’s identity hinges on its in-store ambience, Vitaro said.

“It's not just about the transaction,” Vitaro said. “There's a warmth and a hospitality element to our restaurants that I think differentiates us from some others.”

Moe’s Southwest Grill pushes for net unit growth

One of Chipotle’s largest franchised competitors, Moe’s Southwest Grill, has been shrinking for years, with its unit count falling from 681 at the start of 2021 to 612 at the end of 2023, according to its franchise disclosure document.

But Brian Krause, chief development officer at parent company GoTo Foods, said the brand is on track for a turnaround after Moe’s redesigned its stores to be more inviting.

“We've gone from one older color palette that was much darker in stores, to a much brighter, much vibrant color palette,” Krause said. This has accompanied an effort to “clean up the customer experience as far as the amount of furniture and equipment that's in the front of the store.”

Simultaneously, the brand is working to reduce costs and improve efficiencies while its parent company takes advantage of its purchasing power and economies of scale.

Bringing franchisee costs down is important for Moe’s, as the chain has a relatively low AUV, about $1.2 million, and a fragmented franchisee base. Moe’s has about 150 franchisees in its system and 606 franchised locations, for an average of about four stores per operator.

In recent years, Moe’s reviewed the costs of different items with an eye toward strengthening margins for franchisees and then aligning its marketing with the popularity and margins of its menu items, Krause said.

The chain has seen a gradual consolidation of its franchisee base, according to Krausem. This is in line with a broader trend in QSRs towards favoring experienced, multi-unit operators. But the chain still likes having numerous small operators.

Like the other brands in this space, Moe’s customization is a key element of its menu strategy. While it’s overall menu is simple and consistent, Krause said, the brand has a wide range of fresh additions to its burritos, including ingredients like diced onions, black olives, fresh or pickled jalape?os, that Chipotle lacks. The chain is also shifting toward serving fresh salsa made in-house.

These changes mean the brand is turning things around slowly, Krause said. Moe’s signed a five-unit expansion deal in Arizona in July. But Krause said it’s not likely the brand will return to net unit growth until 2025.

Burritobar’s menu differs radically from rivals

Burritobar, the American division of Canada’s Barburrito, has been signing major development agreements at a blistering pace. Since April, the brand has signed at least seven master franchising agreements totalling about 500 store commitments.

By early July, Burritobar had 750 development commitments for the U.S., according to Jeff Young, the chain’s chief development officer, although only four — three in Michigan and one in Delaware — were open.

Key to its projected growth is a menu that is a substantial departure from the standard Mexican fast casual lineup of bowls, burritos and tacos.

“We have fryers, so we are able to serve a more diverse offering, including signature menu items such as bang bang shrimp, crunchy chicken, falafel, extreme fries, and freshly deep-fried churros,” Young wrote in an email to Restaurant Dive.

The brand makes no pretense of serving authentic Mexican food, and Young describes its menu as Mexican-inspired.

Its development strategy hinges on smaller units, 1,000 to 1,500 square feet that tend to be inline or endcap spaces in open-air shopping centers.

“The smaller format lowers the initial capex and with our reduced on-going operating expenses, and low labor model, our franchisees benefit from a quicker path to profitability,” Young said.

Geographically, the brand is focused on the eastern United States, where it can capitalize on markets’ proximity to its Toronto base to support growth and build brand awareness. That process begins with development in secondary and tertiary suburban markets, Young said, before it can expand to denser, more urban spaces, in something of a reverse of Chipotle’s city-focused early growth strategy.

What’s next for the sector?

Small units, distinct menus and large franchisees may help some brands grow quickly, or return to growth after a period of decline, but not all fast casual Mexican chains have succeeded recently. Tijuana Flats closed 11 shops in the spring, filed for Chapter 11 bankruptcy protections and was acquired by a new owner. Rubio’s Coastal Grill likewise filed for Chapter 11 after closing dozens of locations in May and June.

Vitaro said he thought the bankruptcy of those brands was indicative of specific problems, rather than a sectoral weakness.

“I don't believe that the market in general is hitting saturation,” Vitaro said. “In general, it's a healthy market to be in.”

Brands should look to ensure there's a share to be taken in the market, though it’s not clear if there is an upper limit to the Mexican fast casual market, Igram said.

“You can really compete and beat Chipotle in one market, but maybe not another,” Igram said.

However, chains can grow profitably without having to best Chipotle. Brands can grow instead by ensuring they have compelling unit economics that offer a good return on investment, said Igram.

“Any brand has to work really hard to be relevant and offer the right value and the right experience and hire the right employees,” Vitaro said. “And if you're a franchise, like we are, to have the right franchisees. All of that is still extremely challenging.”