Inc. said Monday that it plans to close 67 company-operated locations of Mexican Grill by September, about 10 percent of the fast-casual chain’s system.
The move comes after the company conducted a comprehensive review of market performance for the Denver-based Qdoba, which has struggled in certain markets in recent years. At the end of the company’s April-ended second quarter, the chain had 647 locations, of which 340 were company owned.
The closures are scheduled to take place before the company’s fiscal year ends on Sept. 29, but officials did not say which restaurants would close or where.
Tim Casey, who was hired in March as president of Qdoba and tasked with reinvigorating the brand, said the company analysis included a review of unit-level sales, cash flows, and other key metrics, such as site location, brand awareness and lease status.
Ridding the system of the underperforming units will allow the fast-casual Mexican chain to emerge as a stronger brand as the company focuses more on markets with higher brand awareness, he said.
“By closing these locations and optimizing our company footprint, we can be more effective in focusing our advertising and marketing resources to support existing and planned restaurants in our core markets where we have high levels of brand awareness,” Casey said in a statement. “We also expect to provide an even better dining experience for our guests as our operations team concentrates its efforts on supporting these markets.”
Though the company is expected to take a $40 million hit in estimated pre-tax charges this year as a result of the decision, Linda Lang, chair and chief executive of Jack in the Box Inc., said the closures are expected to have a positive impact on the brand overall and will result in increases in future earnings, average store volumes, margins, cash flow and return on investment.
Jerry Rebel, Jack in the Box Inc.’s executive vice president and chief financial officer, offered more detail on the move at the Jefferies Global Consumer Conference in Nantucket, Mass., on Tuesday.