Jack in the Box restaurants are rolling out reformulated burger patties, improved buns and new saucing procedures this week as part of an ongoing plan to upgrade core menu items to drive sales.
The move follows earlier improvements to other key menu items, including fries, bacon, coffee and tacos. It also comes at a time when the chain’s same-store sales improvements have stabilized and work on menu pricing and commodity costs continue to need navigation.
The new burger patties are tastier, juicier and have a better texture, said Linda Lang, chairwoman, chief executive and president of the chain’s San Diego-based parent company Jack in the Box Inc.
Menu upgrades and value deals
Jack in the Box is not alone it its plan to rework existing menu items. Competitors across the segment have also invested in core product improvements, such as Wendy’s Dave’s Hot ‘N Juicy Cheeseburger that debuted earlier this year, following the launch of more premium burgers at Burger King and McDonald’s.
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At Jack in the Box, such upgrades — combined with restaurant remodels and efforts to improve service — have helped turn around previously sinking sales, the company said after announcing fourth-quarter results yesterday that exceeded company expectations.
The fourth quarter was the fifth consecutive quarter of same-store sales improvements for Jack in the Box, which was hit hard during the recession by high unemployment in its core market of California.
In a call with analysts on Tuesday, the company said value-positioned bundled deals, such as the $2.99 Jumbo Breakfast Platter and the $3.99 Really Big Chicken Sandwich combo, helped drive a significant increase in traffic, but also negatively affected menu mix.
The 5.8-percent increase in same-store sales at company-owned locations in the fourth quarter, for example, reflected an 8.5-percent increase in traffic. Lang said check averages dropped about 2.7 percent, however, because of the discounted promotional activity.
Still, Lang said promotion of the $2.99 breakfast platter was designed to drive trial and introduce guests to its new bacon.
Consumers are still looking for value, she said, and the chain’s bundled meal strategy will continue.
Commodity costs pressure pricing
Also pressuring margins were higher commodity costs, which rose 7 percent in the fourth quarter. Company officials expect to see an 8-percent increase in such costs in the first quarter of fiscal 2012.
The chain has increased menu prices by about 2.7 percent since May to offset the higher costs.
The company is considering another price increase for next year, but officials said they generally like to stay behind competitors on pricing, as well as behind grocery price inflation.
“We will likely be a follower, not a leader on this,” said Jerry Rebel, Jack in the Box Inc. executive vice president and chief financial officer.
Lang, however, noted that grocery prices have ramped up, “so that might give us a little cover.”
Jack in the Box’s ongoing refranchising plan has helped improve margins as the company moves to an 80-percent franchised system, the company said.
At the end of the fourth quarter, 72 percent of the chain’s 2,221 restaurants were franchise operated. The company plans to sell another 150 to 200 company-owned locations over the next two years.
Meanwhile, Jack in the Box Inc. is ramping up corporate growth of its fast-casual Qdoba Mexican Grill brand with new unit growth and the acquisition of franchised locations.
In fiscal 2011, 67 corporate or franchised locations were opened, which drove Qdoba to a total of 583 units, of which 245 are company owned.
Next year, expectations include the opening of between 70 and 90 more Qdoba restaurants, about half of which will be company owned.
Contact Lisa Jennings at [email protected].
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