Qdoba plots growth with new prototype

Jack in the Box Inc. plans to reignite growth for Qdoba Mexican Grill with a new prototype under development, the company said Thursday.

The San Diego-based operator swung to a profit in the third quarter and upgraded expectations for the year, saying Qdoba was still in the early stages of a repositioning that will only accelerate the fast-casual brand’s momentum.

For the July 6-ended third quarter, Qdoba reported a systemwide same-store sales increase of 7.5 percent, which included a 2.7-percent rise in transactions. In the second quarter, Qdoba reported a systemwide same-store sales increase of 7 percent.

Jack in the Box Inc. chairman and chief executive Lenny Comma credited menu moves, like the marketing campaign around Qdoba’s Mango Mojo products ranging from burritos to mango salads, along with the return of the spicy Queso Diablo sauce, spiked with jalapenos and chipotles, which can be requested as an alternative to the classic three-cheese queso in various dishes.

Qdoba also benefited from double-digit growth in catering, and average check rose as the chain moved away from discounting, he said.

Comma said the company has only scratched the surface on a planned repositioning that will include a new prototype to debut next year. The refreshed Qdoba will include a rework of the menu, service experience and restaurant design.

“There’s so much more we need to do to bring this brand repositioning to life,” said Comma. “I think we’ll be able to set ourselves apart, starting in 2015, from the competition.”

Once the prototype is determined, about 60 new Qdoba locations are expected to open next year, about half of which will be company owned, Comma said.

This year, the company expects to open about 40 to 45 new Qdoba locations, of which 15 to 17 units will be company owned.

The new prototype design will also be applied to existing locations starting next year, Comma said. Remodeling efforts have been put on hold while the company reworks the brand.

The process began last year, after the company closed 67 underperforming Qdoba locations. Jack in the Box Inc. also hired Tim Casey, formerly chief executive of Famous Brands International, as president of Qdoba and charged him with developing a plan to move the brand forward in a crowded field dominated by category leader Chipotle Mexican Grill.

Sister brand Jack in the Box’s same-store sales rose 2.4 percent systemwide, largely on the continued strength of the breakfast and late-night dayparts, Comma said.

Last year, the quick-service chain overhauled its late-night offerings and vibe in an effort to appeal to “the other 9-to-5 crowd,” meaning 9 p.m. to 5 a.m.

That marketing emphasis will continue, Comma said, and Jack in the Box will also continue to innovate with its menu.

On Thursday, the chain rolled out nationwide a new cinnamon-sugar-dusted Croissant Donut, similar to the Cronut, after testing the item in Southern California.

Also new are two breakfast burritos, a Meat Lovers version with sausage, ham and bacon, and a Grande Sausage breakfast burrito that promises to be the chain’s largest.

In the fourth quarter, the company said same-store sales will likely range from 1.5 percent to 2.5 percent for Jack in the Box, and increase 5 percent to 6 percent for Qdoba.

As a result, the company raised its outlook for the year, saying same-store sales for Qdoba would rise 5 percent to 5.5 percent. Earlier projections put Qdoba’s comparable sales for the year at 3 percent to 4 percent.

Jack in the Box’s same-store sales were downgraded slightly for the year to an expected increase of 1.5 percent to 2 percent. Earlier, the company said the quick-service chain’s comps would be 1.5 percent to 2.5 percent.

Earnings per share for the year are now expected to be between $2.38 to $2.45, compared with earlier projections of between $2.25 to $2.35.

For the quarter, Jack in the Box Inc. reported net income of $24.7 million, or 61 cents per share, compared with a loss of $5.7 million, or a loss of 12 cents per share a year ago.

Revenue declined 0.5 percent, to $348.5 million, compared with $350.3 million a year ago.

Jack in the Box Inc. ended the quarter with 2,884 company-owned and franchised restaurants, including 2,252 Jack in the Box locations and 632 Qdoba units.

Contact Lisa Jennings at [email protected]
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