Jack in the Box Inc., challenged in recent months by restless and unsatisfied franchisees, reported a 2.7% increase in systemwide same-store sales for the quarter – marking the company’s best third quarter in four years.
CEO Lenny Comma said consumer interest in “bundled value” items and a boost in add-on orders contributed to higher check averages. Transactions, down in the past, improved to flat for the quarter. Going forward, Comma said the brand plans to expand its delivery reach and continue testing various strategies to improve speed of service, especially at the drive-thru.
“I’m extremely bullish on Jack’s future,” Comma told investors during a Thursday morning conference call.
During the quarter, Comma said Jack in the Box found a winning strategy amid a persistent value war in the quick-service sector. He said guests responded to two new $4.99 bundled promotions and a 2 for $4 breakfast croissant combo. Consumers were also ordering more add-on items, including extra proteins and snack items, he said. The new bundled strategy, compared to deep discounting core items, has helped the brand to become competitive without eroding margins, Comma said.
“We have essentially found our way to compete in the QSR space effectively on value,” Comma said. “We’ll continue to offer bundled deals at competitive pricing.”
During the quarter, Burger King introduced a crispy taco for a $1. Analysts asked if that product hurt Jack in the Box sales. Comma declined to speak directly about Burger King’s tacos; however, he said taco sales at Jack in the Box are up.
If that’s in reaction to a rival player, he said: “Hallelujah.”
Comma was also asked if Jack in the Box would join other QSR chains that have added plant-based meat products to their menu.
The CEO said it would be “counter to what Jack is all about to copy” what competitors are doing. Still, he said Jack in the Box has not ruled out having a “protein substitute” on its menu.
If the brand did add an alternative plant-based protein, the meal would have to be presented in an “interesting way” to remain true to the brand’s roots, he said.
The company said increasing speed of service remains a priority.
The brand continues to test new drive-thru enhancements such as digital menu boards, canopies and adding designated parking for pick-up and delivery.
The digital menu boards, for example, have been helpful in de-cluttering Jack in the Box’s complex menu because the technology allows each restaurant to display certain items based on daypart, Comma said.
“It’s a great platform,” he said. “It helps throughout.”
Still, he said the company is “not 100% sure the investment” will pay off in all markets.
“We do believe it’s worth testing. If we see a return on investment, we’ll go for it,” Comma said.
The San Diego-based chain closed the quarter with 2,242 restaurants.
The 2.7% increase in same-store sales was the best systemwide third-quarter gain since 2015, when the company logged a 7.3% increase in same-stores sales. In third quarters of 2016, 2017 and 2018 same-store sales slowed to +1.1%, -0.2% and +0.5%, respectively.
Total revenue for the third quarter ended July 7 was $222.4 million, compared to $188 million in the same quarter, prior year. The gain was attributed to a change in how the company records franchise advertising. Net income of $13.2 million, or 50 cents a share, compared to $45.3 million, or $1.60 per share in the prior year, same quarter.
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