Qdoba sales propelled by simplified pricingQdoba sales propelled by simplified pricing

Qdoba Mexican Grill’s simplified pricing structure helped propel same-store sales 14 percent in the first quarter, boosting the chain’s average check 9.8 percent without giving the impression of a price increase, company officials said Wednesday.

At sister brand Jack in the Box, officials credited a new focus on food in advertising and staff-wide hospitality training for a 4.4-percent increase in systemwide same-store sales, including a significant acceleration in the latter half of the quarter.

Lenny Comma, chairman and CEO of San Diego-based Jack in the Box Inc., admitted in a call Wednesday discussing first-quarter earnings that even he was a bit astonished by the stellar results, which have continued into the second quarter.

“We’re just as astonished by the performance as you are,” Comma said. “We haven’t really dug deep enough yet to fully understand why consumers are responding so favorably.”

The results marked Qdoba’s fourth consecutive quarter of same-store sales increases above 7 percent, Comma said.

The 12.9-percent same-store sales increase at company-owned Qdoba restaurants was comprised of a 9.8-percent increase in average check. Transactions increased 1.9 percent for the quarter, and catering contributed another 1.2 percent.

Qdoba has been steadily improving since the company closed 62 underperforming locations in 2013 and launched a brand revitalization effort.

That effort included a shift in October to a new pricing structure that let customers pay one price, based on protein, for a menu item, without paying extra for add-ons like guacamole or queso sauce.

“Guests have responded very favorably,” Comma said, noting that guacamole additions have more than doubled and customers now request queso sauce with nearly half of all entrées.

Eliminating the extra cost for add-ons has allowed for more positive interactions between customers and restaurant employees as they build their meals. “It’s not just a price increase,” he said. “In fact, the consumer doesn’t interpret it that way.”

The move also allowed Qdoba to eliminate discounting, which contributed about half of the average check increase, Comma said.

Qdoba is still in the early stages of its brand revitalization, he said. Two new prototype locations are under construction, and when they open in the spring will serve as models for future growth. About 50 to 60 Qdoba units are expected to open in 2015, half of which will be company owned.

Officials declined to offer details on the new design.

At Jack in the Box, Comma said consumers were responding to new menu items, like the Buttery Jack burger introduced in January and the Spicy Sriracha Burger promoted in late 2014.

The 3.9-percent increase in same-store sales at company locations was comprised of a 2.1-percent increase in menu prices, along with a mix benefit of 1 percent and transaction growth of 0.8 percent, the company said.

Breakfast and late night were the quick-service chain’s strongest dayparts. Comma said the chain is now working to build sales at lunch and dinner.

Jack in the Box’s advertising has shifted its focus to the food, emphasizing qualities like the juiciness of the burger, the texture of the bun and the freshness of the tomato, Comma said. The chain also now serves burgers for dine-in customers in baskets with half-wrap, an improvement to their presentation.

Advertising spending hasn’t changed, he said. “What’s changed is what we’re doing with it in the time we’ve purchased on TV or the space on billboards.”

Comma said consumer research last year found that customers rated Jack in the Box burgers poorly compared with competitors. While customers had their favorite menu items, “they didn’t holistically love the entire line,” Comma said.

“They said they expect bold, craveable flavors from Jack, and we weren’t doing enough of that,” he said.

The new Buttery Jack, with garlic-herb butter melted on top, is a sign of innovation to address that perception, he said. “With the Buttery Jack, the mix is the highest we’ve ever seen on the launch of a permanent new item, at least in my time at Jack in the Box,” Comma said.

Consumers also said service wasn’t friendly enough, which prompted the workforce retraining on hospitality.

Improving macroeconomic headwinds and lower gas prices have also likely helped, but Comma said the upward trends for both brands are more due to the company’s ongoing initiatives.

“We’re thinking all those things are coming together nicely,” he said.

Contact Lisa Jennings at [email protected].
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