Despite commodity pressures and reduced first-quarter revenue and profit from refranchising efforts, Jack in the Box said Thursday a “holistic” approach to its brand efforts is driving sales improvements.
In a call to analysts Thursday following the San Diego-based company’s first-quarter results, Linda Lang, Jack in the Box Inc.’s chair, chief executive and president, said same-store sales rose 5.3 percent at company-owned locations, reflecting a 2.8-percent increase in traffic and a 2.5-percent increase in average check.
Lang said the improvement in traffic was the result of investments made over the past year at the 2,200-unit quick-service chain, which have included programs to improve service, food and restaurant design.
Lenny Comma, Jack in the Box Inc.’s executive vice president and chief operating officer, said a comprehensive look at the brand has driven sales success.
“Winners are looking holistically at their brands,” he said.
Service improvements, for example, have included efforts to boost staff friendliness and restaurant cleanliness, she said, as well as improving order accuracy and speed of service.
Improvements also include a remodel effort that is nearly complete, Lang said. Last year, the chain also rolled out new menu boards and new uniforms for employees.
On the menu, Jack in the Box has upgraded core menu items, such as its coffee, French fries, tacos and bacon. In the first quarter, the chain’s burger line was upgraded with enhancements that included reformulated patties, improved buns and new saucing procedures.
Lang said restaurants are reporting higher sales on all of the revamped products.
In addition, promotions – like the chain’s recent offer of a bacon milkshake that went viral – have helped draw attention to the menu upgrades.
The first quarter marked the sixth consecutive quarter of sequential improvements at Jack in the Box, though profits were down in part because of an 8-percent increase in commodity costs during the quarter and ongoing efforts to refranchise the quick-service brand.
Lang aims to see Jack in the Box move to a 70 percent to 80 percent franchised system.
At the same time, the company is building ownership of the 597-unit sister brand Qdoba. During the quarter, the company acquired 11 franchised Qdoba locations for $6.2 million in two markets, and subsequently also purchased another 25 franchise locations for $33 million in two other markets.
In addition, 15 Qdoba locations opened during the first quarter – six company-owned and nine franchised – and the company said 70 to 90 new Qdoba locations are expected to open in 2012, about half of which will be company operated.
This year, between 30 and 35 Jack in the Box units are planned, including about 15 company-operated restaurants. Another 80 to 120 company-owned Jack in the Box units will be sold to franchisees.