Jack in the Box Tackles Menu Upgrades

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.

— Lisa Jennings, NRN.com

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