Development Agreements in Place for More Than 300 New Locations
Jack in the Box is looking to ride rising sales and extended operating hours into added locations, with development agreements in place to add more than 300 restaurants and enter new markets in the coming years.
The operator of more than 2,700 restaurants is looking to pivot off a 4% increase in year-over-year, same-store sales that have been boosted by steady improvements in staffing and business operating hours as effects of the pandemic have waned, executives of the San Diego-based fast-food chain said in a quarterly earnings call with analysts Tuesday.
The company is targeting 4% annual location growth starting next year, with 25 to 30 openings planned in fiscal 2023 for its flagship Jack burger brand and eight to 12 openings of Del Taco, a chain of Mexican-inspired fast-food restaurants it acquired earlier this year for $585 million.
CEO Darin Harris said the company has 68 signed development agreements in place with franchises for a total of 267 Jack restaurants. Of those 267 restaurants, 22 have already opened, leaving 245 for future development. It also has 11 new development agreements in place with franchisees to open 79 Del Taco locations, with openings already taking place in new markets such as Tampa and Orlando, Florida.
“Site approvals are higher in the past 18 months than they were in the previous 30 months combined,” Harris told analysts, noting the company approved nine new restaurant sites during the quarter ended Oct. 2.
In 2023, the company expects to have its first-ever Jack in the Box restaurants in Salt Lake City and Louisville, Kentucky.
The company is also moving forward with remodelings under a small-format concept introduced earlier this year called Crave, in which Jack restaurants de-emphasize dining room space in favor of drive-thru, pickup and delivery services. Harris said the company has received applications from franchisees to reconfigure 366 locations to the Crave model and has so far approved 13 to begin construction.
The company closed 33 underperforming locations in the latest quarter and is in the process of transferring others to better-capitalized franchisees. Also on the real estate front, executives said in a statement that the company is planning to sell some of its owned real estate that “can be monetized at more attractive valuations than the current trading multiple,” but did not name locations.
Proceeds from those sales would go toward purposes including paying down debt and providing added liquidity, it said. For real estate that is currently occupied by franchisees, that could mean reductions in rental revenue, offset by reductions in building operating expenses, executives said.
For its fourth quarter ended Oct. 2, Jack in the Box reported total revenue rising 45% from a year earlier to $402.8 million, with net income increasing 18% to $45.9 million.
For its full fiscal year, revenue rose 28% to $1.5 billion, with net income declining 30% to $115.8 million. The company cited annual cost inflation for food, supplies and labor running at about 14% in its latest quarter.