Jack in the Box defeats McDonald’s during pandemic, in search of franchisees

  • Jack in the Box outshines its main burger competitors under new leadership.
  • The company announced earlier this year its intention to relaunch its franchising program.
  • The California chain is optimistic about franchising after announcing its best quarter in 27 years.
  • See more stories on the Insider business page.

In 2018, a group representing Jack in the Box franchisees called for the ouster of then-CEO Leonard Comma for failing to tackle the burger chain’s declining sales. Frustrated franchisees have complained that rivals are beating Jack in the Box on every level – from marketing to menu innovation. The National Jack in the Box Franchisee Association ultimately sued the San Diego-based chain for breach of contract.

But now the roles have changed. The fifth largest burger brand in the United States outshines its major burger competitors under new management. Jack in the Box has beaten rivals such as McDonald’s and Burger King on several key metrics, including same-store sales. This measure measures a company’s financial performance in stores that have been open for more than a year.

The success of Jack in the Box prompted him to announce his intention to relaunch his franchise program for the first time in ten years.

A different approach to the pandemic

While other big brands like McDonald’s and Taco Bell cut menus and cut back on breakfast options during the pandemic, Jack in the Box has done the exact opposite, CEO Darin Harris told Insider.

The chain, known for having a large menu of Cheesecake Factory-style fast food choices, ranging from tacos to burgers, introduced nearly 20 new items in 2020.

Top sellers include Tiny Tacos and a new fried chicken sandwich called the Cluck Sandwich. The company also launched a giant breakfast platter, spicy chicken strips, and gravy and loaded fries.

“We stepped up our innovation pipeline and started innovating around more high-end items,” said Harris, which began in mid-2020.

Jack in the Box hasn’t strayed away from all-day breakfast either, a menu that includes everything from burritos stuffed with eggs and sausage to chicken cookie sandwiches.

“Jack in the Box was the first QSR to offer a breakfast sandwich so innovation is in our DNA,” said Harris. “Our breakfast and our late-night activities – they were vital during the pandemic.”

Jack in the Box giggle sandwich

Jack in the Box Chicken Cluck Sandwich.

Jack in the box

Investment analyst Morven Groves said menu strategies such as Jack in the Box worked well as it allowed them to meet the needs of fast food lovers who couldn’t get what they wanted with other chains. .

“The clients came out and found them,” said Groves, vice president of 10 Point Capital.

Outperform Your Peers

Jack in the Box’s system-wide comparable store sales increased 4% in fiscal 2020. In comparison, comparable store sales decreased 7.9% in 2020 at Burger King, owned by Restaurant Brands International. McDonald’s saw a 0.4% increase in 2020.

Outside of the burgers category, Jack in the Box also outperformed its other peers last year. Comparable store sales in the quick service industry fell 6.2%, according to market research firm Technomic.

In 2020, permanent closures were a grim reality of the pandemic’s impact on many channels.

Jack in the Box units were down 0.2% or five net closings, according to food industry research firm Dataessential. In contrast, the number of U.S. McDonald’s units fell 1.2%, or 173 net closings. Burger King locations in the United States decreased 4.4% in 2020, down 313 locations from 2019. Jack in the Box has approximately 2,237 restaurants, while there are over 7,000 Burger Kings and over 14,000 McDonald’s locations in the United States.

The momentum of Jack in the Box continued into the first quarter of 2021.

The chain posted a 12.5% ​​increase in same-store sales system-wide. It was the strongest quarter for the chain in 27 years.

Darin Harris CEO of Jack in the Box

Darin Harris, CEO of Jack in the Box since mid 2020.

Jack in the box

Develop the “ pandemic resistant ” brand

The objective of the renewed franchise program is to open 20 and 25 restaurants this year with a prototype that will reduce development costs by 20%.

The total investment to open a single franchise ranges from $ 1.65 million to $ 2.63 million, according to the 2021 franchise disclosure documents. The average unit volume per restaurant in 2020 was $ 1.65.

For comparison, Jimmy John’s needs $ 313,600 to $ 556,100 in upfront capital costs, and McDonald’s costs are $ 1.3 to $ 2.3 million.

“We are delighted to relaunch our franchise development program after the ten-year hiatus,” said Harris, who led Arby’s franchise growth from 2005 to 2008.

Initial growth will be in existing markets in the western and southern United States and then move to other markets such as North Carolina, South Carolina and Nashville, Tennessee. This strategy could potentially add 900 to 1,200 locations in the 21 states where Jack in the Box already operates, Harris said.

The company, which settled its lawsuit with franchisees under Harris leadership, said current franchises would have the first chance to lock in territories for growth. Having proven itself as a “pandemic resistant” brand, Jack in the Box is attracting interest from both outside franchisees and existing Jack in the Box operators, Harris said.

Groves said now is the time for brands like Jack in the Box to expand the franchise.

“The best time to grow is when your franchisees feel like they’re gaining momentum,” she said.

Michael Norwich, president of the Jack in the Box franchise association, said Harris has shown his commitment to working with franchisees.

“Darin rolled up his sleeves and got down to work to mend the broken trust and in doing so, made himself loved by the entire franchise community,” Norwich told Insider in a statement. “He is relational, approachable, objective and confident. He has re-energized the brand to the point of believing that our best days lie ahead.”

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