Jack in the Box

Apr 1, 2022 | Report Announcements

Jack in the Box addresses cravings throughout the day and munchies at night (late-night leadership benefits from 24/7 drive-thru access) with a menu known for variety, innovation and a taco distinction. Although this is a regional system with almost 70% of its stores located in California & Texas, the brand enjoys leading QSR hamburger share in 8 of its 10 major markets. Its crave marketing approach seeks to drive upsell & add-on opportunities as a sustainable way to grow average check over the long-term. A challenger brand positioning (seeking to go against convention & norms) is supported by culturally relevant marketing on social & digital, following a shift in consumer consumption towards gaming & video content. Digital marketing strength helps the brand overcome its dependence on pricier local TV advertising (a function of Jack’s position as a regional player without a national footprint) and fast-growing digital sales have reached a 10% mix so far. Lower priced snacks & sides appeal to value seekers and drives incremental add-on sales from its more premium customers (without causing trade-down) and the quantity of new product news is roughly double the industry average, reinforcing the brand’s positioning around innovation. The system has enjoyed strong post-covid comp performance with 3-5 year annual comp guidance of +2% to +3%. Having said all this, the system’s large exposure to expensive West Coast real estate and labor requires a business model able to generate a relatively high pre-occupancy profit and explains the chain’s aversion to price competition. Despite a system high AUV, its EBITDAR margin remains well below its 2016 peak. Also, Jack’s check is up +36% since 2016 and plans to increase FY22 menu price by MSD to HSD at company stores (total average check increase expanded to +55% through 1Q:22) could be problematic if franchisees follow suit given the current economic condition. In conclusion, while Jack has done a good job of reviving an iconic West Coast brand in a crowded field, it remains to be seen what impact its premium positioning will have on traffic and sales given the current inflationary environment squeezing consumer income.

No Bull Economics
Restaurant Research

Email Sign-up

Current Newsletter

Digital Marketing Opportunities

Recent Posts

Restaurant Research

A Restaurant Research LLC Company