Jack in the Box currently has 2,186 restaurants, including 2,046 franchise units and 140 company-owned units, up from 2,181 units at the end of Q4. The brand has hovered around the 2,220 unit threshold for nearly a decade, but Harris has his sights set on soaring past 6,000 restaurants in the future. To that end, the company has taken several steps to improve its four-wall economic model and make it more compelling for franchisees to open restaurants.
One area of focus is pricing discipline, something Harris said has improved over the past year, thanks to new analytical tools that allow for more surgical and strategic actions.
“The way I think about our franchise-level economics right now is that all of us in the industry have been faced with these dramatic headwinds with commodities,” Harris said. “We’re not able to take enough price in the near-term to overcome it.”
Other efforts to improve store profit margins include investments in equipment and technology to simplify operations. As an example, Harris pointed to a three-in-one toaster, cheese pump, and Hydra Rinse shake machine. Half of the system has installed the cheese pump, and half of the system will have the Hydra-Rinse machine installed by mid-April.
Equipment updates and process improvements, along with supply chain synergies, are giving Jack in the Box a “clear line of sight” into 200 basis points of margin reduction, with potential savings of $50,000 to $55,000 per restaurant, according to Harris. He cautioned that those benefits won’t materialize overnight, though.
“This is about adding up incremental opportunities that eventually breakthrough and become a big number,” he said. “It’s five or 10 things that we’re doing over time, and once you add them all up, they lead to 200 basis points. It’s not one or two things that very quickly enhance the bottom line.”
Jack in the Box is exploring automated frying and drink-making technology. It introduced a fry-cooking robot at a store in California last year and plans to expand the pilot to an additional store in Texas later this year. It also is learning from Del Taco’s AI voice ordering initiative, which has brought about improvements in labor productivity and upsell rates.
“Technology innovation such as automation and voice AI are a small part of our multi-year technology roadmap that is also focused on stabilizing core platforms and modernizing outdated legacy applications,” Harris said. “We continue to implement our plans to replace our current systems over the next year so we can turn our attention to more innovative solutions.”
Efforts to bolster staffing levels are helping Jack in the Box stores stay open longer. Franchisees are within one hour of pre-pandemic operating hours, and approximately 70 percent of Jack in the Box stores are managing to keep their dining rooms for 12 or more hours a day. Harris said the improvements in staffing and operating hours, combined with a training program to improve execution and speed of service, correlated with same-store sales.
Comps were up 7.8 percent at Jack in the Box in Q1, including 12.6 percent at company-operated stores and 7.4 percent for franchises. Company-operated restaurants experienced growth in both average check and traffic while franchise restaurants had growth in average check, partially offset by a decline in traffic.
Same-store sales at Del Taco increased 3 percent, including 3.1 percent at company-operated stores and 2.8 for franchises, driven by the brand’s 20 under $2 value platform and 11.9 percent menu pricing.
Del Taco in Q1 had a net increase of one restaurant, including two franchise openings and one company-operated closure. It ended the quarter with 591 restaurants, including 273 company-owned locations and 319 franchise units. The quick-service Mexican chain signed two additional development agreements for 10 new restaurants in Florida. In December, 16 restaurants were refranchised to an existing Jack in the Box operator in California. The transactions included a development agreement for 16 new stores to be built in the state in the near future.
A new “Fresh Flex” Del Taco prototype is generating interest from franchisees, much like the company’s new Jack in the Box store model. The first location opened a little over a year ago in Orlando and has continued to shine with weekly sales around $50,000. The brand’s second Fresh Flex location opened in Tampa is generating strong weekly sales around $45,000. A drive-thru only version of the prototype currently is under construction in New Mexico and is expected to open this spring.