2024-07-07 15:55:50 ET
Summary
- Jack in the Box is adapting to slow traffic by focusing on low-income guests and implementing cost-cutting measures through refranchising.
- The company is facing challenges due to rising labor costs and competition from convenience stores, impacting traffic and margins.
- Jack's strategies include promotions, premium menu items, digital sales integration, lean unit development, and financial efficiency to navigate industry challenges and maintain growth.
Introduction
In my last analysis we talked a little about companies that are adopting a defensive strategy to navigate a slow traffic scenario. Endogenous and exogenous pressures require the definition of a strategy, and it seems that among QSRs, adapting to the time preferences of low-income guests is the most natural strategy. After all, there is direct competition with convenience stores.
In this context, I invite you to take a deep dive into the strategies and recent developments of Jack in the Box ( JACK ), one of the big names in QSR with the peculiarity of having a large part of its units located in California, the epicenter of AB 1228 .
Before we begin our analysis I would like to talk a little more about the current situation before getting into the actual developments. First, no one is immune to the downturn and like almost the entire industry in the first quarter, Jack reported a sharp decrease in same-store-sales, both in its own stores (0.6%) and in franchises (2.6%). Del Taco, which is another concept owned by Jack, reported a decrease in SSS of 1.4% system-wide. Basically, with the drop in traffic, restaurants that had a positive SSS in the quarter needed to compensate for this factor with an increase in the average check. In Jack's case, the company even managed to increase the average check by 3.1%, but this was not enough to compensate for the 3.7% drop in traffic....
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For further details see:
Jack In The Box: Appetizing Price, Adaptability To 'Value War'