Jack in the Box growth track breaks records

Digital sales were up 38% in the first quarter year-on-year and 271% from two years ago. The channel now accounts for 10% of sales and the customer database grew 52% year over year. The Jack Pack loyalty program also got off to a quick start. Over 95% of mobile orders come from rewards members.

This year, Jack plans to launch an in-store Jack Pack program and roll out its first online ordering platform and a new mobile web experience.

“These additions will immediately help make online ordering and the Jack Pack rewards program much more accessible to our customers,” Harris said.

During the first quarter, Jack experienced wage inflation of 10.9% and commodity inflation of 10.5%, due to higher prices for beef, pork, sauces and oil . To mitigate the high cost environment, the chain raised menu prices 5.5% year-over-year at company-operated restaurants.

Jack took prices up 3.9% in the fourth quarter and in the middle to low three in previous quarters. The brand did not disclose what the franchisees did with the pricing, but chief financial officer Tim Mullany said they maintained a considerable increase in the company’s price.

The average check increased to just under $12 and the average number of items per check remained stable.

“We’re comfortable with the price tag we’ve taken,” Mullany said. “We believe this is consistent with inflationary headwinds from the commodity and labor side. We believe we actually have more headroom to continue if we need to, but we are still in line with our initial high single digit guidance.

“Compared to transactions, there is always a sensitivity to that,” he added. “But so far what we have seen has been roughly in line with our expectations and our modeling of price sensitivity to trends. So there has been no adverse indication that we should abandon our approach and our price-taking strategy in FY22.”

Jack partners with a third-party pricing authority to study consumer reaction and works closely with franchisees to investigate what they are seeing in their specific markets.

A big question for the industry, Harris said, is figuring out what value really means with everyone raising prices at the same time.

“I think that’s the part we’re all trying to figure out, but what’s the value now?” said Harris. “Is it $5, is it $6, is it $7? And how do we continue to improve our pricing power?”

“For us, we’ve said repeatedly that our strategy works with both the customers we’re segmenting,” he continued. “We’ve talked about some high-end customers as well as our core base, and the strategy that we’ve proven is to have a very strong promotional offering with add-on and up-sell opportunities, and we’ve seen that it worked and we’ll continue to do that and focus on that. And it works for us as a competitive differentiation in the industry.

In 2021, Jack revealed he was also open to expanding through mergers and acquisitions with a $575 million purchase of Del Taco. The deal is expected to close around the second week of March. Both parties have begun the process of integrating teams and identifying meaningful synergies and knowledge sharing initiatives, Mullany said.

Del Taco has about 600 units, split about evenly between company and operators. Harris said Jack decided to buy the fast casual with the refranchise in mind.

“We obviously, as part of our due diligence, looked at the portfolio, looked at where we think there are opportunities in our system,” Harris said. “We haven’t had a chance to meet with their franchisees yet and see where there are opportunities within their system. And then we also know there’s a lot of interest outside of the Jack in the Box system, expressing interest in both Jack in the Box and Del Taco.