Improvements in the food across the core menu is paying off for Jack in the Box, despite a challenging competitive environment, officials said Thursday.
The San Diego-based Jack in the Box Inc., parent of the quick-service chain, reported better-than-expected third-quarter earnings on Wednesday, giving its stock price a boost. In midday trading Thursday, the stock price was up about 10 percent to $97.39.
The namesake brand recorded a 1.1 percent increase in systemwide same-store sales for the quarter, beating Wall Street consensus expectations of a 0.1-percent increase.
In a call with analysts on Thursday, Lenny Comma, Jack in the Box Inc. chair and CEO, said the chain’s most frequent guests are noticing and embracing improvements to the menu.
Over the past year, Jack in the Box has revamped about 34 items on the menu to improve quality, creating a balance between more-premium items like the Buttery Jack burger line, and more value-positioned offerings.
Guest surveys indicate a 10-point improvement in how consumers rated the taste of the namesake chain’s core menu of burgers, fries and drinks, he said.
In July, Jack in the Box rolled out the latest example of a more premium limited-time offer: the Jack’s Brewhouse Bacon Burger, topped with a grilled onions, hickory-smoked bacon and porter ale cheese sauce, and introduced with a virtual reality marketing effort to evoke a gastro pub theme.
Television advertising for the burger included the voice of the iconic big-white-ball-headed character Jack, who had disappeared from advertising for a while as the chain focused on promoting the improved food.
Comma, however, said, “Jack is back.”
Also promoted in July, however, was a value-positioned jumbo breakfast platter for $2.99.
That balance between premium and value products is a key strategy for Jack in the Box as it attempts to navigate a difficult competitive environment.
Comma, however, blamed transaction erosion at Jack in the Box on lower grocery prices as the pricing gap between food consumed at home and food away from home widens.
“I would be concerned if we saw that erosion going to the competition, but that’s not what we’re seeing,” he said. “We’re seeing erosion across the industry.”
Consumers are also feeling “deal fatigue,” said Comma.
“The deals that are out there are not necessarily penetrating for the competition the way they had earlier in the year,” he said. “Overall, we’re feeling good about the balanced approach we’ve taken and we think that’s driving results.”
Sister brand Qdoba Mexican Eats, meanwhile, benefited from growing both transactions and its catering program. During the quarter, the chain brought back its mango salsa, a seasonal favorite.
Next week Qdoba will launch a new smoked brisket as a protein that will be spotlighted in the Knockout Tacos platform.
The company also released to its franchise system a new restaurant design and remodel plan that has been tested over the past year. With the redesign, some restaurants will expand alcohol offerings, Comma said.
A new mobile app and a redesign of the affinity program are also in the works for 2017.
Last month Jack in the Box Inc. said the Qdoba brand will move its restaurant support center from Denver to San Diego in a consolidation designed to help reduce general and administrative costs by up to $45 million.