Jack in the Box restaurants have implemented a 1.5-percent menu price increase to help offset rising commodity costs, company officials said Thursday.
In a call to analysts following Wednesday’s report of a 62-percent decline in net income for the second quarter, Jack in the Box Inc. chair, president and chief executive Linda Lang said the price hike at the company’s namesake chain was rolled out last week at corporate locations.
Company officials said they expect commodity costs to increase between 4.5 percent and 5.5 percent for the year — up from previous estimates of a 3-percent to 4-percent hike — and they don’t foresee commodity costs declining in 2012.
The price of beef alone is expected to jump 14 percent for the year, compared with prior estimates of a 9-percent increase. Dairy costs also are expected to increase 6.5 percent for the year.
Still, Lang said the company continues to be “cautious” about pricing, given the shaky economic recovery and discounting by competitors.
Jack in the Box will continue its ongoing strategy of offering both premium items and value-priced options, focusing more on the promotion of bundled meals, which Lang said don’t significantly increase food costs.
In the second quarter, for example, Lang said the chain’s introduction in January of the All-American Jack Burger with fries and a drink for $4.99 was “very popular” and made up a significant portion of the mix.
“Our guests saw this as a good value,” she said.
Also in the second quarter, the chain was promoting its expanded grilled sandwich line with the new Bourbon BBQ Steak Grilled sandwich as a limited-time offer.
In addition, the company will continue to invest in improvements in service and other key guest satisfaction aspects, Lang said.
Over the past year or so, Jack in the Box has been upgrading core menu items, such as its coffee, fries, bacon and tacos, in part to re-connect with lapsed customers, Lang said.
“We believe the improvements we’ve been making are resonating with our guests,” she said.
In June the company plans to roll out new menu boards that will be easier for customers to navigate. With the roll out, Jack in the Box also will drop several less popular menu items, although Lang did not specify which selections are targeted to go.
The deletions will allow the chain to better highlight “average check builders” as well as helping to simplify “operational complexity,” she said.
Sales for the quick-service chain are showing signs of a turnaround with same-store sales up on a two-year cumulative basis in the economically hard-hit core market of California, as well as in Arizona and Texas, Lang said.
Same-store sales for Jack in the Box in the second quarter rose 0.1 percent, primarily because of an 0.8-percent increase in sales at company locations, which offset a decline among franchise units of 0.3 percent.
Because of improving trends, the company upgraded its outlook for the year, saying Jack in the Box’s company-unit same-store sales likely would rise between 1 percent and 3 percent, while sister brand Qdoba’s systemwide same-store sales would increase 4 percent to 6 percent.
Previously, officials had projected same-store sales for the year of between negative 2 percent and an increase of 2 percent for Jack in the Box, and an increase of between 3 percent and 5 percent for Qdoba.