Jack in the Box announced that the brand would have to introduce single-item value options in the near future, CEO Lenny Comma said during the San-Diego-based company’s second quarter earnings call on Wednesday.
”You’ll see us pivot to at least some single-item promotions in the back half of the year simply because we’re being dragged into that space by our competitors, including those with a higher average check,” Comma said.
He admitted that the move was not an ideal course of action but that the company feels it has little choice. Currently, Jack in the Box offers discounts in the form of bundles.
“We’re not going to be able to prevent [single-item discounts] from happening,” said Comma.
The move is projected to be a temporary measure that will allow the brand to stay competitive until commodity prices rise and competitors are unable to maintain their own similar promotions.
Comma described discounting stand-alone items as a “swing of the pendulum” which would work only in the short term. The move is partially in response to a .8% same-store sales dip during the second quarter ended April 16.
Jack in the Box will need to tread carefully into this unfamiliar territory if it wants to maintain its current reputation, Comma said.
“We don’t want to put ourselves in a position where we devalue our brand or where we turn ourselves into a discount [option],” he said.
News of this strategic adjustment comes just a day after the company announced that it had retained Morgan Stanley & Co LLC to aid in evaluating alternatives for the Qdoba brand.
Unable to take advantage of chief competitor, Chipotle Mexican Grill Inc.’s, decline, Qdoba saw system same store sales fall 3.2 percent during the fiscal second quarter, while Jack in the Box same-store sales stayed flat.
The negative same-store sales figures for Qdoba overshadow a 23% rise in company revenues and a 15% increase in company net earnings in the second quarter.
Comma stated at the top of the call that no further clarification would be given at this time regarding Qdoba’s future or if a sale was imminent.
“We continue to believe in the potential of this brand,” Comma said, citing its position as the second largest fast casual Mexican food brand in the United States.
However, during yesterday’s announcement regarding the company’s future, Comma said that “the overall valuation of the company is being impacted by having two different business models.”
In addition to introducing single-item discounts and the coming adjustments regarding Qdoba, Jack in the Box plans to focus on a continued refranchising push and third-party delivery as other potential drivers of future success at its 2,200 plus restaurants across 21 states and Guam.
Contact Dan Orlando at [email protected]
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