Jack in the Box Inc. expects its pace of refranchising and technology investments to increase in the next year or two, the company CEO told the ICR Conference on Monday.
Darin Harris, CEO of San Diego, Calif.-based Jack in the Box told ICR conference attendees in Orlando, Fla., that the company, which bought the Del Taco Mexican-American quick-service brand last year, expects margins to improve into 2023 and 2024 as inflation of the last 12 to 18 months eases.
Harris, in an ICR panel moderated by Christopher Carril of RBC Capital Markets, said Jack in the Box and Del Taco refranchising efforts were impacted by that food and labor inflation.
He said the company anticipates selling 120 restaurants over the next three years and become about 70% franchised in the 591-unit Del Taco brand.
As of Oct. 2, the Jack in the Box brand had 2,181 restaurants, with a little more than 93% of the system franchised in 21 states, including 146 company-owned and 2,035 franchised units.
In a same period, the company’s 591-unit Del Taco brand was about 51% franchised in 15 states, with 290 of those company-owned and 301 franchised. Jack in the Box had acquired Del Taco for about $585 million in March 2022.
Harris said Jack in the Box recently sold 16 Del Taco restaurants to an existing Jack in the Box franchisee, who also signed committed to develop new restaurants.
The CEO also said the brands are committed to upgrading technology in the next several years.
“We have some very old technology in our current restaurants,” Harris said, “and so we needed to really understand what were the challenges.”
The company plans technology modernization this year and next, he added.
“We've made increased investments to stabilize our core technology platforms that result in reduced monthly help-desk challenges, improve system stability and stabilize restaurant payments,” Harris said. The technology roadmap includes a new point-of-sale system to be rolled out by the end of 2024.
“We're testing three different platforms today,” Harris explained. We're very quickly narrowing that to one final platform to roll out into next year.”
He said innovation had to start with the POS and then other things, like digital menu board, artificial intelligence automation and robotics could flow from that.
Harris said the Jack in the Box teams were focused on staffing and getting dining rooms open after the pandemic.
“We see tremendous growth and progress already,” he said, “but we still have tremendous upside in this area of our business. Our company owned restaurants are now at 23.9 hours per day, which is greater than pre-pandemic levels.” He anticipated franchisees benefitting from the company approach, he said.
Investments in technology and operational adjustments give the company “a clear strategy and a line of sight into at least 200 basis points of improvement — or $55,000 per restaurant — in savings,” Harris noted.
Jack in the Box plans to return to net-unit growth in 2023, Harris added.
The company has guided to 25 to 30 openings for the Jack in the Box concept and eight to 12 for Del Taco, he noted. New markets for Jack in the Box will include Salt Lake City, Utah, and Louisville, Ky.; new markets for Del Taco will into Tampa, Fla.
Jack in the Box last fall opened its first off-premises-only unit in Tulsa, Okla.
“We see this as a transformational year to where the growth engine starts to really pick up some speed,” Harris said.
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