In Q4 of 2023, Jack in the Box earnings were underwhelming. The American fast-food chain reported net earnings of $21.9M, a 52.25% decrease compared to $48.9M just one year prior. They opened six new locations, while closing 11. (Verdict Food Service) These numbers typically point to a brand that is in serious decline, facing intense competition from newer, exciting fast-food chains. In reality, Jack in the Box might be the most exciting legacy brand going into 2024.
Founded in 1951, Jack in the Box has dominated the west coast market, with just over 2,200 to date. However, over the last decade, their growth has been stagnant, operating fewer locations today than it did in 2012. The key issue has been the relationship between Jack in the Box and its franchisees, most of whom acquired existing company owned stores as opposed to opening new locations. In 2018, the Franchisee Association even sued Jack in the Box, claiming that they did not perform their contractual obligations of supporting marketing and remodeling initiatives.
Recognizing a need for change, the company brought on CEO Darin Harris in 2020 and never looked back. According to Van Ingram, vice president of franchise recruitment, “franchisees will tell you that before Darin, things had been a little contentious. One of his key characteristics is his ability to work with the franchise system.” (QSR Magazine) Harris’ leadership has completely overhauled the trajectory of the brand. Harris first settled the lawsuit and then transformed his relationship with franchisees. He committed to a plan of 4% annual growth by 2025, presence in 40 states by 2030, and an ultimate goal of 6,000+ locations around the country.
The approach, while hard to execute, is quite simple; support and incentive franchisees to expand, and give them everything they need to do so. Harris wanted to reward existing franchisees for their loyalty, including a 0% royalty for a period of time, as well as reduced loyalties for the first six years of operations. According to Ingram, “there’s a lot of money in their pockets by not having to pay a royalty during that time frame. That clearly resonated with our franchisee system, and we saw them step up in a big way.” (QSR Magazine) In addition, new franchisees that agree to build at least 3 locations received a discount on their royalty, starting at 1% for the first year, increasing 1% per year, until it remains consistent at 5%. Lastly, at the corporate level, they identified 200 basis points of margin improvement, saving individual restaurants up to $55,000 per year.
Jack in the Box gave all franchisees a strategic market expansion plan, using mapping and data analytics, to prioritize growth based on the expansion potential. The company identified over 1,500 locations in its existing states, as well as over 2,200 additional opportunities in the 29 states where they have no stores. Salt Lake City, which has plans to reach 15 locations by the end of 2025, is Jack in the Box’s first new market in over a decade.
In 2023, Jack in the Box opened 3 new locations in Salt Lake City, as well as a fourth in Louisville, both outside of their typical market. While four new locations for a 2,000+ fast food brand are typically inconsequential, the results have been staggering. Since opening, these four stores have averaged $100,000 in sales per week. (Restaurant Business) Calculated over the course of a year, that implies $5.2M in revenue, more than double the $1.9M Average Unit Volume for all Jack in the Box locations. “We’ve put together a specific playbook of how to enter the market, everything from operations, how we’re going to build awareness before and after coming to the market, how we want to ramp up digital sales and late night sales and without any LTOs,” he said. (Restaurant Business)
Currently, the chain has signed agreements for 389 new locations since the launch of its development program, and even plans to open in Mexico in 2024. With a repeatable playbook in place, and early signs of huge success, Jack in the Box is committed to becoming a household name again. Sometimes the revitalization of an existing brand, especially one with the public recognition of Jack in the Box, can be just as exciting as the development of a new concept. While it may take a few years, Jack in the Box is creating the right blueprint to become the powerhouse it once was.