Jack in the Box turns in strongest sales year since 2007

Jack in the Box turned in its best year of sales since 2007. During the company's fourth quarter earnings call Tuesday, CEO Linda A. Lang attributed this performance to investments made to enhance the brand's food, service and facilities.

On the year, same-store sales were up 4.6 percent, with traffic driving half of the increase. During Q4, company same-store sales increased 3.1 percent, driven by a combination of traffic growth and an increase in average check.

Franchisees made up some ground during the quarter as well, with same-store sales up 3 percent.

"Jack in the Box same-store sales growth for the quarter was almost double that of the QSR sandwich segment for the comparable period, according to The NPD Group's SalesTrack Weekly for the 12-week time period ended Sept. 30, 2012. Included in this segment are the top 15 sandwich and QSR burger chain competitors," Lang said. "We believe we have strategies in place to continue to drive sustainable sales and market share growth at the Jack in the Box brand."

Q4 drivers

Drivers for the fourth quarter included the waffle breakfast sandwich and the All-American Jack combo. The brand also promoted 5-, 10- and 20-piece chicken nuggets during the period, and the same-store sales improvement was experienced across dayparts.

"Several marketing initiatives (caused) a great improvement to the overall guest experience and it continued in the fourth quarter with speed of service," Leonard Comma, president and chief operating officer, said during the earnings call.

That momentum is expected to continue through Q1 2013 with the recent Sourdough Cheesesteak Melt and Loaded Breakfast Sandwich launches.

Speed of service has been one of the major focuses in improving guest experience at Jack in the Box. The company turned in its seventh straight quarter of improvement in this metric.

"We believe (speed of service) is building trust with our guests and driving additional visits," Lang said. "It only takes six guests per day to drive 1 percent same-store sales growth at a typical Jack in the Box restaurant."

Remodeling, refranchising initiatives

Another major initiative is the systemwide restaurant reimaging program. The company announced that franchisees have completed this effort and, as a result, have experienced "significantly" higher guest satisfaction scores.

Also, with the recent refranchising of 97 restaurants, Jack in the Box is now 76 percent franchised. The company opened a total of 95 restaurants systemwide during the year, including 37 Jack in the Box and 58 Qdoba restaurants.

"Jack in the Box has several initiatives lined up going into 2013 that involve a more robust pipeline on the marketing side, as well as continued improvement in the overall guest experience," Lang said.

Obamacare

Finally, Jack in the Box executives were asked about the company's plan for the implementation of Obamacare within the next two years.

Chief financial officer Jerry Rebel responded, in part: "There are still a lot of unknowns. Based on what we know, we're looking at the impact on margin to be in the neighborhood of 50 to 100 basis points. The midpoint of that is about $10,000 per restaurant ... That's lower than what we have been hearing many (other restaurants) talk about. We think we have a pretty good beat on this (because) at Jack in the Box and Qdoba, our managers and assistants are already offered health care by the company. Most of our part-time employees already average less than the 30 hour-per-week threshold. So we don't believe there's going to be a big impact on having part-time employees actually be classified as full-time equivalents.

"Also, we currently offer some level of health care plan, mini-med plan, for the full-time crew employees and also offer a health care plan to the Jack in the Box team leaders. Acceptance rates are less than 20 percent and we're not anticipating that we would have a meaningful appreciation in terms of the acceptance rate going forward ... The high levels of turnover (in the industry) will also lessen the impact."

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