A significant transformation awaits the San Diego-based fast-food chain Jack in the Box as its new CEO Lance Tucker unveils sweeping changes to strengthen the company's market position.
According to the Akron News Reporter, the company plans to shutter up to 200 underperforming restaurant locations and explore the potential sale of Del Taco, a chain it acquired just three years ago for $585 million.
The initiative, dubbed "JACK on Track," will be implemented in phases, with the first wave of closures targeting 80 to 120 locations by the end of 2024. This strategic move aims to strengthen the company's financial position and enable it to pay down $300 million in debt.
Strategic shifts in fast food operations
Jack in the Box CEO Lance Tucker shared his vision for the restructuring plan during a Wednesday conference call with analysts and investors.
Tucker explained:
We expect closing these restaurants will strengthen the overall long-term economics of our franchisees, free up dollars for reinvestment, and allow the system to focus on maximizing performance of our stronger restaurants. In short, we anticipate this program will better position Jack in the Box for more reliable, consistent, positive unit growth in the future.
The company currently operates 2,191 Jack in the Box stores, with the majority being franchised locations. California and Texas host the highest concentration of restaurants, including 103 venues in San Diego County alone.
The fast-food industry faces mounting challenges, including increased wage requirements in California, rising food costs, and consumer spending uncertainty. These factors have contributed to declining same-store sales, with Jack in the Box experiencing a 4.4% decrease and Del Taco seeing a 3.6% drop in the quarter ending April 13.
Del Taco acquisition complications
Restaurant consultant John Gordon criticized the Del Taco purchase, suggesting the company overpaid by $200 million to $300 million. The timing of the acquisition proved particularly challenging, coinciding with new legislation mandating a $20-an-hour minimum wage for fast-food workers.
Tucker maintained a diplomatic stance regarding Del Taco's potential sale, emphasizing the brand's value while acknowledging the need to streamline operations. The company has enlisted B of A Securities to explore divestiture options.
The decision marks a return to Jack in the Box's roots, following a pattern similar to its previous sale of Qdoba, which it had owned for over two decades.
Financial implications and market response
The company faces significant financial pressure, with more than $500 million in secured notes due by February 2027. This looming debt obligation has likely influenced the board's decision to pursue aggressive restructuring measures.
Jack in the Box's stock has reflected these challenges, closing at $23.96 per share on Thursday, marking a 5.72% decline. Over the past year, the company's stock value has plummeted by nearly 60%.
Strategic realignment shapes future direction
Jack in the Box's restructuring plan represents a crucial turning point for the San Diego-based fast-food chain. Under CEO Lance Tucker's leadership, the company will close up to 200 locations and explore selling Del Taco to concentrate on its core brand. These strategic decisions aim to address mounting financial challenges, including substantial debt obligations and declining same-store sales while positioning the company for sustainable growth in an increasingly competitive market.
