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Financing

Jack in the Box is making a huge investment in drive-thrus

The company hopes the improvements and a focus on speed will bolster sales.
Photograph: Shutterstock

Jack in the Box is putting its money where its customers are: in the drive-thru.

The San Diego-based burger chain is planning to spend millions to upgrade the drive-thrus of company-run restaurants starting next year as part of a broad strategy to improve convenience, solidify operations and add more diversity to its menu.

“With the lion’s share of the business going through the drive-thru, that’s the most prudent place to invest,” CEO Lenny Comma said on the company’s earnings call Thursday.

“And as we evaluate how the consumer’s behavior is changing, particularly around delivery and app-related purchases, we want to make sure whatever investments we make in the future are actually fulfilling that consumer need.”

Jack in the Box gets 70% of its traffic through the drive-thru. And a slower drive-thru tends to hurt sales.

Comma noted, for instance, that the bottom quartile of the chain’s restaurants are more than a minute slower than system average and have year-over-year sales that are 2% less than the top restaurants.

The company is planning to invest $10 million to $15 million a year over three years to make changes to its drive-thrus, starting in 2019. Jack in the Box owns 146 of the chain’s more than 2,200 locations.

That includes digital menu boards in the drive-thrus as well as menu board canopies and outside order takers to improve speed.

The company will also add landscaping and other improvements “to make sure we look crisp,” Comma said.

Franchisees have the option to make the improvements to their drive-thrus. And franchisees of the 600 oldest restaurants will have the option to remodel their locations, too, the company said.

And the chain is working to improve speed by reducing complexity. That includes simplifying operating procedures, upgrading equipment and reducing redundant items. “We must simplify our operations and significantly reduce complexity to drastically reduce wait times,” Comma said.

Jack in the Box executives made the comments on an earnings call after posting same-store sales growth of 0.5% in the quarter and improved earnings. Earnings increased 54% in the company’s fiscal third quarter ended July 8 to $48.1 million, or $1.70 per share, from $31.3 million, or $1.05 per share.

Executives on the earnings call said that Jack in the Box has been working to avoid the heavy discounting trap in the quick-service space.

“We’re still seeing aggressive value offerings in the marketplace and we’ve chosen to address it by deploying additional advertising, combined with margin-friendly value offers,” Comma said. “We remain competitive today, while protecting the brand’s equity over the long term.”

He said the company is “avoiding the potential longer-term consequences of training customers to only come to us when we are offering an aggressive deal.”

In addition to the drive-thru changes, Jack in the Box plans to roll out its smartphone app later this year. “It’s time to up our game when it comes to other areas like technology and providing consistent guest experience,” Comma said.

And the company is working to make improvements to the menu, too, beyond burgers. The company wants a menu with more unique, “culturally relevant and affordable food.”

That includes more items such as teriyaki bowls, jalapeno poppers and tacos. “Expect to see more of those kinds of nontraditional items as we target an increasingly diverse population that craves a greater variety of foods and flavors,” Comma said.

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