Jack in the Box is making good on a promise that it would sell off company-operated Del Taco restaurants.
The company on Wednesday announced a partnership with the investment banking firm Cypress Group to sell the restaurants to franchisees. About half of Del Taco’s 600 locations are company-run.
The San Diego-based Jack in the Box acquired Del Taco earlier this year and promised to convert the Mexican fast-food chain into an “asset-light” model similar to its namesake burger chain. Franchisees operate more than 90% of Jack in the Box’s 2,200 locations.
“We want this business to be asset-light and look very similar to the Jack in the Box footprint eventually,” Jack in the Box CEO Darin Harris said in August, according to a transcript on the financial services site Sentieo. That would suggest some 250 Del Taco restaurants are for sale.
The Cypress Group is no stranger to this task. Restaurant companies, including Wendy’s and TGI Friday’s, have regularly tapped the investment banker to market corporate stores during refranchising efforts.
“These unique, challenger brands offer outstanding unit economics and a tremendous growth opportunity to franchisees, which give us great confidence to successfully execute the process,” Cypress CEO Dean Zuccarello said in a statement.
Refranchising efforts have slowed in recent years, in part because the largest brands have mostly sold their corporate stores. Companies refranchise because it is more profitable to sell franchises than it is to run restaurants. Chains like Burger King, Wendy’s, McDonald’s and Jack in the Box itself have undertaken sizable refranchising plans over the years.
The perceived demand for franchises, and particularly franchises with drive-thrus such as Del Taco, could also lure plenty of buyers. Del Taco restaurants average $1.5 million in unit volumes, and its same-store sales have been consistently strong coming out of the pandemic.
“We’ve already had two offers on two markets with Del Taco that we’re still considering,” Harris said in August.
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