Jack’s same-store sales declined 0.6 percent in the quarter because of lapping stimulus, but there are reasons for optimism going forward. For one, comps ramped up as the chain exited the period and speed of service improved throughout. The chain has also opened 55 percent of its dining rooms, which provides a low-single-digit lift in sales. And for the first time in many quarters, Jack didn’t experience any meaningful product supply disruptions or shortages.
In terms of profitability, jack’s operation services team and franchisee margin task force are working to build margins by 200 basis points through new restaurant-level processes, equipment, and technology. Some examples include simplified packaging, a new machine that standardizes cleaning and sanitation, new cheese pumps, and automation testing with restaurant tech vendor Miso Robotics.
Restaurant-level margin was 15.8 percent, a drop year-over-year because of rising food and packaging costs, wage inflation of 13.2 percent, and increases in utilities, maintenance, and repair costs. Commodity expenses lifted 16.8 percent in Q3 because of protein, sauces, oil, and beverages. When removing Jack’s underperforming company-owned markets that are under repair (Oregon, Kansas City, Oklahoma City, and Nashville), margin was 19.3 percent in Q3.
Jack used pricing of 9.7 percent in the quarter to manage the cost environment. Harris said the brand was able to attract consumers on the highest and lowest end of income levels, but needs to do a better job of engaging the middle section.
“We've been very careful in the pricing process that we've taken and how we've promoted our items, and as we look forward, we'll continue in our hook-and-build strategy that continues to work,” Harris said. “I think what gives me the most confidence beyond the execution of our strategy and our innovation strategy is that we still have upside from a standpoint of improving our staffing, continuing to open dining rooms. And then what I'm seeing across both brands is this really strong execution at the restaurant level, that gives me a lot of confidence that the marketing approach that we're taking is resonating, the execution is happening.”
The brand ended Q3 with 2,207 units, including 2,036 franchises and 171 company-run locations. Jack has signed 62 agreements for 233 restaurants since it relaunched a more sophisticated franchise program last summer. Thirteen of these units have already opened. Nearly 373 franchises have submitted forms to undergo reimaging, which has proven to come with traffic-led sales gains.
Del Taco finished Q3 with 594 stores—303 franchises and 291 corporate units. The chain’s Fresh Flex prototype has produced development agreements for 79 locations since 2021.