Digital sales grew 38 percent in the first quarter year-over-year, and 271 percent compared to two years ago. The channel now accounts for 10 percent of sales, and the customer database has risen 52 percent year-over-year. The Jack Pack loyalty program is off to a fast start, as well. More than 95 percent of mobile orders are coming from rewards members.
This year, Jack plans to launch an in-store Jack Pack program and roll out its first online ordering platform and a new mobile web experience.
“These additions will immediately help make online ordering and the Jack Pack rewards program significantly more accessible to our guests,” Harris said.
During Q1, Jack experienced wage inflation of 10.9 percent and commodity inflation of 10.5 percent, due to rises in price of beef, pork, sauces, and oil. To mitigate the high-cost environment, the chain increased menu pricing by 5.5 percent year-over-year at company-run restaurants.
Jack took 3.9 percent pricing in Q4 and in the mid-to-low threes in the preceding quarters. The brand hasn’t disclosed what franchisees have done with pricing, but CFO Tim Mullany said they’ve maintained a sizable increase over the company price take.
Average check has increased to just under $12 and average number of items per check has held steady.
“We’re comfortable with the price take that we’ve taken,” Mullany said. “We feel it’s in line with inflationary headwinds on the commodity and labor side. We think we do actually have more room to go on that should we need to, but we’re still in line with our original guidance of high-single digits.”
“Relative to the transactions, there’s always sensitivity to that,” he added. “But so far, what we’ve seen has been pretty much in line with our expectations and our modeling for price sensitivity versus trends. So there haven’t been any adverse indications that we should back off of our approach and strategy towards taking price in FY22.”
Jack partners with a third-party pricing authority to research how consumers are responding, and works closely with franchisees to investigate what they’re seeing in their specific markets.
A big question for the industry, Harris said, is determining what value truly means with everyone raising prices at the same time.
“I think that’s the part we’re all trying to get our head around, but what is now value?” Harris said. “Is it $5, is it $6, is it $7? And how do we continue to improve our pricing power?"
“For us, we stated multiple times that our strategy is working with both the customers that we segmented,” he continued. “We talked about some higher-end customers along with our core base, and the strategy that we’ve proven is that, have a very strong promotional offering with add-on and upsell opportunities, and we’ve seen that work and we’ll continue to do that and focus on that. And it’s working for us as a competitive differentiation in the industry.”
In 2021, Jack revealed it's also willing to grow through M&A with a $575 million purchase of Del Taco. The deal is expected to close around the second week of March. The two sides have begun the process of integrating teams and identifying meaningful synergies and knowledge-sharing initiatives, Mullany said.
Del Taco has roughly 600 units, which are about evenly split between the company and operators. Harris said Jack decided to purchase the fast casual with refranchising in mind.
“We’ve obviously, as part of our due diligence, looked at the portfolio, looked at where we think there is opportunity within our system,” Harris said. “We haven’t had a chance yet to meet their franchisees and see where there is opportunity within their system. And then, we also know that there is plenty of interest from outside the Jack in the Box system expressing both interest in Jack in the Box and Del Taco.”