Following its $585 million purchase of Del Taco in March, Jack in the Box revealed plans Wednesday to sell at least 250 company-owned Del Taco restaurants—about half of the system’s footprint—to new and existing franchisees. The move to refranchise Del Taco will help the burger chain land more securitized debt, financed by royalty fees from owners.
To assist in the effort, Jack partnered with The Cypress Group, a restaurant and franchise investment banking firm with more than 30 years of multi-unit M&A and restaurant refranchising experience.
“The attractiveness in acquiring a growth brand like Del Taco included the opportunity to create a multi-brand organization that operates asset light, with the ability to make significant refranchising progress shortly after completion,” said Darin Harris, Jack in the Box CEO, in a statement.
“Between our recent experience refranchising Jack in the Box, and now adding the expertise of The Cypress Group through this partnership, we feel we are well equipped to make progress toward this objective during 2023,” Harris added.
By acquiring Del Taco, Jack in the Box added about 300 corporate-owned and 300 franchise-owned units under its portfolio, growing its overall reach to more than 2,800 locations spanning about 25 states.
While Jack in the Box’s franchise footprint previously comprised about 93 percent of its system, the combined ownership shifted owner-operated units to about 84 percent. The refranchising plan will aid in Jack in the Box’s goal to get back to its previous ratio of company and franchise locations. An asset-light model will also help shield Jack in the Box from inflationary-related pressures.
In the third quarter ending on July 10, Jack in the Box reported total revenues of $398.3 million—an increase of 47.8 percent from last year during the same period. Del Taco comprised about $126.3 million of the total, nearly 32 percent of the quarter’s revenue. Jack in the Box is expected to report earnings for the fiscal quarter ending in September on November 22.
The Cypress Group will immediately launch franchise opportunities to prospective owners, as well as current Jack in the Box and Del Taco operators.
With about 600 drive-thru units and U.S. systemwide sales of $931 million in 2021, Del Taco ranked No. 42 on QSR’s 50 Biggest Fast-Food Chains in America list.
Since being acquired by Jack in the Box, Del Taco launched a multi-faceted umbrella, Del Taco Better Mex, with Epic Tortas as its first menu initiative in August.