Industry News | May 18, 2017 | By Alex Dixon | QSR Exclusive Brief

Jack in the Box Could Sell Qdoba

Jack in the Box same-store sales dropped by 0.8 percent. Andy Callahan
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Fourteen years and more than 600 new locations later, Jack in the Box has decided it is time to potentially sell Qdoba.

The brand made the announcement in its Q2 earnings announcement, which beat forecasts and sent shares up by more than 10 percent.

Jack in the Box same-store sales dropped by 0.8 percent—lagging behind competitors’ recent results—while Qdoba’s fell by 3.2 percent. Qdoba sales also lagged behind Jack in the Box in Q1, in which same-store sales dropped 1 percent while Jack in the Box’s increased by 3.1 percent.

Company revenue increased from $29 million to $33.8 million over the year.

Jack in the Box CEO and chairman Lenny Comma said in a conference call Wednesday that the industry’s consistent focus on value advertising has been affecting Jack in the Box’s performance, and that the brand may need to reevaluate bundling products for value and instead focus on single items and discounting in the short term.

“So we know that what’s driving the down cycle in sales and transactions right now really is the lower-priced items, and we’re going to have to play some more in that space,” he said. “[But] we don’t want to put ourselves in a position where we devalue our brand by essentially turning ourselves into a perpetual discounter and training the consumer that they no longer should come to us for the mid-tier and top-tier products.”

At the company’s investor meeting last year, Comma said one of the factors that would lead the company to reconsider its Qdoba strategy was valuation.

“It has become more apparent since then that the overall valuation of the company is being impacted by having two different business models,” Comma said Wednesday.

Qdoba, which now has more than 700 locations in 47 states, has system-wide sales of more than $800 million.

Comma said Jack in the Box continues to believe in the potential for the brand and said the company will not comment further on Qdoba’s future until Morgan Stanley has completed is evaluation and the board has determined next steps.