Donning a Ted Lasso costume for Halloween last year, Darin Harris just so happens to share a few qualities with the fictional American college football coach turned English soccer coach—from his optimistic demeanor to his ability to win over skeptics. Though, to be fair, Harris had no shortage of restaurant experience when he joined Jack in the Box as CEO.
He helped lead the turnaround of Cicis Pizza as CEO from 2013 to 2018, resulting in 17 consecutive quarters of same-store sales and traffic growth after the brand was bought by a private equity firm. (For context, Cicis faced five straight years of negative restaurant sales and more than 200 restaurant closures before Harris joined). Before, he also revitalized restaurant growth in his senior vice president role at Arby’s, leading the global strategy for international, franchise, and non-traditional development.
Upon joining Jack in the Box in June of 2020, Harris was tasked in his first 90 days with every new CEO’s dream—settling a two-year-old lawsuit with the Jack in the Box National Franchisee Association, which represents 95 franchise owners with about 2,000 of the brand’s more than 2,200 restaurants.
However, his diligent work paid off. Jack’s stock price, as of press time, was hovering around its all-time high—about $89, an increase of 170 percent since Harris came on board. Overall franchisee satisfaction scores also improved from 56 percent in 2020 to 72 percent. He attributes Jack’s successful turnaround to clarifying the brand’s strategic direction, re-establishing franchisee relationships, hiring a new leadership team, and focusing on culture.
Delving into the latter, Harris faced another immediate challenge when he entered an empty office during a pandemic and began assembling a new C-suite at a time when people were still nervous about meeting in person.
“Just trying to figure out, how do I roll up my sleeves and understand the business, and understand what really happens at Jack in the Box and the culture and the people and franchisees, was a huge challenge,” Harris says.
The lack of in-person meetings led to missed moments to connect and build culture, “because you’re focused so much on how do we execute, what do we need to get done today,” he adds. “A whole new leadership team didn’t know their employees personally, because they weren’t seeing each other in the office each day.”
Though Harris admits the solution to building a strong culture in today’s environment is ever evolving, building time in the schedule to get to know employees and ask about their families has boosted morale, and even helped the team align on a shared vision and strategy.
“If we get people and culture right, 90 percent of our success will come from those two things,” Harris says, plus “having a clear strategy and being able to adapt.”
If rising sales figures are the measure of success, Harris must be on to something. In 2021, Jack in the Box reported $1.8 million average-unit volumes—up 20 percent from 2020, and providing $4.3 million enterprise average EBITDA, Harris says.
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. The brand ended Q3 with 2,207 units, including 2,036 franchises and 171 company-run locations.
An energizing acquisition leads to learnings and new prototype
A significant driver of Jack in the Box’s success over the last year can be attributed to a strategic acquisition completed in March 2022 of Del Taco, which comprised about $126.3 million—nearly 32 percent—of the total revenue in Q3.
Aligning menu offerings, company cultures, and guest profiles drove Jack in the Box’s interest in the $585 million purchase of Del Taco, another California-based American fast-food chain that offers burgers, fries, shakes, and, no surprise—tacos. By acquiring Del Taco, Jack in the Box added about 300 corporate-owned and 300 franchise-owned units under its portfolio, growing Jack’s overall reach to more than 2,800 locations spanning about 25 states.
There was also the opportunity for Jack in the Box to learn from Del Taco’s success with its “Fresh Flex” prototype, a new restaurant design that dropped in January 2021 and led to increased franchise deals for the 600-unit-plus franchise. Highlights include third-party delivery pickup stations, double drive-thru lanes dedicated to mobile or delivery orders, and a kitchen redesigned for optimal labor efficiency.
Following the deal, Harris and his team reflected and realized it “had been a very long time” since Jack in the Box released a new prototype, Harris says.
“So our focus became, what can we do to make this a more viable development opportunity for growth?” he says. “One, it has to have a great image to the street, but it also has to be more cost effective and efficient to build and have a great economic model.”
Del Taco’s Fresh Flex design was based off of a previous Jack in the Box prototype that a former architect brought to Del Taco, Harris reveals, which they tweaked and improved upon.
“We very quickly said, OK, this is very interesting,” Harris says. “Why don’t we take their learnings and provide our new image to a building that’s already more value engineered? And that’s what we were able to do.”
In October, Jack in the Box announced its new “CRAVED” model—which stands for “Cultural, Relevant, Authentic, Visible, Easy, and Distinctive”—with a new restaurant opening in Tulsa, Oklahoma at only 1,350 square feet, less than half the size of Jack’s typical dine-in restaurants. The new prototype features a double Y-lane drive-thru and pickup window, no interior seating to lower building costs, dual assembly kitchens, and exclusive parking for mobile and third-party delivery orders—sound familiar?
The brand also brought a more modern design and color palette to its restaurant of the future with warm wood tiles, natural concrete waiting blocks, graphic poster panels, white cube tiles, and upgraded lighting and landscaping.
“This was only the beginning of how we will continue to evolve both brands through the shared model,” Harris notes.
The goal of the new prototype was to reduce buildout costs by 18 to 23 percent while also increasing real estate flexibility, says Tim Linderman, chief development officer at Jack in the Box. The model is designed for free-standing locations, but can also be adapted to fit in a variety of spaces such as C-stores, travel plazas, and end-cap locations. The design is also meant to attract franchisees, both new and existing.
“With our drive-thru sales skyrocketing amid the pandemic which accounted for 85 percent or more of a store’s sales, we needed a new prototype that would align with evolving consumer preferences,” Linderman says. Before COVID, drive-thru accounted for about 70 percent of sales. “We believe that off-premises will remain a preferred method of consumption for many of our guests and we want to ensure we are meeting and exceeding their expectations.”
In November, Jack in the Box revealed plans to sell at least 250 company-owned Del Taco restaurants—about half of the system’s footprint—to prospective and current 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.
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 should also help shield Jack in the Box from some inflationary-related pressures.
“Inflation is something that’s impacting everyone in the industry right now, so we’ve become more disciplined in our pricing strategy and are investing in the right technology to support that,” Harris says. “Partnering with our supply chain vendors to meet these challenges head on has been key to ensure those relationships remain steady for continuity sake.”
Tech trials and innovation
As labor woes impacted the entire restaurant industry, Jack in the Box began trying out an innovative solution in April by hiring a robot at its San Diego location. The burger chain tested Miso Robotics’ fry-cooking robot Flippy 2, which uses AI to identify and pick up food, then cook it in the correct fry basket. Miso estimates the robot increases throughput by 30 percent, or roughly 60 baskets per hour. Jack also piloted Sippy, a POS-integrated robot that automatically dispenses beverages and seals cups.
“At the restaurant level, we’re continuing to test and perfect our robotics cooking technology and the flexibility of our location prototypes to stay on the leading edge of innovation in the [quick-service] space,” Harris says. “We are constantly looking for technology opportunities to drive performance. This could be done with expansion of Flippy, or through other pilot programs that ensure the restaurant operations provide a more seamless, quick and efficient experience for the customer.”
Jack hired chief information officer Doug Cook to enhance these efforts by improving AI and removing more costs from the P&L. Cook has more than 20 years of experience in this area, including at Pizza Hut and Sonic.
“Innovation is at the heart of Jack In the Box. We had to re-ignite that across all aspects of our business: marketing, development, operations,” Harris says.
An upgraded website, a mobile app update, and a new loyalty program—dubbed The Jack Pack, which has more than 2 million members—round out Jack’s recent digital advances.
“We recognized that our current system for our app and website was a barrier that we could improve upon,” adds Ryan Ostrom, chief marketing officer at Jack in the Box. “As such, we partnered with Bounteous to launch a new ordering website and mobile app that integrates with our loyalty program.”
Partnerships are paramount
Partnerships are a key area quick-service restaurants are leaning into to drive interest and sales from younger consumers, especially with athletes and other well-known public figures. McDonald’s collaborated with K-pop group BTS for both signature meals with special dipping sauces and merchandise last year, for example.
In July, Jack in the Box partnered with Star Wars actor Mark Hamill to highlight the launch of French Toast Sticks, returning to the brand’s menu after a 10-year hiatus. The sweet, vanilla-battered product starts at $2 and comes in three or six pieces, or as part of the Jumbo Breakfast Platter. And unlike other competitors in the space, there isn’t an 11 a.m. deadline for customers to order the breakfast item.
With the majority of stores open 24 hours a day, “we do not follow the rules of breakfast only being confined to the morning,” Ostrom says. “At Jack, you can get tacos for breakfast. You can get breakfast for dinner. You can get food late at night. People crave different flavors at different times, and our brand likes to offer a variety of choices and let people taste outside the box and live outside the box on their terms.”
Jack in the Box also teamed up with reality TV star Kyle Richards in October to launch limited-time-only Monster Tacos during Halloween season—a larger version of Jack in the Box’s tiny tacos, topped off with melty American cheese, shredded lettuce, and taco sauce.
“We knew she was a known, massive fan of the brand, and given her love of Jack tacos and connection to Halloween horror movie culture, it made sense to bring her on board as we popped up with Monster Tacos,” Ostrom says about Richards. “These are the scrappy and authentic partnerships we are looking to continue to execute in the months to come.”
“People are so used to the burger brands or the chicken brands. We are different. At Jack, we are a burger brand that is famous for our tacos. That makes us unique,” Ostrom adds.
The brand also capitalized off of an unintentional, non-official partnership with J-Hope when the BTS star released his new album called “Jack in the Box” in July. “With the record dropping in mere days, we needed to act quickly to catch the news cycle,” Ostrom recalls.
Ostrom and his team did a deep dive into the BTS universe and unearthed a recurring inside joke between J-Hope and his fanbase about the singer’s love for drinking Sprite, and subsequently released a promo code for fans to receive a free Sprite with a purchase timed with the release of the record.
“In less than 48-hours, we came up with, and executed, an authentic way to connect the brand to ‘Jack in the Box,’ the album,” Ostrom says. “All told, the campaign received more than 1 million TikTok views through user-generated content and over 700 million earned media impressions.”
Poised for future growth
About 70 percent of Jack’s franchise operators started their brand journey working at the restaurant or corporate level, which Harris believes is a testament to their commitment to grow from within, he says.
As additional proof, the rollout of a new training platform in the third quarter of 2022 increased general manager certification from 25 to 80 percent, Harris notes. The new platform also increased performance, which in turn boosted retention.
And “despite the current scale of Jack in the Box, there is still so much opportunity for growth for us in untapped markets across the country,” he says.
Since the relaunch of the brand’s franchise sales program in mid-2021, Jack in the Box has signed 68 agreements and opened 22, with another 245 stores in the development pipeline. With discounted royalty incentive programs for multi-unit franchisees and AUVs topping $1.8 million, Jack in the Box is setting itself up for explosive growth.
By analyzing demographics and completing a strategic market plan that identifies key areas for new Jack in the Box restaurants, Linderman, CDO, estimates the brand has more than 1,500 opportunities in its current footprint, and 2,250-plus opportunities in new markets. “We believe there is an opportunity for about 6,000 total restaurants in the U.S.,” Linderman says.
Growth endeavors are focused on multi-unit investors in markets east of the Mississippi River, he says. Additionally, remodeling current franchisee locations is in the works. Owners have submitted more than 360 reimage forms so far to update their restaurants with the new CRAVED image and design elements, and 256 were cleared to proceed as of press time.
Many franchisees are also interested in building the 1,350-square-foot prototype, and while Jack in the Box is allowing a few lucky owners to test the new image, “we’re openly trying to hold them back a little since we’ve got to test it and get consumer feedback,” Harris says.
Seeing current owners excited about building more restaurants is a 180-degree turn from the dynamic franchisees had with the franchisor when Harris first joined the brand.
“It goes back, whether it’s with the leadership team or franchisees, to rebuilding that relationship,” Harris says. “It’s enabled us to do things like utilize our franchisees’ knowledge, adapting to headwinds, coming up with the new prototype—they’re involved every step of the way.”