Customer value remains paramount for Jack in the Box heading into the final stretch of fiscal 2024. Like many of its quick-service counterparts, it is looking to win back price-sensitive guests who have largely cut back on dining out. 

“Our industry is operating in an unusual consumer environment,” CEO Darin Harris said during the company’s Q3 earnings call on Tuesday. “With an enhanced focus on reconnecting with the lower-income, value-oriented guests, we realize that what you get for what you pay is more important than ever.”

To that end, the chain in May launched a new Jack’s Munchies Under $4 Menu. It features servings of Tiny Tacos, junior sandwiches, and other snack-sized items. Harris said the platform was created to help grow transactions with a compelling price point. It also aligns with the brand’s attachment and upsell strategies. 

That wasn’t enough to overcome a tough sales environment—at least not in Q3. Systemwide sales were down 1.3 percent in the quarter. Comps slid 2.2 percent, including a 2.4 percent decline at franchised restaurants and a 0.1 percent increase at company-operated locations. Mix and transactions were both negative, although transactions improved slightly from Q2. 

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The Under $4 Menu is just one of several levers Jack pulled to regain positive sales after a challenging first half of the year. It zeroed in on late-night in Q3 with the return of its Chicken Tater Melt, promoting the item with rapper and actor Ice Cube. It followed that up with the systemwide rollout of chicken wings. Harris said the launch occurred via digital channels, which provided “solid operations knowledge” for larger campaigns and future promotions. 

The brand added the fan-favorite French Toast Sticks LTO as a permanent offering this spring. It plans to incorporate breakfast value promotions into each marketing window going forward while adding new options, like the recent introduction of Chicken and Waffle Sticks in Q4. The current quarter also has seen the brand bring back a $5 price point called Jack’s Big Deal Meal. A promotional partnership with the “Deadpool and Wolverine” movie featuring two new products is underway, too. 

Additionally, Jack is gearing up to introduce a redesigned version of its app in September. Harris said the improved platform will set the foundation for increased personalization through targeted loyalty offerings. That’s part of a broader push to funnel more traffic through first-party channels and grow digital orders from 14 percent to 20 percent of sales. 

The brand is also making progress on another big change to its tech stack with a new POS system. It’s been installed in 100 stores so far and should be in roughly 350 more by the end of the year. A full rollout is expected to be completed in 2025. 

“This POS system includes kiosk capabilities and will support a seamless loyalty experience while unlocking future operational innovation, including enhanced inventory and labor management, along with automation AI to reduce costs and improve speed,” Harris said. 

Those future operational improvements will build on other initiatives that have been making their way into stores lately. In Q3, that included increased adoption of a new oil management process and the ongoing rollout of new, labor-saving equipment. Harris said the addition of a second fryer automation test site and fresh training programs focused on food and labor management also have the potential to drive significant cost savings. 

“The team continues to work with urgency to roll these out to our entire system to maximize both our franchisee four-wall EBITDA and our company-owned restaurant margins,” he said.

Jack’s profit margin took a hit in Q3 with the wage hike in California, where roughly 40 percent of its stores are located. The regulation (AB 1228, also called The FAST Act) took effect in April and upped the minimum pay for fast-food workers to $20 an hour. As a result, labor costs increased 200 basis points to 32.4 percent of sales at company-owned outlets. Restaurant-level margins were 21 percent of sales, an 80-basis-point decline from 23.6 percent in the same period a year ago. 

Harris noted that comps in California were stronger than the rest of the system, thanks to pricing actions that offset much of the transaction declines. 

“California fared substantially better than we thought,” he said. “Franchisees worked with us when we rolled out our plan for AB 1228, where we looked at pricing by menu item across every market by every store. We took specific surgical pricing on individual items and we did it in a timely fashion.” 

Meanwhile, Jack’s unit growth ambitions are continuing to accelerate. Executives said interest from new and existing franchisees is picking up on the heels of continued strength in new markets. The brand’s five locations in Salt Lake City are each averaging over $100,000 in weekly AUVs. Its two Louisville restaurants have been operational for nine months and also are performing well with nearly $70,000 in weekly AUVs. 

Looking ahead, the chain plans to open 10 company-owned units in Chicago in 2025 before partnering with franchisees for further expansion into the previously untapped market. Expansion into Florida is on the horizon for next year, too. 

The brand’s re-image program, backed by a $50 million corporate investment, is gaining traction with franchisees. With over 1,000 remodeling requests received, the company is positioned to support approximately 25 percent to 30 percent of those projects with incentives. Harris said more operators are starting to prioritize and expedite their remodeling plans. That’s expected to yield “meaningful” same-store sales growth going forward. 

Jack’s net restaurant count remained flat at 2,195 in Q3, with three closures offset by three openings. Since the launch of its development incentive in mid-2021, the brand has signed 96 agreements for a total of 437 restaurants, with 46 of those units opened to date.

Del Taco’s comps fell 3.9 percent in Q3. That included a 4.1 percent decline at franchised locations and a 3.5 drop at company-owned outlets. Transactions were down while average check was up for the Mexican food concept, culminating in a 3.2 percent decline in systemwide sales. Restaurant-level margins were 13.4 percent, down from 17.4 percent a year ago. Executives attributed some of the weakness to refranchising and noted that increased labor and utility costs were partially mitigated by price increases. 

Harris acknowledged the results were “disappointing” but said the company is seeing some early signs of improved sales performance. He added that new leaders at Del Taco are “making good progress” on multiple fronts to optimize the marketing, media, and menu strategy 

“The Del team is moving quickly on these efforts, while adeptly dealing with the recent changes in consumer buying behavior and wage increases in California,” he said. “I’ve been part of many brand transformation projects in my career, and similar to the changes we have been making at Jack in the Box, it takes time. I’m confident that we have the right team in place and I’m encouraged by their progress in executing a strategy to improve sales and profitability.” 

He pointed to a new menu simplification test as one example. So far, it’s showing increased sales, speed of service, and margins with no pushback from customers. The brand is expanding the test in Q4 to a few additional markets to validate results and gain additional learnings before rolling the changes out systemwide next year.

Another example is the brand’s kiosk test. It’s generating stronger-than-expected guest adoption along with increased ticket sizes and labor savings. The company will utilize the best practice knowledge it has gained from that test as it introduces kiosks to both of its brands. 

Importantly, Harris said Del Taco is following in Jack’s footsteps with successful openings, with the three most recent stores to come online each setting new records for first-week sales. The brand netted two restaurants in Q3 and ended the quarter with 597 units.