Jack In The Box Discloses Troubling Store Trends

Jack In The Box Discloses Troubling Store Trends

Jack in the Box Inc. JACK announced last week that it will begin the search for a new CEO — and whoever is appointed will be challenged on day one, according to a Wednesday Restaurant Business report. 

Negative Operating Income At Jack In The Box Stores 

Data compiled from Jack in the Box franchise disclosure document shows around 300 of its total 2,200 locations generate less than $1 million in annual sales, the publication reported.

The median operating income for these stores is negative $36,260,  which is suggestive of the possibility of store closures.

Some locations with more than $1 million in annual sales are also in the red, Restaurant Business said. 

Jack in the Box only started selling stores to franchisees in the early 2000s, and the company kept control of the properties. The restaurant chain leased the properties to operators for around 9.5% of revenues.

While this type of arrangement is common, franchise rent accounts for around 30% of Jack in the Box's overall revenue. Some argue this fee is too high given low average unit volumes, according to Restaurant Business. 

Consultant Says 13% Of Locations Could Be Cash Flow Negative

Restaurant consultant John Gordon told Restaurant Business it is possible around 13% of all Jack in the Box locations are cash flow negative.

What's even more concerning: the data provided by Jack in the Box covers only 2018, and rising labor and other costs imply further deterioration occurred throughout 2019.

The restaurant chain did not respond to Restaurant Business' request for comment, the publication said. 

What's Next

Whoever replaces Lenny Comma as CEO will feel "immediate pressure" to help support sales and prevent franchisees from throwing in the towel, according to Restaurant Business. 

The stock was trading 0.8% higher at $76.59 at the time of publication. 

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Photo by Coolcaesar via Wikimedia

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