Back to top

Image: Bigstock

Jack in the Box (JACK) Inks Agreement to Open 64 New Restaurants

Read MoreHide Full Article

Jack in the Box Inc. (JACK - Free Report) recently announced that through the end of the third quarter of fiscal 2021, it has awarded 16 franchise development contracts to open 64 new restaurants in various regions, including Arizona, California, Idaho, Texas and Utah.

Jack in the Box is now working on brand developments and measures to penetrate in the new markets of Salt Lake City, Chicago and Louisville. Also, the company is simultaneously focusing on expanding its presence in the existing markets of Houston, Phoenix, San Francisco, Los Angeles, Dallas and other cities.
With respect to this, Darin Harris, CEO of Jack in the Box, stated, “In order to grow, we needed to re-energize our franchisees and strengthen relationships with our existing franchisee network. We're humbled that operators want to be part of Jack in the Box and we will continue to provide a brand that brings in guests and systems that ensure our franchisees are equipped to successfully provide great food and service.”

In a bid to achieve its goal of reaching 4% annual restaurant growth by 2025, the company has opened 10 locations till the third-quarter fiscal 2021-end. Additionally, Jack in the Box launched MK12 during early 2021. This only off-premise and online pickup feature introduced by the company will not only reduce its development costs up to 18-23% but will also allow more storage capacity. MK12 is expected to start operating from fiscal 2022 in Oklahoma and California region.

Solid Franchising Efforts Driving Growth

Jack in the Box restaurants are largely franchised. During third-quarter fiscal 2021, the company had 91% of its restaurant franchised. Also, during the quarter, franchise-level margin, as a percentage of total franchise revenues, was 43.3%, up from 41.5% in the year-ago quarter. We believe franchising a large chunk of its system will lower its general and administrative expenses and thereby boost earnings.

The company also aims to continue focusing on effectively managing costs along with improving guest experience by striving toward operational excellence. Notably, the company believes that the majority of Jack in the Box’s new unit growth will be through franchise restaurants. During the third quarter, Franchise rental revenues climbed 6% year over year to $80.6 million. Franchise royalties and other revenues increased 12.4% year over year to $48.6 million owing to rise in franchise same-store sales. Also, franchise contributions to advertising and other services revenues surged 19.3% year over year to $48.4 million.

Shares of Jack in the Box have gained 28.7% over the past year compared with the Zacks Retail - Restaurants industry’s 29.1% growth. The company’s earnings estimates for the fiscal fourth quarter and fiscal year 2021 have moved up 4.2% and 2.4%, respectively, over the past 30 days, depicting analysts’ optimism regarding its bottom-line growth potential.

Zacks Investment Research
Image Source: Zacks Investment Research

Zacks Rank & Other Key Picks

Jack in the Box carries a Zacks Rank #2 (Buy). A few other top-ranked stocks in the same space include Brinker International, Inc. (EAT - Free Report) , The Wendy's Company (WEN - Free Report) and Yum! Brands, Inc. (YUM - Free Report) , each sporting a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Brinker’s earnings for fiscal 2021 are expected to surge 84.2%.

Wendy's and Yum! Brands’ earnings for 2021 are expected to rise 42.1% and 22.4%, respectively.

Published in