Jack in the Box launches turnaround with plan to close up to 200 locations

In a surprise move Jack in the Box revealed this week it would be closing as numerous as of its restaurant locations in addition to possibly unloading Del Taco a chain it purchased only three years ago The latest initiative by the San Diego-based fast-food chain will allow it to focus more exclusively on the Jack in the Box brand while shuttering underperforming restaurants and raising cash to eventually pay down million in debt the company s new CEO Lance Tucker reported The closing of dozens of locations none of which have been communicated yet will be done in phases with the first to to be shuttered by the end of this year The company is calling its new strategy JACK on Track We expect closing these restaurants will strengthen the overall long-term economics of our franchisees free up dollars for reinvestment and allow the system to focus on maximizing performance of our stronger restaurants Tucker mentioned during a Wednesday conference call with analysts and investors In short we anticipate this plan will better position Jack in the Box for more reliable consistent positive unit upsurge in the future While Tucker did not indicate whether Del Taco is formally up for sale he stated that Jack in the Box is presently working with B of A Securities to explore a anticipated divestiture The decision to sell stores as well as the Del Taco chain comes at a time when fast-food restaurants in general face a number of challenges including higher wages in California food cost inflation and more lately a pullback in spending by consumers in the face of economic uncertainty The new strategy effectively returns Jack in the Box to its roots when the focus was solely on the burger chain It no longer owns the Qdoba fast-casual Mexican brand that it purchased more than two decades ago and later sold And it could soon be free of Del Taco as well The purchase of the chain for million closed in The obstacle is they bought Del Taco in the first place and paid too much noted San Diego restaurant consultant John Gordon They hoped that they could sell off a bunch of Del Taco s company-owned stores and there would be a lot more progress in Del Taco not just from franchisees but also from Jack in the Box franchisees who would buy Del Taco stores but that didn t happen It was a bet by the prior CEO but one that didn t pay off Gordon mentioned he and others have estimated that Jack in the Box overpaid for Del Taco by million to million According to the latest financial figures distributed by the company this week same-store sales for both brands struggled during the last quarter ending April They were down by for Jack in the Box and for Del Taco In all there are Jack in the Box stores of which the vast majority are franchised The highest concentration of locations is in California and Texas and of those are in San Diego County which includes two venues at the airport and one at Petco Park There are nearly Del Taco restaurants with more than half in California In explaining the move to sell Del Taco Tucker was careful to place no blame on the chain itself Related Articles Does a plan affect financial aid Tech industry tried reducing AI s pervasive bias Now Trump wants to end its woke AI efforts China shrugs off threat of US tariffs to economic activity says it has tools to protect jobs Tech stocks weigh on Wall Street at the start of a week full of feasible swings Trump administration cuts more than M in grants from Minnesota museums institutions I think highly of the Del Taco brand and I think it can thrive he advised analysts I just think it requirements to be in a situation where we need to focus on our own core business It just makes a lot more sense to simplify our model and they can move ahead and in addition to that I don t know that the results in the next several years are going to meaningfully contribute to Jack s bottom line so I think it makes sense to move them on to another owner He also acknowledged the timing of the purchase was not great coming about a year before new provision was passed mandating a -an-hour minimum wage for fast-food workers The new hourly wage went into effect last year Gordon pointed out that the latest decisions were no doubt prompted in part by looming debt coming due The company he mentioned is facing repayment of more than million in secured notes by February What may have frightened the board is that they re thinking Oh no we bought into this bad concept of Del Taco and now we have a debt payment coming up on it Gordon explained Normally restaurants don t like to close down units but now the situation is far more severe They need to make the fixes to the system now so that later the base of the system improves and they can be in better shape Jack in the Box s stock price closed Thursday at a share down or The stock has fallen nearly in the past year