As a part of its re-franchising initiative,
Jack in the Box Inc.
) recently completed re-franchising of its 22 company-owned
restaurants to two franchisees, Ameen Poonja and TLIG
Restaurants, LLC. The financial terms of the transaction were not
In early February, Amen Poonja - a popular franchisee of
Dunkin' Brands Group, Inc.
) Dunkin' Donuts and
AFC Enterprises Inc.
) Popeyes Louisiana Kitchen -got hold of four Jack in the Box
restaurants located in the city of Indianapolis. The rest of the
18 restaurants in Beaumont, Texas were acquired by the company's
existing franchisee TLIG Restaurants at the end of second-quarter
fiscal 2013. These franchisees will boost the brand's presence in
key markets of Indianapolis and Beaumont, going ahead.
Jack in the Box also plans to franschise 10 of its new
company-owned restaurants based in Tulsa, Indianapolis and
Cincinnati. In this regard, the company is looking for potential
and efficient franchisees in the Southeast and Midwest
Previously, in Sep 2012, the company re-franchised seven
restaurants in Oklahoma. We believe this re-franchising
initiative would help boost the company's royalty and franchise
revenues in the coming quarters.
In order to reduce its financial obligations and shift toward
a franchise-based model, this Zacks Rank #2 (Buy) company remains
focused on the strategy of re-franchising its company-owned
units. In this regard, the company has implemented a 'seeding
strategy.' The strategy focuses on expanding into the emerging
markets and improving brand recognition, which in turn will help
the company strengthen its franchise-based model.
Beginning in 2007, the re-franchise program transformed Jack
in the Box's business to a 76% franchise-centric model. The
company now aims to achieve 80% - 85% franchised model.
Burger King Worldwide Inc.
) is also walking the re-franchising route and is working
diligently to become 100% franchised.
Operating and expanding through franchising is less capital
intensive, which in turn enhances free cash flow generation.
Further, the revenue stream also remains fixed in the form of
fees. We believe that the re-franchising of a large chunk of its
stores will provide another opportunity for margin expansion for
Jack in the Box.
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