Popular hamburger chain
Jack in the Box Inc.
) is on the verge of closing 67 underperforming restaurants under
its Qdoba Mexican Grill brand by the end of fiscal 2013 (ending
Sept 29, 2013).
The company came to this decision following an extensive
operational review and financial analysis of its Qdoba
restaurants. The end to negotiations with the leaseholder is also
expected to be the reason for this shutdown. All these shuttered
restaurants will be treated as discontinued operations.
Currently, there are 647 Qdoba restaurants including 340
company-owned units. Following the closure, the total number of
Qdoba restaurants will be reduced by 10%. The restaurateur stated
that it expects to incur about $28 million as impairment charges
related to the closings and approximately $12 million in
lease-related costs during fiscal 2013.
Management believes that since the restaurants were not doing
well, closing them would improve the company's future profit and
enhance the cash flow position. Continuous decline in traffic due
to macro concerns and resultant conservative spending is the
primary reasons behind the sluggish performance.
Jack in the Box's Qdoba units have been reeling under pressure
in various locations. Therefore, this restaurant closures can be
seen as a part of the company's brand revitalization initiative.
We believe that it will help the company to reduce its overhead
and also allow it to venture into fast-growing markets where
traffic is expected to be high.
Jack in the Box is set to open 70-75 new units including 40
company-owned restaurants across North America by the end of
fiscal 2013. Moreover, nearly 60-70 Qdoba restaurants are slated
to be launched in 2014 in the region.
Jack in the Box carries a Zacks Rank #3 (Hold). Some other
restaurateurs worth considering are
AFC Enterprises Inc.
The Wendy's Co.
CEC Entertainment Inc.
). While CEC Entertainment carries a Zacks Rank #1 (Strong Buy),
AFC Enterprises and The Wendy's carry a Zacks Rank #2 (Buy).
AFC ENTERPRISES (AFCE): Free Stock Analysis
CEC ENTERTANMNT (CEC): Free Stock Analysis
JACK IN THE BOX (JACK): Free Stock Analysis
WENDYS CO/THE (WEN): Free Stock Analysis
To read this article on Zacks.com click here.