Jack In The Box Inc. (JACK)

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Jack In The Box Inc. (JACK)

UBS Global Consumer Conference

March 14, 2013 8:50 am ET


Carol A. DiRaimo - Vice President of Investor Relations & Corporate Communications

Leonard A. Comma - President and Chief Operating Officer


David Palmer - UBS Investment Bank, Research Division


David Palmer - UBS Investment Bank, Research Division

All right. Okay, well, thank you, Carol and Lenny, for joining us here today, and sorry for the run over from the first session. I'm going to introduce Lenny here in a second. As a reminder, we're going to have -- this is going to be a fireside chat. We have index cards that will be made available to you, and we would encourage you to write down your questions, and we'll have those passed up, and we'll work those into our Q&A today.

Lenny Comma has been Chief Operating Officer of Jack in the Box since early 2010, with the additional title of President since May 2012. He has been with the company in various operation, leadership roles since 2001, and I know his operations focus has made a big difference in the last few years in key metrics, and we'll talk more about that.

Many of you know -- also know Carol DiRaimo, has been with the company since 2008. She's been the VP of Investor Relations and Corporate Communications since that time. She's previously spent 14 years at Applebee's International, where she held various positions including VP of Investor Relations from 2004 to 2007. I know that Carol is also a leader among her Investor Relations peers, having served on the Board Directors -- Board of Directors at NIRI. Welcome, Lenny and Carol.

Carol A. DiRaimo

Thanks, David.

Leonard A. Comma

Thank you.

David Palmer - UBS Investment Bank, Research Division

I know Boston's not exactly San Diego in March, so thank you for being here. Lenny, before we get into questions, perhaps you'd start with a bit of a state of the union for Jack in the Box.

Leonard A. Comma

Sure. So I'll take a few minutes and just share what's happening with Jack and then Carol and I will entertain any questions. I guess there are 3 components that I want to -- that I really want to speak about that really make up our investment thesis.The first one is our franchising business; second one, I'll speak a little bit about company operations and then thirdly, speak a little bit about what's happening with Qdoba.

So first franchising, probably makes sense for those of you who may not be as familiar with the story to know that over about the last 6 years, Jack in the Box has refranchised our business and actually sold off now 76% of our restaurants to our franchisees. As a result of that activity, we've really generated an annuity like cash flow for the company, which is coming from 2 sources: One from rental income, and I can go into that in some detail later if folks want some detail on that and then second, from royalties. And there's very companies that actually have both of those streams, but the business turns out to be very profitable for us set up in that model.

Second thing is our company operations. And I can speak a little bit about what's happening with company operations and also -- how it relates to some of the initiatives that have impacted not only company but franchise. But if you look at our results in 2012, they were the best same-store sales results for company operated since 2007. We have 4.6% year-over-year increase for same-store sales for the company. And we think that, that really came from and along with franchisees that had a nice increase in sales, and that came from several initiatives that we've been focusing on for the last handful of years.

The way Jack in the Box looks at it, we'll go back to early 2000s, when just about every fast food company was focusing primarily on new food items and new news around food. A very few companies were focusing on sort of the entire brand experience, which would be food, service and the image. Clearly the winner, McDonald's, back in the early 2000s, made a commitment to focusing the entire experience, and I think that, that we've all seen what they've been able to achieve. Jack in the Box in about the mid-2000s started really taking a more holistic approach to the business. We started looking at reimages, and we have largely completed all of our interior and exterior reimages, and our new logos will be up by August in all of our franchise locations -- excuse me, by April in all of our franchise locations. We're at 100% up in our company locations at this time.

So we've got a great new look. We've also improved our food. We've improved our french fries, our hamburger patties, our bacon, our tacos, our coffee, and we continue to invest in food with new items that will hit the menu as LTOs as well as permanent new items. So we've got great new things happening in the area of food on our menu.

And then lastly, and probably most importantly over the last couple of years, our focus on service. Back in early 2010, we really just had a -- an awakening, I guess, you could say where the company realized that certain things just weren't it going well for us in the service front. Our speed of service times were too slow. Our restaurants were not accurate enough, they were not clean enough, they were not friendly enough. And so we put a huge initiative in place to sort of wake up the organization and get them focused on improving the service. We have seen a steady improvement in our service scores since that time. We've achieved 8 consecutive quarters of improvements in our speed of service times. And we continue to see that the focus in this area is paying big dividends. So if you kind of look at our results for last year and then also first quarter of this year, same-store sales for company store's up 2.1%. We believe that this is all due to the holistic approach that we've had to reimaging our stores, improving our food and improving our service. So you'll -- you can expect Jack in the Box to continue to look at the business that way. We want to make sure that we don't make mistakes that maybe prior to the early 2000s, a lot of companies were making where we were kind of one-tricked ponies, focused mainly on food and then potentially allowing other parts of your business to become irrelevant in the consumer's eyes. So holistic approach going forward is what we think will help drive same-store sales.

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