Jack in the Box sales slump as diners choose to eat at home

Jack in the Box's chief executive, Lenny Comma, attributes the company's third quarter slump to the reduction of food costs at supermarkets.

It was Jack in the Box’s turn to explain the slumping quick-service restaurant business and Chairman-CEO Lenny Comma pointed to “deal fatigue” and a rising gap between food-at-home and food-away-from home prices, a gap causing “transaction erosion” to supermarkets.

For its fiscal Q3 ended July 3, 2016, Jack in the Box reported a 1.1% increase systemwide in same-store sales for Jack in the Box (including +1.5% by franchisees) and a 0.6% increase for its Qdoba chain. The company said Jack’s 1.1% was just behind the QSR sandwich segment’s 1.2% gain according to The NPD Group’s SalesTrack Weekly for the 12 weeks ended July 3, 2016.

But Jack’s Q3 gain was the result of a 3.3% increasing in pricing and an increase in premium-product sales that offset a transactions decline of 3.7%.

What we’re seeing, Comma said, is “deal fatigue in the marketplace now. Deals that are out there are not penetrating” as they did earlier this year. The other important factor is that the Consumer Price Index for food-away-from-home is down 1.3% over the past 12 months, while food-at-home is up 2.6%.

“There’s transaction erosion to the food-at-home players, the supermarkets,” Comma said. Supermarkets can reflect reduction in food costs much more quickly than can restaurants he said. “I would be very concerned if those transactions were going to our competitors. That’s not what we’re seeing.”

Comma said Jack “is where we ought to be” with its balance of value and premium-price products. On the low end, the chain has launched Garlic Herb Fries and a $2.99 Jumbo Breakfast Platter deal. At the premium end is the recently released Jack’s Brewhouse Bacon Burger, however that also is being promoted via a $4.99 small combo bundle deal.

Comma said Jack will be more aggressive on both the value and premium fronts in the current quarter than it has been earlier in its fiscal year. Qdoba next week will add smoked brisket to its menu systemwide.

During its earnings call yesterday, The Habit Burger’s President-CEO Russ Bendel said marketplace softness has spurred heavy discounting that he vowed not to join. “Without question it seems to us that we are in a time of unprecedented discounting, not only below us in the QSR category which…has seemed to accelerate discounting again as we finished Q2. But now [there’s] also a tremendous amount of discounting in casual dining sector, which has been challenged in this environment as well… We’re going to avoid getting into discounting That’s not who we are.”

In a down, near-recessionary restaurants look to improve results through increased sales of higher-profit sides and beverages. Jack in the Box’s Garlic Herb Fries, mentioned above, are an example. And Wendy’s next week (Aug. 9) will launch advertising and marketing for its Baconator burger and companion Baconator Fries, which are offered for a limited time at just $1.99.

This article first appeared at BurgerBusiness.