Jack in the Box Inc. (NASDAQ: JACK) is planning to close between 150 and 200 underperforming restaurants and has begun exploring the divestiture of its Del Taco brand.
The company’s announcement is part of what the San Diego-based company called its “Jack on Track’ plan designed to “improve long-term financial performance across its restaurant system, strengthen its balance sheet and demonstrate its commitment to running an asset-light business model — all of which will position the Company for sustainable growth in the coming years.” This follows the second quarter earnings report that showed same-store sales at Jack in the Box eateries were down year-over-year by 4.4% while Del Taco’s same-store sales were down 3.6% from one year earlier.
The new program will consist of approximately 80-120 restaurant closures between now and Dec. 31, with the remaining restaurants closing thereafter based upon respective franchise agreement termination dates. The company also hired BofA Securities to assist in the process of exploring strategic alternatives for the Del Taco brand, including a possible divestiture of the business.
“In my time thus far as CEO, I have worked quickly with our teams to conclude that Jack in the Box operates at its best, and maximizes shareholder return potential, within a simplified and asset-light business model,” said Lance Tucker, who was named CEO at Jack in the Box on March 31. “Our actions today focus on three main areas: addressing our balance sheet to accelerate cash flow and pay down debt, while preserving growth-oriented capital investments related to technology and restaurant reimage; closing underperforming restaurants to position ourselves for consistent net unit growth and competitive unit economics; and, an overall return to simplicity for the Jack in the Box business model and investor story.”
