Jack In The Box 2005 Annual Report Download - page 8

products, many of which we’re able to deliver at
our Jack in the Box restaurants, like Natural Cut
Fries and our line of ciabatta burgers and sand-
wiches. We believe that the innovative features of
JBX Grill – including menu items, service initiatives
and restaurant design elements – can be best
leveraged across the existing chain of Jack in the Box
restaurants rather than through a separate concept.
Pursuing this strategy is also likely to provide the
company with higher returns and require lower
capital investments.
Qdoba Mexican Grill is a thriving fast-casual
Mexican chain. What’s the secret to their success?
Qdoba is indeed doing very well. Same-store sales
at company restaurants increased 11.8 percent for
the year on top of a 9.3 percent increase in 2004,
and the chain extended to 25 its streak of consecutive
quarters with increased same-store sales. And as
expected, Qdoba was accretive to earnings for the
year. Among fast-casual Mexican chains, Qdoba
is truly unique, from its flavorful nouveau Mexican
menu to its hip dining atmosphere. With a keen
focus on serving guests quickly, Qdoba also
provides a level of personalized service unparalleled
in the industry.
What is Qdoba’s growth potential?
Qdoba has nearly tripled in size, to 250 locations,
since it was acquired by Jack in the Box Inc. in 2003.
We opened 77 new restaurants in 2005 – a unit
growth rate of more than 40 percent over last year –
and plan to add another 85-95 stores in 2006, with
franchised locations accounting for most of the
growth. There is tremendous upside potential
for this concept, which could exceed 800 locations
in the next few years.
How does your convenience-store concept,
Quick Stuff, fit into your strategic plan?
Quick Stuff has been a successful concept for us
and is an important part of our strategic plan. In
addition to the convenience store, each Quick Stuff
location includes a major-brand fuel station and is
built adjacent to a full-size Jack in the Box restaurant.
This co-branded concept generally produces higher
returns than a stand-alone restaurant and is a great
growth vehicle for Jack in the Box. In fact, we plan
to leverage this concept to expand Jack in the Box
into new contiguous markets, beginning in 2006.
By sharing the development costs among the
three businesses, we can build restaurants in
high-traffic areas that might otherwise be too
costly for a stand-alone restaurant. And by operating
all three businesses, we’re generating revenues
and profits from multiple sources.
What kind of progress are you making in growing
the franchised side of your business?
In the past three years, the number of franchised
Jack in the Box locations has increased nearly
50 percent, primarily through the sale of company
restaurants to existing franchisees. This growth
has increased the ratio of franchised locations in
our system from 19 percent at the end of fiscal
2002 to about 25 percent at the end of fiscal 2005.
Our near-term goal is to increase the number
of franchised restaurants to about
35 percent of our system total
by fiscal 2008 and to even
higher levels in the
years thereafter.
Increasing our
franchising activities
at a gradually
accelerated pace
should enable us
to improve margins
and returns with
less financial risk,
while redeploying
cash proceeds from
the sales of restau-
rants to expand our
system, reinvent the
Jack in the Box
brand, and buy
back shares.
By compar-
ison, the