Jack in the Box: Company-Owned Restaurant Sales Dominate Revenue


Jan. 15 2016, Updated 12:49 p.m. ET

Business model

Jack in the Box (JACK) embraced franchising in 1982, more than 30 years after the company was founded. By the end of September 2015, franchisee-operated restaurants formed 82% of the Jack in the Box brand’s total restaurant count. Until 2012, the company provided distribution and warehouse services to franchisee-operated restaurants, supplementing them with poultry, beef, cheese, and pork products. However, with the intention of lowering operating costs, the company outsourced the distribution business to a third party in 2012. Currently, Jack in the Box primarily derives revenue from company-owned restaurant sales, franchise rental revenue, and franchise royalties.

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Analyzing the Jack in the Box brand’s revenue sources

From 2011 to 2015, the Jack in the Box brand’s revenue fell from $1.4 billion to $1.1 billion, a decrease of over 20.8%. This fall was largely due to closing down or selling underperforming restaurants. Let’s take a look at each segment and its performance over the last five years.

Company-owned revenue sales

From 2011 to 2015, company-owned restaurant sales fell from $1.2 billion to $783 million, a decrease of over 33.8%. In 2011, the company operated 629 restaurants, which fell to 413 by 2015. Although same-store sales have increased over the years, the decrease in company-operated restaurants has brought down the revenue earned from this segment.

Peer comparison: Revenue growth

From October 2011 to September 2015, McDonald’s (MCD) company-owned restaurants revenue fell by 6% and The Wendy’s Company’s (WEN) company-owned restaurants revenue fell by more than 28.9%, largely due to the sale of company-owned restaurants to franchisees.

The Consumer Discretionary Select Sector SPDR ETF (XLY), which invests about 10% of its portfolio in restaurant stocks, has 4.8% of its portfolio invested in McDonald’s (MCD) and 3.8% invested in Starbucks (SBUX).


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