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.
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).