Jack in the Box has announced that it will close between 150 and 200 restaurants this year in addition to possibly selling the Del Taco chain.
The San Diego-based company’s “Jack on Track” plan to improve its financial performance will include between 80 to 120 of those closures from now through the end of 2025.
What the company described as “underperforming restaurants” will close afterward based upon termination dates of franchise agreements.
The announcement did not indicate which restaurants would be shuttered, but said most of them “have been in the system for over three decades.”
The company also said it would “significantly reduce” spending on new restaurant development starting next year while exploring “strategic alternatives for the Del Taco brand, including a possible divestiture of the business.” Jack in the Box has brought in BofA Securities to examine those options.
Jack in the Box acquired Del Taco in 2022 for around $585 million. The company operates approximately 2,200 Jack in the Box outlets in 22 states. Del Taco has approximately 600 restaurants in 17 states.
Lance Tucker, the fast-food chain’s CEO since March 31, said in a statement that the company “operates at its best, and maximizes shareholder return potential, within a simplified and asset-light business model.”
To achieve that, he said, Jack in the Box will focus on three areas, “addressing our balance sheet to accelerate cash flow and pay down debt, while preserving growth-oriented capital investments related to technology and restaurant re-image; 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.”
Temporary boosts to cash flow could come from real estate sales and discontinued dividend for investors. The company said it will prioritize paying down debts.
As part of the plan, Jack in the Box, despite spending less on company-owned new restaurant development, will continue with planned improvements of its current locations.
At the conclusion of the “Jack on Track” plan, the company said it “expects to deliver consistent, positive net unit growth, helped by the strong performance of new markets.”
Officials announced an adjusted earnings estimate of $282 to $292 million for the year, without factoring in the impact of future cost-cutting actions expected late in the fiscal year.
The company attributed some of its troubles to the new California law requiring a $20 minimum wage for fast-food workers, which took effect last year, along with higher utility costs, and inflation.
City News Service contributed to this report.
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