Jack in the Box Inc. (NASDAQ: JACK) today announced that it has substantially completed its previously disclosed review of market performance for its Qdoba Mexican Grill brand. As a result of this comprehensive review, the company plans to close 67 of its company-operated Qdoba restaurants by the end of fiscal 2013, which ends Sept. 29, 2013. As of the end of the second quarter, Qdoba’s system included 647 restaurants, of which 340 were company-operated. The decision to close the restaurants followed a comprehensive unit-level analysis of sales, cash flows and other key performance metrics, as well as site locations, brand awareness and lease status.
According to Tim Casey, who joined Qdoba as president in March, “After a comprehensive review and an in-depth analysis of our real estate portfolio, we believe we can significantly improve Qdoba’s performance and continue to grow the brand. By closing these locations and optimizing our company footprint, we can be more effective in focusing our advertising and marketing resources to support existing and planned restaurants in our core markets where we have high levels of brand awareness. We also expect to provide an even better dining experience for our guests as our operations teams concentrate their efforts on supporting these markets.”
Linda Lang, chairman and chief executive officer of Jack in the Box Inc., said, “These closures are expected to have a positive impact on the financial performance of our Qdoba brand, resulting in higher future earnings, average unit volumes, restaurant operating margins, cash flow and return on invested capital.
“We believe in the tremendous potential of the Qdoba brand, and we plan to continue expanding in North America, with 70 to 75 new locations expected to open system-wide in fiscal 2013, including approximately 40 company locations. In 2014, we expect 60 to 70 new Qdoba restaurants to open, approximately half of which will be company locations.”
The company currently estimates it will incur pre-tax charges during fiscal 2013 of approximately $40 million, including an estimated $28 million in non-cash impairment charges and approximately $12 million in charges related to cash lease obligations and employee severance costs. The company will update the estimated pre-tax charges, if necessary, related to the restaurant closures when it reports its third-quarter operating results in August.
The restaurant closures will be discussed when Jack in the Box Inc. management presents at two upcoming investment conferences: Jefferies Global Consumer Conference on June 18 and Oppenheimer Annual Consumer Conference on June 26. Live webcasts of both presentations can be accessed via the Jack in the Box Inc. website at http://investors.jackinthebox.com.