No. 4 Burger Chain Looks to Stop Recent Sales Decline

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CHICAGO (AdAge.com) -- Jack in the Box executives on Wednesday laid out their plans to transform the No. 4 burger chain into a national restaurant company.

In a conference call with analysts, executives for the San Diego-based company outlined a five-year strategic plan while reporting weak sales at the chain and in the larger fast-food hamburger category. Sales at company stores open a year dived in the first two months of its fourth quarter ending Sept. 30, falling 3% compared to a 3.8% gain in the same earlier-year period. It expects same-store sales to fall 0.09% for the full year, compared to a 4.1% increase in the prior year.

To reach its goals, the fast-feeder, known for its clown-faced spokesman and hefty burgers, said its strategy will be to expand its core brand through convenience store and gas station concepts, lighter non-hamburger fare, and more franchised units to boost sales and earnings.

Such rebuilding plans seem to be all the rage in the troubled hamburger category. The segment's leader, McDonald's Corp., detailed its own $300 million to $400 million restructuring effort, which involves remodeling and rebuilding stores and a mew national value menu.

Controls 4.6% of market
Robert J. Nugent,

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Jack in the Box's chairman-CEO, said the current plan, devised in 1996, helped the chain outpace the growth of the quick-service category and increase its market share by 25%. Jack in the Box controls 4.6% of market share, according to Technomic. That's about a third of the share held by No. 3 Wendy's International and a 10th of McDonald's. Sonic Drive-Ins is a close No. 5 with a 4.3% share.

Regardless of the burger chain's gains, consumers are increasingly turning toward non-burger offerings and so-called fast-casual concepts, and Mr. Nugent said that to boost its growth and shareholder value, the company "must change, too."

The company plans to increase franchised units to 35% of all stores, from the current 20%, which is the reverse trend for most fast-food chains. It also will expand its 12 convenience stores, called QuickStuff, located in Arizona, California and Texas, to 20 units by the end of 2003. Over the five-year period, the company said it expects these units to drive 20% to 25% of growth. Then, the company will "evaluate other restaurant concepts for acquisition" to supplement its growth and balance the risks of the quick-service category, executives said. It is unclear whether the company will include convenience stores in its acquisition plan.

'Best burger ever'
In August, the company revamped its line of 13 burgers by improving the buns, patties, bacon and sauces and backed the change with a new ad campaign from Secret Weapon Marketing, Santa Monica, Calif., called "Our Best Burger Ever" that lampooned the competition. Last month the chain added another option to its two value-menu sizes. Now the chain is retooling advertising to more directly communicate the quality improvements.

So far, neither effort has done much to lift sales out of their doldrums.

Linda Lang, executive vice president of marketing, operations, human resources and information systems, said there were no plans to further tweak advertising beyond expanding the target consumer base beyond the core 18- to 34-year-old male to include women and older males.

Remodeling stores
"At a time when consumers are faced with so many choices, we must give them a reason to seek us out,' Ms. Lang. Like its competitors, Jack in the Box plans to remodel and rebuild restaurants, continue to shave off service times and revamp its menus to cater to more finicky customers.

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