I was done in the Southeast a week ago and the
stores are booming! They are SOOOOO busy that some
people are actually complaining that they are so busy.
Plus, they haven't even seen the commercials yet. Just
wait until those start! I don't know why they're
waiting on releasing the commercials, maybe because they
wouldn't be able to handle the business?? And those stores
are the bomb!! They are going to be opening one here
in Sd soon, I think in El Cajon but I'm not sure on
As far as G&A goes, I also heard
that they were cutting alot of it back mid FY00 to
make some of it up. Not sure how.
It took some
time, but hopefully those stock prices will keep going
up & up & up!
CKE's Carl's Jr. concept has had debit cards
(with a usage charge to the user I beleive) to pay for
and food at their stores here in SoCal. Maybe even
cash back like an ATM. They have had it installed at
or near each register, but never really promoted it,
for many years now. As I recall they have added
credit processing recently.
At one of the
previous two JBX annual meetings I recall a question being
answered, or a summary of future plans to include all
company Jack in the Boxes to be equiped with the debit
and/or credit processing terminals. They didn't make it
sound like it was an urgent item--but I wouldn't expect
them to tip their hat. I suspect it is a bigger part
of makeing eating at Jack in the Box more
convenient. If done correctly, I would wager, could give the
company the infrastructure to potentially eJack
themselves into the wireless world. Just a
With an electronic wallet (or better yet, a eJackhead
keychain wand) tied in with a major processor like Visa or
Mobil Speedpass, patrons could pay for their food
faster and easier than cash or even than a
card--automatically. Transactions would soar. No cash. No problem.
Let's go to Jack in the Box. Annother reason for you to
chose JiTB over the competitor.
Recently you may
have read a Canadian company, a local toll-road
company, along with some SoCal McDonald's offering to
customers that have a FastTrack toll road transponder in
their vehicle to optionally pay for their drive-thru
food by having it charged to their toll
account--automatically. No cash needed. Can you imagine if McDonald's
claims (aka owns) that portion of the windshield real
estate, and Mobil speedpass window transponder owns the
back windshild corner, Jack, along with a
multi-location VISA-type transponder payment system may needed
soon before all the corners get used up. Or they need
to tie themselves in with a company that specializes
in it already.
I could envision a little
plastic snap-around Jack head that fits around the Mobil
Speedpass transponder wand that could make money for both
concepts, encourage loyalty, create value and boost
transactions. If not too expensive to transact, it would
immediately buy into a huge base of Mobil users. Jack in the
Box purchases could be paid for on the affiliated
Speedpass charge card. Mobil users would get an additonal
benifit from it too. Like Arco, maybe a 25c or so usage
charge can be added for convenience and investment
The only problem may be usage is drive-thru (if
secured to a users keyring). You'd have to remove the
wand (and your keys) to get it close enough for
triggering the receiver. Maybe that would encourage inside
eating. I'm sure their are other usage challenges like if
the payment between the companies is batch processed
versus real time transacted and the liability for stolen
and not reported transponders etc....
There are only a few of those Eatzi's as you say
bgh92109. We hope to try it in the next month during a trip
to Houston. My mother-in-law who lives in Houston is
very laudatory about the one near her, though it is
not cheap by any means. Next time I plan on buying a
stock for a 50% up move in 6 months, I will surely let
you know after I've purchased the full position. :)
Right now, my feeling about EAT is that if it drops
below 30, it is a buy and below 27, a screaming buy.
Along with JBX, it is a long-term core holding.
Nice job on EAT. Congratulations. One of
Brinker's newest concepts is Eatzi's, which, I think are
only in Dallas, Houston, Atlanta? Have you been able
to try them? I guess it takes a critical mass of
affluent consumers to justify one. From what I've read,
Eatzi's sounds like a place I'd like to go
Say, next time you've got a 50% move up in six months,
let me know. Just kidding. Niiice.
(continued from pt. 3)
Bob Nugent: We will continue to grow at a measured,
sustained pace, adding about 10% company units per year.
But our existing markets are also growing. In 1980,
the distribution of food expenditures was 61%
consumed in home, 39% away from home. Between 1980 and
1999, that's changed. Now it's in home 53% and away
from home 46%. Over the last 3 years, consumers
continue to increase their spending at restaurants. In
1997, increase was 6.6%, in 1998, it was up 7.4%, and
up 6.2% in 1999. American's use of restaurants
continues to rise, the annual meals that are purchased at a
restaurant on a per person basis went from 139 in 1990 to
158 in 1999, or a 14% increase. So existing markets
continue to grow. The QSR segment also continues to grow
at the expense of other segments, specifically for
mid-scale restaurants. Since 1991, the fast food segment
has grown 60% overall, or almost 5% a year. So we are
not only growing geographically, but our market is
(continued from pt. 2)
Do you know of any
competitor that you're hurting in your new
We sent in reconnaisance teams in, and one of the
things we noticed was the lack of discounting. So we
actually structured our menu to acommodate that, we did
not go in with a 99 cent Jumbo Jack. We went in with
a fully priced Jumbo Jack and reduced the price of
other items. Since we entered the market, the
competition has responded with some agressive price
discounting, but we still have not reduced the Jumbo
Any plans to add franchised stores?
some franchisees who have the desire and ability to
develop new restaurants and expect over the coming years,
we will see some new restaurant development in our
franchises, but we don't expect it to be
How much have the volumes from the Southeast markets
fallen from the peaks? What is the average check in the
new markets vs. core markets?
Volumes have not
fallen from their peaks. When we opened in Charlotte, we
opened at a given level, and we began advertising 3 or 4
months after we opened, and the volumes have not stopped
growing since then. Nashville did not open at a high
volume and fall. They opened at a given volume 15% ahead
of system, maintained it, and we just started
advertising last week so it's too early to tell. I expect to
see a repeat from what what happened in Charlotte. We
have not started to advertise in Baton Rouge yet.
Average check for the system was just over $4.60 for the
quarter. It is slightly higher than chain average in the
Tell us more about your customer
research and food quality improvements under
We do a great deal of research, and we have been
monitoring very attribute ratings of our business for years.
The most significant movement we have ever seen in
that regard has been over the past 6 months: hot and
fresh food, good tasting food. We have made
statistically significant improvements relative to all of our
competition. We're not going to sit back and rest on that,
we've got other initiatives underway that I believe
will have as much impact on those kind of scores as
ATO did. Some of those are in the development stage,
some are in the rollout stage. So I expect to see
So your improvement is not
just a function of maybe one or two competitors
eroding, but pretty much across the board?
think it's a game of rising tide, I think everybody in
this business is recognizing the importance of the
quality of your food, and it's just a matter of who's
able to execute at the highest levels to meet those
Is that dropoff in service times
also showing up in that kind of feedback, or is your
consumer showing a little more resiliance on the longer
No, that's amazing that it doesn't. In-N-Out Burger
chain gets the highest scores in the industry for
service, but their speed of service is by 2 times the
slowest in the industry. The most important experience is
the quality of the food, and if you deliver high
quality food, it puts a halo around everything else.
(continued from pt. 1)
and store openings for this year, and an estimate for
We expect to open 120 new company
restaurants this year, we've already opened 63, so we expect
to open approximately 30 new restaurants in each of
the next 2 quarters. Capex for this year is expected
to be about $145-$150M range. Next year, capex will
go up somewhat from this year's level.
that spending level, would there be an increase in
We expect this year to be debt-neutral, or very
close to what we started the year at.
primary reason we expect to turn profitable sooner in the
new markets is due to the higher sales volumes. We'll
end the year with about 25 new restaurants in the new
markets. We're spending less on advertising than we
thought, also due to the acceptance of our concept. G&A is
about what we anticipated for this year. Given where we
are, we are right on where we thought we'd be. I think
the G&A will come down somewhat next year as a
percentage of sales. Problem with changing expansion plan is
identifying new sites, and it takes about a year to get a new
site open. Also, training and hiring people takes
time, and speeding up the expansion would put pressure
on our operations.
Has G&A peaked relative to
the 3 new markets?
These levels will probably
stay about the same for the rest of the
Comps (current 3rd) quarter to date? Address the
bottlenecks in ATO.
Comparisons year to year become
tougher as we move into the year, due to the strength
last year, but we expect to maintain our sales
momentum in the 3% range. We have experienced about a
30-second slowdown in our service, and we believe that we
can eliminate that slowdown and actually improve
service. These inititatives is not fully rolled out into
the system, but we'll update you in the
Commodity and labor trends?
Margin went up by about .4%, in spite of increases in
labor, and this was due to lower food costs. In the
second quarter, we had increased pressure on beef and
pork, but this was offset by decreases in items like
chicken, dairy, produce. Looking ahead over the next 6 to
9 months, we see no material impact on our food
costs. Labor markets are tight throughout our entire
system, and it's creating some pressue on the cost. Our
average wage is up between 3 and 4%, on top of it being
up about 5 or 6% last year. So it's a difficult
situation, but we are managing it quite satisfactorily.
I finally got around to listening to the
conference call. Here are my notes, which are by no means
complete. DISCLAIMER: you should listen to the conference
call yourself and make no investment decision based on
anything I've written here. There may be typos and
mistakes. corrections welcomed.
2Q00 Conference Call
Bob Nugent: Record sales and operating earnings,
excluding an unusual item from last year's 2Q. Comparisons
today are without that unusual item. YTD, earnings are
up 24% compared with last year, company restaurant
sales grew more than 14% compared to last year's 2Q.
YTD company sales are up more than 15% over last
year. Systemwide, sales improved nearly 12% and are up
nearly 14% YTD. Total revenues have improved 15%, and
16% YTD. Total revenues also include not only sales
from our convenience store and gas station test
program, but also the JITB distribution company. Unlike
some competitors, we are not at the mercy of another
business to deliver goods to our
Pleased with the 3% increase in same store sales,
especially since it was on top of the 9.1% improvment
experienced this time last year. 1.4% increase in
transactions, 1.6% improvement in average check amounts.
Restaurant Operating Margins are up from 19.5% to 19.9%.
Labor was up due to wage pressures and new store
openings, but this was offset by lower food costs.
Advertising costs and promotions were 5.1% of sales,
essentially the same as one year ago.
We have been
putting in an infrastructure to support the new expansion
to become a nationwide chain. Reflecting that, G&A
was 6.7% of revenues, compared to 6% a year ago.
EBITDA was $44.8M, up 17% quarter to quarter. Capex was
$24M/quarter, $48M YTD. We opened 29 new JITB restaurants, and
63 YTD, for a total of 1,255 company restaurants at
end of 2Q.
Since the inception of our Assemble
To Order program, food quality scores have indeed
risen. We have delivered on the promise of a great
restaurant experience. In our new Southeastern markets,
customers in focus groups made overwhelmingly positive
comments on our food, service and new building. Only
negative comment was that service was slow because of the
crowds. ATO has slowed our service on it somewhat and
expect improvements in the future. But we get credit for
assembling to order and the food is worth the wait. Sales
volumes there are 15-20% ahead of our sales system wide.
We thought our new markets would be profitable in
about 2 years, and have since cut that time in half; we
expect next year to be profitable in these markets.
That's not to suggest that the competition uis not
responding--they are, with discounts and refurbished restaurants,
especially with freshly painted exteriors. So pleased are we
about our new market performance, we approved an
additional new market for next year, the
Greenville/Spartanburg, S.C., area.
Next quarter, there will be a
few additions to our core product lineup. Refreshing
the menu offers value-added opportunities. You will
see a new and improved Chicken Supreme Sandwich,
biscuit sandwiches, the return of the root beer float and
the raspberry ice cream shake. (continued)