Q4 2024 Jack in the Box Inc Earnings Call
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Speaker Change: Chris Brandon, Darin Harris, Brian Scott, Darin Harris, Brian Scott, Darin Harris, Brian
Speaker Change: We therefore consider the safe harbor statement in the earnings release and the cautionary statements in our most recent 10k to be part of our discussion.
Speaker Change: Material risk factors, as well as information relating to company operations, are detailed in our most recent 10-K, 10-Q, and other public documents filed with the SEC, and are also available on our Investor Relations website.
Speaker Change: And with that, I'd like to turn the call over to our Chief Executive Officer, Darin Harris.
Darin Harris: Thank you, Chris. In fiscal 2024, we achieved really significant milestones for our company with the largest number of new restaurants opening in over a decade for Jack in the Box, with sustained sales outperformance in new markets.
Darin Harris: positive net unit growth at both brands with a growing new restaurant pipeline, progress on brand building initiatives including first and third party digital, new POS rollout, and restaurant re-images.
Darin Harris: Refranchising of Del Taco, now an asset-light business at about 80% franchise-owned.
Darin Harris: And lastly, managing through significant inflation plus the cost pressures from increased minimum wages in California.
Chris Brandon: and I'm going to be talking about the The Uncanny Counter. So, I'm going to start by introducing myself. My name is Chris Brandon and I'm a lawyer. I'm also a lawyer for the United States Supreme Court and I'm a lawyer for the United States Supreme Court. I'm a lawyer for the United States Supreme Court and I'm also a lawyer for the United States Supreme Court.
Speaker Change: Entering 2025, I am encouraged by the start to the year and believe strongly in our ability to continue executing on our transformation strategy to deliver results and shareholder value.
Speaker Change: I am thrilled to report the recent hiring of our new CFO, Lance Tucker, a familiar face to both the restaurant industry and the Jack brand.
Speaker Change: Lance will be a terrific addition to our leadership team and will get acclimated very quickly with our teams, many of whom worked with Lance in the past, and our business.
Speaker Change: Most importantly, he will take the time to connect with franchisees and build relationships.
Speaker Change: With that said, let's briefly look back at 2024, particularly the progress and results related to net unit growth, new market openings in digital.
Speaker Change: Our growth plan, several years in the making, is beginning to take shape and show results.
Speaker Change: There were notable macro challenges that emerged during the year and I want to thank our franchisees and restaurant leadership teams for their efforts.
Speaker Change: dedication in serving our guests and making progress on our key long-term ambitions related to digital sales, unit economics, and new restaurant growth.
Speaker Change: We battled through a tough environment that brought top-line headwinds to the industry, and we are adapting to this new environment to accelerate sales throughout 2025 and beyond.
Speaker Change: Our investments in modernizing restaurant technology and advancing our digital capabilities are now contributing toward the ambition objectives we shared last January.
Speaker Change: including becoming a 20% digital business by 2027. We will have nearly 550 Jack in the Box restaurants on our new POS by the end of calendar 2025, all of which include flip kiosk capabilities.
Speaker Change: I want to extend a huge thanks to our technology teams and franchisees for the tremendous efforts in making this a seamless rollout.
Speaker Change: Although it is early innings, using the new kiosk capabilities, we are experiencing a double-digit increase in average check, helped by upsell and menu visibility.
Speaker Change: We're now starting to test freestanding kiosks and are excited to see how this can drive additional sales and labor efficiencies.
Speaker Change: New network capability added to all our restaurants this year, plus the POS implementation, enabled us to begin testing kiosks.
Speaker Change: We also launched our new iOS Jack app during the fourth quarter, with immediate benefits including an improved user experience,
Speaker Change: speed of ordering, incremental sales, and accelerated acquisition of loyalty members.
Speaker Change: With digital now at over 14% The combination of the new POS and app for Jack will allow us to dramatically improve our loyalty program To deliver personalized offers and promotions to our growing loyalty guest base
Speaker Change: First party sales continue to grow higher by 83% year over year in quarter four and third party now it's nearly 70% of our total digital business continues to grow consistently and was up high single digits.
Speaker Change: First Party also saw record-setting sales over the last eight weeks. Our digital investments are leading to incremental sales and a growing loyalty membership, which makes reaching guests more efficient and gives us confidence that digital can make a strong contribution in growing total sales this year.
Speaker Change: And this progress is expected to continue with the upcoming launch of our app for Android and a new mobile web ordering platform
Speaker Change: Now, we attacked the macro backdrop aggressively in the fourth quarter, highlighted by our Munchies Under Four platform, which drove an everyday value message and resulted in increased items per check and year-over-year improvement in average ticket.
Speaker Change: This will remain a permanent part of our menu and will continue to evolve and expand.
Speaker Change: Our focus on value has continued through the recent LTOs of our Bonus Jack and two-for-three dollar Monster Tacos which have been successful.
Speaker Change: Early in the quarter we saw strong average check supported by our spicy chicken strips and we made news with our Deadpool and Wolverine partnership which featured many chimneys as a product tie-in.
Speaker Change: Breakfast improved in the fourth quarter, supported by French toast sticks permanent, and LTOs including the chicken and waffle sticks and scrambler sandwiches.
Speaker Change: We will continue to feature breakfast value in every window, highlighted by our $5 Breakfast Meals and $2 for $3 Breakfast Jacks.
Speaker Change: I'm encouraged to see this day part moving in the right direction. The late night day part continued its streak as our best performer, but followed closely by a much improved dinner day part.
Speaker Change: As I stated earlier, I am pleased with the start to fiscal year 2025. This emphasis on digital value and innovation helped us exit the fourth quarter with sales and transaction momentum, with first quarter to date running at about 1% positive same-store sales.
Speaker Change: Look for us to continue to reach both the value and premium guests with innovation as we currently are executing with our Biscoff shakes and donut holes as well as Birria tiny tacos and the introduction of our sourdough smash jacks.
Speaker Change: We will also support both value and breakfast as we have with our $5 meals and munchies under $4.
Speaker Change: We will drive digital via first- and third-party offers and aggressive activity.
Speaker Change: And we will bring back fan favorites as we are currently doing with our Potato Wedges LTO.
Speaker Change: Chicago is also part of our current cloud kitchen test, with two locations up and running.
Speaker Change: But I am certainly excited to cut the ribbon on our first full restaurant location in the second quarter of this year.
Speaker Change: This, in addition to our entry into Florida later in 2025, set us up for a special year for the brand, and our teams on the ground are working hard to ensure a terrific first impression of the JAC experience in these two new markets.
Speaker Change: And just this week, we completed a development agreement to enter Detroit, our second market in Michigan.
Speaker Change: Restaurant openings and new market performance were both a major highlight in 2024, a year where we increased our gross openings by 50% with 10 more restaurants than prior year and saw sustained momentum of new restaurants and white space markets.
Speaker Change: Of our 30, new restaurants in fiscal 2024, five opened in Salt Lake City and continued to collectively achieve over 90, K and weekly <unk>.
Speaker Change: With three restaurants now open for over a year.
Speaker Change: Our two Louisville restaurants are averaging nearly 60000, a week with performance sustaining nicely during our first full year in the market.
Speaker Change: And our two Chihuahua restaurants in Mexico, while still early are performing better than expected.
Bringing new franchisees to Jack in the box has been a major focus for our team since the beginning.
Speaker Change: And we're seeing that focus pay off we've added 22, new franchisees to the system. The most in our brand's history.
Speaker Change: We're thrilled to have these new operators joined Jack during this key moment for our long term growth story, which is currently ahead of schedule.
Speaker Change: While it's still early in our re image program, we have committed $50 million on a multiyear basis to support the over 1100 request for Remodels, we have received.
Speaker Change: And we are beginning to see some progress with.
Speaker Change: We've now completed 17 of our industrial re images with 67 in the design and permitting stage.
And the future of our <unk> platform. The Crave design now has 377 sites approved to participate in our capital incentive program.
Speaker Change: This is a great start and we look forward to providing more updates in the future including performance from these restaurants, which have historically ran around a 15% same store sales lift.
Speaker Change: Our margin improvement initiatives continue to rollout and we believe both our franchise and company owned restaurant level margins will improve.
Speaker Change: We're also in the process of finalizing our beverage provider contract and believe the new equipment will improve product quality and definitely generate significant cost savings that will benefit restaurant level margins.
Speaker Change: These initiatives, which include oil management inventory management and continued equipment implementation will continue to help offset.
Speaker Change: $12 28, and other cost pressures we are facing.
Speaker Change: In 2025.
Speaker Change: We'll update our organizational structure to be more focused on the guest.
Speaker Change: And their experience with our back to basics operational approach, great frictionless digital pickup experience.
Speaker Change: Our guest expect and we will deliver better speed and accuracy at the drive thru.
Speaker Change: And we will absolutely have an obsession to reduce guest alerts, especially on these digital orders.
We believe all of this will lead to a better overall guest satisfaction and when you couple this with our great tasting food and all day everyday menu variety.
Speaker Change: It will make the future JAK experience more valuable for our guests.
Speaker Change: Now I want to turn to the del Taco.
Speaker Change: The leadership team there is making progress to transform this business and that's helped by our first brand research study and guest segmentation work in seven years.
Speaker Change: We will be enhancing the media and marketing calendar that aligns.
Speaker Change: To this segmentation work.
We will focus on rebuilding the innovation pipeline to support a barbell offering to meet the demands of both the value and premium guests.
Speaker Change: Very very excited to report that our new menu initiative launched system wide yesterday.
After a successful test demonstrating improved speed.
Speaker Change: Positive feedback from operators.
Speaker Change: And improvements to top and bottom line performance.
Speaker Change: We look forward to reporting on how this performs throughout the remainder of the year and beyond.
Speaker Change: The team is working hard towards positioning this brand to compete for the long term.
Speaker Change: And grab share from the number one player.
Speaker Change: I've been part of many brand transformation projects in my career.
Speaker Change: And this takes time.
Speaker Change: But I can see the progress being made for example, our transactions saw sequential improvement for the first time in several quarters.
Speaker Change: Demonstrating that our focus on value may be starting to take shape.
Speaker Change: I am optimistic that we will begin to see fundamental improvements in 2025% led by an improved innovation and media calendar.
Speaker Change: Expanding the rollout of freestanding kiosk.
With 63, now installed and 300 additional planned by the end of 2025.
Speaker Change: Where we have seen a 15% to 20% average check lift from kiosk orders.
Speaker Change: We will add catering representing a brand new oriented Cajun <unk> currently.
Speaker Change: Something we have under test.
Speaker Change: We will evolve.
Speaker Change: The <unk> rewards program.
Speaker Change: And we.
Speaker Change: We will focus on scalable cost and margin saving initiatives similar to those up and running at Jack in the box that will dramatically helped the bottom line.
Speaker Change: I'd also like to note, our progress on making del Taco and asset light business.
Speaker Change: As we are now at 80% franchised.
Speaker Change: Our new del franchisees are very excited about what the future holds.
Speaker Change: Now operating within a category that represents an incredible opportunity to grow and gain share.
Speaker Change: In closing I'd like to take this opportunity to thank Brian for his time with Jack in the box and wish him well on his return to its former company and industry.
Speaker Change: And I'd also like to thank Don Hooper for stepping up once again to serve as interim CFO between now and Lance's start in mid January.
Speaker Change: I anticipate 2025.
To be an outstanding year of progress towards achieving our ambitions and delivering sustained long term value for our shareholders.
Brian Scott: I will take this moment now to turn the call over to Brian.
Brian Scott: Thanks, Darren and good afternoon, everyone I'll begin by reviewing the results of our two brands individually and then will provide details on our 2024 consolidated performance on 2025 guidance.
Brian Scott: Beginning with Jack in the box are fourth quarter system same store sales declined two 1% with franchise comps lower by 2% on company on comps down two 2%.
Brian Scott: This result included a decrease in transactions and negative mix, partially offset by a four 8% increase in price.
Brian Scott: We continue to drive increases in mobile and delivery channels and are excited by the early signs from our kiosk tests at both brands.
Brian Scott: Which will ultimately help drive higher average ticket and restaurant efficiencies.
Brian Scott: Our ongoing investments in technology, and marketing are paying off as we work towards achieving our ambition of 20% of sales through digital channels.
Brian Scott: Turning to restaurant Count, we opened 16 restaurants in the quarter.
Brian Scott: For the full year, there were 30, Jack restaurant openings, the highest number in over a decade, along with 25 closures, resulting in Jack delivering positive net restaurant growth for the year.
We ended the year with 2191 restaurants.
Brian Scott: Our development pipeline continues to grow and we are tracking well for another step up in openings in 2025.
Brian Scott: An exciting example of expanding pipeline includes our recently announced deals in Chicago and Detroit.
Speaker Change: Which Dan mentioned earlier.
Speaker Change: Jack restaurant level margin for the quarter decreased year over year by 220 basis points to 18, 5%.
Speaker Change: The margin decrease was mainly driven by the lower same store sales during a period of increases in wages from California's new minimum wage law, along with certain other restaurant level cost increases.
Speaker Change: Food and packaging costs as a percentage of company on sales declined 50 basis points to 33%.
Speaker Change: Driven by price increases exceeding an approximately 2% increase in commodity inflation and an unfavorable sales mix change.
Speaker Change: Labor cost as a percentage of company owned sales increased to 180 basis points to 32, 7%.
Speaker Change: Primarily due to wage inflation of over 14% from implementing <unk>, while 28, along with negative sales leverage.
Speaker Change: Occupancy and other operating cost as a percentage of company owned sales increased 100 basis points to 18, 6%.
Speaker Change: Franchise level margin was $70 9 million or <unk>, 44% of franchise revenues compared to $71 1 million or <unk> 39, 9% a year ago.
Speaker Change: The dollar decrease was driven by lower franchise same store sales and lower early termination fees.
Speaker Change: Partly offset by lower support costs and higher franchise lease termination income.
Speaker Change: For del Taco system same store sales declined three 9% consisting.
Speaker Change: Consistent with company owned comps down, 3% and franchise comps down four 2%.
Speaker Change: This decline was driven by a decrease in transactions and an unfavorable mix.
Speaker Change: Offset by an eight 2% price increase.
For the full year, there were 14 restaurant openings and 12 restaurant closures.
Speaker Change: While Taco ended the year with our restaurant count of 594.
Speaker Change: Okay.
Speaker Change: So I'll talk about restaurant level margin was nine 3% compared to 14, 8% in the prior year.
Speaker Change: This decrease was primarily driven by transaction decline.
Speaker Change: <unk> increases in wages and other restaurant operating costs, partially offset by menu price increases and a change in restaurant mix.
Speaker Change: Food and packaging costs decreased 200 basis points to 25, 2% due primarily to price increases more than offsetting about 2% commodity inflation.
Speaker Change: Labor costs increased 430 basis points to 39%, primarily due to approximately 16% wage inflation driven by the new California minimum wage regulation.
Speaker Change: Occupancy and other costs increased 320 basis points to 26, 5% driven primarily by higher utilities maintenance and it costs.
Speaker Change: Okay.
Speaker Change: Franchise level margin was $6 million or 26, 5% our franchise revenues compared to $6 3 million or 32, 5% in the prior year.
Speaker Change: The dollar decrease was driven by higher <unk> expenses, partially offset by increased royalties from refranchising transactions.
Speaker Change: Margin percentage declined primarily from the additional refranchising and the impact of the pass through rent and marketing fees.
Speaker Change: Moving to our consolidated results SG&A for the fourth quarter was $30 million or eight 6% of revenues as compared to $43 7 million or 11, 7% a year ago.
Speaker Change: The biggest drivers of the decrease were a $6 million benefit from current year gains on the cash surrender value of our company owned life insurance policies and.
Speaker Change: And $3 million lower incentive based compensation as.
Speaker Change: As well as decreases in legal share based compensation and other operating expenses.
Speaker Change: Excluding the net quota gains along with company on marketing expenses, G&A was $26 6 million or two 2% of total system wide sales.
Speaker Change: Consolidated adjusted EBITDA was $65 $5 million down from $68 4 million in the prior year due primarily to the impact from del Taco Refranchising and the decrease in sales, partially offset by the lower G&A.
Speaker Change: GAAP diluted earnings per share was $1 12 for the quarter compared to $1 eight in the prior year.
Speaker Change: Operating earnings per share, which includes certain adjustments was $1 16 for the quarter versus $1 10 in the prior year.
Speaker Change: Our effective tax rate for the quarter was 29, 2% compared to 33, 1% in the prior year quarter.
Speaker Change: The effective tax rate for such periods differs from the statutory tax rate, primarily due to the impact of non deductible goodwill related to the sale of company operated restaurants.
Speaker Change: Partially offset by non taxable coli gains in both fiscal years.
The non-GAAP operating EPS tax rate was 28, 1% for the fourth quarter and 27, 2% for the full fiscal year.
Speaker Change: Cash flow from operations for the quarter were $29 6 million and for the full year was $68 8 million.
Speaker Change: The full year operating cash flow was muted in part from $50 million of fiscal 2023 income tax payments that were deferred into fiscal 'twenty four as.
Speaker Change: As well as a $25 million litigation settlement payments.
Speaker Change: Our capital expenditures were $29 $7 million for the quarter and $115 5 million for the full year and included investments in our technology and digital initiatives increased development of new company restaurants, and remodeling of existing restaurants.
Our capital allocation plan continues to focus first on investing in our long term strategy, including our restaurant growth and technology initiatives. While also returning cash to shareholders through dividends and selective share repurchases.
Speaker Change: Accordingly on November 14th our board of Directors declared a cash dividend of <unk> 44 per share to be paid on December 30th.
Speaker Change: And during Q4, we repurchased approximately 300000 shares for $15 million.
Speaker Change: For the full year, we repurchased approximately one 1 million shares for $70 million.
As of year end, we had $180 million remaining under our board authorized share repurchase program.
Speaker Change: We ended the year with an unrestricted cash balance of $24 7 million.
Speaker Change: We also had available borrowing capacity of $169 5 million.
Speaker Change: Our total debt at year end was $1 8 billion with our net debt to adjusted EBITDA leverage ratio at five three times.
Speaker Change: Lastly, I'll cover our current outlook for 2025 on.
Speaker Change: On a consolidated basis, we are expecting the following.
Capital expenditures of $105 million to $115 million.
Speaker Change: SG&A expenses of $160 million to $170 million.
Speaker Change: Depreciation and amortization of $58 million to $60 million.
Speaker Change: Share repurchases of approximately $20 million.
Speaker Change: Operating EPS tax rate of approximately 27, 5%.
Speaker Change: Adjusted EBITDA of $288 million to $303 million.
Speaker Change: And operating EPS of $5 <unk> to $5 45.
Speaker Change: For the Jack in the box segment, we are expecting the following.
Speaker Change: Same store sales of flat to up 1%.
Speaker Change: 35% to 45 gross restaurant openings.
Speaker Change: Company owned restaurant level margin of $20 to 22%, which reflects the full year impact of <unk> was 28 wage increases and assumes low single digit commodity inflation.
And franchise level margin of $40 to 41%.
Speaker Change: For the del Taco segment, we are expecting the following.
Speaker Change: Same store sales of approximately flat to down 1%.
Speaker Change: 15% to 20 gross restaurant openings.
Speaker Change: Company owned restaurant level margin of 9% to 11%, which reflects the full year impact of <unk> 228 wage increases and assumes mid single digit commodity inflation.
Speaker Change: And franchise level marks for $25 to 26%.
Speaker Change: I would like to provide some additional context regarding our guidance.
Speaker Change: Part of my final efforts here Jack included the completion of our 2025 budget and a refresh of our top priorities for the coming year.
This process established a framework for our fiscal 2025 guidance and our path from this point towards achieving our long term ambitions.
Speaker Change: Although we spoken today about the great progress made last year across multiple strategic initiatives. We also faced some near term industry headwinds that shaped our expectations for next year.
Speaker Change: And while we are encouraged by the improved sales trends at Jack to start the year. It is early and our full year sales guidance reflects some near term gross margin pressures.
Speaker Change: This includes about $15 million of additional expense annualized and the impact of California's new minimum wage law.
Speaker Change: We are also expecting a more historically normalized commodity inflation after experiencing net deflation for our combined brands in fiscal 2024.
Speaker Change: Along with increased utility cost this year and realizing the full year impact from del Taco Refranchising transactions.
Speaker Change: On the G&A front, we are proud of the efficiency gains achieved at the del Taco integration and our ongoing process improvement initiatives. However.
Speaker Change: However, G&A is expected to be higher in fiscal 2025% as we are lapping prior year $4 million actuarial reserve benefits and reset our incentive compensation accruals to target.
Speaker Change: As well as having increased preopening cost for our company owned restaurants opening in 2025.
Speaker Change: We remain confident.
Speaker Change: Confident that our investments in digital new market expansion restaurant technology operational improvements and our uniquely craveable menu is will drive positive same store sales over time, along with higher incremental level of profitability.
Speaker Change: This team has made tremendous progress over the last several years that set the foundation for delivering consistent and meaningful long term shareholder value.
Speaker Change: Before we open up the call for questions I would like to take a moment to express my appreciation to Darrin an entire Jack in the box team for my time here.
Speaker Change: The passion and dedication to our brands bleed throughout this organization and I am excited to watch the company's continued growth and success in the coming years.
Speaker Change: And with that operator, please feel free to open the line for Q&A.
Speaker Change: Okay.
Speaker Change: Thank you and everyone. If you have any question today. Please press star one on your telephone keypad, we will go first to Lauren Silberman Deutsche Bank.
Speaker Change: Thank you for the question.
Speaker Change: Want to ask about quarter to date.
Speaker Change: And it's running up 1%, which is a pretty meaningful acceleration from the fourth quarter. So can you talk about what's driving that acceleration and the extent that you expect those trends to continue as we move through the quarter. Thank you.
Thanks, Lauren Yeah, I think what we've seen as we've had our calendar has been aligned to both innovation and value. During this time and we have seen as we said meaningful improvement to.
Speaker Change: Coming out of quarter, four and into quarter one.
Speaker Change: We're running at approximately 1% same store sales growth at Jack I'm a lot of that has also been that innovation and premium has been paired with.
Speaker Change: US continuing to lean into digital as you know we've rolled out our new App, we are about to rollout into an Android component of that App as well and all of these things are working to drive sales in a more meaningful way.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: We will go to the next question from Brian Mullan Piper Sandler.
Speaker Change: Okay. Thank you.
Speaker Change: Question on del Taco as just I just wanted to ask about the restaurant level margin guide for the year. If we go back to the Investor Day in January we got to hear a lot from Tom Rosen the opportunity to actually grow these over time.
Speaker Change: I know, it's a tough consumer environment and Youre dealing with Avi 12, 28. So my question is really just do you still feel good about the work that has gone on behind the scenes, maybe what's the right way to think about.
Speaker Change: <unk> margin in that business and what the path is to get to where you want to be.
Speaker Change: So Brian I think the work that we're doing similar to what we did at Jack with financial fundamentals is working and in progress.
Speaker Change: I think some of the discipline that Thomas implemented around inventory management and other things have it has enabled us to run.
Speaker Change: Our P&L from our food and food and packaging standpoint substantially better by almost two points than we did in the past the real challenge has been with AB 228, and the inflation we've had.
Speaker Change: Weighted too it has driven up labor by about four a little over four points and then also with electricity in California, and some of our restaurants. That's also been driving up the P&L. So the key here is driving top line and if we drop top drive topline I think the margins come in line and it all flows and the last thing I would say with the new <unk>.
Speaker Change: Menu rollout that we introduced at <unk>.
Investor Day, we're seeing substantial improvement in our business from a top line standpoint in our Bottomline standpoint, and it is going into the system. This week.
Speaker Change: And we will be system wide within the next couple of weeks.
Speaker Change: Okay.
Speaker Change: The next question will come from Sarah Senatore Bank of America.
Speaker Change: Hi. Thank you this is Katherine Griffin on for Sarah.
Speaker Change: Wanted to ask you what it is.
Speaker Change: And would you attribute the softer performance in the quarter to the demand backdrop in California very says your own on front of share loss relative underperforming. Thank you.
Speaker Change: I've missed the last part of that question.
Speaker Change: No problem.
Speaker Change: Yes, just wanted to add to just trying to figure out the.
To what extent was the softer performance in the quarter a function of the <unk>.
Speaker Change: Water demand backdrop in California versus your own share lost and relative underperformance.
Yes, Yes go ahead, yes, it does it Brian.
Brian Scott: California has actually performed relatively well for us if you look at our Q4 performance for Jack.
Brian Scott: In line, if not slightly better so we've seen as.
Brian Scott: As we talked about even last quarter, although we did take more price than we had a little more of a traffic impact.
Brian Scott: California, it's such a strong market for us it's actually it's actually held up well. So there is some variation across different regions and some of that is based on what's going on in the consumer behavior in those markets as well as some some price.
Brian Scott: Take differences with our franchisees, but overall the price discipline and the strategy we've had in California.
Brian Scott: It's held up well so that it's not it's really more of an industry issue that all the <unk> faced in the last couple of quarters, and we're not immune to that but overall our performance in California, we've been very pleased with and feel good about it going forward as well.
Speaker Change: Add to what Bryan said, we're also seeing the same at del Taco, California tends to be the best performing of the regions and then also as you think about industry wide, where if you measure industrywide all cohorts at all income levels are.
Speaker Change: Showing less <unk> spend in transactions and that also is age ethnicity.
Speaker Change: Gender.
Speaker Change: And overall demographics and income levels. So we know that <unk> transactions are softer than they've been historically and we anticipate that improving into 2025.
Speaker Change: Great. Thank you both.
Speaker Change: Thank you.
Speaker Change: Your next question is from Brian Bittner Oppenheimer.
Speaker Change: Thanks.
As it relates to the Jack in the box brand. It is encouraging to see you continue to make progress on the gross openings and development agreements, but elevation in the closures.
Speaker Change: They do continue to pressure the net impact of this progress. So Darren do you have visibility into the current health of the bottom quintile of stores within that franchise portfolio and do you have a line of sight to these closures subsiding and improving the net impact of the progress youre, making on the gross openings.
Speaker Change: Yes, we continue to see that our closures what we saw in Q4 as we went ahead and accelerated some closures.
With all the openings, we are having to get in front of it, especially with the environment. We're in we feel good about the health of the system.
If we just look at our financial.
Speaker Change: Our franchisees financials.
Speaker Change: They basically held flat.
Speaker Change: When we compare.
Speaker Change: Last year to this year.
Speaker Change: And so we feel good about the overall health of the system. If we think about going forward closures. We've always suggested on these calls that historical averages somewhere between 16 and 18 of year, two 1%, which is more industry norm would be kind of the run rate of closure. So that's what we anticipate going forward is more of an IND.
Speaker Change: History norm.
Speaker Change: Thank you.
Speaker Change: Next step is Gregory Frankfurt Guggenheim.
Speaker Change: Yes.
Speaker Change: Hey.
Speaker Change: Thanks for the question My question is just on.
The Capex and just the guidance for next year, Brian can you maybe break down how much of that is going to go into new stores versus maintenance capex versus investment projects I'm trying to get maybe how lv that is versus what it could be in a couple of years. Thanks.
Speaker Change: No doubt and you can you can reference back to the Investor Day presentation is while there is no there's been no real material change in our strategy as we've talked about.
Speaker Change: Our top priority is investing in the strategy that we have where we're seeing it pay off we mentioned digital we're making really good progress in growing our digital mix and that that does take investment and so that as you look at.
Speaker Change: Fiscal 'twenty five.
Speaker Change: The technology investments are relatively similar.
Speaker Change: Looking at somewhere in the $40 to $45 million range four of digital and restaurant technology and kind of other corporate systems, where the biggest components being out.
Rollout of our Pos and I want to make a comment as well I think on our prepared remarks.
Speaker Change: We want to assure its clear that we expect to have about 550 stores of the Pos implemented by the end of this calendar year and while we are targeting to have the whole system completely on the new point of sale point of sale by the end of 2025, I think that was the wrong on the prepared remarks that you make sure Thats fair, we're on track with what.
We've talked about in prior calls, making really good progress.
Speaker Change: Digressing a bit here like that its gone really smoothly implementation of the Pls I'm really proud of the teams and in that process and again, we're on good track to be able to get the whole system over by the end of next year and so that that work with the point of sale implementation as well as this work around digital we've got a new iOS version of our App.
Speaker Change: More work to do on Android New web.
Speaker Change: And then building out a lot of our loyalty we can drive more personalized messaging to continue to grow our loyalty program. Those all are really critical investments as well as in.
Speaker Change: Restaurant operational system enhancements. So that is that's pretty much in line as we've talked about before that the other step up we've had that 125 is on the new restaurant openings were looking at somewhere by north of $30 million from the $30 million to $40 million range and that again is aligned to what we shared earlier this year as we really continue that kind of ramp up here in some of these new markets like Chicago.
Speaker Change: Cargo and soon to be Florida.
Speaker Change: There is a corporate dollars into those new markets and then the rest is going to cover a variety of things like.
Speaker Change: Mains in the stores re <unk>, we're doing in the company restaurants.
Speaker Change: Ryan I'm going to Miss you have been in this room. It's great you Flabbergast me, how you can get in there and remember to say things like the Pos in the <unk>.
Speaker Change: Rollout that we're going to have completed this year and next year.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: Next step is Alton stump loop capital.
Speaker Change: Great. Thanks for taking my question.
Speaker Change: Wanted to ask I objected box growth front, obviously, congrats on the over decade high opening set.
Speaker Change: Obviously site development deal.
Speaker Change: I'm just going to ask.
Speaker Change: The fact that as you have pointed out this call it's been a tough overall macro environment over the last couple of quarters. In particular has that had any negative impact on the appetite for franchisees to build jackup bus units or are they looking a bit longer term.
Speaker Change: Therefore it.
Speaker Change: Is not impacted.
Speaker Change: No.
Speaker Change: Yes, I'm glad you asked I mean, we're signing more development agreements. So we've ever signed we're excited about our pipeline of Jack just to give you. An example, we have 18 restaurants under construction now we have 54% and design and permitting and 32 approvals for sites and so our site pipeline is as strong as it's ever been again I think we said this year we had.
Speaker Change: <unk>.
Speaker Change: 101 development agreements for 464 restaurants.
Speaker Change: Place 51 of those have opened since we started this process and so we have a good pipeline.
Speaker Change: We signed 22, new franchisees are new markets are working Salt Lake City, we've already opened nine.
Speaker Change: And those are averaging 90000, so far.
Speaker Change: <unk> the same to open 60, <unk> with eight restaurants coming Mexico, Chicago. So we think the development pipeline is starting to build the momentum that we had hoped for.
Speaker Change: I think in our early comments and my comments in my script I mentioned that.
Speaker Change: This year the 30 openings were the most gross openings since we've had since 2012 and we as we've guided to believe will accelerate that even into this year in 2025. So we feel good about what's happening with our development pipeline our franchisees are supportive.
Speaker Change: And we will continue to add more new franchisees to our future.
Speaker Change: Yeah.
Speaker Change: The next question Dennis Geiger UBS.
Speaker Change: Okay.
Speaker Change: Great. Thanks, guys I wanted to see if you could talk a little bit more about the Taco refranchising and kind of what feedback you've had there how demand has been any kind of update that you could give on the timeline or milestones as we think about franchise percent levels, obviously seeing good progress getting good agreements tied to those those.
Speaker Change: But just any other update and as we look ahead to <unk>.
Speaker Change: Central milestone thank you.
Yes, so with del Taco worried about 80% re franchise today.
Speaker Change: And we would call that asset light will continue to re franchise. We have deals in works now for about 13 restaurants, and then what we're going to do is we're going to continue to evaluate.
Speaker Change: 12, 28 as impacted as some topline how it's being impacted by this kind of restaurant environment.
Speaker Change: Because we want to maintain margin and grow margin and make sure we're getting the valuation for these restaurants that they deserve and so that's what we're going to hold steady too. We still have good demand. We still have deals that we could execute but we're in a holding pattern right. Now just so we can make sure. We can recapture some of the margin that has been challenged in the.
Speaker Change: We've had.
Speaker Change: Yeah.
Speaker Change: Makes sense. Thank you.
Speaker Change: We will go next to John powers Sydney.
Speaker Change: Yes.
Speaker Change: Hey, Thanks for taking the question I was just curious Darin you ran through a lot of the new product news.
Speaker Change: That's come out in fiscal 'twenty, four and some more coming in 2025 and I'm just curious how you communicate that message and balance the operations against it and frankly.
Speaker Change: Best return on the advertising spend in particular, given all the new food. That's all of the new food news that's out there. It just seems like Theres a lot of.
Activity and I'm, just curious if that's cutting through to the consumer and then kind of following up on that.
Have you offered and I apologize if you did on the call any thoughts around pricing into fiscal 'twenty five.
Speaker Change: Yes.
Speaker Change: So as it relates to how we're driving sales and communicating to our guests I think it goes back to a lot of the great work that our team has done around brand positioning and brand strategy and optimizing our media spend to maximize reach and awareness and so I think making sure we're hitting the variety of audience at the right time with the right offer and.
Speaker Change: What we've found is that we have.
Speaker Change: The deals that are in the marketplace are important to kind of keep your guest base, but we also have to answer both sides of it with the premium and the value at the same time.
Speaker Change: Making sure we're thinking about different offers by day part and then also leaning into digital aggressively because it is now a channel that has become a regular.
Speaker Change: And of.
Speaker Change: Weekly occasion for most guests and so we need to make sure. We're communicating all the right areas at the right times.
Speaker Change: And I can comment on the price side.
Speaker Change: Right now for four Jack for fiscal 'twenty, five is around 3% to 4% price and for Dallas five to six I.
Speaker Change: Think about as kind of two parts of that we've got some we have rollover of.
Speaker Change: About 2% on the Jack side. So we're looking at another kind of 1% to 2% price take during the year and then on the on the Dell side were going to rollover about 3% price and then looking at another 2% to 3% price during the year some of that a lot of that is aligned to that to the new menu.
Speaker Change: If we have that we're rolling out and that has some changes to the pricing that puts it a little bit higher than Jack.
Speaker Change: We're predominantly focused on just very strategic price increases.
Speaker Change: On certain items, so little more of a normalized environment on the pricing side that that's embedded into that same store sales guidance that we gave.
Speaker Change: Got it thanks for taking the questions.
Speaker Change: Sure.
Speaker Change: Logan rank RBC capital markets is up next.
Speaker Change: Hey, good afternoon, Thanks for taking my question.
Other follow up just on the on the franchisee profitability side.
Speaker Change: Gross openings are encouraging and you guys have faced some headwinds in the business.
Sort of appear to be turning around how do you how would you characterize franchisee profitability today and sort of outlook on how that's going to trend through next year.
Speaker Change: For 'twenty.
Speaker Change: And I think it comes down to sales growth I think we've done a good job with the programs. We rolled out that are really helping them manage the P&L effectively and efficiently.
Speaker Change: It comes down to if we get topline growth and it'll flow. If we look back as I mentioned franchisees currently.
Speaker Change: In the most recent data that we received.
Speaker Change: Our running basically flat year over year on profitability now.
With AB 228, continuing into 2025.
Speaker Change: I'm sure it will impact the P&L somewhat just like it is for US I mean, we're seeing that's a lot of the headwinds you see in the guidance that we've provided is.
Speaker Change: If you annualize AG 228, just on our company restaurants at $15 million of the impact. So it is a large numbers. So franchisees in California will definitely feel some of that unless we offset it with more topline growth and then some of the things we're doing from a cost standpoint, but just keep in mind. Our franchisees are many of them are.
Speaker Change: Multi unit owners.
And then Brian at a good level of profitability. So they are able to absorb some of this near term pressure and again, we've driven improvement in our margin through a lot of the financial fundamentals and so there we will navigate through this they are aligned with us and overall again in multiple locations.
Speaker Change: They're performing they're performing well overall again, obviously everybody's happier when you have topline sales growth.
Speaker Change: We're set up for that that will flow straight through to the bottom line, but but overall the system is very healthy.
Speaker Change: Okay. Thanks.
The next question is from Alex Slagle with Jefferies.
Speaker Change: Hey, Thanks, you talked about a big focus on digital and improving execution.
Speaker Change: Back to the basics approach at Jack in 25. So I was wondering if you could expand on that a little bit add some color on what youre going to be doing differently.
Speaker Change: Yes.
Main focus is on how do we obsess about improving the guest experience and we're going to structure around that we're going to make sure that we focus on programs that are scalable and back to the basics specifically around.
Speaker Change: Frictionless digital because we know that is where the business is heading since 2019. It is the only aspect of the <unk> business that has grown so we as we continue to invest in our digital stack and our Martech stack. We also need to invest at the restaurant level and how do we make sure that experiences amazing for our <unk>.
Speaker Change: Guests.
Speaker Change: And then improving the accuracy both in our digital business, but also at the drive thru so.
Speaker Change: That enable that will enable us to reduce alerts, it's something that we hear from our guests that we can improve on and we're going to make sure. We do that in 2025, so aligned around it and the entire organization.
Speaker Change: And again that all that's all set up either.
Speaker Change: New App.
Speaker Change: Enhancements are going to make to our loyalty program. The new point of sale. All of these are the cornerstones of the back the backbone of everything Darin just described and again.
Speaker Change: Teams have done a phenomenal job executing we're making progress we're seeing it already in the performance with the growth. We saw in first party in the fourth quarter that is accelerated into the into the first part of 'twenty five.
Speaker Change: A lot of it driven by our new App.
The marketing team has also done a really good job of it.
Speaker Change: Yes.
Speaker Change: Looking at the digital channels and in optimizing on them and Thats driving incremental traffic and transactions on both first and third party and we expect that to continue through this year.
Got it thank you.
Speaker Change: Andrew Charles from TD Cowen has the next question.
Andrew Charles: Great. Thanks, Darren it's good to hear you've seen sales improved to the high end of your 2025 same store sales guidance range, but with your largest competitor set to release, a bazooka value deals in early calendar 2025.
Andrew Charles: What needs to be done to properly protect traffic could you anticipate commodity inflation pick up got it.
Andrew Charles: And then just squeeze in a quick follow up can you quantify the impact quarter date for your largest competitors fruitcake challenges.
Presumably had some benefit for you or for the Jack brand, maybe said differently big quarter to date accelerated after October 22nd.
Speaker Change: So Andrew I think the best thing that we can do is always be uniquely Jack and focus on our brand positioning and what makes us different and we can do that through the means of what we do is all day everyday we lean into our innovation in premium and value and then we do advance our digital capability, which we've been doing.
Speaker Change: I mean, we're having we're at about 14% to 16% digital sales today.
Speaker Change: We still have plenty of opportunity to grow that because we are behind the industry.
Speaker Change: Industry from an investment standpoint, and we're catching up rapidly and we're seeing that advance our business and we're going to continue to do that.
Speaker Change: So just as an example, our loyalty users up.
Speaker Change: Our growth in loyalty is up to 107% we know there's opportunity there. So we're going to continue to focus on how do we get better at that business model.
Speaker Change: Then.
Brian Scott: The second part of the question Brian.
Brian Scott: Do you want to talk about what he had asked about.
Brian Scott: About Mcdonald's and yet we were already seeing improvement on that trend.
Before that so there's no doubt that that everyone gained a little bit of share.
Brian Scott: From there are challenges, but we were fortunate that I think the actions that we took in the back half of 'twenty four we're already starting to take hold as we went through the fourth quarter and that trend was starting to pick up into the first quarter.
Brian Scott: And so I think that yes, again, everybody probably gain gained some.
Brian Scott: But its not we don't look at that as the primary driver.
Brian Scott: At our start to the year I think thats why we are.
Brian Scott: Being a little bit cautious too on a full year guide because we don't nobody knows exactly what that impact was.
Brian Scott: And how it will impact the industry, but again, we are already encouraged before that happened about the trends that we're seeing.
Speaker Change: Very helpful. Thanks.
Speaker Change: Yeah.
Speaker Change: From Goldman Sachs. Christine Cho has the next question yeah. Thank you for taking the question. So can we talk a little bit more about value. So.
Speaker Change: Could you talk about how value mix trended this quarter and how youre thinking about the balance of the promoted value versus everyday value menu.
Speaker Change: Are there any modifications that need to be made given the changing competitive dynamics and returns on the value promotion.
Speaker Change: So as an example during Q4.
Monkeys under four that we've talked about it was the first full quarter in <unk>.
Speaker Change: Action and we saw about 120 basis points improvement in trends for that value component of our menu and so we're excited about what the much agenda.
Speaker Change: <unk> has done for our business model. It also led to addition to check which we haven't seen for a period of time and add on.
Speaker Change: So we'll continue to focus on growing our monkeys under four business.
And then what we saw with our digital performing offers are $5 breakfast and our two for $3 or two for $5.
Speaker Change: Really helped us during the quarter.
The next step is Brian Harper Morgan Stanley.
Speaker Change: Yes, thanks, good afternoon guys.
Speaker Change: A question on a couple of pieces that just.
Speaker Change: Feed into your guidance for next year.
Speaker Change: Have you assumed any refranchising sort of beyond the.
Speaker Change: 13 that you mentioned.
Speaker Change: I don't know if are there any G&A savings that come.
Speaker Change: Come from from that it seems like maybe not at this point.
Speaker Change: And then also just kind of what drives the repurchase assumption relative to kind of what you did in 'twenty four.
Brian Scott: Yes, yes. This is Brian.
Brian Scott: So no we do not have anything beyond the 13 restaurants that we expect to close here very shortly.
Brian Scott: And the guidance for next year, we kind of have not provided that because it's hard it's hard to know magnitude and timing of those and as Darren mentioned earlier, we will likely won't see too. Many more this year unless somebody is really wants to step up because we got to make sure we get good value for these.
Brian Scott: These high quality restaurants.
Brian Scott: So I think the other.
Brian Scott: In terms of the share repurchases.
Brian Scott: Again, we are looking at prioritization of our of our operating cash flow and how we deploy it in.
Brian Scott: Again, the investments we talked about.
Brian Scott: Through our Capex, our priority number one we will get a good return on those and then we've got our dividend. So we're just really right now just modeling out a very comfortable amount of free cash flow that we can deploy them through repurchases will continue to adjust that during the year, but.
Brian Scott: The greatest way, we can deliver shareholder value long term as is investing in our strategy and so that's where we've had to make some tradeoff and repurchases to achieve that but that's exactly aligned with what we laid out in our strategy. This year I will add just a couple of other points that we didn't guide on just to make sure everybody's kind of aligned on it one is the.
Interest expense for the year, we're spending about $80 million.
Brian Scott: And in the guide and then the other on that.
Brian Scott: The preopening costs I kind of made a note about preopening, which we separate from our traditional SG&A.
Brian Scott: We were about two 5 million in fiscal 'twenty four with the increase in the number of new restaurant openings next year that number we expect to be closer to $5 million. So that does help shape, a little bit too as you're looking at your models.
Brian Scott: To align with our with the guidance that we gave.
Speaker Change: Thank you.
Speaker Change: Next up we'll hear from drew north with Baird.
Speaker Change: Okay.
Speaker Change: Thanks for taking the question, it's a bit of a follow up on John's question earlier was hoping you could share some of the metrics on the Jack comps performance for Q4, I know you mentioned the perspective on pricing in the prepared remarks, but where did traffic and mix shake out for the quarter and then the follow up being how are you thinking about the cadence of traffic.
Speaker Change: Embedded in your guidance for 2025, and if there's any notable quarterly volatility to be aware of.
Speaker Change: Trends were.
Flat basically from quarter to quarter.
Speaker Change: <unk> increased slightly our improved slightly I should say and then price.
Speaker Change: Was lower than the previous quarter.
Speaker Change: And the traffic was down about 5% and that it did improve slightly from the third quarter.
Speaker Change: Yes, you can kind of worker back to it and again in next year. We gave we gave some expectations around price for the full year and so you can you kind of work back the difference on that between price and.
Speaker Change: The same store sales is going to be a combination of traffic and mix.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: And everyone that is blocked question today that does conclude our question and answer session. Also does conclude our conference. Thank you all for your participation you may now disconnect.
Speaker Change: Thank you <unk> canaccord.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Okay.