abhishreshthaa
Abhijeet S
Jack in the Box (NASDAQ: JACK) is a fast food hamburger restaurant chain that operates and franchises 2,212 Jack in the Box locations in 18 states. In addition to it's traditional business, Jack in the Box also operates the Qdoba mexican grill concept, with 510 locations in 42 states. Jack in the Box sells fast food staples like hamburgers, french fries, soft drink, as well as an assortment of other sandwiches and fast food items. Qdoba offers fast-casual Mexican fare like burritos, tacos, quesadillas, and salads. In 2009, the company earned $2.47 billion in net sales and $131 million in net income.[1]
Jack in the Box operates in an extremely competitive market with larger restaurants like McDonalds and Burger King. The fast food hamburger industry is so competitive because each restaurant offers extremely similar food, and it is hard to differentiate one company from the competition. This leads to price wars in order to attract customers, which hurt the bottom line.
Company Overview
Jack in the Box operates a total of 2,700 quick-service restaurants (QSR) and Qdoba Mexican Grill fast-casual restaurants.
Restaurants[2]
Jack in the Box - The first Jack in the Box restaurant, which offered only drive-thru service, opened in 1951. Jack in the Box is one of the nation’s largest hamburger chains, and based on the number of units, is the second or third largest QSR hamburger chain in most of its major markets. The company's 2,212 restaurants offers a variety of hamburgers, salads, specialty sandwiches, tacos, drinks, smoothies, real ice cream shakes and side items. Most of them are open 18-24 hours a day. Drive-thru sales currently account for approximately 70% of sales.
Contents
1 Company Overview
1.1 Restaurants[2]
2 Business Growth
2.1 FY 2009 (ended September 27, 2009)[1]
3 Trends and Forces
3.1 Rising Food and Commodity Prices
3.2 Changes in Diet/Increased Focus on Healthfulness
3.3 Health Scares
4 Competition
5 References
Qdoba Mexican Grill - Qdoba is the largest Mexican-food chain in the fast-casual segment of the restaurant industry. The restaurants make their food in full view of the customer to allow them to customize the meal anyway they want it.
Business Growth
FY 2009 (ended September 27, 2009)[1]
Net sales fell 2.7% to $2.47 billion. This was due to 1.2% and 2.3% comparable store declines at Jack in the Box and Qdoba restaurants respectively. The company attributes the decline to the weak economy.
Commodity costs increased 2% during the year.
Net income increased 10.9% to $131 million.
The company opened 64 Jack in the Box restaurants and 62 Qdoba restaurants in 2009. The company plans to open between 45-50 Jack in the Box restaurants and 30-40 Qdoba restaurants in 2010.
Trends and Forces
Rising Food and Commodity Prices
Jack in the Box's margins are highly dependent on food prices. In particular, the company is dependent on the price of corn, beef and also oil. Recently, the price of many key inputs has risen and could affect the profitability of the firm in years to come. The price of corn, which is fed to livestock and is also a key input in many processed foods, has doubled in the last two years, due mainly in part to the ethanol boom. Because it now costs more to feed the cattle, the price of beef and chicken, two extremely important inputs for a fast food restaurant, has also risen. In addition, oil prices have risen four-fold since 2001 and the price of gas is also up 40% in the last year alone. Oil is used to produce food, as well as to transport it all over the world. Finally, the price of food has risen due to higher demand in developing countries like China and India. In 2009, the company reported that its commodities costs increased by 2%.[1]
Changes in Diet/Increased Focus on Healthfulness
Jack in the Box could be affected by a shift in consumer tastes and eating habits due to new diet, nutrition, or health trends. Jack in the Box produces a food that is high in fat and sodium, and is not particularly healthy. Exotic diets, like the Atkins diet, have grown in popularity in the last few years, and have made people more aware of what they are eating and what they should be eating to live a healthy life. If people continue to try to live and eat healthy, it could have a material impact on Jack in the Box's profitability. To read a more detailed discussion of consumer health trends and how they affect the fast-food industry, see also Healthier Food Consumption.
Health Scares
Jack in the Box is vulnerable to a range of health scares that have affected other restaurants and the fast food industry in general. The two most well known scares are mad cow disease (scientifically termed bovine spongiform encephalopathy, or BSE) and outbreaks of illness from the bacteria E. coli. BSE is a fatal neurodegenerative disease found in cattle. Any scares or rumors of E. coli would severely decrease traffic in Jack in the Box restaurants. For a more detailed discussion of health scares and how they impacts the food industry, see also Health scares.
Competition
The Quick Service Industry (QSR) is one of the largest components of the over 440 billion dollar restaurant and food service industry, and is one of the most competitive industries in the world. Jack in the Box most clearly falls under the fast food hamburger category, and competes against multi-national giants McDonalds, Burger King and Wendy's. However, Jack in the Box also competes against other QSR concepts. Another huge player in this industry is Yum! Brands, parent company of KFC and Taco Bell. In addition, the Qdoba concept competes in an extremely competitive Mexican segment, with other well know restaurants Chipotle and Baja Fresh, among others.
Jack in the Box operates in an extremely competitive market with larger restaurants like McDonalds and Burger King. The fast food hamburger industry is so competitive because each restaurant offers extremely similar food, and it is hard to differentiate one company from the competition. This leads to price wars in order to attract customers, which hurt the bottom line.
Company Overview
Jack in the Box operates a total of 2,700 quick-service restaurants (QSR) and Qdoba Mexican Grill fast-casual restaurants.
Restaurants[2]
Jack in the Box - The first Jack in the Box restaurant, which offered only drive-thru service, opened in 1951. Jack in the Box is one of the nation’s largest hamburger chains, and based on the number of units, is the second or third largest QSR hamburger chain in most of its major markets. The company's 2,212 restaurants offers a variety of hamburgers, salads, specialty sandwiches, tacos, drinks, smoothies, real ice cream shakes and side items. Most of them are open 18-24 hours a day. Drive-thru sales currently account for approximately 70% of sales.
Contents
1 Company Overview
1.1 Restaurants[2]
2 Business Growth
2.1 FY 2009 (ended September 27, 2009)[1]
3 Trends and Forces
3.1 Rising Food and Commodity Prices
3.2 Changes in Diet/Increased Focus on Healthfulness
3.3 Health Scares
4 Competition
5 References
Qdoba Mexican Grill - Qdoba is the largest Mexican-food chain in the fast-casual segment of the restaurant industry. The restaurants make their food in full view of the customer to allow them to customize the meal anyway they want it.
Business Growth
FY 2009 (ended September 27, 2009)[1]
Net sales fell 2.7% to $2.47 billion. This was due to 1.2% and 2.3% comparable store declines at Jack in the Box and Qdoba restaurants respectively. The company attributes the decline to the weak economy.
Commodity costs increased 2% during the year.
Net income increased 10.9% to $131 million.
The company opened 64 Jack in the Box restaurants and 62 Qdoba restaurants in 2009. The company plans to open between 45-50 Jack in the Box restaurants and 30-40 Qdoba restaurants in 2010.
Trends and Forces
Rising Food and Commodity Prices
Jack in the Box's margins are highly dependent on food prices. In particular, the company is dependent on the price of corn, beef and also oil. Recently, the price of many key inputs has risen and could affect the profitability of the firm in years to come. The price of corn, which is fed to livestock and is also a key input in many processed foods, has doubled in the last two years, due mainly in part to the ethanol boom. Because it now costs more to feed the cattle, the price of beef and chicken, two extremely important inputs for a fast food restaurant, has also risen. In addition, oil prices have risen four-fold since 2001 and the price of gas is also up 40% in the last year alone. Oil is used to produce food, as well as to transport it all over the world. Finally, the price of food has risen due to higher demand in developing countries like China and India. In 2009, the company reported that its commodities costs increased by 2%.[1]
Changes in Diet/Increased Focus on Healthfulness
Jack in the Box could be affected by a shift in consumer tastes and eating habits due to new diet, nutrition, or health trends. Jack in the Box produces a food that is high in fat and sodium, and is not particularly healthy. Exotic diets, like the Atkins diet, have grown in popularity in the last few years, and have made people more aware of what they are eating and what they should be eating to live a healthy life. If people continue to try to live and eat healthy, it could have a material impact on Jack in the Box's profitability. To read a more detailed discussion of consumer health trends and how they affect the fast-food industry, see also Healthier Food Consumption.
Health Scares
Jack in the Box is vulnerable to a range of health scares that have affected other restaurants and the fast food industry in general. The two most well known scares are mad cow disease (scientifically termed bovine spongiform encephalopathy, or BSE) and outbreaks of illness from the bacteria E. coli. BSE is a fatal neurodegenerative disease found in cattle. Any scares or rumors of E. coli would severely decrease traffic in Jack in the Box restaurants. For a more detailed discussion of health scares and how they impacts the food industry, see also Health scares.
Competition
The Quick Service Industry (QSR) is one of the largest components of the over 440 billion dollar restaurant and food service industry, and is one of the most competitive industries in the world. Jack in the Box most clearly falls under the fast food hamburger category, and competes against multi-national giants McDonalds, Burger King and Wendy's. However, Jack in the Box also competes against other QSR concepts. Another huge player in this industry is Yum! Brands, parent company of KFC and Taco Bell. In addition, the Qdoba concept competes in an extremely competitive Mexican segment, with other well know restaurants Chipotle and Baja Fresh, among others.