Jack in the Box CEO on the company’s ‘best quarter in 27 years’

Darin Harris, Jack in the Box CEO, joins Yahoo Finance to discuss how the restaurant chain plans to adapt its business model amid the pandemic.

Video Transcript

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ZACK GUZMAN: Welcome back to Yahoo Finance Live. One space that got serious boost in this pandemic was the fast food space. I want to spotlight shares of Jack in the Box, up about 12% since the company reported earnings last month, when the fast food chain put up some of its best numbers in nearly three decades. System wide same store sales increased 12.5% for the quarter, compared with less than 2% growth in the year ago quarter, boosted by a big jump in digital orders as well.

And for more on that happy to be joined by the CEO of Jack in the Box. Darin Harris joins us now. Darin, appreciate you being here. I mean, obviously, the first question is, is that growth, not just for you guys, but fast food really seeing a pop. Inevitably, maybe if that goes away as restaurants come back on board. So what are you seeing since you put those numbers up and how should investors be thinking about that when it comes to Jack in the Box?

DARIN HARRIS: Yeah, I think for us it was we'll continue to do a lot of the same things that we've been doing, which is we made changes early in the pandemic to focus on the safety of our guests and our employees and we'll continue to do that. But it enabled us to really focus on off premise, whether that's mobile and digital or even drive-through and by focusing on that and listening to our guests, we learned that they wanted a better experience from those off premise opportunities, but they also wanted from us more premium items. So we were able to continue our product innovation and give guests what they wanted, which as you stated, led to the best quarter we've had in 27 years.

AKIKO FUJITA: Huge growth in digital sales as you highlighted, doubled in the first quarter. You're still looking at roughly 7% of overall sales if I have the numbers down correctly here. How do you increase the usage of the app, what kind of features are you thinking about?

DARIN HARRIS: Yeah, I think for us we're at the early stage you know, especially when more people in the industry are adopting or more consumers are adopting the digital experience. So for us, our next level is continue to put the delivery service providers in our app and let them have accessibility through our application but also launch a loyalty program. That's the biggest next step for us as well as capturing data on our guests, so that we can serve up a better marketing experience, a one to one loyalty marketing experience. And that's what we're hearing from our guests that they want more from Jack in the Box.

ZACK GUZMAN: Yeah, I guess that would be another question here, how much kind of retained experience you're expecting. I mean, if people came to you first time in a pandemic, really leaned into fast food, I imagine that would be a stickier experience if you have them in apps. Talk to me about that relative to maybe some growth spurts you may have seen pre-pandemic.

DARIN HARRIS: Yeah, a lot of the work that we did was focusing on listening to our guests during this pandemic and really doing a lot of research around guest segmentation and understanding what they wanted from us. And so as we continue to gather that data and understand it, it enables us to offer up a better experience and a better you know, ongoing you know, whether it's app, whether it's digital, whether it's delivery, that's our focus is giving the guest what they want from Jack in the Box. And so mobile is just one environment for us to do that. We'll continue to focus on it and build that data so we can continue to offer to guests what they want from Jack in the Box.

AKIKO FUJITA: One of the key initiatives you put your efforts behind since you've come on board in this role, relaunching the franchise redevelopment initiative. You've talked about a lot of interest already from franchisees. But ultimately, when you look at where the demand is right now, what kind of expansion are you thinking about new stores coming online through franchises?

DARIN HARRIS: Yeah, this year, we're planning to open 20 to 25 restaurants. And our restaurant averages for Jack in the Box locations over the last three years have been greater than our system average. So that gives us a strong economic model to build around.

But beyond that, by relaunching our franchise strategy, you know, we went on a hiatus for about the last 10 years as we re-franchised units and sold them to existing franchisees or great operators. The switch in this strategy is really attracting new and existing franchisees to expand not only in our 21 markets that we're in today, just in those markets alone we have the ability to add 1,200 locations, but also in new markets in the West, the Midwest, and the Southeast by attracting operators or people that are looking for a great business opportunity.

ZACK GUZMAN: Darin, we've also been watching inflation in this environment here. You guys actually saw your margins increase. You said food and packaging costs as a percentage decreased 150 basis points in the quarter because of some of the changes you made to your menu. Talk to me about what you're seeing on the inflation front if costs maybe start to rise or if they already have, what are you seeing there?

DARIN HARRIS: Yeah, I mean, we're focused on like I mentioned earlier, is taking care of our guest and during the pandemic by offering our guest things like snack-able add-ons or crave-able products like tiny tacos. We saw the typical check move from 3.7 items to 4.2. So just that alone helps improve margins by more products per order. And so if that's what our guest wants, we want to continue to offer them the type of products that will drive that check up. Or you know, a better experience. And that lets us focus on the right things versus just how do we improve margins.

You know, many people in the industry are talking about minimum wage. The way we think about it is let's focus on really serving our people and our franchisees well. And by doing that we'll have engaged employees and we'll make sure they're taken care of, so in turn they can really focus on the guest experience.

AKIKO FUJITA: You've got us thinking about tiny tacos now, Darin. Perfect for lunchtime as we both get hungry. Darin Harris, the CEO of Jack in the Box. It's good to talk to you today. I appreciate your time.