Jack is back--with relish.
Six years after a fatal outbreak of food poisoning at Jack in the Box Inc. restaurants nearly sank the company, the 1,515-store chain is thriving like never before, and its stock has firmly established itself as one of the hottest in its industry.
At a time when rivals such as Carl's Jr. parent CKE Restaurants Inc. are struggling to stand out in the fiercely competitive, $52-billion U.S. industry for fast-food burgers and other sandwiches, San Diego-based Jack in the Box is posting strong gains in sales and earnings.
Credit improved food quality and an expanded menu, upgraded restaurants, better service, an avid team spirit among employees and the appeal of the company's fabled, clown-headed leader, "Jack," whose goofy commercials have built an increasingly strong brand identity for the company.
"Despite the fact that Jack's not real, he's very real to the customer," said David Rose, an analyst with the investment firm Jefferies & Co. in Los Angeles. "Jack appeals to the heaviest fast-food user, the male 18 to 34, and Jack is telling a story--not about his personality, but about his better product."
Moreover, Jack in the Box Inc.--which just changed its name from the mundane moniker Foodmaker Inc.--owns rather than franchises most of its restaurants. That means that as its chain of stores improves and expands, it gets a higher stream of revenue compared with chains composed mostly of franchisees that send royalty checks to the parent company.
And Jack in the Box has big expansion plans. The chain now operates in 11 states, mostly in the West, but it will soon open stores in three Southeast states, and it is "committed to becoming, over time, a national chain," said Robert Nugent, Jack in the Box's chief executive.
To be sure, its opening of about 30 stores next year in Tennessee, Louisiana and North Carolina--part of an estimated 120 restaurants it plans to open in 2000--is a question mark for the company: Can it repeat its success in those uncharted markets?
Nugent is unfazed. Those regions have strong economies, and the competition "is equal to or less than what we face in California," the toughest fast-food market in the country, Nugent said.
Regardless, investors can't get enough of Jack.
