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Jack in the Box Says It Will Expand Into National Market

Restaurants: Fast-food chain is developing a 'more relevant' menu featuring lighter fare.

September 19, 2002|JERRY HIRSCH | TIMES STAFF WRITER

Jack in the Box Inc. said Wednesday that it plans to expand from a regional player in the fast-food industry into a national restaurant chain by adding nearly 300 outlets a year.

The San Diego-based company linked its planned expansion to an optimistic forecast for its operations, including double-digit annual earnings growth over the next five years. Shares jumped nearly 6% to $23.58 on the New York Stock Exchange. They tumbled last week after the firm warned of a fourth-quarter profit shortfall.

Jack in the Box Chief Executive Robert J. Nugent said the chain of 1,847 fast-food outlets was evaluating the acquisition of other chains and will expand its Box C-Stores, which co-brand a Jack in the Box restaurant with a Quick Stuff convenience store and a gas station.

At the same time, the firm, which operates in 17 states, will broaden its reach by adding about 200 franchises annually and opening company-owned stores at a rate of about 90 a year.

Jack in the Box said it expects sales at restaurants open at least a year to grow 3% next year. Overall restaurant sales are expected to grow 7% to an estimated $1.95 billion next year and the firm expects earnings growth of 10% to 15% annually over the next five years.

With successful menu items such as its Sourdough Jack sandwich, Jack in the Box says it has increased its market share by 25% over the last four years, a time when discounting and slow growth have hurt other big fast-food chains such as CKE Restaurants Inc., the owner of the Carl's Jr. and Hardee's chains.

Known for its entertaining television commercials--the current versions poke fun at competitors such as Wendy's International Inc. and Subway and feature its fictional "chief executive" Jack--the fast-food chain has built a strong following among men age 18 to 34.

But in announcing its expansion strategy Wednesday, the company said it is developing "a more relevant menu that includes lighter fare."

"By strengthening the Jack in the Box brand and pursuing growth with more flexible options, the company can better position itself as an increasingly profitable restaurant company," Nugent said.

In a report to investors, Andrew Barish, an analyst with Banc of America Securities in San Francisco, said he believed the company's plan to increase the number of franchised outlets is sound. But he cautioned that in the current fast-food environment the new initiatives "will not likely produce results overnight."

Barish said expanding into lighter fare to reach women and older customers is risky. A "light" menu developed by Irvine-based Taco Bell a decade ago turned off its core teenage customers and failed to attract new customers.

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