JACK - Earnings call transcript Q4 2018

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Operator

Good day, everyone, and welcome to the Jack in the Box Incorporated's Fourth Quarter Fiscal 2018 Earnings Conference Call. Today's call is being broadcast live over the Internet. A replay of the call will be available on the Jack in the Box corporate website starting today. [Operator Instructions] At this time, for opening remarks and introductions, I would like to turn the call over to Carol DiRaimo, Chief Investor Relations and Corporate Communications Officer for Jack in the Box. Please go ahead.

Carol DiRaimo

good and Amber, you, morning, everyone. Thank

the amounts on Lenny Comma; me Tucker. operating our per earnings tax the share or is earnings restaurants, and excess cash call of CEO, earnings tenant GAAP and In of share morning, company's expense, other basis, the capital income now as defined of Free tax share company-operated charges this depreciation Chairman from sale the per are allowances. are tenant comments including expenditures. to tax expense and of tax income and Lance amortization gains excluding improvement versus or discontinued diluted restaurants, on impairment per today restructuring losses which the a amortization, CFO, operations, Joining refer defined per Adjusted benefits franchise Executive allowances taxes, operations net improvement share-based well share and arrangements, equity a President on from as as flow interest as diluted represents the component GAAP operations, compensation losses and on the reform less from recorded is impact assets, as of and a previously. continuing deferred and earnings basis, flow sale Vice on from excluding gains charges, cash EBITDA company-operated

measures restaurant release. Please margin, operating earnings non-GAAP as restaurant-level margin such in other the to refer EBITDA. include non-GAAP and franchise may franchise comments reconciliations Our the EBITDA, included

our Investors yesterday's part information most risk with Actual Material that Form materially to future, operations, company's on expectations release as factors, as expectations today, other in quarter morning, recent may XXXX results are XX, this January at the the announce most a tentatively news information. on February fiscal website the Following in and XX-K Safe XX-K, The from presentation plan current documents the are few risks ends note SEC. first the our Please of XX, our our be these section public Harbor cautionary available the results in calendar www.JackintheBox.com. on filed this session of today's are of differ statement recent on and statement based and company to the business. close. based well may community. considered which to on items after of advised we financial and during from statements course for detailed reflect related we presentation, the forward-looking take XX-Q that our make management's questions conference we'll These A call. are to market documents Wednesday, question-and-answer

call on Our Thursday, X:XX to the scheduled And call with over at I'll time be Pacific conference AM that, held turn Lenny. XX. February is to tentatively

Leonard Comma

you, Thank morning. and good Carol,

the locations being levels guidance years help XX since how sold resulted it in cost in I'd rental than and bought our quarter a and Lance reviews and of years has and how system This we our royalties while over to for income achieve $XXX when time some restaurant in highlights like in XX XXXX form to Before Jack our how XXX has our from grew of as at fourth we to lowering provide structure. million XX% sold predictable we of Qdoba the we It the It recap March. success. better brand. year, initiative, and we from Box some very it to We locations of in hundreds franchise the company-operated franchise. revenues franchises, ago continued gone than understanding different XX% plan you higher more more we evolved just few on perspective company was we've and a evolved understand is a as launched refranchising on coming for we've did

Our fiscal has in been sales consistent, Box. the growth at sales of straight Jack system the same-store marking performance eight the XXXX year very

stages in model when last agreements asset-light adjust this the of business we G&A of roll the We’re have out we final Qdoba, completing transition transforming this to entity. our the and process an year We'll single be services accordingly. brand at our

part our points of fiscal the this to expenses business sales. we to of lowered X.X% As our decline. XX XXXX, of expenses model, transformation continue basis G&A will expect we G&A In by

been Marcus to which this future developing Product you be shareholder fifth to we operations place position. consecutive evolve mindful Tucker; over needs Chief plan an our the billion and activities and and all with interim, enhancing interests Lance the recognized two Officer, Tom; less we XXXX Development nearly to value, team years. centered investments we model making candidates We the we X Once year, dividends dividends. franchisees, was of our than including addition meeting remain cash teams. Operating with buybacks free capital marketing August. maximize with of we're Officer updated the of grow to employees evolving of and balance that brand in that in hands shareholders. through In sales to stock which shareholders via We've plan are are share is stakeholders, in Chief relevant, designed Officer, will returns. leading our the shared purchases new year totaled we to customers, on shareholders of returning around so Marketing VPs Lance expect $X very to capable improving plan must our than Financial our intensive, seasoned the Communications and industry emphasis our objectives capital onboard, With consistency, are have to and for and in and year consumer $XXX long-term addition, In Marketing form the the more In and our Marcus leading billion million continue those committed higher flows. our return executives; two later to our Chief more actively the structure strengthened leadership interviewing This our of $X.X XXXX

affordable uniquely For burgers our relevant sandwiches innovating flavorful culturally comprise we'll menu, adding which while of continue and and food. our core the also around menu,

optimize expectations later new in And and and a many enhancing we modifying fiscal our more humor time. in to testing year. plan leveraging Our sense of in redundant we'll marketing our restaurants testing offers brand's franchised, across like we'll that operating restaurants currently fiscal reducing procedures. when were fiscal towards this on our roughly protect like system We're XXX to experience, might can the returns consistency which platforms update the and us equity comes Quick target that kitchens, balance investments help promoting our wait year are final primarily simplify across our and than those unique meeting finally, margins. app; calendar look what be and irreverent numerous We're program digital our equipment premium operations streamlining restaurants of 'XX. and by we will in near-zero oldest will estimated we locations, completing value mobile 'XX we it restaurants at unashamedly the that to and currently operating of rollout efficiency SKUs continue remodeled by where And launched twice October. procedures, our it system covers in products re-modeling brand our the to to leveraging products entire that drive-thru XX fiscal

expect be in will reflect experience. we're of initiative, restaurant promote construction October major the of opened consistency new remodel the the and believe newest the our of the which of in testing feel the elements can prototype Diego will system, see initial that across what are in drive-thru To fiscal you a our of the a San restaurant For California. systems. and end look same more overhaul XXXX, Riverside, franchise By which we XX% can future of touch we we drive-thru than

Our pieces brand lower goal smaller for develop was development the costs. of at estate allow on could prototype to overall that this real smaller expand a restaurant to

turning in Before in the employees sales those environment. grew success most franchisees. Jack to to I hyper-competitive want have and to employees brand; been again the responsible who once over of Box this the call a for take thank Restaurant the opportunity hardworking Lance,

Our employees the to also enabled supporting of in sale complete once through brand. continue sets organization Their Box the brand of level XXXX the for a during the and persevered that at us up areas. in to lot Qdoba efforts fiscal the Qdoba corporate and distractions Jack numerous

unwavering operators size in our industry in is because of which modest advantage compared modest have allows the As they system this us give brand. the we for in former arguably that's the are appreciate increase franchise competitors. passion us Strategically, is the several [indiscernible] ownership in their industry. employees. to can the years, by dynamic percentage franchisees community in Despite a Box large for Even over the of that this nimble Box franchise our still standards, of our to franchisees, size, our Jack with brand with the larger be past unparalleled Jack our an the

In will continued franchisees for for share our that all children. turn have the tenured addition, a to Jack about to of very the in beginning some their on operators well Together over next-generation We're of restaurants influence brand. are success. the we bodes its the more Box excited passion

a finding goals such raised more in labor very managing spirited We expectations our currently our I'll at by our successful. about the with market are their our fully believe a we'll Jack year. community our goals hyper-competitive traffic We mutual concerns any our fiscal facing that over successful are about new detailed our there share achieve call representing minds objectives; our We understand the franchisees, be been some is for often that, have With most issues never we aligned. how has environment. look aren't if our Box fourth we're that Lance issues and in Lance? the in the aligned. question franchisees through of Although to and turn franchise debates quarter ultimate we cannot Association and rising much of interests costs, industry know the as

Lance Tucker

than were and $X.XX of quarter you, Thank guidance The morning, $X.XX the compared driven year fourth Operating a the selectively refranchising. then impact for and year. high year and from fiscal into few tax Lenny, more the from fourth primarily and last increase move I'll quarter, G&A the dilution fiscal EPS offset to XXXX. lower costs, was repurchases, XXXX good share hit by which reform points as for everyone.

Average from XX maintenance. basis transactions increased refranchised. EBITDA of points the fourth G&A. due fourth to stores refranchising for partially in were due $XX.X to prior stores fourth and sales to margin for points lesser from sales to X.X% the being in system-wide to a which pricing XX.X% basis decreased down as increased related initiative restaurant-level year Mix million $X declined repairs costs, the increased year XX of were in increased basis the sale labor we fees compared was stores quarter increased XX.X%, both sales unit X.XX income quarter. primarily to The approximately comparable reflected and X.X% due Company reduction the to due last comparable $X.X X%. quarter, last volumes these as XX franchise quarter of X%. to points were is restaurant-level million for EBITDA to the comparable approximately services Franchise XXXX. G&A Company was points basis system-wide of comprised of points in million Our EBITDA sales transition refranchising. XX year. keeping completion increased royalties now utilities, to in the upon higher and Qdoba, XXX lower offsetting of margin decrease year Franchise and Rent higher million about basis in the the number the fiscal by the XXX XX.X% mainly quarter. a

fourth the taxes, a XX% tax tax effective QX resulting state rate was below for federal reductions XX% from from partially to compared of SG&A adjusted our which In the blended addition, a quarter. rate Act This the costs which $X.X certain and from in related in our decrease workforce and higher effective of XX.X% to decreases the These X, of was $X.XX Qdoba onetime XX%, federal incremental million contributions the million reduced million Also tax loss to Including excludes $X.X typical due tax were $X.X following Act. utilization to of in the Tax from fiscal statutory rate last rate to included our carry-forwards prior in decrease year mark-to-market and million partially year quarter, impact credits effective $X.X a statutory by Tax by program. adjustments. related to in in the at our pension G&A the completion are refranchising advertising benefited bonuses share-based quarter. was the and refranchising, January offset costs. compensation, lower refranchising sale unfavorable Advertising year. rate due were offset

the fiscal Act Our weighted again effective We million quarter $XXX onetime nearly repurchased change. during million year average the impact versus shares excluding the of was X% rate X.X by tax Tax of for XX.X%, decreased stock accounting the adjustments for the and from full shares year. and last outstanding

over last have million returned dividends we currently repurchases week's including to $XXX repurchases Including million XXXX, $XXX During ratio leverage share of times we $XXX shareholders and and XXXX refranchised refranchising end total the our X million. number our competing approximately was and refranchised of initiative. of available the $XX we our share bringing for of authorization, In quarter, units quarter. X at million approximately units, to the in fourth XXX,

franchised. now are As of of the end we XXXX, year fiscal XX%

we'll to guidance. Now, on move

the the provided guidance from view move we historically sales making to manage decided We same-store we've long-term we to to have giving have away used guidance. change the with one consistent quarterly we're business,

continue provide also issued conference in address And year, and them. trends we We our that Note, would communicate our on to targets. all updates guidance of in hit we calls. ability long-term reaffirming quarter-to-date to our view, we of this on will the to it our on however, sales point we are long-term at topic to we if confident long-term those of guidance, some quarterly long-term August the remain decide

throughout year around to year. up with Moving guidance to our for the expectation specifics same-store improvement is X%, sales XXXX, flat full the

slow sales weeks first change of a off are a have fiscal quarter, we and a this inflation X%, to For pivoted more between the the down and methods EBITDA mid-single seen X% have value-oriented XX% digits. commodity X% restaurant seems same-store which the our XXXX last of sales, got X company is in XX% guidance in quarter sales a start first to but for Restaurant-level bit approximately the and wage weeks of trends. of X inflation just to year in

Every the EBITDA estimated adjusted as million $X.XX million, provide XX We impacts in $XXX expect sensitivity every be company a $XXX reductions. every XX system-wide by X% sales EBITDA $X.X impacts by EBITDA to change some to point of drag measures by in refranchising franchise change in SG&A for million million $X.X change from the X% point sales expected EBITDA $XXX XXXX, and basis margins EBITDA EBITDA as XXXX million We an compared same-store restaurant company sales largely change percentage in XXXX, will every and offset in basis estimated G&A impacts of by by an million. million. in and impacts approximately $X.X same-store

capital of XXXX million $XX effect XXXX, tenant each guidance August. in revenue cumulative line the in fiscal $XX expect approximately Effective released allowances recognition GAAP in improvement to expenditures transition the is $XX a million with which of approximately we new using method. We adopted standard million, long-term of

corresponding from related to revenues, increase reclassification fees marketing increase a and received of the expect franchisees. primarily franchise standard franchise the to result We an in new to to expenses

for amounts fiscal this G&A as franchise for expenses, will our amortization reflected as the franchise impact EBITDA. previously more have rules detail our should pro P&L new see of year guidance for has a classified within impact on slides website forma recognition this been In change, revenue addition, fees, included minimal XXXX. including fiscal be XXXX. on certain on Please the Including

the We to new XX% XX.X% X.X% revenue of the recognition prior methodology. expect of to using revenues to according SG&A X% reflecting standards

plan. system-wide new of in G&A standards reflecting We percentage X.X% to the methodology. X% our to reduction of expect long-term prior revenue the to recognition a G&A which approximately projections X.X% [indiscernible] our sales included as Types of using equates X%

towards that to remain in implementing structure confident continue we complete new XXXX, work first the previously will a as half of leverage we say process should and fiscal this I communicated. We XXXX

is not putting currently should a decision route. determine the to we this to the While in accommodate structure go are locked-in, securitization XXX% we place

the of implementation. we upon the closer details around it's more We will to we provide ultimately decide specifics get structure as

in conditions. open given you the models Finally, guided over to for your expense look operator our interest the the to remarks. like XXXX market we have not I'd it Amber? up for call current turn rate we prepared interest take assumptions while now questions. at to concludes That a recommend to

Operator

is Our Glass John question [Operator Morgan Instructions] first Stanley. for of

John Glass

sales or if using mark any promotion, could on what's to have talk that? tactics are guess current What and the is do industry I you're the maybe maybe -- you around about color an what this responding missed think you're you trends, just just first they changed; that done different to or you this a slowdown that you more your or are those about direct that or system? that something talk just offers? past can franchisee how you've embracing, or in they're do used you And discounts sharper they're value you with maybe is the that greater maybe across consistent recommending offers? alignment now than Is franchise

Leonard Comma

of So about a And a year, let value. franchisees how see in the we finally, QX. see then I'll pieces; we in remainder me is, first here bit the handle how of changed and throughout what value our little that talk the different couple

for a Buttery value So QX item we but of and the was rate below Ribeye see would typical first, of we combination and hamburger, what the that us value went of the into bundle, we on in that's something didn't take Jack of combination premium traditionally the of premium form form see, hamburger. hamburger strong like also a typically $X in a with

system even item to a that year happening has from show dining, price need and more then is the switched actually put more would into nonetheless, for for burger-related what catalyst franchisees well at with our during in oriented drove The was And [ph], a priced Ribeye as and that bundle more value but feel which value make premium the that BLT the quality -- so worked and very change quickly, us. pointed for chicken the nuggets to make fast the X we not once we a switch really that which for was XX% at anticipated $X; you can than you're up food now into bundle, that also actually pivoted aligned this X with marketplace. we we've the What from move when were change premium of was BLT that to of XX% entrée today to new and or fries you is the seeing items are even everything this timeframe look really get as low $X into marketplace competition; so yourself was XX you seen $X. players French through for casual some the

nonetheless, recapture argue to or little desperation need to even of space So across the we the below things a point. of some to to there that a play entire $X market for are at industry and a degree in that hyper-competitive are and you be almost Jack might if times sales our transaction irrational, that and what but in the lot seems same-store customer happening maintain going the lost Box price accounts doesn't in that's we're the

and as you'll add-on that can the more value $X or and and items bundles used in So meals; sales are have see and from itself. to expect snack-related hovering to then you either the moving that range have we’ll in $X around $X see value for of is, indulgent the what that remainder year complete should cover be will between forward $X us of

priced our the offer line-up not remainder more below we it or from whether want in also and $X the throughout they're priced. value a everything they to year be space value-oriented understand in that see point. what understand would you'll meal -- value doesn't consumer at year, much part typically it's premium-oriented a the premium large to that that will So We but at deal, this see they sensitivity a need pretty want overall be -- type the to when remainder almost of only throughout the a be the bundle have of buying of

the us evidenced them BLT. from be our by So seemed you can expect that's to need and to aligned franchisees this with and do into opting what very

great address this think I how we've got we'll forward. alignment about going

Operator

Our next Bittner of Oppenheimer. question Brian will be from

Brian Bittner

to not can the meaningfully the position why kind sales I why model you where short then about, to put the fall moving off, hit year, where you offset just are the a in you same-store forward if trending, for yourselves guidance? First And EBITDA sales follow-up. pretty of that? of guidance talk with levers any comps do a your guidance there do candidly, line your improve in you're put have And same-store more in to have

Leonard Comma

first for what about the two the year there since softer think piece aggressive remainder part value we year, we little and I is and that's last about year. the When Brian, we're ago perspective it's from the a just throughout year, I look the for remainder the of to the does lineup put roll did When way. remainder aggressive of the compelling what also Yes, of you we if get feel comfortable year; rollovers it but is a the at guidance is spoke what to spoke a reason of moment I this part year. multi-year -- the as lineup compared to by the that a first out the consumer present Lenny than more it a you the of it, it more at so pretty look significantly from of going last overs is why

levers, feel be. we in like we some So want can an think are standpoint off Lance, -- for one? to pull do EBITDA us on right from you we place to that's that jump then the there And

Lance Tucker

the obviously, in $X there so single million, were then levers some incentive biggest incentive doing. the pull by around you that that mainly that then missed prepared down to compensation and between But in all spending [brand] comp, our [indiscernible] sensitivities EBITDA the and going significantly roughly are if large, I compensation; corporate and EBITDA the we're have I what by smaller we is come is think there gave my rather I Obviously [ph], in. biggest jump I'll significantly is lever remarks; miss incentive we one the comp. if enfranchise, were can to

Brian Bittner

just on just that that? recapitalization, and environment, EBITDA; given the that at potential your thoughts perhaps an may A) your just evolved this B) would target. you now follow-up on changed if higher fact us you have next about you return have -- two rate $X over the believe you think current how And large truly I expect your opinion you'd or want on several stock do thinking long-term the Xx all the ideally years? interest shareholders And have the levels want the billion to in to frontload the repurchases price

Thanks. both on helpful. of color be dynamics any those So will

Lance Tucker

that I'll Brian, Lenny start in. with let jump I'll and

and of to thinking is question, rates competitors the rates, some Xx address and interest opposed and significantly other first to brands leverage comfortably it feel that haven't where what one even X.Xx chose is at significantly between that are still changed interest First Xx historically from above our given of as part debt service Xx can the of we some the low our interest reasons despite all, up see are; [indiscernible]. your we you'll of we like

but can I the want into lot lot more we'll is -- I detail, want so cash detail. to frontload with a balance we sheet; whole repurchases, beyond while don't be somewhat when go that will what of and won't a some We say can to of of I very sit into we go share the likely a on don't opportunistic we lot can

Leonard Comma

things place on I won't engagement. engagement about we're place very made although driving so statement Jack that with the value things active that shareholders; drive we working quite specifics with so shareholders valuable them, overall, to know would and enough in are is, where in I'd bad of shareholders, that on they first feel Particularly productive, you we've Box in the we say were about that comfortable has on we and have for comment very these to, with do value are feel of don't we're last and the we've our And thing like actually discussed particular we a any common good there. been goals -- that a aligned that the discussed

Operator

question next from David be will Robert of Tarantino Baird. W. Our coming

David Tarantino

concerns summarize points some Lenny, you of what complaints very And well you're representatives doing of some to contention might franchisees of of there are? perhaps and wondering if has what was coming that in system? biggest of the NFA and publicized just and out resolve be tension the that been I could specifically [ph], your the some

Leonard Comma

to cover they efficiency some thing even and I on pressure as that on P&L think driving forward. of really a half is potentially and to those the of the costs, first cost so high can going confidence have bottom well the franchise degree the of most obvious in model their labor rising put that has the which order stronger they P&Ls in is sales need see topline

there we're we're to aligned that, do need about something to think and we So I rectify that. working that some that's actively with our so anxiety is franchisees all think I and

forward place I'll in just concerns that where today, dots concerns be that process would we're can disagree greatly based around our '"if having I are I those look performing think sales, top CMO up of I a their to are on contribute and in think I our connecting CMO line had saying, they're valuable one that the place; to the Some significant grab looking we to in a expertise we title continuing have say first, in don't amount team, driving sales. level who team that they leading necessarily that bring and confidence largely CMO currently I our and to some this team the patience versus currently give marketing, going find, but in someone a a two for. their person are we that of brand, currently the way to right and that the our skillset to I a identifying are running and VPs that will us don't of just to I believe have are franchisees believe that is that do

rushing same our are shared because seen us a their force and equities protect with we it that right interest all discounting common jumping of from I quality performance person, play versus talent what to to the individuals do way publicly, you've do a the time and goals. I that To opportunity mentioned. value the a And At think that going like to that, say me be it's necessary. heard two margins, interest food. wanted the that on calls think essentially said, I'm brand are I are how the think equity to to are we've that historically allows and that round behind go to the that because several some protect I the value think right about they and on had the find going to and way marketing driving find for equities what's to discounting the deep the mentioned about running you've brand over improve wars I'm afforded have the we're and would to not that that's I'm is way our I I our team real of earlier I our franchisees the appropriate based it have for a I long-term we're by going the I take appropriately, concerns time, space associated high Think think not their So decision there. out and the into we to is would just great who looking to franchisees goals in

they face to productive of and And can the team more able to committed on with So franchisees, we're improve performance dialogue going, spent and through have meeting become that road issues suspect to time the as the lot the continue to our a out, working I overtime. hearing them forward. that we're has management that and do that relationship would will keep face going

David Tarantino

One company? wondering and a follow-up, create one topic to and made you you're out I the structure recently I structure of structure possibility is that that's guess estate popped that separate and spinning this question I or potentially the structure that why move selling as whether a real guess that making issue or up creates was new

Lance Tucker

remarks, have it doing a that need we on we that of prepared should currently go XXX% my and very structuring some to going the is elect do attractive So route. securitization decided we option, as I noted the work we're route to in but

have on that You the impact any we interact with right will that whether have say said, franchisees. franchisees, know way leases, changes certainly their agreement, impact the or our with franchise agreements, not any negative the don't on is our structure development the contractually which their

rights one prepare, that Their this order to fair is securitization really needs done but subsidiary just we with moving another. work perhaps concern we're should not for the go impact to unfounded and -- So bit. from to in does that one owned is franchisees to decide be wholly leases

don't So and we're or to be not down a think spinning road I would that's that discuss out, relative the intent. prepared things to now right go

Operator

next Chris question The will be O'Cull from of Stifel. coming

Chris O'Cull

of maybe Lenny, operational company with but restaurants, stores, be the open with more to to considered either standards financial a menu level the has ever company provides higher franchisees competitive remodel meet pricing? to franchisees or providing incentives incentives to

Leonard Comma

we No, that. considered not have

how operators I and handles at and standards. also ultimately serves think when the safety standards with that image-related is guests things like restaurant brand which associated look food you

good not behavior. prepared What essentially business case a to say if I that that would down things think they the and just certain incentivize it bottom if buy you a so when their expect flag, or performance best would requires hard and think something improve do a in franchisee sign-up we our they company for the what you in franchise price for and operations and so road operations, go we how business, would line that's that's move present be behavior. make for their independent of a us to are the need is what's of ultimately that. sort their that direction, having incentivizing I would to the that wouldn't and would and consumer, when prepared to we the make dedication, and business versus think it have decisions with menu we're to commitment about incentivize pricing, we work as or -- pertains to it I commensurate And decisions to franchisees value-oriented that

Chris O'Cull

then you at And stores. the on the elaborate could I changes hoping XXX was

been how capital the whether there menus said stores? has for investments you menu maybe the testing it how is had think simplified going different, disruptive maybe you on I any and a

Leonard Comma

house, makes in an multiple is training of have line a a toasters slow inhibit redundant and I we've and very SKUs than for will looked the faster it the it these the products it execution stores of of of essentially there difficult much can at builds, actually also and we things things through or what would it as different been product that of seem last sauces, kitchen down of We've types first. felt make sandwich from of employees. of easier the standpoint for different a some speed test reduced be This very protein to we've then we and part we and where a the and we've done historically culinary places very very reduced so the builds the in in SKUs on the because happens kind the have be that like answer the well. and that -- to but sauces disruptive lot look carriers some like as ordered easier. and It's sandwich difficult on sandwich, produced for standardized multiple like other and of is some looked things and is in that at the that production a so the we operation we some of might procedures also not at are there serve moment, them breads, does was when essentially or specific the better that make cheese the of we what are things lens for way, back some bread to service have different and cheeses, in requires standardized these much for our spreads different tend the a place be have

about be for this to or have seem month, don't our are we a going into just we test so So well. any operators it complaints does customers; our from

on actually be the we're so take easier guests on test to our that we'll crews for things continue make to more and consistent even and We and some it the expand our of simple but working far easier. But things apply and that them bit later so to pretty learning's in make year. aren't ready have little disruptive those a it good, this evolve we

Operator

Barclays. Jeffrey of question Next from will be Bernstein

Jeffrey Bernstein

Two questions as well.

following color franchisees wondering, us or you you've get with the share you with can maybe profitability. profitability a First on color provide one, mentioned just much lot how just terms of ability and I'm frequency up their in more any their they just directional you if open whether think up, obviously, franchise the maybe and the P&Ls, remodels to to you're trends reinvest in inclination either offer stores? I of any have there, had And then seeing and one not aggressively kind the the you can new follow-up. what or

Lance Tucker

with of First big But any us data all, continuously and pretty give the our franchise sales some the perhaps from pretty along financial could Coast that of you've to so of got health how form very our franchisees overall balance get from the hit of strong. more and system ever to of we sheets. We we do data into that good have a solid course a better continuously speaking, in like we than trends and any standpoint, with investments given asked like We than deal the we manage health with have of do honestly. in past. look and good lot give able quarterly P&Ls performing in but P&Ls franchisees they're others, make the we West the is for do that strong is to the franchise feel if but the stores remodels, overall a the generally competitive said, the health labor a haven't particularly lot of environment those and here

Jeffrey Bernstein

about And achieve comps unit as like your think $X to seemed forward, but number growth growth billion XXXX, of predict, unit obviously in going critical. sales hard fiscal system we to are it then, so is

back decade, close have over consistently pretty past, to looking guys at the mean, XXXX units. you a I Just sat

your number Just of one, some stores, have by have years, you and of new the XXXX future unit is but over confidence in maybe net you in you fiscal a XXXX to growth open in system the have -- next number wondering, in in importantly units I two to years? stores more target know do or what have expect commitments of that acceleration what your confidence

Leonard Comma

would going from operations Company XXX our Qdoba we we look at into our Let of just Box, me time, we've my with sort a mention One that and versus invest opening second But the and choices result, the you made lead we first, capital some stores strategic to to and remarks. I this our tried made units. Jack that as that were that would was the stores the in of as around remained buying decisions grew There franchisees in that And were Box sort critical have XX in I'll XXXX toward over, outcome. to two refranchise them the was call last the our of would to from Jack it growing resources brand the we building. be available XX which that that our units capital years. essentially over led for if

by of I somewhat plateauing that sort So of think the design. that brand

our new one, some ability that we grow think, margins have And the about forward franchisees as think parts, labor pressures large are the today, so our feeling group units, they to industry. in of in I look highest of they're the and although well-capitalized

refranchising, would as the off expect redirect some And of to so, capital of they recent Jack brand. the into Box they their be in would able growing that roll we the

also our to want new incentives think continue will best take franchisees restaurant we in the one of We of. which advantage place to have

are the the our franchisees the And refranchising so existing keep the franchisees -- that majority in ones brought in stores of our that mind effort.

to we is when at pretty strong not only in to the also itself continue need to get it look our existing the brand for reach. and don't meet so It goals. Jack unit demand within see doesn't a we the us there growth our to ramp up to Box So all significantly targets up grow to long-term ramp that but are that stores, there, we well for although the think need

Operator

of America. Bank Francfort of Gregory Our is from next question

Gregory Francfort

at Maybe questions; you of and into separate how have Lance, you about about the that upon, have thought I the you a real I one XXX what I sort -- it question one, properties on you that? following -- those first looking thinking think just where maybe or two them for today. fully own Have was goes monetizing the David's estate. think analysis are question,

Lance Tucker

our So use it's and guidance ultimately bit something have becomes value. of We makes little we that it sense drive lot and our to that talk don't to a about want any how into think cash internally. we just that built we a whether of

board not on the if So I certainly changes. you that's necessarily that's something drawing say that update we'll but for would now,

Gregory Francfort

this year? normal an something of provide to your been on outsized you've based the you sort spend fund expect supplemental sort of know share specific to sort to where company base your that you advertising that this of that continue year I brand. adding that the expected of dollar you is store of or to for based Do use was overall the ad kind

Lance Tucker

it may for answer. incremental you in right significant provided but you pull to to marketing what can contributions doing think not did it's like what the not need become as now, that as $X contemplate guidance, At saw, at you this tell that, if So incremental does did to does is, the the levers event our would if you we be will that we But tell the 'XX. in guidance look we from we we pulls that we right as -- we the spend in I that reserve time, do XXXX. as in but the about XXXX going million feel of some, we rights

Operator

from Your of Geiger Dennis question will be UBS. next

Dennis Geiger

to most bit look balance XXXX. to through delivery, what the a just premium menu think if and and digital drive-thru on on accelerate to even for more you focus wondering the the assuming comp drive end that the a most is and going improvements But to I'm the the impactful initiatives as comp. you the strategy. could touch some color marketing you of your the value as experience. on should good thanks and be Lenny, about be but ops And enhancements critical, of

as this Just wondering can be as meaningful year. how all soon that

that improvement months? could we've kind just you in I to around of give what recent or in Thank is from embedded could that. related guess burger what color is your healthy a Just seen if some you. last guidance, environment QSR specifically Just QSR wondering say, that perhaps you

Leonard Comma

make is I an focused Yes. the The easiest rank way of important to sort ordering, this what to that attempt do are areas. think most

We've value. important think of consumer so number are point, the area and I got is the that our $X I be at right focus the lost one think competitors now price the ultra particularly transactions to vast of below providing is majority that our extremely aggressive. value to because

area second the focus that to in think service. I of got our has improving be guest the consistency

are significant of so performing is we're drivers or else. comp with can this digital I more our have on when see then poor think a create inconsistencies operating -- that those comp other drag and big do throughout our like very overall and the look operations chain, at are think I not what inconsistent associated us I outliers drag primarily that if that overall complement year. than we some there and and our as they look do. anything of delivery, And those trying initiatives to I although

redefined has important are how convenience. those that keeping I consumer with think think but things I they in more are the

you're going that necessarily space, sales. get If you aggressively space in don't the don't playing play to grow likely I no just your is vote. know in that to that

I don't counts So significantly. our necessarily know to that's it's the but have, keep that sort grow going guest to guess we of necessary

Operator

Holthouse Goldman Next Sachs. question from Karen will be of

Karen Holthouse

or is year it of into On that is timing price next sort about things, of or price carrying like bit price of of that? about mid-X% more quarter running reflective level terms thinking shift there the more end-user this part of Should of sort as we it like you're think in ticked from a driving relates the to lower something traffic things X%. looks a and side of company a to down then little forward

Lance Tucker

on cautious. is sales And we the right would we like market, we're aggressive at things, significant home couple be don't what's that even a is what food I plans. that very alignment versus we space, impact because second thing in business. a we to Yes, food has our home competitive for in we'll at this, one, of the seeing away with on if side inflation offers going competitive home, typically find conscious super from what's now of guide, we're But see a food be continue, pricing we're more obviously looking say get the going and when

but price, So going we other with the value typically that that for work we place. in unison we plant some plan also are have some to of in

be change price, driving trend overall on Our we transactions, not bad aggressive goal can can a allow for will more to be to really the on us. that outcome able us and sales if transactions and that's around

Karen Holthouse

growth those on into unit sites of have then pick what the sites. XXXX still pickup of a if How challenges. the some sales And we side sort imply been this in visibility does unit the plans signed opens XXXX on things, leases in against guidance you for much terms versus what saw that if do year of

Lance Tucker

a say of would couple I things.

and pretty XXXX. into into of a that actually XXXX good out some this, there shifted have units visibility were We

feel we units. about So solid those

expect third of processes You with a I the and closures. ability also have side think and on comfortable piece that the permitting of would of less other so the moved have out it we few the now feels as color in coin, at are and pretty look refranchising, leases the whatnot, we probably kind we've you to where

visibility and So pretty numbers, about there. unit our pretty overall decent good a feel amount of

Operator

Charles Next Andrew will Cowen. from be of question

Andrew Charles

talked then, how just strategy you value $X similar? and XXXX curious to seems $X And items offer to For pretty bundles. about that broadly single versus XXXX changed intentions $X the to that's $X

Lance Tucker

more and is than ever quantity the that things haven't of it items, frequency before. those about so we really those It's done

did that as what lower can line sale we it about that have today were products less Mash-Up that's of which Loaded those as it you Sauced a confident the is average year, provide look really see add-on and you'll last at look because did at items spot you playing add-on, they can at price we other at that below & the drive If think an were value sweet time, of we're and but an feel when one take franchisees items less their bundles for meal lower did value breakfast on fiscal this responded either how see as with Munchie like XXXX points. us in the as add-on, some very and/or pocket space our check dollars Loaded, to looking it can consumers who those used is the overall an to who construct a same for that you'll in consumers value primarily have and some consumer and an & in of the us because Sauced $X. not hand do it But it below but placed only price year $X right in and we also far do

Andrew Charles

then you you're and are of And I process meantime traffic? talk know to filling the the what still role, can the the about in priorities protect marketing CMO in efforts

Lance Tucker

repeat that? you Can

Andrew Charles

Yes.

meantime, terms candidates, role, know you're I priorities what to protect [ph] still from traffic but perspective help still are the the content Just, just the you're you in fill a CMO just looking to perspective? looking in for doing and policy-on-air of

Leonard Comma

are two the unrelated. that say would I guess I

a a essentially the at through On looking convenience our hand, significant a looking of in we're industry redefinition the CMO new is because industry. going we're of changes, for one amount

enabled convenience and at rise different Some the seeing also digitally of completely that is positions space. within you're sort convenience, of sort this of marketing

mix who have and well Guest can someone seeing and are the are Chief I'd Digital a there I who but Officer I additive rise, that this the really much on in positions traditional positions the the the in and that team. of end to is the bring my experience, are sort about but Chief as guess traditional guest on is thinking that the that is so think are day, type I positions bring today, you're that rather going I at Officer example, a For industry anything CMO forward entire CMO on Experience of as rise.

they versus has an is thing, we thinking skill that's sort our more of about been. as hire going bring really in So set CMO I more it industry will hopefully think unrelated that about where the and where future come I'm some the

I far sales As covered pretty doing have in transactions, as not the I've drive to vetted we're that only plan be covered VPs -- also going have to we think well two think and be. to what in drive place, front that forward, a our they think to I well have but agile proven but they've needed I when and team that operators the of quite also

Operator

of question Farmer Next from Jeff Gordon be [ph]. will

Unidentified Analyst

Just these the following guy's in is up on because across confidence I'm two question, consistently history shift customers just that responding -- your what value a offers value you to tiers. pricing Andrew's in of strategy? curious there just value the gives I'm

Leonard Comma

price to example. opted and is simply aggressively you're I else essentially XX% a they quick an the to from off that we shifted behavior don't We system the what providing that's and quarter playing is saw slow, value. not the BLT We just those consumers immediate go to started is into. the guess who response that in below when I go we're this seeing of what you point, $X consumers' would someone pretty use consumer --

we and this we that in dollars the seen share get in that and marketing So invest consistently the to again and we have time innovation dollars Jack of space, greater starts consumer choose a Box wallet. when time

not actually seeing think to where they're What's that's that downs, in presenting, into what is out we're get happening what you're or have shows. is happening. our your operators $X or data what's and that's price brand the data concerned brand on the that going is, the trading consumer based trade not historically what I the been presenting, point is of your either trading although

Unidentified Analyst

but of Company-owned one the And you again, and just guys you there. of think unrelated on of I fact sort just XX% touched focused have the in consumers your on this, restaurants I'm that terms California follow-up,

You were pricing for be before, other that years. asked above consumers' knowing what's at what's of about it, of you couple not on, better able Box, over but the word just ahead pricing menu coming going of that menu only going the not Do we think tolerance but California just lack next to terms just in of quick there that's Jack to ongoing given in a levels push in labor seen that are concepts backdrop? are historically service haven't the

Leonard Comma

That recent struck say cost to maybe we labor balance of that the today other aggressive figure is seems out continues with better California value. have and California I'd be although with has to all I balance competitors And performing years that been markets. to the to guess, be what the in a need marketplace rising lot the strongest to have. been of in than -- in how in trying market we're

sandwiches comparative a look operators are marketplace operators rate. the the just chosen that levels competitive. be to lower important considers much much for that'll that consumer and like being understanding, phenomenon, that and California above take it's hamburgers those California have to the So out combos. those we is have everyday analysis. where And that beyond I than likely items associated we confident look the range and be we will can marketplace I'd take that that remain a who and see pricing across chicken sensitivity or pricing -- priced at is that higher think that a items price significantly the very when the take rate more they and say with you and that things like this a need look everyday the strong. they operators California a of or place are so where very is within know the we'll pricing can within What be There things

Carol DiRaimo

Operator, I more we question. one for think time

Operator

be DiFrisco. question Last will coming from Matthew

Matthew DiFrisco

I and sales just question, may investing had bundle of sort weeks not. repurchase your of some did of of share your also but I I some perhaps on a of then or from is know view as comparable capital, peers the through the remodel to with clearly is your but to too guys seven campaigns, have clarify, to respect want raising just that. alongside. leverage understand obviously alongside what like increasing first And raising refer reversing the and some attractive, the wanted to the negative trends the you investing sort franchisees BLT accelerate done already?

Lance Tucker

I'll start with the second part that. of

in of as franchisees, contributing remodels, first highest all, the industry. which our percentages doing of one actually So XX%, it alongside on we're the relates we're is to major investing so, the

thing there. we So like the feel do that we doing need to we're

so I far to as you to would a think the seen improve. As go it say, we've trends, relates I don't the complete what sales is, seen tell we we've reversal. trends

Matthew DiFrisco

to accelerate So alongside or up I you that there more potentially continue a have potential just even hand? as follow-up the at to were if capital that investing would you're guess

Lance Tucker

Yes.

think any haven't -- haven't call word this that, looking don't would we here going decision made make am have We do to what's certainly any that's on I we for; we're today. made I the that -- we not said

contributions you assumed at we guidance, have in to do time. are quick with we let to kind cash to as that decided flow numbers more a if we're long-term number any articulated of we'll out that. said were free flow free there, So cash August than our with relative this But we going those do know certain not and of and numbers within

Carol DiRaimo

you and joining forward to we safe look Have Great. to us Thanks everyone And Thanksgiving. soon. happy for today. speaking a

Operator

This speakers. conclude today's may parties does conference. you, All disconnect. Thank

Jack in the Box (JACK) 20 Nov 182018 Q4 Earnings call transcript