Click Here for great Idaho Potato Recipes!

Jack in the Box Bumps Its Head on $4 Price Ceiling

Filed under Discount, LTO, Marketing, Menu, Pricing, Test Market

How real is the widely accepted $4 limit on what consumers are comfortable paying for a quick-service menu item? Real enough that it factored into Jack in the Box’s surprising 11.1% decline in same-store sales for the quarter ended Jan. 17, 2010.

jackextIn a conference call today, Jack in the Box Chairman-CEO Linda Lang told analysts that bad weather, unemployment, aggressive discounting, lower supermarket prices and other continuing problems hurt sales, but she also conceded that the Southwest Chicken Bowl introduced on Nov. 6, 2009, underperformed. That the item was introduced at a $4.29 price (which some franchisees raised) didn’t help, Lang said. In fact, after test-market results persuaded Jack in the Box that its Grilled Sandwich line was a keeper, the chain “re-reciped” the sandwiches so they could be profitably menued under $4. The Turkey Bacon & Cheddar and Deli Trio sandwiches were introduced Feb. 7 at $3.99. On Feb. 23, Jack in the Box will give a free Grilled Sandwich to customers who buy a large drink.

The chain also launched a $3.49 Jumbo Deal that bundled a Jumbo Jack burger, two tacos, small fries and small drink that didn’t bolster same-store sales enough to head off the double-digit decline. But Lang says Jack in the Box will continue to have faith in similar bundled meal-deal promotions rather than deep discounts even though “we haven’t seen a decrease in discounting” among QSR competitors. Land noted that Burger King’s moving off the current $1 Double Cheeseburger deal “will help” all other QSRs.

Lang said the company’s Qdoba Mexican Grill chain fared better during the quarter, with same-store sales off only 1.7%. She suggested that it benefits from a higher-income clientele and that those consumers are bouncing back from the recession faster than are young, lower-income consumers who are more likely to frequent Jack in the Box. Qdoba soon will mount an online promotion for its Craft 2 pick-your-meal-component menu.

Jack in the Box is accelerating new-menu-item R&D, Lang said to meet “greater need for new products and news” in the marketplace. The chain continues to test Quesadilla Grillers, similar to the grilled quesadillas at Qdoba, and could add them as an extension of its new grilled-foods line.