Why Jack in the Box is Floundering While Its Qdoba Division Flourishes

Last Updated May 14, 2010 10:44 AM EDT

Jack in the Box (JACK) and its subsidiary Qdoba Mexican Grill are overseen by the same corporate management team. Yet, Qdoba is flourishing and has growing comparable-store sales, while the company's core brand Jack in the Box saw the same metric fall nearly 9 percent in the second quarter. The same trend seems likely to continue in the next quarter.

What's Qdoba got that Jack doesn't? Here's a look at three points of difference for Qdoba:

  • More franchise owners managing stores. There's a general rule in restaurant that hired-gun managers aren't as motivated as owner-operators and tend to have poorer performance at their stores. Jack has been trying without much success to unload its large stock of company-owned stores -- more than half its total of 2,200 units -- selling off 30 so far this year with another 21 set to close later this fall. Jack's goal is to unload 200 company stores in all this year, but that will hardly make a dent in the problem. Many of these stores the company got stuck with after one big franchise owner of 70 units went bankrupt. Until they can sell off their company stores, many of these units likely won't gross as much or operate as efficiently as franchised restaurants with owner-operators. By contrast, Qdoba owns just 160 of its 500 restaurants.
  • A concept more in line with today's healthy-dining trends. Qdoba's fresh-Mex concept stands for healthier, fresh food. But no matter how many grilled sandwiches Jack introduces, the chain is still heavily associated with Ultimate Bacon Cheeseburgers and fried onion rings. Lots of Americans just shouldn't be eating that kind of food anymore. The "fast-casual" feel of Qdoba versus the traditional fast-food attitude Jack shares with McDonald's (MCD) and other burger chains gives consumers more of an 'affordable luxury' feeling, which given how strapped for cash many diners are right now is more alluring than hitting the $1 menu at a fast feeder.
  • Better menu innovation. While J in the B heavily promotes a steady stream of new food items, Qdoba's new Craft2 mix-n-match menu gave diners what they want -- more freedom to create the combo meal they'd like. The promotion was so successful Qdoba added new items to it recently to keep the momentum going.
Photo via Flickr user roland
  • Carol Tice

    Carol Tice is a longtime business reporter whose work has appeared in Entrepreneur, The Seattle Times, and Nation's Restaurant News, among others. Online sites she's written for include Allbusiness.com and Yahoo!Hotjobs. She blogs about the business of writing at Make a Living Writing.