Jack in the Box Invests in Robotics to Curb Labor Issues – QSR magazine

Jack in the Box is turning to automation and technology to mitigate ongoing labor shortages.

During the brands Q4, same-store sales were essentially flat at 0.1 percent year-over-year, and grew 12.3 percent on a two-year basis. The company estimated that limited operating hours due to lower staffing levels impacted comps by roughly 3 percent. In Q1 thus far, the system is seeing comps in the low-to-mid single digit range and a two-year stack in the low double digits.

To reduce the number of bodies needed in the kitchen, Jack will soon test robotics at the fries station and also look to implement automated drink machines and self-cleaning milkshake machines.

These technologies are things that in our analysis can be fairly meaningful when we look at the unit economic model in the long-term and across the system as a whole as far as being able to reduce required average labor hours per week, said CFO Tim Mullany during Jack's Q4 earnings call.

Mullany also discussed a software program that enables restaurants to manage labor and food costs more effectively, and an op services team whose sole focus is refining process systems and technology to elevate restaurant-level economics. The CFO said the group has built a plan to remove a minimum of two points from Jack's P&L.

Additionally, CEO Darin Harris noted that recently hired Chief Information Officer Doug Cookhas brought forth ideas on improving AI tools to drive out more costs. The industry veteran has more than 20 years of experience with leading guest and employee-facing platforms. He previously served as Jack's interim CTO, and prior to that role, he served as chief information officer of Pizza Hut and spent two decades at Sonic.

Harris said franchisees participate in investments through a tech fee, which the company can increase over time.

We would have to sit down with our partners, our franchisees, and help them see the roadmap and participate in that journey with us, and we've been doing that accordingly, the CEO said. We've showed them our tech roadmap, and I've started bringing them along in the process to where we're taking technology.

To help with recruitment, Jack is using mobile and app-based application portals in company-run stores to quicken processing and selection of employees as opposed to restaurant managers taking time to review applications. The chain is also leveraging social media and online channels to garner greater impressions and cast a wider net in hopes of attracting more workers.

READ MORE: Jack in the Box Attracts New and Core Guests with Balanced Menu

Jack's staffing is most impacted in the Northwest and Midwest, and least affected in California and Texas. Late-night is the hardest-hit daypart, and the brand is hoping to improve matters with premium differential pay, which will soon be rolled out across all company restaurants. Where the initiative is active, operating hours have increased 25 percent.

As these headwinds alleviate, we have an opportunity to not only take share and lead, but dominate this daypart versus the competition, Harris said.

The chains 0.1 percent comp performance in the fourth quarter breaks out to a 0.6 increase for franchises and a 4.4 percent decrease at company-operated stores. The main difference was that franchisees took more aggressive pricing actions and found better success with hiring and retaining workers.

Jack's Q4 performance was heavily driven by menu price increases, according to Harris.For 2021 overall, the company lifted menu prices 3.5 percent, and data suggests theres more opportunity. The CEO said the company took less than its peers last year and that its seeing favorability with the core menu whereas historically, restaurants took much of their price in the promotional menu.

Typically, theres four opportunities throughout the year to increase prices, Mullany explained. But the chain is examining how it can accelerate that pace in 2022 and determining sensitivity from customers.

This is something that's clearly top priority for the company, the CFO said. We understand the margin pressures and headwinds we have, and we understand our ability to mitigate those by taking price and, again, that we have dry powder to do that. So, we're actively evaluating that acceleration.

Jack's same-store sales were also negatively affected by labor issues within distribution channels, which hurt comps by 1 percent. During Q4, one of the companys largest distribution centers faced a walkout by staff. Harris views it as a one-time event, and something thats not related to the larger macroeconomic environment.

Both our partner at the [distribution center] and us, we learned about ways to mitigate that for the future, and we've put multiple layers of protection in place so we didn't have to go through that challenge again, Harris said. But it was definitely something we didn't anticipate and now we're prepared for beyond the shadow of it all."

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Jack in the Box Invests in Robotics to Curb Labor Issues - QSR magazine