Jack in the Box finds the ‘perfect cut’ at Del Taco

Image courtesy of Del Taco

Jack in the Box has completed its $585 million purchase of Del Taco, the company announced Tuesday, after shareholders approved the merger of two California-based fast food chains that are just a little different from their contemporaries.

“One of the main reasons we’re thrilled to bring Del Taco into the Jack family is because it’s the perfect fit between business model, geography, customer base and culture,” said last month Jack in the Box CEO Darin Harris to investors.

There are many similarities between the two chains, partly based on the menu. Jack in the Box is a burger chain that sells tacos and Del Taco is a taco chain that sells burgers. Both are based in California and have similar markets.

Both brands have significant late-night businesses and offer a combination of value and high-end products. And both concepts compete with much larger companies – Taco Bell, in Del Taco’s case; and McDonald’s, Wendy’s and Burger King in Jack’s case.

Both brands hope their combined buying power will help them be more competitive in this set at a time when costs are skyrocketing and technology demands from brands have never been greater. “Both brands will be able to scale in many strategic areas faster together than separately,” Harris said.

Certainly, as with most of these mergers, the two companies believe they will find “synergies” that will allow them to share costs or services that they can combine to achieve economies of scale and thus reduce overhead. of the company. Jack in the Box expects to find cost savings in supply chain, distribution and digital.

Jack in the Box is expected to generate $15 million in such synergies within two years, but he thinks he can exceed that amount. “We continue to be excited about the opportunities this transaction will provide and the possibility of exceeding our previous target of $15 million in run rate synergies,” said Tim Mullany, Chief Financial Officer of Jack in the Box.

That said, there could be some changes in perspective for Del Taco as it falls under the Jack in the Box umbrella. One can be its corporate stores.

Jack in the Box has approximately 2,200 locations, approximately 95% of which are operated by franchisees. Del Taco has approximately 600 locations, half of which are owned by franchisees. Jack in the Box executives suggested they might consider refranchising some of the Del Taco company stores.

“We see an opportunity for the refranchising strategy,” Harris said. “It was part of the strategic approach we took when we bought Del Taco.”

But, Harris said, the company hasn’t had a chance to meet with Del Taco franchisees and determine whether to sell company stores. Additionally, “there is a lot of interest outside of the Jack in the Box system expressing interest in both Jack in the Box and Del Taco,” Harris said. “We have done some work, but we are not able to talk about it openly.”

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