Jack in the Box Heats Up Combo of Food, Groceries, Gasoline
Jack in the Box Inc. is pushing its new combo: gasoline and groceries to go with your burgers and fries.
Since last fall, the San Diego-based chain has stepped up plans to open more fast-food restaurants adjacent to the company’s Quick Stuff convenience stores -- mini-marts that stock items from diapers to detergent and where gasoline bays outside sell Shell, Arco and other brands.
It’s a twist on one-stop shopping that Jack in the Box says earns more than double the profit of a stand-alone restaurant. And like other fast-food purveyors that have buddied up with retailers, Jack in the Box has found that alliances help blunt the effect of falling sales and rising real estate costs.
Customers seem to like it too. “I find this very convenient,” said Mike Beacon, 47, a hearing-aid salesman who stopped by the Anaheim Quick Stuff after buying tacos at the adjoining Jack in the Box. “It’s got pretty much everything -- coffee, snacks, gas, food and, of course, Lotto tickets.”
Co-branding has been around for years at highway truck stops, and now it’s picking up steam in cities and suburbs. Sharing space is a cost-effective way to increase traffic for retailers and fast-food outlets.
Both are facing challenges. Convenience stores have been hurt by a decline in cigarette sales. Restaurants dependent on burgers and fries have seen diners switch to upscale sandwich and ethnic food shops.
“Everyone’s trying to maximize the value of a piece of real estate,” said Larry Miller, a Florida-based consultant who teams up retailers and restaurants. “Just having multiple draws to a location will add to the customer count.”
McDonald’s Corp. has outlets in 800 Wal-Mart stores, most of them in the U.S., and plans to open about 100 more this year. In a pilot project, there has been a McDonald’s in a Blockbuster video store in College Station, Texas, since 2001, and the company has been pleased with sales, a spokesman said.
Louisville, Ky.-based Yum Brands Inc. has installed more than 200 Pizza Hut and Taco Bell restaurants inside Target stores. And more than 10% of the 500 Panda Express restaurants, owned by Rosemead-based Panda Restaurant Group, are housed in Vons grocery stores, mostly in Southern California.
Unlike other fast-food chains, Jack in the Box decided to launch a convenience store line, Quick Stuff, to partner with its restaurants.
The company plans to open eight combos this year and to add as many as 150 more over the next five years.
“There is an advantage to having the two sites and sharing the cost of the real estate,” said Lenny Comma, who heads the Quick Stuff project.
“It helps us make a better return, and it lets us into locations that we would not be able to afford for a stand-alone Jack in the Box.”
Much of the prime fast-food real estate in established communities has been snapped up, said Philip Mangieri, a partner with Restaurant Research. That makes acquiring sites expensive, putting pressure on restaurants to maximize returns when they buy land.
Along with others in the struggling fast-food sector, Jack in the Box must watch every penny. The company posted 2002 revenue of nearly $2 billion but saw net income in its fiscal quarter ended Jan. 31 fall nearly 20% to $21 million compared with the year-earlier period. In its second quarter, Jack in the Box expects a 4% drop in sales at restaurants open at least one year.
With the Quick Stuff combos -- which were launched in 1998 but didn’t become a major corporate initiative until last fall -- the company can improve its profit picture while appealing to consumers on the go.
With brightly lighted gas pumps a short stride from the restaurant door, the Jack in the Box-Quick Stuff alliance on busy Magnolia Avenue in Anaheim has the appeal of a highway oasis.
“I need fuel and I’m hungry, so I need fuel for my car and fuel for me,” said Oliver Ruffin, 43, as he waited for his lunch order. “This works.”
The restaurant has a drive-through window, but customers can’t use it to order a gallon of milk or mouthwash to go with their Philly cheesesteak sandwiches.
Patrons enter the site via the restaurant or the convenience store; the two are joined by a central area that includes a 50-seat dining room and restrooms.
“We’ve proven to ourselves that we can operate these facilities at a level that is telling us to build more and increase the pace of construction,” Comma said. “We’re well ahead of our targets.”
The Jack in the Box venture is being watched by competitors, including some that have yet to embrace co-branding.
“Seeing them does make us say, ‘Hmmm, let’s see how this works for them,’ ” said Renea Hutchings, executive vice president of development for Santa Barbara-based CKE Restaurants Inc., which owns the Carl’s Jr. and Hardee’s chains. There are several CKE restaurants teamed with convenience stores, but those were created by individual franchisees, not top management.
In the mid-1990s, some convenience store operators sought to boost profits by becoming Carl’s franchisees, and they struggled with the transition, Hutchings said.
At a convenience store, there typically are two people working, he added. But “you have 12 at least in a fast-food restaurant. It was hard for people used to managing just two or three people.”
Not for Gil Ficke and his partner. They tore down their Long Beach convenience store and in 1999 opened the Long Beach Travel Center -- which has a Carl’s Jr. outlet, a Green Burrito restaurant, a convenience store, a Baskin-Robbins concession and a utility bill payment center.
“It made sense to do this,” said Ficke, who estimates that adding the restaurant helped boost convenience store sales from about $35,000 a month to nearly $150,000.
“We’re both serving the same customer: people on the run.”
