Jack Be Nimble

David Theno and Terri Graham step up food quality and flavor while keeping value in the equation at Jack in the Box.

Chain Leader

Monica Rogers

Outlaw Burgers, Malted Crunch milkshakes and Sirloin Steak 'n' Cheddar Ciabatta sandwiches are just a few of the upmarket product launches powering Jack in the Box's continued spring above status-quo quick service. Same-store sales at the San Diego-based company grew 3.4 percent over the previous 12 months (fiscal year ended Oct. 1), compared with an average 2.9 percent industrywide gain, according to Atlanta-based RBC Capital Markets.

And some analysts believe the best is yet to come. "Jack in the Box has churned out an average of nine quality products a year since it opened its state-of-the-art innovation center in 2004," says Larry Miller, restaurant analyst at RBC Capital Markets. "That's a leadership position we expect them to keep." With management's vision for "reinventing" the brand and embracing "the total picture—price, value and experience," Miller anticipates continued same-store-sales growth and improved returns as the chain grows from 2,065 units in 17 states to a national brand.

Jack in the Box's short-term strategy moves the best design, food and service elements from the company's discontinued JBX Grill, the fast-casual concept it tested and then halted in October 2005, into re-imaged regular stores. While the company is still adapting service and design bits from the upscale test for application systemwide, upscale and high-flavor-profile food winners have moved much faster to the field.

"Natural-cut fries, natural fresh cheeses, new sauces and toppings, the ciabatta sandwich.…There's a ton of stuff we initially did for JBX Grill that's done extremely well launched systemwide on Jack in the Box menus in '06," says Senior Vice President of Quality and Logistics David Theno.

For example, in August the company launched revamped premium shakes such as Vanilla Malted Crunch. Like those at JBX, the shakes use ingredients such as real-fruit purees and higher-end chocolate syrup in the mix, and come in clear plastic cups with whipped cream and a cherry on top.

Likewise, creative spreads and sauces such as the cilantro-lime dressing on the $4.89 Acapulco Chicken Salad that launched this summer were tested at JBX Grill before adding oomph to Jack in the Box's lineup.

Real-Time Tech

To get these and other products to market, Theno works with Vice President and Chief Marketing Officer Terri Graham, Theno on development; Graham on strategy. Both say Jack in the Box's Innovation Center has been key to the process. Opened in 2004, the Innovation Center is where menu ideation, development and testing happens. "It's amazing to watch," says Graham, "because new technologies we have in place at the center actually enable us to do product refinement in real time."

Take the test of the Chipotle Chicken Ciabatta sandwich, $4.39, which the company launched in April. Designed in response to guest desires for bolder flavor and high quality, the sandwich includes choice of grilled or spicy crispy chicken with green-leaf lettuce, sliced tomatoes, bacon, cheddar cheese and smoky chipotle sauce. But guests tasting early versions of the sandwich said it was too bland. "And because those responses were typed right into laptops, we were able to take that real-time statistical profile and tweak the product so the next panel that came in tasted products that were a little hotter," Theno says.

Ultimately, the sandwich that went to market played up the smoky notes of the chipotle. "We didn't end up taking the sandwich to a spicier heat level," says Theno. "We just better enhanced the sauce to bring out the full flavor of the chipotle."

Price, Value, Experience

Looking at the bigger picture, Jack in the Box tackled menu strategy on three fronts in 2006: launching a new product each quarter, weaving value promotions with premium products, and introducing products that focus on specific dayparts.

Broadening breakfast—an underutilized daypart for Jack in the Box—the company added biscuits systemwide in September as a side item and in two breakfast sandwiches: bacon, egg and cheese, and sausage, egg and cheese, each $1.99.

Traffic-building promotions included summer's The Big Deal, a $2.59 bundle of a chicken sandwich, two beef tacos and a 20-ounce drink.

Indulgent products included the Diner Melt combo meal offered from May through July. It featured a one- or two-decker patty melt topped with two cheeses and grilled onions, paired with natural-cut fries and a premium shake for $5.39 and $5.79, respectively. The two Outlaw sandwiches also fit the premium category. The burger version, $3.29, has fried onion rings, bacon, American cheese, lettuce, tomatoes and barbecue sauce. The spicy chicken, $3.89, substitutes a spicy fried chicken breast for the beef. And the Steak 'n' Cheddar Ciabatta, $4.59, launched in October, crowns the lot.

Of these, developing the Steak 'n' Cheddar Ciabatta sandwich—marinated sirloin pieces on toasted ciabatta with cheddar cheese, red onions, tomatoes, green-leaf lettuce and creamy peppercorn mayo—took the most time. The company spent two years developing the sandwich, "testing all the varieties of steak available to get the right flavor, texture and bite," Theno says. During early tests, Theno recalls, "People would say, 'Well, that's steak-like.' But we spent time and did the diligence to ensure the sandwich would feature real steak, not something like it."

King of Steak

Throughout the process, Theno's personal penchant for red meat helped him not only endure but enjoy the task. "I'm the king of steak," Theno laughs. "I've always loved the texture, the aroma, the wide variety of tastes." But taking that devotion deeper than his own diet, Theno got a Ph.D. in both food and animal science, leading to jobs directing food quality and safety at Armour Foods and Kellogg's. He joined Jack in the Box soon after the chain's E. coli outbreak in 1993, where he created and implemented a comprehensive system for safely preparing, holding and serving food. Willing to share the program at industry and USDA food-safety councils, Theno helped change the way the fast-food segment handles hamburgers.

But whether he's working on burgers or French toast sticks, Theno says his development objective in the quick-service setting is the same as it was when he shaped food for sale in the retail case: "Your whole equation only works if you deliver on the promise. People see a photo on a package of food or on a restaurant marquee and say, 'That sounds like what I want.' It's my job to deliver on it. If the taste doesn't meet or exceed guest expectations, I've failed."

Thus far, Jack in the Box's efforts to up the flavor and quality ante have been successful, with some of its most positive guest reactions linked to its burgeoning line of ciabatta sandwiches. The bread, says Theno, has been crucial to their success. With a distinctive but not overpowering flavor profile and texture, ciabatta is hearty, holds up well and is a great platform for premium builds and flavors, Graham says.

Jack in the Box first used ciabatta-style bread in February 2004 for a deli-sandwich trio called the Pannido. "It had some loyal users but just didn't resonate with our core user," Theno says. Still, because guests liked the bread so much, Jack in the Box had its supplier change the foot-long thin loaf used for the Pannido into a square ciabatta roll. The company debuted the square roll with its February 2005 launch of the Bruschetta Chicken Ciabatta, $4.29, grilled chicken breast with provolone cheese, green-leaf lettuce, mayo-onion sauce and diced tomatoes marinated in basil, garlic, olive oil, vinegar and Parmesan cheese. The roll now serves as the platform for several chicken sandwiches, burgers, a breakfast sandwich and the new steak sandwich.

All Day, Every Day

While the ciabatta line underscores Jack in the Box's success developing high-end tastes, improving operations to consistently deliver those tastes continues to be a challenge. "Serving the whole menu, all day, every day, is one of our major points of differentiation from competitors, and it's also one of our biggest challenges," says Theno. "There's a complex choreography that goes into making that happen."

Theno says he continues to put a lot of thought into "pre-prep and things that will help us get a running start on items that might be a speed bump during certain times of the day." Someone ordering a chicken-fajita pita sandwich at breakfast time, for example, used to throw a wrench into the works. "But we've done some things with pre-positioning of ingredients, etc., to allow handy access and to simplify getting that sandwich ready quickly, no matter when it's ordered," he says.

Keeping food costs in line is also a challenge. "Used to be, quick service was its own competitive set," says Theno. "But the need to improve quality to compete with fast casual and casual theme at the same time that we offer value has been a continual hurdle for us. There's been a lot of price pressure."

Relieving some of that pressure: Jack in the Box's higher-priced premium products. "Our increase in same-store sales through the first three quarters of this year was driven by an increase in transaction and an increase in average check," Theno says.

Moving forward to next year, Graham says guests continue to want higher-quality, fresh ingredients that offer more diversity and higher flavor profiles: "Products that go beyond everyday fare." She says Jack in the Box will continue to evolve breakfast offerings, offer more high-quality indulgences and more snack options along with new lunch and dinner items.

While Theno hopes to allow for some regional variation in menus as Jack in the Box grows, such items would still need broad appeal. "If the product doesn't have velocity, it doesn't stick," he says. "It has to appeal to a large group."