Jack in the Box: Up in Smoke

Over just the past two years, Jack in the Box (NASDAQ: JACK) has yielded a -76% return for investors, significantly under performing peers and the total market (see Figure I).

Accordingly, Egan-Jones recommends shareholders withhold votes from Chairman David Goebels as well as Guillermo Diaz, Jr., Madeleine Kleiner, Michael Murphy, James Myers, and Vivien Yeung, whose tenures have coincided with severe and sustained value destruction at the Company.

Figure I: 2-year TSR of Jack in the Box Underperforms Peers and the Total Market (source)

Yum! Brands include Taco Bell, KFC, Pizza Hut, and Habit Burger & Grill. Restaurant Brands International (RBI) includes Burger King, Tim Hortons, Popeyes, and Firehouse Subs. McDonald’s is excluded from our peer comparison because its market capitalization is more than 100 times larger than that of Jack in the Box, making it an unsuitable benchmark for our analysis.

Jack in the Box’s challenges stem primarily from declining customer traffic over the past several years. While multiple factors have contributed to this trend, a lack of consistent and focused branding appears to be a central issue. Compounding these challenges, the Company has experienced significant executive turnover in recent years and recently sold Del Taco at a significant loss.

In April 2025, management launched the JACK on Track strategic plan to address these issues. However, the plan has yet to demonstrate meaningful results. Same-store sales continued to deteriorate following the plan’s introduction, declining to -7.4% year-over-year in Q4 of FY 2025.

The Company is also highly leveraged, with a debt service coverage ratio (DSCR) of less than one in the last two fiscal years.  Unless Jack in the Box can execute its planned debt reduction of approximately $300 million over the next 12-18 months while simultaneously improving store traffic and earnings, it may struggle to meet its debt obligations.

Jack in the Box Origins

Founded in 1951 in San Diego by Robert O. Peterson, Jack in the Box was an early innovator in fast food, pioneering the modern drive-through with two-way intercom ordering. Its early branding leaned heavily on a clown mascot and novelty appeal. As the chain expanded through the 1960s and 1970s, it began repositioning toward a broader, more adult audience.

A major inflection point occurred in the 1980s, when the Company famously “blew up” its clown imagery in advertising and adopted a more irreverent, tongue-in-cheek tone. This period also saw menu diversification beyond burgers and a brief, unsuccessful attempt to rebrand as Monterey Jack’s. Following a highly publicized E. coli outbreak in the mid-1990s, Jack in the Box focused on rebuilding trust through food-safety reforms and reintroduced “Jack” as a satirical, corporate-style mascot.

The Company developed a reputation for an eclectic menu featuring tacos, breakfast items, and unconventional limited-time offerings, paired with humor-driven marketing rather than family-oriented nostalgia.

What has gone wrong?

1. Lack of Brand Focus
   Historically, Jack in the Box was clearly positioned as a late-night and distinctly non-family-oriented dining option, with options such as the $4.20 “Merry Munchie Meal” in partnership with Snoop Dogg in early 2018. The strategy differentiated the brand and established it as a go-to destination for late-night occasions and for a specific set of clienteles.
   In recent years, however, this positioning has weakened. Its once-explicit late-night and countercultural messaging has been softened, replaced by an attempt to appeal to value-focused and health-conscious consumers.
   ‍
   Efforts to reengage the brand’s historical audience, such as the 2023 Snoop Dogg “Munchie Meal” that came with a purple haze air freshener (possibly named after a popular cannabis strain), have therefore been inconsistent and diluted. Without a clear brand focus, Jack in the Box’s menu spans burgers, tacos, salads, all-day breakfast, protein bowls, wraps, milkshakes, desserts, and chicken sandwiches. The Munchie Meal remains on the menu as part of an effort by JACK to retain its former banner demographic.
   
   While the fast-food industry has been dominated by large, well-known brands, smaller players such as Whataburger, In-N-Out, and Culver’s have established defensible positions via clear branding and consistent products. Conversely, Jack in the Box leadership has failed to satisfy their historical demographic while seeking to attract new ones.
   ‍
2. Pricing out the Core Customer
   At its peak from 2012 to 2015, Jack in the Box successfully employed a “barbell” promotional strategy, offering a wide range of value-priced menu items alongside higher-priced, premium offerings. This approach is common in the QSR segment and has also been effectively used by peers such as McDonald’s. Over the past decade, however, Jack in the Box moved away from lower-priced options. Given that its core customer base is primarily lower income, this shift contributed to meaningful declines in traffic.
   ‍
   Over the past year, the company has begun to address these challenges by reintroducing value-oriented offerings, including a $4.49 combo deal and the $5 Smashed Jack, as part of a renewed barbell strategy aimed at value-conscious consumers. In addition, Jack in the Box increased the size of its small beverages by 25% (after previously reducing sizes) and lowered the prices of most combo meals to $10 or less.
   ‍
3. Del Taco Fiasco
   JACK’s poor record is a symptom of poor management. Consider also that JACK fumbled an opportunity with Del Taco, despite Del Taco’s much clearer brand position.
   ‍
   In March 2022, Jack in the Box acquired Del Taco for $585 million, citing expected synergies between the two quick-service restaurant brands. However, in December 2025, the Company divested Del Taco for approximately $115 million in a sale to Yadav Enterprises, representing a substantial loss of invested capital. Notably, Yadav Enterprises operates approximately 220 Jack in the Box restaurants, or roughly 10% of the Company’s system-wide footprint.

Management’s Strategy: The JACK on Track Plan

In April 2025, just weeks after Lance Tucker began his tenure as CEO of Jack in the Box, the Company introduced its JACK on Track strategic plan. Management characterizes the plan as an effort to simplify the business and transition toward a more asset-light operating model.

According to the Company, the strategy focuses on three primary initiatives:

1. Improve capital allocation and reduce debt: Management plans to sell real estate, suspend the dividend, and reduce capital expenditures related to new company-owned restaurant development, with the goal of repaying approximately $300 million in debt over 12-18 months.
   ‍
2. Close underperforming restaurants: The Company announced plans to close 80-120 restaurants in 2025, with additional closures planned for 2026. This represents approximately 5% of the Company’s total locations. However, as reported on February 5, 2026, the company was only able to close 51 stores in FY 2025.
   ‍
3. Simplify the business model and investor narrative: This pillar includes the divestiture of Del Taco, a focus on expansion of franchisee restaurants rather than company-owned restaurants, and menu and pricing adjustments focused on lower-cost meal options.

Falling Liquidity and a Failing Strategy

With falling earnings and cash flow, Jack in the Box is poorly positioned to address its debt service each year, as evidenced by a DSCR of less than one in the past two years. Under the JACK on Track plan, the Company has indicated its intention to reduce debt by approximately $300 million over a 12-18 month period. However, achieving this target alone may be insufficient.

Additionally, the Company does not seem on track to make that goal as of its February 5, 2025, press release. The Company will also need to materially improve earnings and cash flow generation to meet its debt obligations.

Figure II: Debt Service Coverage Ratio at Dangerously Low Levels (FactSet)

To date, management’s strategy has failed to deliver results. Same-store sales growth was modest in Q1 2025 at 0.4% year-over-year (prior to the plan announcement) but declined to -7.4% year-over-year in Q4 of FY 2025, marking some of the weakest performance reported in years. This sustained deterioration suggests that consumer sentiment has not improved, while the continued weakness in the Company’s share price indicates that investor confidence remains impaired.

Recommendation

Under all its policies, Egan-Jones therefore recommends withholding votes from several directors who have overseen this value destruction.