Dive Brief:
- Jack in the Box is joining the value battle among major QSR chains with a Jack’s Munchies Under $4 menu, announced on Wednesday. The menu offers a combination of new items and core menu items.
- While some of the Munchies menu items are available now, more will become available on Monday, including a new Sourdough Grilled Cheese and French Toast Sticks.
- Restaurant brands are reacting to a broad consumer sentiment that pricing actions of recent years have gone too far, with McDonald’s and Burger King both attempting to roll out value deals through their franchised systems.
Dive Insight:
Jack in the Box plans to use the Munchies menu as a hook for customers, accompanied by “disciplined pricing on our add-on and upsell favorites to increase attachment,” Darin Harris, Jack in the Box’s CEO, said on the chain’s most recent earnings call. In Jack in the Box’s fiscal Q2 2024, comparable sales fell by about 2.5%.
The menu is not meant to compete directly with new meal promotions at McDonald’s and Burger King, Harris said on the earnings call, noting that Jack in the Box already does value meal promotions. Instead, the Munchies menu items are “snack-sized,” in keeping with a broader industry emphasis on snacking as a way to bolster different dayparts and potentially create new occasions.
“Value is what you get for what you pay, and so the right channel to the right guest is really what we’re focused on. Sometimes that’s not just a $5 meal. We do have that available to us, and we will promote it in app,” Harris said.
The consumer price index of food away from home prices skyrocketed from 290 in March 2020 to about 365 in April 2024, taking the mid-1980s as the base value of 100, for a proportional increase of about 26% over four years. The aggressive increase in fast food prices began to dampen traffic in recent quarters, with the price elasticity of demand for some chains changing. Starbucks, for instance, found pricing unable to compensate for traffic declines in Q2 2024 when a 7% drop in U.S. transactions was only partly offset by increased prices.
On the chain’s fiscal Q4 2023 earnings call, Harris said Jack in the Box was looking to implement price increases of 6% to 8% in 2024, in part to offset increased labor costs attributed to AB 1228.
The reversion to value as opposed to price increases is evident in industries outside of restaurants, as well, with retailers and grocers like Target and Walmart cutting prices on a wide range of goods.
