Menu innovation drives Qdoba sales growth

by Rebekah Schouten
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Qdoba has complemented the new pricing with new menu items featuring unique flavors like the spicy tequila mango-smothered burrito.

SAN DIEGO — Qdoba Mexican Grill is ditching discounts and focusing on flavor. The restaurant, a subsidiary of Jack in the Box Inc., has restructured its pricing and is offering unique menu items to draw in customers.

Lenny Comma, c.e.o. and chairman for Jack in the Box Inc.

“We’ve been transitioning away from some of the more value and discount-oriented consumers that we attracted in the past, to consumers that are more focused on freedom of choice and different flavors,” said Lenny Comma, chief executive officer and chairman for Jack in the Box Inc., during an Aug. 6 earnings call. “The new pricing structure and intensified focus on menu innovation are the first major outcomes of Qdoba’s brand strategy and positioning work. Qdoba is now the only major fast-casual Mexican brand that doesn’t nickel-and-dime you by charging for extra things like guacamole and queso.”

Net income at Jack in the Box Inc. in the third quarter ended July 5 was $26,831,000, equal to 72c per share on the common stock, up 9% from $24,703,000, or 62c per share, in the same period a year ago. Revenues increased 3.2% to $359,506,000 from $348,492,000.

System-wide comparable store sales for Qdoba rose 7.7% in the third quarter, reflecting a 6.6% increase in company-owned restaurants and a 9% increase in franchise restaurants.

Mr. Comma said Qdoba has complemented the new pricing with new menu items featuring unique flavors “guests can’t get elsewhere,” like the spicy tequila mango-smothered burrito and the mango salad.

“We don’t want to use discounting as the major driver,” Mr. Comma said. “So we’ll continue to have promotions, but we won’t be the bargain-basement brand that’s driving them in through a bunch of low-priced offerings and freebies. It will be really based on higher-quality food that gets the repeat traffic in there and attracting new guests.”

Qdoba plans to focus less on discounts and more on higher quality food customers ask for, like the mango salad.

Qdoba has lost a percentage of its customers due to the pricing restructure, mainly those focused on discounting and coupons. But, Mr. Comma said, the restaurant has plans to fill in those gaps.

“We feel pretty good about where this whole thing has played out, because we’ve been able to replace the vast majority of those value-seekers with people who are looking for the differentiated flavors and quality,” Mr. Comma said. “So going forward, we understand that we are going to need to start ramping up the attraction of that new targeted consumer. And that’s why we’ll be testing new ways to communicate with and attract that set of consumers to our new offerings.”

System-wide comparable store sales for Jack in the Box increased 7.3% for the quarter, reflecting a 5.5% increase in company-owned restaurants and a 7.9% increase in franchise restaurants.
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