Jack in the Box Inc. (JACK) Earnings Call Transcript & Summary

Good afternoon, everyone. It's John Glass from Morgan Stanley, the restaurant analyst here. And it's my pleasure to welcome you back to our Global Consumer Conference 2020, virtual style. Before getting into the fireside chat with Jack in the Box, I do want to just again, cover a couple of housekeeping items that you may have heard of before. First, there is a function, if you're listening to the webcast, to ask a question. So please feel free to do so. I would just encourage you to ask them early and often as they occur to you that way, it gives me there a chance to look at them and interject them as we're covering a certain topic. Secondly, I'm obliged to provide to you disclosures, 4 important disclosures, please see our Morgan Stanley disclosures at our website, morganstanley.com/researchdisclosures, or of course, you can ask your Morgan Stanley sales representative. Well, thank you all again for joining us. It's my pleasure to welcome Jack in the Box management team to our conference, a virtual conference this year. I'm joined this afternoon by Darin Harris, the company's CEO; Dawn Hooper, Principal Financial Officer; Sean Bogue, who's the Treasurer of the company; and Carol DiRaimo, a long time Jack in the Box face, who's rejoined the company to pinch-hit on some investor relations. So thank you all for joining us this afternoon.

Absolutely, appreciate it.

Darin, I wanted to -- you are quite welcome. I wanted to, Darin, maybe to have you make a couple of introductory remarks in the form of 2 questions. First, for those of you who maybe are less familiar, you joined Jack in the Box in June as the company's CEO. And so those who have not been as close to the story and haven't maybe even on the last couple of earnings calls, can you just provide us just a brief introduction to you by way of your background, from a restaurant perspective and other industries. And then I want to talk a little bit about how you think about the organizational structure. So first, Darin, a little bit about yourself, please.

Sure. I grew up in Kansas and attended Creighton and Kansas University playing baseball. And I bring up baseball because it was really how I started my career into the restaurant industry. Back working with the Montreal Expos and trying to get Pizza Hut express to come to a stadium. And through that, I developed relationships with those at Pizza Hut and found out that they were going to grow nontraditional locations across the world and started having conversations about what I would have liked to have seen at our stadium, which was too small. Those conversations led to me doing research into co-branding and nontraditional development, and ultimately a position with Pizza Hut to join them to help them launch their nontraditional growth across the country. And from there, the career progressed in development, mostly growing units at Pizza Hut, We -- I think we opened 400 nontraditional units in those first 2 years, so aggressive growth. And then over time, I joined other brands and led development for Captain D's and Arby's, progressed into being a franchisee of Papa John's and Qdoba. And then actually jumped out of the restaurant industry for a time as a COO of Primrose Schools, a fast-growing franchise company owned by Roark Capital, and then did a turnaround stint as the CEO for a private equity firm that owns CiCi's Pizza Hut -- CiCi's Pizza. And then most recently, I was with Regus and helping them grow flexible working across the country, and I led their North American business that grew EBITDA at 32% growth for the last year I was there. So a lot of my background you heard is a story about growth.

That's fantastic. And I want to touch on that in a moment. But Darin, just before getting into growth, you did come into an organization where you're making some changes, a CFO search that's underway. You talked about putting in the formalization of a CMO role. Can you maybe just talk about some of the changes either have or plan to make in the near-term on the organizational structure and what we should look forward to and roles that need to be filled?

Yes. We're deep in a search process for both our CFO role and our CMO role, and I've been very encouraged by the level of interest from candidates and the candidates we've been seeing. And so hopefully, we'll have those 2 roles and positions filled very shortly and be able to announce that. I'm looking forward to doing that. And then beyond that, I've already [indiscernible] both side of the business to really focus on the front end, meaning the real estate and franchise sales component of our growth engine. And so that has been solidified by a gentleman by the name of Tim Linderman, who will lead that component of our business.

Well, that's great. And that leads into my next series of questions and -- which is on development. I think normally, we often talk about same-store sales trends initially or sort of talk about the current trends, but I think it's such an important conversation, particularly as it relates to Jack. So maybe can we talk about the return-to-franchise-led development. And speaking early on about some of the barriers that you needed to remove or changes you need to make in order to stimulate interest in franchise developments. So maybe early observations about where the company was from a development history and some of the early changes you're making to ensure that in the future, we start to see some franchisee-led development in the brand? Darin, are you there?

Sorry about that. Yes. So if you think about it historically over the last 10 years, Jack in the Box went through a transition from being substantially company-owned to a franchise or asset-light model. And so during that transition, a lot of the activity was about refranchising and selling units to existing employees or existing franchisees and having them commit to some level of growth, but they were also paying a substantial multiple for the business as well as some remodel commitments. So a lot of things from a capital standpoint were part of the requirements. Also, on top of that, the real focus of the organization at the time was growing Qdoba and using that as their growth vehicle, and really having a very stable cash business in -- cash-generating business in Jack in the Box. So now that Qdoba has been spun off prior to my time, the focus is now back to how do we grow Jack in the Box? And what do we -- what resources do we need to do that? And how do we focus our energy around growing Jack? Part of it was we needed to resolve the franchise lawsuit that was out there. Since I've joined, we've been able to settle that lawsuit and clear the path forward for growth and really align with our franchisees. And we're encouraged by our franchisees because in 2019 and '20, the openings that we've seen occur have opened higher than the system average. Franchisees have been really enthusiastic about growth. We did a recent survey where 2/3 had communicated to us that they're interested in growing and willing to build additional locations. And that's just our existing base. And so beyond that, and we had 27 new openings in 2020 and we would expect that the 2021 openings could be somewhere in that same unit count. But in order to really accelerate it, part of it was putting a really structured approach into how do we attract new franchisees, how do we approach our existing franchisees to grow. And so we've put that structure into place. But we've also been working on a lot of different prototypes, focused around taking cost out of the bill to generate a better return, having flexible prototypes that can fit on many different types of properties or locations where our guests want to consume Jack and experience jack. So things like an in-line or in-cap, nontraditional dark kitchens or just opportunities for conversion that we're seeing happen. Historically, Jack wasn't focused on those opportunities, mostly a freestanding prototype. So what we're doing going forward is really going to find out where our consumers are and let's go meet them in the way that they want to experience the brand.

That's very helpful. I wonder if you could just expand on a couple of the things you brought up. One is -- when you think about the initial wave of development and you're talking to franchisees, one is are you thinking now about the existing footprint of the Jack brand that there's enough -- ample development opportunities just within the markets you are in now? Or are you already talking about new territories? And so how do you think about what the potential is just in your existing markets? And how do you think about thinking about developing in those markets versus entering new territories?

Yes, sure. The way we're thinking about it is we've done a lot of work, just in the short time I've been here around, focusing around both the art and the science -- doing the scientific work of trying to determine how many opportunities there are based upon demographics, psychographics and a lot of correlation analysis. So we've determined that within our existing markets, there's 900 to 1,200 locations that could be built. So it's plenty of white space and opportunity for us to grow. And then beyond that, we'll start pushing the boundaries through concentric circles around areas of where we have units. And then hopefully, in year 4 and 5, we'll start to penetrate some new markets.

And then how do you think about the mix of existing versus new franchisees? I don't know, but maybe you could just inform us as have you recently had new franchisees joining the brand over the last couple of years? Or has this really been a story about the existing franchise base growing or acquiring stores? And so -- and how do you think about what the ideal mix is of new versus existing franchisees when you think about, maybe not tomorrow or the next couple of months, but over time, how do you want to balance new versus existing franchisees in the system?

Yes. I don't think that there's a particular mix. But what the historical perspective had been mostly existing have been signing up to build more on a reactive when they found the right piece of property and so now it's time for me to build an additional unit versus this will be a combination of existing proactively signing development agreements, committing to build more units in addition to bringing in new franchisees to build alongside them in some of the existing markets and underdeveloped markets. And then also potentially, the company supporting some of that growth. Again, remaining asset-light, but the company also supporting some of that growth to feed some of the markets.

And Darin, just to be clear, what does that mean? Does that mean maybe pioneering or developing a few more company-operated stores in order to do that? Or is it more about cost-sharing with franchisees? How do you define company's existence in that regard?

One is the incentive program that we offer our franchisees to grow. So we have an incentive program that we rolled out and put into our FDD that will incent them to grow. The second is, going in and helping, say, take it Denver and 3 or 4 franchisees and corporate team would go in there and build alongside them so we can get better penetration more rapidly in a market that's underdeveloped.

Got you. And then development, obviously, flows from franchisee cash flows and returns. Can you just give us a sense of where franchisee cash flows were, let's say, in 2019? What kind of return would a franchisee get from a new unit? I think a lot of this comes down to, is there a viable economic proposition for the franchisees? So I just -- what is it today? What do you think the right number is from a return either cash-on-cash or ROI, however you want to look at it? What do you think the right return is that will generate demand for franchise growth?

Yes. So what I would say is, overall, reducing the cost is what we focused on initially, which is just through this new prototype, we've developed taking out 18% to 23% of the cost to build. Beyond that, that's not figuring in what it would cost for land. They'll be able to put it on a smaller piece of property, so we'll be able to lower that cost. And the way we look at that, at the same AUV or better, and so if that's the case, then we're looking at north of anywhere from 20% to 25% cash-on-cash returns that would attract capital.

Got it. That's very helpful. And then just to sort of gauge expectations for when this development returns. I think you said earlier, maybe not, maybe you've got a similar number of openings -- gross openings in '21 as you in '20, maybe if I heard that correctly, just -- or if I didn't hear it correctly, correct me. Is this then more about '22 and beyond, just understanding that pipelines take time to be built? And is there a number yet you think in your mind, what is the right long-term unit growth for Jack? Or is that too early to express that?

I think it's too early to express that. What I would say for the next 24 months is you'll see a similar level of growth. And then with -- it takes a period of time to find sites, find the franchisees and get them open. So by 24 months in, I think, you'll start to see momentum built in a substantially larger pipeline than what we have today.

And then lastly, on development or maybe it's related to development. How do you assess the condition of the existing fleet? There were some periods of time when Jack in the Box was remodeling. Some of their stores -- some of your stores in your home markets were older and there was some thought about bringing those up to more of a contemporary image. And of course, there's always competing needs from a franchise capital standpoint, whether you want them to be remodeling their stores and improving the drive-throughs versus development. Do you -- so how do you look at the condition of your existing asset base in various markets? And how do you think about the trade-off between remodeling those stores and setting franchisees to grow? Or can you have it both ways?

Yes. I think there's a couple of different ways we can do it. First, I think as we think about our fleet, there's a number of stores, roughly 600 that are older, substantially older than majority of the prototypes out there, close to 30. About 130 of them have been remodeled. So our first focus would be in going in and making sure those older units have been fully remodeled, not just paint. And some improvements over time, but a major remodel. So those would be where we would focus some energy. Also, what we've seen from our franchisees during the pandemic is a desire to really upgrade the exterior of the building, invest there with so much of our business being off-premise through the drive-through. So we put together a lower cost refresh that can really spruce up a building, spruce up the outside of the environment to really -- put a really nice front to the consumer -- front-facing image to the consumer.

And what percentage of the fleet do you think still need -- is that -- are you're referring still to the several hundred older units? Or what percentage of the fleet do you think needs to have that sort of level of refurbishment?

Sean, do you want to take that question?

Yes, sure, Darin. So like Darin mentioned, I mean, the first thing we would be addressing is the older stores, the 600 plus. But -- I mean that addresses stores that are all over 30 years old. So clearly, there's still a set of stores younger than 30 years old that probably need to be addressed as well. But it's just a matter of prioritization. We're going to probably address the older stores first, but then once we started to get into the stores that are 20 years old, 15 years old, there's a pretty good chunk of those that we're going to have to start to have a plan for as well.

Got it. Okay. And then maybe, Darin, one other on development, I'm sorry, I just -- in thinking this, we've seen a number -- as you think about not development just now in your existing markets, but there's always the sort of challenge of, if you aspire to be a national brand, and maybe that question you can answer. Do you think this is a national brand? Or are you happy for the next many years still seeing a regional brand about how you how you start to advertise differently, right? I remember when Sonic went through this, they had to make ultimately a decision whether to do -- keep local advertising or go to a national platform and what that did to their existing core markets. Well, it provided some benefit to those newer markets. How do you think about that? Is it, again, too -- way too early, and we're still thinking about regional development in concentric circles for many years? Or are you already starting to think about how can we position Jack, maybe ultimately to be a national brand? And how do you achieve that given that brand recognition still has to be sort of widened to make those new markets work?

Yes. I think the key is we aspire to be a national brand. The key question is, what is the time line that we can achieve that. And so in order to get that started, though, we need to get the momentum built from showing proof of concept and really getting new unit growth moving on the right trajectory. And then I think that's when we start to aggressively move into new markets and tell the story. So it's really seeing the momentum that's already been built from this year, 2019 and '20, success of a lot of the new units that have been built and just continuing that momentum with new growth in markets that are not as penetrated, let's say, San Diego or an L.A. or a Houston. We're really be able to generate additional movement to some of those new markets.

Got you. Let me now transition, Darin, if I can, and others to sales. Maybe at just a high level, and then I want to get into details. I'm talking about same-store sales. The last 2 quarters have been some of the strongest, if not the strongest in Jack in the Box history. I think you had to go back to the early '90s, when there was some other phenomenon or other dynamics going on. How do you -- just at a high level, Darin, how do you explain this massive acceleration? I want to talk about the dynamics between check and traffic. But just at a high level, how do you came into the business. It certainly was on fire now from a comp store sales perspective. What is it that you've observed that has really driven, even relative to your peers, such strong sales growth?

Yes. I think it's a combination of a few things. And I think it starts with -- over the past couple of years, the brand is really focused on getting the value equation right, understanding what that is for the Jack consumer. Understanding what the $4.99 and $5.99 value bundles should be that will attract guests. So I think they've done a nice job of doing that. And I think they've also done a nice job of thinking about an upsell and add-on strategy. And so even prior to the pandemic, we had a nice sales run with the introduction of Tiny Tacos. And so that definitely helps. So first was value. Second was the innovation that I mentioned on products guests crave enough. Third is operational execution. And I think during the fourth quarter, the 3 of those things came together all at once. And you saw the benefit that we experienced in sales. So some of our speed initiatives were rolled out, and we're starting to see the benefit of them. So with behaviors and training that we encouraged around product introductions. So all 3 of those things coming together have really helped our sales gain momentum.

And your check growth has been extraordinarily strong, even your check growth has been stronger than, I think, other's check growth. Everyone is sort of seeing this dynamic of declining traffic and stronger check growth. I guess, 2 questions. One is, what do you think it led to your stronger check growth? Simply is that you're getting more add-on products, for example, and you're just observing that the items per order is just growing and the number of add-ons per order are growing. And do you worry at all that this check growth over time, even though it's consumer led, they hurt the value proposition that you're fighting so hard to sort of get across to consumers? Or do you not -- did not worry so much about that?

I mean I think it's always a careful equation that we have to look out for. And we've seen our items per order moved from 3.8 to 4.2 and average check from $8.68 to $10.52. So we definitely see some -- we've seen some change in the business recently. So watching it carefully, making sure that we're communicating with our guests and really where we're focusing a lot of energy and time is guest segmentation, understanding why our guests come to us, why that we -- who are they going to and where we have opportunities to make sure that we're delivering on what they see as value. So for some people, that means different things. Some think of our $3 add-ons as a value price point in and of itself, whether it's Mini Munchies or Tiny Tacos. Often, people will see that as a value option. And we also are very sensitive around the burger bundles. I think those are more price competitive. So we show a lot more sensitivity around driving price around some of the burger bundles.

That's helpful. And maybe just talk a little more about product innovation. Tiny Tacos, you mentioned big success. Popcorn Chicken. You talked about the upcoming chicken sandwich launch or relaunch perhaps. Maybe can you talk about that product specifically. But can you also talk about the development process. So like other brands will talk about a stage-gate process, where they're more deliberate and thoughtful about how fits into the lineup. How it fits in from an operational standpoint from a price point. Has that process changed, fundamentally changed Jack such that your hit rate is, if you will, is better than it was in the past, maybe talk about those 2 pieces?

I think historically, Jack, is really focused on product innovation. And I think just since joining as we started to calibrate internally around the strategy and our overall brand positioning, I think the brand has given greater clarity around value, innovation and operations working hand-in-hand, what I mentioned earlier, and so that all -- that brand positioning in that story and how those things work together are really what's communicated to an amplified strategy of innovation. And so what I mean by amplified is adding third-party partners beyond just our internal group to develop new ideas and new products with clarity around our brand positioning, our vendors being involved, our franchisees being involved and our whole team. And so with that clarity, everybody is looking at how do we make these products successful, what is the right product for our consumer and then delivering on it. And I think that's the piece that's changed.

Yes. And that's fascinating. So you mentioned getting your -- some of your partners, I assume you meant like vendors, helping you. Are franchisees now playing an active role in product development? Are there examples of ideas that have boiled up from the franchise system that have made their way to the restaurants that have been successes?

I don't have a specific example in the short time I've been with the company. But what I can say is that we're encouraging them to be a partner in strategy and sit at the table with us as we go through the ideation process. For example, recently, we were working with a third-party vendor, where we've engaged franchisees to be a part of it to help with the ideation process.

Got you. And then you mentioned one of the contributing factors this past quarter or 2 has been this confluence of things like product successes, but also operations. And I know historically, Jack has had some opportunity from a throughput standpoint. Where are you on that initiative? How much opportunity do you see to improve speed of service at the drive through, to the extent you're willing to talk about numbers qualitatively. Where are you on that speed of service journey?

Yes. With the pandemic, some of the operational initiatives got pushed to the fourth quarter and current in this quarter. So what we focused on really during the pandemic is making sure that our employees were safe, that our customers were safe, making sure our restaurants are staffed and that we execute according to standard. That's really where our time was focused. Recently in the fourth quarter, some of our operational initiatives have been showing up in the restaurants. One is a new training platform, where we were able to focus on speed behaviors and focus our team around what are those behaviors that can enable us to not just get speed, but what we want more than anything is consistent speed. So our guests have a certain expectation versus onetime coming and getting it very fast experience, the next time having a long experience. We want consistency. We've implemented some retrofit cabinets into our locations to deliver -- that enable us to deliver better speed as well as higher quality product. We've implemented some new cooking procedures that are going in with the launch of our new chicken platform. Those will also reduce the overall cooking time, but also produce a better quality product. And so those are the examples that enable us to deliver speed, but also work hand-in-hand with innovation when we're seeing -- launching a whole new product with a whole new cooking procedure that actually delivers a better guest experience, both in taste, but also in speed.

That's very helpful. And then maybe talk a little bit about -- from a daypart perspective, how sales are doing. I think last quarter, and you can't comp the way you've comp maybe having all the parts positive. But maybe thinking -- help us think through the different dayparts, in particular, the strongest dayparts, and I want to follow up on breakfast a little bit on how you think about breakfast, but maybe just from a daypart perspective, what's happening? And where are there still opportunities to improve the business?

Yes. We've definitely seen some strength in our dinner and lunch business, but we've been fortunate to be positive in all 4 of our dayparts. Late night has seen some strong share momentum and gaining share, whereas breakfast has maintained our share. And so we've definitely seen all 4 components of our dayparts remain positive.

What do you -- I mean, breakfast, in particular, is impressive, right? Breakfast has been challenged for obvious reasons. There's now more competitive activity in breakfast. Is it -- when you speak about breakfast, first of all, I'm assuming you're talking about the morning daypart, not breakfast all day, right? We're talking about the morning business. I'm just wondering why your breakfast business has been strong and positive when others have not seen that. Has there been innovation in breakfast? Or is it just business -- as mobility has increased that just has come back naturally?

I think some of it is just -- people recognize Jack for having breakfast that's being the first with breakfast in the industry. Beyond that, I think what we've seen is people knowing that breakfast is available all day, every day. Still -- that's not how we measure breakfast. We measure it during the breakfast daypart. But people know us for breakfast at all day, every day. We have seen a trend up during the 7:00 to 10:00 a.m. time frame as traffic has recovered during those hours as people commute more than what they were doing in the early part of the pandemic.

Got it. Okay. That's helpful. And then maybe, Darin, just before leaving that, sense of the competitive intensity in traditional QSR. I always struck when I hear someone asked that question because the answer is it's always intensely competitive, right? It's a very competitive business where a lot of large players looking for share and the category historically does maybe not has grown as much. But do you think the competitive intensity has stayed relatively consistent through COVID? How do you think about how it may change going forward? What's your view on the relative competitive intensity versus, I don't know, the sheer history of the brand or maybe what you understand from others what it has been in the past?

Yes. I think the core for us is the focus around makes Jack different, what makes us better and how do we give that to the guests so that people focus on coming to Jack for our differentiating factors. To the key to your question on has it intensified? I would say, absolutely intensified because of the benefit of the drive-through and increasing the throughput on the drive-through to the way that brands have quickly innovated -- created innovation around curbside or delivery that didn't happen before. So I think what you're seeing is the intensity of competition and the way they generate a customer experience is rapidly getting more aggressive and assertive.

Yes. And how do you -- it's an interesting question, right? I think this question came up on a call, and I'm not sure it was a Jack in the Box call or another call. But how do you defend your -- the advantages you have, both Jack specifically in QSR, right? If everyone else -- if curbside or car side or other relative channels are all sort of competing now for what you historically owned as the drive-through. How do you defend your position? Is it a matter of simply of speed? Or do you also have to evolve incremental channels to help serve the consumer in your own car side version? How do you defend your position as the leading QSR and particularly Jack as the leader in drive-through service?

Yes. I think the most important thing is to be clear on who our guests are and why they come to us and -- so that we can make sure we deliver upon that consistently. And the second piece of that is what I just mentioned consistently, execution is the key. So if we can communicate effectively, give our guests the products that they love and then do it where they taste like they expect, where it's in the time frame they expect, and the quality they expect, then they'll come back more often. So I think that's -- it goes still back to the basics, can we make sure that we deliver a great experience for the guests that frequent us.

Got it. I want to maybe pivot a little bit to the digital strategy, right? '20 has been a breakthrough year for -- from the perspective of digital adoption across the industry. I think you disclosed that digital is about a mid-single-digit percentage of your sales, but it's largely -- I think it's largely delivery, maybe not as much mobile order and pay or some of those other formats. Can you just kind of confirm that? Is that, in fact, what's happening? And what do you think -- where do you think digital is most relevant in QSR? Is it a mobile app and mobile order and pay? Or is it much more delivery is sort of the opportunity from a digital standpoint? Where do you think the big opportunities for Jack are?

Well, I think we've seen our delivery double during the pandemic. So I think the majority of QSRs will continue to see people adopt the third-party delivery platforms. And when I say people adopt, I mean, most of our guests, the frequency of usage of the third-party platforms will continue to, I think, gain in popularity. So for us, it's about how do we continue to make that as high quality of an experience as what someone coming to the drive-though would receive. So I think that's where we focus is, how do we give the guests the best experience regardless of how they come to us, whether it's digital or through the drive through. I think beyond that, the apps, we're going through a process where we're integrating the delivery platforms into our app and also giving our guests, the ability to order that delivery through the app or customized through our app and making digital a larger component of the way guests interact with the brand.

And do you think...

And that involves things like loyalty as well.

Yes. So I want to come back to loyalty in a minute. That's an interesting point. But just on the point of delivery, I mean, on the one hand, obviously, delivery is -- third-party delivery is growing. On the other hand, your category, QSR, is value intense category. And delivery sort of on a mass scale basis doesn't really -- isn't terribly consistent with value, right, because you've got to pay some either a markup or fee or whatever. Do you have a view on how important do you think delivery is to your category? I mean, is it going to somehow cap out and say, well, there's -- we already have drive-through access, our consumers are already value-focused and so delivery penetration is ultimately going to be low? Or do you have a different view on how delivery really works in fast food?

Yes. I think delivery has come. I think it's parallel to convenience. We have many locations to make it more convenient for our guests. Delivery also answers that convenience in another way. And so I think it's always going to be a key component of our business model and only grow going forward.

And you mentioned...

And I would say an example of that is, think of dark kitchens. Dark kitchens give us the ability to give our guests a more convenient opportunity to experience us.

And is that something you are testing at the moment? Or is that something on the drawing board for '21?

We do not have a location open yet, but our hope is to have one open within '21.

And that would be utilizing an existing Jack asset, in other words, not renting out a dark kitchen space, but trying one on your own. Is that fair?

Correct.

Got it. And you mentioned -- Darin, you mentioned loyalty earlier. Where does that stand in your priority list. How do you stand out in loyalty at this point? There's a lot of loyalty programs or is this like you need to have it because you got a core customer base and who kind of expects it? Or is there something you can think of that might look different, have a Jack twist, if you will, to it that may stand out from a differentiation in the loyalty marketplace?

Yes. I think you nailed it on one of the key points you just made. First and foremost, we want to make sure that our loyal guests have the opportunity to have a frequency opportunity loyalty program. So they'll come back one more time. So gaining that frequency and through the work we've been doing and the aggressive work around segmentation and understanding why guests come to us, one of our most loyal guests would like us to have an app, and they've told us that, and they'll come back more often. So focusing there is the first priority. Second is around, I think, our ability as a brand to go and re-craft our brand positioning and tell our story, the fun reverent personality of Jack via a good communication tool, which is our loyalty program and being able to communicate because we build a great database of our customers and gain knowledge that we can constantly communicate with them through a good app and through a good loyalty program.

Got it. My last few questions are a bit more financial in nature. And Darin, you can always take a pass or if Sean or Dawn want to address these. But first is just sort of from a G&A structure standpoint, right? I think your target -- I know quarter-to-quarter, this varies, I think your target was 1.7% of system sales and maybe look at it on a total year and on a quarter basis. But 1.7% of system sales, it's a pretty low number, that's really only being achieved by, I think, some of the larger enterprise fast food names. So is that a number that you think needs to go up over time? Or can you achieve your goals, whether it's franchise-led growth or maybe better digital penetration and still keep that G&A as efficient as it is? I don't know if there's -- if you have initial thoughts on that or not?

No. As I've assessed the business currently, what -- there will be some areas we need to invest in G&A. But the way I think about it is from a standpoint of creating returns. So if we're going to invest in people around the initiative, whether it's growing sales or reducing cost, I think we can focus on it from generating returns. So at this point, the 1.7% G&A factor seems reasonable to me. It seems achievable. And that's where we're focusing our energy.

Got you. That's very helpful. And Darin, a little off topic, but in -- but I would love to get your reaction to it. In terms of platform creations within restaurants, right? We've seen a large acquisition. You came from a platform or work, which had just created platforms. You've seen them further expand that platform. You've seen other large QSRs across the space who are sort of multiple brand owners. There must be a thesis behind that, right? That scale really matters in this business and whether it's technology, et cetera. So how do you -- I mean, how do you feel need? Is Jack part of a platform? Is Jack need to create a platform? How do you think of that? Or is this like it's not necessary to have the kind of scale that they have? Their argument is that technology is scalable. And so your technology spend may be the same as someone else's who's much larger and they can just get much more efficiency at it? Or are there ways you can sort of offset those efficiencies by either outsourcing? How do you think about the need for scale in fast food generally right now?

Yes. I definitely see the opportunity to benefit from scale. But in a lot of the things you're talking about, they're not necessarily differentiated. So we can go out and purchase technology that's fast and be as competitive. What I focus on for our team and for our strategy is more of a value creation staircase and looking into what makes us great as being a challenger brand and finding some areas where we can differentiate, whether it's data and data science or a specific technology tool or a product or our delivery platform, the mode of how we operate, and trying to find a way that we can create additional value over time. And so not as focused on scale because we can benefit from going out on the technology front, as I mentioned, and getting the outcome of others already having scale.

Got it. My last question for you, Darin, is on capital allocation. So obviously, there was a period of time, you hold your dividend, you restored the dividend, you've increased the authorization. Is this ultimately -- is Jack ultimately, now with this new securitization, with the current debt structure, is this all kind of a levered recap model, the way we think about many other names, similar to Jack in the space? Or how do you think about using the balance sheet to create shareholder value? Or does it create frictions within the company or in other constituents where that may not be the focus? You'd like to utilize existing leverage, but the leverage recap model may not be the -- necessarily the right strategy for Jack.

No. I think I would hold off providing much guidance around it at this point in time until I roll out the long-term plan after the first of the year until we have a CFO in place. The way to think about it, as you think about our business today is more through a historical lens. Jack will continue to provide a dividend, will continue to provide share repurchase as we've just approved an additional $100 million for share repurchase. So I would think about it more through a historical lens and then wait until we provide guidance around our capital allocation strategy.

And then, Darin, just on that point, you mentioned after the first of the year, do you need to have a new CEO -- CFO in a seat, and this person be there for a period of time in order to review plans and -- or create plans with you? What should the expectation be from an investor standpoint when Jack would maybe prepared to lay out that kind of longer term, either capital allocation and/or growth plan for investors?

Yes, I think it's important that the CFO, who will be my partner and really laying out the key strategy, we've developed an internal strategy. We're now partner with our CFO and our internal team, Dawn, who is our Principal Financial Officer today, and Sean, on making sure that we're all aligned with the Board on where we want to take it. So early next year is the right time line.

Got it. Okay. Well, we look forward to that. Well, Darin, thank you so much for your time. And Dawn, Sean and Carol as well, really appreciate it. Have a wonderful holiday season. Enjoy the rest of the conference if you still have some time with investors left. And for all of you listening, thank you so much for your time as well.

Thank you.

Thanks, John.

Thank you. You're welcome.