Jack in the Box is working to sell at least 250 restaurants to franchisees following its March acquisition of Del Taco Restaurants, a move that is in part aimed at retaining access to cheap debt
is working to sell at least 250 restaurants to franchisees following its March acquisition of Del Taco Restaurants, a move that is in part aimed at retaining access to cheap debt., which focuses on Mexican food, expanded Jack in the Box’s presence in certain U.S. states and strengthened its foothold in the Southwest and Western regions.
Increasing the number of franchise restaurants would reduce the number of assets Jack in the Box holds on the balance sheet, allowing the chain to maintain access to securitized debt, which is typically cheaper—and comes with less onerous debt agreements—than conventional term loans, Mr. Mullany said. However, such debt is only available to heavily franchised businesses. Having fewer assets also lessens the company’s exposure to inflation and simplifies its business model, he said.
Mr. Mullany said he has played a key role in the integration of Del Taco, serving as co-chair of the integration steering committee alongside Jack in the Box’s head of human resources. The CFO said he oversees a team that assesses the impact of refranchising on Del Taco’s structure and another one that negotiates with prospective franchisees, alongside external consultants. Mr. Mullany declined to name the consulting firm.
The company plans to spend the majority of the proceeds from the refranchising on buying back its own shares and paying out dividends, Mr. Mullany said. Jack in the Box, which hasn’t bought back stock since the quarter ended October 2021, has $200 million remaining under a buyback program that is set to expire in November 2023.
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