One of the restaurant industry’s first predictions since the start of the pandemic was that the big guys were going to get bigger. We started very early, as independent restaurants simply couldn’t afford months of closure and unpredictability.
The prediction continues to emerge nearly two years later, as major chains unveil aggressive growth plans and with a mergers and acquisitions market on fire.
As of March 2020, for example, Arby’s parent company, Inspire Brands, has acquired Dunkin ‘; Restaurant Business International, parent of Burger King / Popeyes, added Firehouse Subs; Panera
This is only a fraction of the M&A activity in the restaurant space over the past year and a half. This activity continued its momentum on Monday as Jack in the Box
In a statement, Jack in the Box CEO Darin Harris said, “This is a natural combination of two like-minded challenger brands with exceptional growth opportunities. Together, Jack in the Box and Del Taco will benefit from a stronger financial model, gaining greater scale to invest in digital and technological capabilities, and unit growth for both brands. “
This “likeness of spirit” comes from the chains’ emphasis on the West Coast – Jack in the Box is headquartered in San Diego and Del Taco in Lake Forest, California. And, despite being a burger chain, Jack in the Box also sells a lot of tacos, of the tiny, loaded, and monstrous variety.
In addition, both companies are heavy on drive-thru, which is a major advantage in a pandemic environment in which the chain has seen a significant increase in its activity.
That said, Jack in the Box has tried this before. The chain acquired Qdoba in 2003 to sell it in 2018 after sailing pressure from activist investors.
This time around, it’s likely to be different, however. Consolidation is not new to the industry. Miam brands
In a press release, Jack in the Box said the acquisition will create $ 15 million in annual savings by the end of 2023 by combining supply chain, digital, technology and other areas. . The company also touts the possibility of sharing learning, which has also become a major advantage for consolidation. Applebee, for example, has found a solid foundation with its virtual brand Cosmic Wings and now sister channel IHOP is capitalizing on this information. and jump into space. Yum Brands shares its digital innovations through its KFC, Taco Bell, Pizza Hut and The Habit Burger Grill concepts.
For Jack in the Box, Del Taco seems like an attractive target on paper. The company has approximately 600 restaurants in 16 states and competes in the Mexican quick-service category, which is not as competitive as the burgers or chicken segments.
It increased its sales from $ 622 million in 2013 to $ 918 million in 2021, while its revenue rose from $ 371 million to $ 521 million during the same period. Del Taco has also been agile during the pandemic, pushing gas on its offsite business and deployment of a new loyalty program, for example. In response to the growing demand for steering wheel controls, Del Taco also introduced new prototypes, including drive-thru models only, focused on primarily digital consumers.
“Over the past few years, we’ve uniquely positioned Del Taco as a leader in the growing Mexican fast food category, expanded our digital capabilities to improve consumer convenience, and focused on brand growth through through franchising, which has resulted in eight consecutive years of same-store franchise sales growth. and a new pipeline of units that is accelerating, “Del Taco CEO John Cappasola said in a statement, adding that the company was thrilled to have found a partner in Jack in the Box who” shares our vision. for the future “.
The time also seems to have come for Jack in the Box to open his wallet. The company actually gained new customers during the pandemic, while its fourth-quarter sales were up 12.3% over two years.
Jack in the Box will acquire each Del Taco share for $ 12.51 in cash, far more than the $ 7.53 Del Taco share price that closed on Friday. The combined companies will have more than 2,800 locations in 25 states.