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It’s Official: The Munchies Are Saving Jack in the Box Inc.

By John Maxfield – Mar 26, 2014 at 7:45AM

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While Jack in the Box's latest marketing strategy may be humorous and unconventional, it's also proving to be effective.

Laugh all you want, but Jack in the Box's (JACK 0.17%) unconventional marketing strategy geared toward alleviating late-night "munchies" is helping the chain outperform its peers in the notoriously competitive fast-food industry.

The San Diego-based company rolled out the strategy last September to boost late-night sales. It consisted of television advertisements directed at young adults suffering from a case of the munchies; a lineup of new menu items and "Munchie Meals;" and a revamped ambiance with club music and purple lighting.

According to CEO Leonard Comma,

What we decided to do is double down on what people believe about us anyway. And so we're not shying away from how people have used us at late night. We came sort of right at it with the late night Munchie Meal, a purple lighting scheme and club music that starts at 9:00 p.m. and ends at 5:00 a.m.

The company sees the move as an opportunity to distinguish itself from the pack. "We're doing things that allow us to stand out and not exist in sort of this sea of sameness," Comma said on a different occasion. "So people have come to understand that Jack in the Box is just a little different."

By all appearances, the executive has a point. Not only has Jack in the Box reaffirmed its self-described status as the "weirdness of fast food," but it's also leveraging the distinction for the benefit of shareholders. In the three months ending Jan. 19, the company's same-store sales increased by 1.9%. And, importantly, half of the increase came from the late-night shift.

As you can see, Jack in the Box's latest performance beat out all but one of its primary competitors.

At McDonald's, domestic comparable-store sales decreased by 1.4% in the final three months of last year. Sales fell by 2% for Yum! Brands, the proprietor of Taco Bell, Pizza Hut, and KFC. And they grew by only 0.2% at Burger King. The only chain to outperform Jack in the Box was Wendy's, which reported same-store sales growth of roughly 3% in its latest quarter.

This result has fueled Jack in the Box's stock price more than any of these competitors. Since this time last year, it's up by 73%, compared to 58% at Wendy's, 35% at Burger King, 5% at Yum! Brands, and a negative 2% for McDonald's. 

The takeaway here is that thinking outside of the box works. Even in an industry as competitive and established as fast food, there's still opportunity for incremental improvement given a cogent strategy and good execution.

John Maxfield has no position in any stocks mentioned. The Motley Fool recommends Burger King Worldwide and McDonald's. The Motley Fool owns shares of McDonald's. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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