Three years after dumping Qdoba Mexican Eats, Jack in the Box has agreed to buy Del Taco for $575 million. The transaction, which is expected to close early next year, expands on Jack in the Box’s taco success. Jack in the Box serves a diverse range of foods jobs,from burgers to egg rolls, but the chain has made a name for itself with its tacos, which, despite mixed reviews, have long been a top-selling item for the brand.

Del Taco is the polar opposite: it specializes in tacos, quesadillas, and another American-style Mexican fare, but it also sells American fare like burgers. ‘According to the companies, the combined California-based brands will have over 2,800 restaurants in 25 states and will be better positioned to compete with large quick-service restaurants jobs.

Joining forces will provide additional resources to drive innovation to create more unique, innovative menu items and exceptional guest experiences,” Jack in the Box CEO Darin Harris said during a Monday analyst call discussing the deal. “This will allow Jack and Del Taco to better engage with their existing guests and reach new ones.”

Investors believe this is a wise decision by Del Taco. On the news, the company’s stock jumped nearly 66 percent to around $12.5. Jack in the Box, on the other hand, fell about 4% to around $80.5 per share.  Jack in the Box (JACK) purchased the fast-casual Mexican chain Qdoba in 2003 and announced its intention to sell it in 2017 after the brand’s sales jobs had declined, closing the deal the following year.

Del Taco (TACO) will be a better fit, according to Harris, because it attracts customers who already shop at Jack in the Box, operates in the same markets, and has a similarly sizable drive-thru business: 99 percent of Del Taco restaurants have a drive-thru, compared to about 90 percent of Jack in the Box locations. That’s a “key differentiation” from Qdoba, which doesn’t have many drive-thrus, Harris added.’

During the pandemic, many customers felt safer in their cars than in restaurants, so the drive-thru became increasingly important to fast-food restaurants. This enthusiasm has only grown: According to a Technomic consumer survey, approximately 52 percent of quick-service restaurant orders were placed in drive-thrus in August 2021, up from approximately 42 percent in January 2020.

Jack is one of many restaurant chains that has recently expanded its portfolio. Restaurant Brands International (QSR), which owns Burger King, Popeyes, and Tim Horton’s, announced the acquisition of Firehouse Subs in November. Other recent acquisitions include Johnny Rockets and Fatburger owner FAT Brands’ purchase of Native Grill & Wing, and BurgerFi’s acquisition of Anthony’s Coal Fired Pizza & Wings from L Catterton.

Source: CNN Business

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