Compacted Trash Costs

Until a recent change in operations, Jack in the Box had a veritable recipe for disaster cooking in its waste-management department. The San Diego-based fast-casual, quick-serve restaurant (QSR) operator was burning money every month on excessive charges and late fees incurred for waste-management at its more than 1,400 corporate locations. In addition to more than 1,300 stores in its namesake hamburger chain, Jack in the Box owns more than 100 restaurants operating under its Qdoba Mexican Grill banner.

The problems arose because Jack in the Box’s corporate accounts payable office, through which all bill processing and payment were centralized, had no visibility into the actual services performed or the contracts established with local vendors. At one time, the corporate office was trying to reconcile 1,372 accounts, but it was impossible to audit all the bills and process payments in a timely manner.

“Since we have more than 1,000 restaurants to manage, it complicated the matter to an unfathomable degree,” explained Rebecca Aoun, energy project manager for Jack in the Box. “Right-sizing your trash program can be a difficult task if you lack the necessary tools to analyze your data.”

Jack in the Box decided to outsource management of the payment processing and audits to Advantage IQ, Spokane, Wash., which already handled cost management for the food retailer’s energy and utility services.

Bills are sent directly to Advantage IQ, where they are evaluated for accuracy and paid in a timely manner. Detailed, line-item data is entered into the system, where Jack in the Box employees view in-depth reports of services and charges.

Some Facts About Jack

Jack in the Box’s recent operational savings (see article) contributes to the company’s long-term strategic goal of increasing franchisee ownership to 70% to 80% of its portfolio. Currently, of the 2,158 Jack in the Box restaurants, 812 are franchise locations, and 343 of the 454 Qdoba Mexican Grill sites are owned by franchisees. Over the last three years, the company has increased franchisee ownership from 25% to 38% of its portfolio.

For its 2008 fiscal year, which ended Sept. 28, Jack in the Box had total revenues of $2.539 billion, up from $2.513 billion in 2007. However, revenues at company-owned locations declined from $2.150 billion in 2007 to $2.101 billion in 2008.

The company expects to open 40 to 45 new Jack in the Box locations in 2009, of which 14 to 19 will be franchises, as well as 60 to 80 Qdoba Mexican Grills, with at least half of those owned by franchisees.

The partnership has successfully achieved the objectives identified by Jack in the Box, including data collection to support strategic decision-making; identification and resolution of billing errors in a timely manner; a reduction in late fees; and a more environmentally responsible waste-removal program throughout the portfolio.

Jack in the Box has already recorded a number of quantifiable benefits, such as eliminating both service interruptions to its trash removal and late fees. There have also been instances when costly issues were identified at specific locations.

In one case, Jack in the Box was able to recover $560 per month at a single location by replacing an expensive industrial-size 12-yard trash bin with the more economical three-yard bin traditionally used by stores.

Additionally, Jack in the Box stores have optimized waste pick-up services, waiting for trash bins to reach maximum capacity, which allows them to reduce the number of store visits by garbage trucks. The transportation efficiencies not only cut expenses, but also have a positive environmental impact.

Aoun estimated that the company has already saved more than $400,000.

“Our department has become a central resource of information for other groups across the organization,” she stated. “When senior management wants to put in new equipment, build a new location or sell an existing location to a franchisee, they turn to us for information about the [cost] impacts of waste, energy and utilities. Our analysis plays an important role in making the right decisions.”