Don't Blame the Guac: Wages Behind Jack's Taco Price Increases

(Bloomberg) -- Taco Tuesday just got more expensive, at least for diners in the Golden State.

Jack in the Box Inc. says its franchisees have hiked taco prices at some locations due to wage increases taking hold across California. The San Diego-based fast-food chain is largely concentrated there, where the minimum pay was raised to $11 an hour this year for large employers, compared with $10.50 a year ago.

Tacos used to be two for 99 cents at Jack in the Box. Some menus now list two for $1.29, and a customer’s online petition is looking to reverse that.

“We did allow the lid to lift on taco pricing,” said Carol DiRaimo, head of investor relations at the chain, during an investor conference Wednesday in New York. “As minimum wage in California started to creep up toward the $15 mark, it doesn’t necessarily make sense from a profitability perspective for our franchisees to continue at that price point.”

As it has raised menu prices, Jack in the Box has lost some of its budget-conscious customers to competitors including Hardee’s, Carl’s Jr. and Taco Bell, DiRaimo said. They’re seeing more competition from value offerings at rivals, like Taco Bell’s recently advertised $1 nacho fries.

In its latest quarter, Jack in the Box same-store sales fell 0.1 percent, its fifth straight quarter of declines. That’s driven the company’s stock down about 25 percent in the past year.

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Jonathan Roeder

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