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Operator
Good day, and thank you for standing by, and welcome to the Jack in the Box Incorporated Quarter 1 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on the telephone keypad. And please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Mr. Chris Brandon, Vice President of Investor Relations. Sir, please go ahead.
Jack
Thanks very much, and good morning, everyone. We appreciate you joining today's discussion, highlighting our first quarter 2022 results. Joining us today are Chief Executive Officer Darren Harris and Chief Financial Officer Tim Mullaney. Following their prepared remarks, we are happy to take some questions from our sell-side coverage analysts. During our prepared remarks and the Q&A portion of today's call, we may refer to non-GAAP items. Please refer to the non-GAAP reconciliations provided in today's earnings release, which is available on the Investor Relations website at jackinthebox.com. We may also make forward-looking statements that reflect management's current expectations for the future, which are based on current information and judgments. Actual results may differ materially from these expectations based on risks to the business. The safe harbor statement in today's news release and the cautionary statement in the company's most recent 10-K are considered a part of today's discussion. Material risk factors, as well as information relating to company operations, are detailed in our most recent 10-K, 10-Q, and other public documents filed with the SEC and are also available on the Investor Relations section of our website. And with that out of the way, let's get started. I will now turn the call over to our Chief Financial Officer, Tim Mullaney.
Darren Harris
Thanks, Chris, and good morning, everyone. We continued to make progress on our long-term strategic plan and delivered same-store sales results of 13.7% on a two-year basis in the first quarter, despite a continued challenging operating environment. We're working diligently with our operators and franchisees to mitigate the effect of inflation and labor pressures on our business and remain confident in our path to deliver best-in-class unit economics to fuel our growth strategy. As I will discuss in a moment, we are well on track to achieve the long-term growth targets that we laid out on our investor day. We're also making steady progress toward closing our acquisition of Del Taco and beginning the process of integrating our teams while working to identify and unlock meaningful synergies as well as knowledge-sharing initiatives. We will provide more insight into these efforts in the coming quarters. Let's turn to some detail on our Q1 results and our start to 2022. We are very proud of our franchisees, operators, and restaurant managers who have navigated a tough environment to generate positive system-wide sales growth, led by a same-store sales increase of 1.2%. This growth can largely be attributed to price increases in addition to an effective add-on strategy during the quarter. Same-store sales performance in Q1 was nevertheless pressured by limited hours of operation due to labor shortages and some unusual weather impact in the Pacific Northwest. To mitigate the impacts due to the current inflationary environment, we increased pricing by 5.5% year-over-year within our company-operated restaurants. This also allowed us to narrow the performance gap between our company operated and franchisee restaurants in the quarter. Turning to earnings, we delivered diluted EPS of $1.85 for the first quarter, with our operating EPS coming in at $1.97, just below flat when compared to a year ago. I'll provide additional context on our earnings performance in a moment. In terms of future unit growth, The quarter was highlighted by the completion of 26 development agreements signed for 98 future restaurant openings, bringing total agreements to 50 and restaurant commitments to 201. This is the highest level of unit growth commitments in company history. While the results of building our development pipeline have been robust and encouraging, we continue to make the needed efforts toward portfolio optimization, including the targeted closure of underperforming units. In the first quarter, we closed 12 units while opening two for a net decrease of 10 units. While we knew this process would take some time, we are making great progress on getting the current store base where it needs to be for our growth strategies to take full shape. As always, keep in mind that with the exception of naturally expiring franchise agreements, most of our closed locations continue to provide economics in the form of both royalty and rent contributions. Overall, we remain confident that our growth strategy and focus on best-in-class financial fundamentals will enable us to reach 4% net unit growth in 2025 and have jack-in-the-box in 40 states by the year 2030. Turning to revenues, we reported $345 million, up approximately 1.8% year-over-year. This increase was largely due to the growth in system-wide sales and same-store sales. For our company-owned stores, which, as a reminder, make up about 7% of total store count and less than 10% of system-wide sales, restaurant-level margin was 18.3%, driven by cost and labor pressures, as well as the impact from our evolving markets, which we are working to re-franchise. Franchise-level margin, driven by 93% of our unit portfolio, was up 0.4% from a year ago due to improved sales performance. SG&A expenses increased approximately $4.8 million, mostly due to COLE unfavorability and partially offset by a decrease in incentive compensation. A reported effective tax rate was 26.5% for the quarter as compared to 25.1% in the first quarter a year ago. This was primarily due to the non-deductible COLE losses in the current year versus non-taxable gains in the prior year. Combining all of these elements, Net earnings decreased to $39.3 million and adjusted EBITDA was just over $91 million in the first quarter. Shifting to cash, our economic model remains resilient as it continued to generate attractive free cash flow in the first quarter. We generated free cash flow of approximately $24.7 million and spent approximately $9.4 million on CapEx, primarily toward lease right of first refusal transactions, maintenance, remodel and refresh of company-operated restaurants, and digital and technology initiatives. In terms of our capital allocation, at the beginning of the second quarter, we were able to take advantage of the favorable interest rate environment to repay in full a tranche of the company's existing 2019 senior secured notes and to fund a portion of the company's acquisition of Del Taco. Our $200 million buyback authorization remains in place and we'll continue to view share buybacks as part of our total shareholder return strategy, and we'll likely revisit this approach in the back half of 2022. Our board also recently declared a quarterly dividend of 44 cents per share, which will return approximately $9.3 million to shareholders and will be paid out during Q2. I'd like to quickly touch base on the addition of Nashville to our evolving markets. Joining Oregon, Kansas, and Oklahoma, as markets that we intend to re-franchise in the near future. The effect on restaurant-level margin from these markets is temporary, and we quantify their impact at 200 to 250 basis points until they exit the company-operated restaurant portfolio. In closing, and before I turn it over to Darren, I'd like to provide some perspective on a Del Taco transaction and how it fits into our overall financial outlook. As we discussed when we announced this transaction in December, Adding Del Taco is an opportunity to scale our business, improve profitability, and share best practices while strengthening our capital structure. We believe that this transaction is particularly critical in the current environment as it will provide us operating and financial synergies that will help mitigate some of the macroeconomic headwinds we are facing. As we continue to work through our integration planning, We continue to be excited about the opportunities that this transaction will provide and the possibility of exceeding our previous target of $15 million in run rate synergies. We will provide further updates on this and other aspects of integration upon deal close. To wrap up, we are very pleased with our start to 2022 and how the business managed despite a backdrop of inflationary headwinds and labor challenges while delivering strong sales performance and record-setting growth in our new unit development pipeline. Thank you again for joining the call today, and now I'll turn it over to Darren.
Chris
Thank you, Tim, and good morning, everyone. As we begin another year, I'm extremely proud of the work our team, franchisees, and operators are doing to deliver for our guests, as well as our shareholders. Despite the industry headwinds due mostly to the ongoing challenges from COVID, Their resilience and dedication enabled us to grow same store sales while making strong progress on our strategic foundation and four pillars. I have seen during the past year and a half many instances where our scrappy challenger brand mentality and culture is truly a competitive advantage. But I have particularly noticed it of recent as our team's ability to take on these headwinds with passion and tenacity has been on full display. Now, before I reflect on our results and progress within our strategy, I want to expand upon Tim's commentary in terms of the state of the industry and how we see it impacting our business and our guests. In November, we signaled what the rest of the industry is now seeing, namely that inflation and labor pressures were going to have an impact on Jack in the Box and our peers in 2022. This last quarter demonstrated for most in the industry that these cost pressures are real and may take longer to overcome. Let's touch on COVID. We were experiencing positive trends in staffing and top line sales performance until the onset of Omicron, which temporarily reversed some of these trends and limited operating hours across many of our restaurants. Like others in the industry have noted, we are seeing improvement coinciding with the rapid decline of Omicron. We're not alone in navigating these challenges, and most in the industry are using price as one lever to manage through the inflationary and wage pressures. I do believe we have opportunity within pricing, but more importantly, and something that differentiates us, is the promotional strategy we have executed since establishing our craved marketing approach. In essence, creating upsell and add-on opportunities with our wide variety of craveable menu items, which is certainly a more sustainable way to grow average check over the long term. We are taking a disciplined approach to pricing, keeping both the short-term needs and long-term objectives of the business in mind. Both our company operators and franchisees are seeing that their guests remain quite loyal, even with our increased pricing activity during the quarter, which is a good sign. Keep in mind that our significant pricing action didn't take place until the end of Q1 in January. Besides our focus on upsell and add-ons as part of a promotion, we believe there continues to be opportunities to take a surgical approach to price increases within our core menu. Combined with menu innovation, we are in a unique position with multiple levers to pull related to price. Shifting toward our results for the quarter, our same-store sales remained solid and grew on a two-year basis by 13.7%. Although limited hours impacted our same-store sales, our performance shows that our top-line drivers remain in great shape, even as we await the opportunity to consistently execute our strategy across all five of our day parts, which, as you know, is part of what makes the guest experience at Jack's special. and will reignite our ability to dominate the late-night day park. I remain confident in our potential to drive a balance of ticket and traffic in a more normalized operating environment. Our ability to sell value and premium items concurrently, offer upsell and add-on platforms due to our unique menu variety, and bring more new customers into the Jack experience via digital are meaningful ways we are positioned to drive balanced comp results. Now we'll turn to our performance across our four strategic pillars as our teams continue to make strong progress against our strategic objectives and roadmap to results, beginning with building brand loyalty. Our updated brand positioning and craved marketing strategy continue to resonate with our guests. From a product and promotional standpoint, it was a strong quarter for our burger category, including the cheddar-loaded cheeseburger and our ultimate burger platform, which led the way in terms of sales contribution. I would also note the strong performance from our Tiny Taco Big Box platform, a great example of packaging and platform innovation using current items. And it was just another way to utilize our add-on strategy that positively impacts Ticket beyond just raising price. We continue to grow our e-commerce platform and digital capabilities. Building on our strong progress from 2021, during which we achieved a 90.6% increase. We grew digital sales by 38% in Q1 and 271% since two years ago when we started focusing on this aspect of the business. Our digital channels now make up nearly 10% of all sales, and our digital database has grown 52% since a year ago. Loyalty is off to a great start in its first year. and it continues to help drive our digital growth. Over 95% of our mobile orders are coming from guests who are Jack Pack Rewards members, and we are pleased that our existing digital customers are seeing value in the program. While we are only a couple of quarters in since the launch, we look forward to providing more detail around active member growth and how it is impacting customer behavior in the near future. I'm also pleased to announce that in quarter two, We will expand loyalty beyond just our mobile app by launching our in-store Jackpack program. In addition, we will be launching our first-ever web ordering platform and an entirely new mobile web experience later this year. These additions will immediately help make online ordering and the Jackpack Rewards program significantly more accessible to our guests. Turning to our next pillar, driving operational excellence. We are taking labor and staffing challenges head on, implementing and testing everything from increased pay to automation, enhanced training to local market activation, all in the effort of attracting and retaining talented people to work at Jack in the Box. Building a top in-store culture within QSR and providing a place people genuinely want to work is our focus. We will also provide them opportunities for development and career advancement. We are committed to helping our team members and managers break out of the box and reach their full potential. This has always been a part of the Jack in the Box culture, as most of our franchisees started out by working in one of our restaurants. We are focused on three main actions of operational improvement. The rollout of our new guest experience systems and brand standards that enables us to significantly raise the bar on the expectation we place on ourselves and servicing our guests. Improving the image of our restaurants. Recently, we made our new re-image and remodel program available to our franchisees. We will certainly update you on the progress of this important initiative. And lastly, and already underway, is strengthening our training infrastructure, which includes online training, above-restaurant-level training, certified training restaurants, and new restaurant opening support. Our third pillar, growing restaurant profits, has certainly been a focus point for our operator experience management team. We continue to work with our franchisees on ways to manage through the macro pressures we are facing, but most importantly, ways to maximize profitability for the long term. We have invested in an operations services team that is laser focused on innovating processes, equipment, and technology to drive out cost and simplify operational tasks. As you heard from us this past December, our record-setting year of store-level economics, highlighted by our 20% increase in store-level EBITDA, supports our franchisees in their efforts to navigate industry margin pressures and positions them well for future growth. And this is a nice segue to our final pillar, expanding Jack's reach. Tim mentioned our development agreement signed in quarter one. And I'm thrilled that in such a short time since launch of the program, we already have commitments for 201 restaurants from our existing franchisees. The strong pace and enthusiasm from our franchisees has me very encouraged about our ability to maximize our long-term growth potential. And that both the realignment of our relationship and our shared emphasis on finding ways to improve store-level ROI and profitability are beginning to pave the way toward our goal of 4% restaurant growth by 2025. And let me assure you, this is only the beginning. Before closing, I'd like to discuss a few thoughts on Del Taco as we find ourselves closer to deal completion. As I said when we announced this transaction in December, a key reason we are excited to bring Del Taco into the Jack family is the perfect fit of business model, geography, customer base, and culture. Through this transaction, both brands will be able to evolve within many strategic areas faster together than apart. We are confident there will be synergies, opportunities to scale technology, execute on a common growth strategy, and benefit from knowledge sharing. Scale certainly helps through short-term pressures, but more importantly, will help our long-term efforts to position both Del Taco and Jack in the Box franchisees for even more success in terms of restaurant margins, store-level profitability, and taking more share every day from the competition. Over the last several weeks, we have been working closely with the Del Taco team to develop a thoughtful plan to bring our businesses together. Through this integration process, I've gained even more respect for their team, culture, and dedication to providing guests with great food and exceptional experiences. And together, I believe we will create an organization that is a force within the industry. In closing, I want to reiterate how grateful and appreciative I am for our franchisees and corporate operators and their relentless dedication towards serving our guests. While we may face headwinds and while we may not be able to predict the future, I can say with full confidence we will control what we can control, rise to the challenge, and continue to make progress on the long-term strategy that will evolve our business, our brand, and will bring Jack to places we haven't been before. We appreciate you joining us today, and we are happy to take your questions.
Operator
Thank you. And as a reminder, to ask a question, you will need to press star 1 on your telephone keypad. Again, that will be star 1 on your telephone keypad. And to withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Again, Brian Bittner, your line is now open. You may ask your question.
Brian Bittner
Thank you. Good morning, Darren and Tim. You know, Jack's improving unit growth story is a prove-it story in the eyes of the investment community, and I think you guys realize that. And you've made major strides in the first quarter with these development agreements, 98 restaurants doubling your pipeline to 200. Can you just talk – about these 1Q commitment wins and how they line up against your expectations as you walk this path towards the 4% net unit growth goals that you've laid out. And maybe help us understand the timeframe of how these commitments transform into shovels in the ground. And the follow up to that is just these wins are coming at a time where you're still dealing with elevated net closings. Can you maybe explain how much longer we should anticipate this net closing dynamic to persist for the financial model? Thanks.
Chris
Brian, thank you for the question. It's good to hear from you. Let's start with the growth. You know, we are incredibly excited by what we've accomplished with 26 development agreements for another 98 restaurants. As we said on previous calls, those are split over about a three to four year period. So they're evenly balanced as we sign with our existing franchisees. And we're confident based upon know the increased activity of our real estate team working with franchisees going out into the market and really driving sites into the process which we don't provide guidance around that this pipeline is rapidly increasing and that um you know we start to see this you know really start to turn into 2023 to a unit growth story leading to our four percent growth by 2025. so it's all happening um as we've expected The pace is picking up from a development activity standpoint. And this is just with our existing base. We're still out talking to new franchisees as well and increasing that pipeline. As it relates to closures, we've mentioned this before, but we're continuing to do the tough work around optimizing our portfolio and preparing for growth. The store closures that we had in this quarter, we knew were coming. We budgeted it. Many of them were related to the St. Louis issue. six of the closures. So, you know, most of these were things that we anticipated and prepared for. And we'll continue to optimize the portfolio throughout this year as we focus on, you know, moving to that 4% growth rate by 2025.
Darren Harris
Yeah, and Brian, just to add to that too, like on the closures, you know, we continue to receive economics on those. So, you know, as they close, we'll record that. But also these units typically have fairly low average unit volumes. And because of that, the extent that they have sandwiched leases, what we ended up receiving from those is fairly minimal to begin with. So the loss here is negligible as we close.
Brian Bittner
Great. Thank you.
Operator
Thank you. The next question comes from the line of Brian of Deutsche Bank. Your line is now open. You may ask your question.
spk02
Hey. Thank you. Just a question on the pending Del Taco acquisition. specifically around the potential re-franchising process, in addition to perhaps receiving some inbounds from your existing franchisees, which we heard a few months ago. Is there any work you've been able to do ahead of time to position yourself to execute on re-franchising opportunities once the deal closes? And if you could just speak to your desire to move fast and your ability to move fast, if you choose to do so. Thank you.
Darren Harris
Yes. So we're currently in the process of obviously closing the transaction. We're mindful of gun jumping sensitivities and considerations. So the amount of tangible work that we're able to do in setting re-franchising strategy for Del Taco is fairly limited until we close. We expect to close in the second week or so of March. However, having said that, we do obviously just like with Jack in the Box with Del Taco, we see re-franchising as an opportunity, a tool to be evaluated that could be a meaningful addition to our strategic plan.
Chris
To add to what Tim mentioned, Brian, we see the opportunity for the strategy of re-franchising. That was part of the strategic approach that we took when we bought Del Taco. We've obviously, as part of our due diligence, looked at the portfolio, looked at where we think there's opportunity within our system. We haven't had a chance yet to meet their franchisees and see where there's opportunity within their system. And then we also know that there's plenty of interest from outside the Jack in the Box system expressing both interest in Jack in the Box and Del Taco. So we know that re-franchising is part of the strategy. We've done some work, but we're not in a position where we can talk openly about it until post the transaction.
Tim
Thank you.
Operator
Thank you. The next question comes from the line of Gregory Frankfurt. Your line is now open. You may ask your question.
Tim
Hey, thanks for the question. I think you talked a little bit about company store pricing. Can you talk a little bit about where the franchisees stand, and maybe do you feel like you're in a good spot right now in terms of pricing, or you might take more in the coming months to kind of protect the margins where they stand?
Darren Harris
Thanks.
spk17
Sure. Thanks, Greg.
Darren Harris
So for company store pricing in Q1 – we took 5.5%. That was a very deliberate increase in previous quarterly price takes. So in Q4, you'll recall we took 3.9%. In preceding quarters to that, we were in the mid to low threes. So we expect that we're going to have that as a tool and an opportunity for us to mitigate some of these inflationary headwinds going forward on the company side. The franchisees We haven't disclosed the specific price take percentage on that, but they've maintained a sizable increase over our company price take. So they're also using that as a tool to offset wage and commodity pressures.
Chris
The other thing I would add to what Tim mentioned is that a lot of the company price increase didn't take full effect until January. So we're not getting the benefit of that in this much of the benefit of that in these quarterly results on the company stores. So, you know, roughly, um, two to two and a half percent was, you know, November, the remaining part was in January. So we'll start to see that kick in, um, into the second quarter. Thanks.
Operator
Thank you. The next question, we have the line up Nick Satan of what Bush securities your line is now open. You may ask a question.
Nick Satan
Thank you. Just as a follow-up, so what will the pricing be in FQ2, the Olin pricing?
Darren Harris
Yeah, we're going to continue with our original guide of high single digits for the fiscal year. And as Darren mentioned, with the price take that we took at the end of Q1, we'll start to see that gearing up in Q2 is what we expect.
Nick Satan
Got it. And can you just maybe help us quantify or identify the Omicron impact, you know, within the quarter in terms of the comp impact. And I know you guys, you know, did a pretty good job of quantifying the staffing headwind, the supply chain headwind last quarter. You know, anything in line with that would be very, very helpful. And then any kind of sort of, you know, quarter-to-date trajectory around post-Omicron normalization would also be very helpful.
Darren Harris
Yeah, we saw the impact fairly similar to what we saw last quarter. And note that our Q1 has four periods. So unlike most of our industry peer grouping, we saw or incurred a greater proportionality of that Omicron impact in our quarterly results than many others have. But we did see something very consistent with prior quarters. We also saw that dining rooms receded a little bit. So we had fewer dining rooms open this quarter than last quarter as a result of Omicron. But we also saw those behaviors mitigate somewhat towards the end of the quarter and start to recover. So we have an optimistic view of that in Q2.
Chris
To add to Tim's comments, through the first three periods, sales momentum was growing. you know, tremendous and gaining ground. And then with our period four, as Omicron, you know, spiked, we felt the same thing the rest of the industry did, which was, you know, limitation on our day parts and hours. And, you know, and we're now starting to see those trends change as Omicron has declined. And, you know, it's correlating, you know, with the decline in Omicron that, you know, we're seeing, you know, stores come back online. So, The good news is that the trends are improving since Omicron.
Tim
Thank you.
Operator
Thank you. We have the next question. It comes from the line of Gerard Garber of Goldman Sachs. Your line is now open. You may ask your question.
Gerard Garber
Hi, thanks for the question. Darren and Tim, you talked a little bit about the impact from the reacquired units from franchisees. I think there's maybe 30 or a handful above 30 in the company-owned base now. And there was a little bit more of a productivity drag in the quarter that we saw versus our expectations, I think partially based on that. And then you also noted the 200 to 250 basis points of margin drag from those required units. So can you just talk about, I guess, two things? One would be, sort of the AUV basis of those acquired units, including those nine that you just acquired in the Nashville area, to how we should be thinking about the productivity of the company store revenues, and then also what's the right baseline to base that 200 to 250 basis point margin drag? And then finally, just kind of how do you think about re-franchising those units over time?
Darren Harris
Thanks, Jared. High level on the beginning part of your question there. So we did report an 18.3% restaurant level margin for our portfolio. And we noted that there was a 230 basis point impact on the evolving markets portfolio, and that excludes the Nashville stores that came into that. So we're guiding roughly a drag of 200 to 250 basis points in that portfolio that you could pro forma out that 18.3 on top of which gets us back in line with some historical margin figures or in range of that. So typically, these evolving markets, as you can imagine, have a lower ADV than the average remainder of our restaurant company-owned portfolio. And we're actively, obviously, focusing on labor as a primary margin driver to improve restricted hours in those markets and increase the RLM portfolio.
Chris
What we'll also do, to add to what Tim said, is we're actively re-franchising a portion of these markets now. We don't have timing and we won't provide guidance around timing, but we're actively re-franchising them. And also what we saw when we took over units, one of the markets was underperforming from an operational standpoint. Another market was what we found in both the markets and part of the operational challenges was just staffing. And so our corporate team has really been active on increasing staffing and training the restaurants, and we've already seen improvement in both Oregon and Nashville as a result.
Gerard Garber
Great, thanks. And is the idea to re-franchise those markets to one franchise operator then with the intent to grow that market thereafter?
Chris
Yeah, our goal is to utilize re-franchising for growth using multiple operators.
Gerard Garber
Great, thank you.
Operator
Thank you. We have the next question comes on the line of Dennis Geiger of UBS. Your line is now open. You may ask your question.
Dennis Geiger
Thanks for the question. Just wondering if the full year 22 guidance that you previously provided around restaurant margins and some of the key inflation targets, if that's generally still sort of the right way to think about the year, recognizing that there are some moving pieces and and appreciate the color on the units that were temporarily bought back in. But just curious if you could touch on kind of any updates to those previous targets, if there are any. Thank you.
Chris
At this point, we give our guidance in November and we update it in May. We'll have a better read as we get into the year. But right now, we're not making any adjustments to guidance. As we navigate the headwinds, and we we understand what's happening with the headwinds also our pricing ability um you know we'll decide if that's needed you know by may thank you thank you we have the next question from the line of alex slugley of jeffries your line is now open you may answer questions hey thanks good morning um wondered if you could comment on any
spk00
subtle changes you're seeing in the underlying consumer behavior, how they're trading up, or any changes you've seen related to any particular consumer type, specifically, you know, with the rising gas prices here, especially in California or all the inflationary pressures, really, but just anything you're seeing.
Chris
Yeah, I think the biggest thing for those of us in the industry that we're seeing is what is considered the value consumer and what's the price point that you would notice being that value play consumer because everybody's raising prices pretty aggressively. So I think that's the part we're all trying to get our head around. What is now value? Is it $5? Is it $6? Is it $7? And how do we continue to improve our pricing power? For us, we stated multiple times that our strategy is working with both the customers that we've segmented. We've talked about some higher-end customers along with our core base, And the strategy that we've proven is that have a very strong promotional offering with add-on and upsell opportunities, and we've seen that work. And we'll continue to do that and focus on that. And it's working for us as a competitive differentiation in the industry.
Operator
Thank you. Thanks. We have the next question. All right, thank you. We have the next question comes from the line of Chris . Your line is now open. You may ask your question.
Chris
Hi. Thank you guys for taking my question, which relates to transaction performance. By our math, transactions at company locations are down about 17% to pre-COVID levels. Is this primarily a loss of dining room traffic? And do you think the drive-through is capable of generating the throughput to recover those transactions?
Darren Harris
Yeah. Thanks, Chris. We don't disclose the transaction trends and behaviors. We're pleased this quarter with our overall two-year stack same-store sales performance coming in where it did, along with our quarterly 1.2% same-store sales. We're also seeing some impressive growth in our loyalty base as a sales vehicle and how we look at transactions. So our loyalty program was up 68% this quarter. Now we have over $1.4 million members in that bucket. And those members, from a behavioral point of view, have a transaction frequency that's almost double the rate of our typical in-store guest. So we're really leaning in on those digital channels and are pleased with the performance to date.
Chris
Okay. Thank you.
Operator
Thank you. We have the next question. It comes from the line of David Carantino of Baird. Your line is now open. You may ask your question.
David Carantino
Hi. Good morning. I had a question on your commentary around the synergies for Del Taco. And I think, Tim, you said that the synergies would help you to mitigate some of the macro pressures. And I just wanted to ask you to clarify what you meant by that statement and whether you expect those synergies to flow through to profitability or do you see them being an offset to some of the cost pressures that you might have in the business, netting to something lower than that. Thanks.
Darren Harris
Sure. Thanks, David. Yeah, absolutely. I mean, we're actively working with our business unit leaders here, along with Bain Consulting as an outside advisor in the integration process. And clearly, you know, part of this acquisition when we looked at synergies was both in short and medium term to identify economies of scale, and particularly in in supply chain channels, distribution, digital, construction outside of the P&L. So there's quite a few areas where we see meaningful opportunity given the complementary nature of the two brands in both menu and geographical overlay. So that $15 million that we initially guided towards as targeted synergies is a run rate. That's not something that we anticipate to achieve overnight, but within two years we expect to get there. But we do think that there's meaningful opportunities across a broad range of functionalities.
David Carantino
And just to clarify, is that something you expect to flow through to earnings fully, or do you think there will be some cost offsets to that so you would net to a smaller benefit or a different benefit than that on your earnings?
Darren Harris
Yeah, it depends on the type of synergy. So if we look at, for example, supply chain, just to provide one, that we would expect that to flow through to restaurant level margin. We're also looking at, you know, clearly other sort of cost synergies, you know, within digital and ops and other areas. But in addition to that, we're identifying some top line sale driving synergies as well that we would expect to flow through. So I would say a majority of these would primarily flow through to bottom line. And we'll have more to come on that as we get further along in the integration process.
David Carantino
Great. Thank you.
Operator
Thank you. We have the next question. It comes from the lineup John Glass of Morgan Stanley. Your line is now open. You may ask your question.
John Glass
Thanks. Good morning. Just going back to pricing for a moment, I think simple math, my math would suggest pricing might be running like north of 9% if you take the two price increases. So maybe correct me if that's wrong. Aside from looking at traffic in near term, How do you know that's not too much? Do you have real-time tracking of value scores? And if you do, what is that telling you specifically? Because that would seem still higher than some of your competitors, at least on a national basis, but maybe it's different in your local markets. And then just finally, I think in the past, you've provided maybe the average check size and absolute dollars and the number of items per order. If you had that for this quarter, that would be very helpful as well. Thanks. Thanks.
Darren Harris
Yeah, we're comfortable with the price state that we've taken. We feel it's in line with inflationary headwinds on the commodity and laser side. We think we do actually have more room to go on that should we need to, but we're still in line with our original guidance of high single digits. Relative to average check size, we're just under, you know, approaching $12 an average check. So we've seen growth there. Our average number of items per check has held constant and steady, so that's been encouraging that we haven't seen any degradation of that as we've taken price. Relative to the transactions, there's always sensitivity to that, but so far what we've seen has been pretty much in line with our expectations and our modeling for price sensitivity versus trans. So there haven't been any adverse indications that we should back off of our approach and strategy towards taking price in FY22.
John Glass
And I guess my question was, how do you know you've got that? What is the evidence, I guess, you have on that pricing part? What's the data that informs that was the question?
Chris
Yeah, we're constantly doing research and data-driven approach to our pricing models. And so we're looking at, you know, how consumers are responding to our market research. We do it through, you know, an outsourced pricing authority. And we're working hand-in-hand with our franchisees and what they're seeing in their markets. So We take a three-legged stool approach to this. Got it.
John Glass
Thank you.
Operator
Thank you. We have the next question. It comes from the line of Jeffrey Bernstein of Barclays. Your line is now open. You may ask your question.
Jeffrey Bernstein
Great. Thank you very much. My question is on development. You mentioned ramping up the development pipeline. I'm just wondering if you can share any color on typical terms of agreements whether you're offering any incentives to accelerate that growth, and maybe what's the greatest hurdle or challenge to achieving that acceleration in unit growth, whether it's near-term inflation or real estate availability or maybe brand recognition in new markets, just trying to gauge the incentives you're providing, if any, and what could be the greatest hurdles to that acceleration target. Thank you.
Chris
Yeah, I'll let Tim address the incentives. We've had the incentives in our FDD for the last few years. So it's been the standard incentive that we've offered. As far as challenges, I think the biggest thing is we've been out working with our existing franchisees, working hand-in-hand, and we've used data to map every market. And now the focus is about really driving sites into the pipeline We've seen a really rapid increase, which we're not providing guidance on, but an increase in our site approvals within the organization. I think the challenge that we've seen is many brands have reported their challenge with getting equipment and supply related to whether it's HVAC or other items to complete the build process. That's happening just like supply challenges across all industries. So what we've done to offset that is we've, you know, we've used our balance sheet to, you know, pre-order a lot of the items to be prepared for this oncoming growth so that it doesn't hamper our ability to, you know, meet our objectives from a growth standpoint in 2023 and beyond.
Operator
Thank you. We have the next question comes in. All right. Thank you. We have the next question comes in the line of Lauren Silverman of Credit Suisse. Your line is now open. You may ask a question.
Lauren Silverman
Thank you very much for the question. In the queue, I think that mix for company restaurants is down 2% for the quarter. Can you talk about what's driving a little bit of the negative mix shift and your expectation for mix for the rest of the year?
Chris
Can you repeat part of that question? I heard the second half of it, the first part about mix shift.
Lauren Silverman
Sure. I think that mix for company restaurants in the queue was down 2% for the quarter. Just wanted to know if you could talk about what's driving some of that.
spk17
You mean as it relates to franchise sales versus company sales?
Lauren Silverman
Sorry, no. I think that it was average check was 3.5%. So if you have price of 5.5%, then the mix would be negative 2%.
Jack
So you're, Lauren, you're talking about the mix within the company-owned comp of ticket and traffic?
Lauren Silverman
Within average check being price and mix.
Chris
Yeah, we'll have to, because, you know, I don't want to provide something that's inaccurate, but I think the shift is somewhat related to operating hours. And some of the company-owned stores are specifically those evolving markets. But we'll handle that offline.
Lauren Silverman
All right. Thank you very much.
Operator
Thank you. And we have the last question comes from the line of Andrew Charles of Cowen. Your line is now open. You may ask your question.
Andrew Charles of Cowen
Thanks, guys. This is actually Brian on for Andrew. And just to follow up to one of the last couple of questions here, we were pretty encouraged by the acceleration and development agreements. And I guess just within those, can you guys talk a little bit more about the availability of drive-through sites versus, you know, let's say a quarter ago, I guess some of the efforts to make the footprint a little more flexible than staying off there?
Darren Harris
Yeah, our drive-thrus have been unaffected, completely unaffected, and we've been taking an increasing proportionality of our volume through the drive-thru and off-premises, and part of that's also being aided by our digital initiatives as well. So we've been pleased with that performance, and that's been obviously a competitive advantage for us relative to the industry in general.
Chris
And at this point, as far as sites, we're still seeing an increased level of sites being submitted into our real estate pipeline? So we have not, you know, we have not seen it, you know, the lack of drive-through sites or, you know, that concern hamper our development. We've seen plenty of sites coming into the pipeline all having drive-through ability. Great.
Andrew Charles of Cowen
Thanks, guys.
Operator
Thank you. And there are no further questions at this time. I would now like to turn the call over back to Mr. Darren Harris, Chief Executive Officer, sir.
Chris
We appreciate your time today. We were encouraged by this quarter and the results we're having and the momentum we continue to see in the Jack in the Box business. So we look forward to talking to you further, and thank you for your time today.
Operator
Thank you, ladies and gentlemen. That concludes today's conference call. Thank you all for participating.
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