Fast-food chain sells 25 of its isle stores

Jack in the Box announces the sale to Scanlan Management

Twenty-five of Hawaii's 26 Jack in the Box restaurants have been bought by Chris Scanlan, the former president and chief executive of Hawaii's largest operator of franchised Burger King and KFC restaurants.

San Diego-based Jack in the Box Inc. announced the sale yesterday of its company-owned Hawaii restaurants for an undisclosed price to Scanlan Management LLC. The sale is expected to close before the end of next month.

"The pending sale of our company restaurants in Hawaii underscores the progress we're making in our strategic initiative to increase franchising," said Linda A. Lang, chairman and chief executive of the parent company. "Franchising will help expand the Jack in the Box brand in new and existing markets and can generate higher returns and margins for the company."

The deal also includes a development agreement for new restaurants, but neither Jack in the Box officials nor Scanlan were able to comment further because "we are in a quiet period," Scanlan said.

Jack in the Box's 26 Hawaii restaurants are on Oahu, Maui and the Big Island. The single Big Island location, in Hilo, is a franchise and is not included in the deal. A 27th location, on Kalakaua Avenue in Waikiki, closed last month when its lease expired, according to spokesman Brian Luscomb.

Jack in the Box employs about 800 people in Hawaii.

A prospectus prepared in 2003 showed McDonald's owning 33 percent of the local fast-food market, Jack in the Box with 24 percent, Zippy's with 18 percent, Taco Bell with 13 percent, Burger King with 8 percent and KFC with 4 percent.

Scanlan was unable to comment on whether there has been any shift in market shares since.

As of July 9, Jack in the Box Inc. had 2,065 company-owned and franchised locations nationwide, including about 50 with Quick Stuff convenience stores that also have gas stations. Through a wholly owned subsidiary, Jack in the Box also operates 298 company-owned and franchised Qdoba Mexican Grill fast-casual restaurants, but neither of the latter two concepts operate in the islands.

The company plans 40 new restaurants, both its own and franchises, including 12 with Quick Stuff stores, according to its latest earnings report and forecast. The report did not say where.

Scanlan left Kazi Management LLC a year ago to form Trinity Restaurant Partners LLC with Kevin Burke, managing partner of investment firm Trinity Capital LLC. Their intention was to spend as much as $100 million investing in local restaurants and bringing new chains to the islands.

Their plan at the time was to operate out of Los Angeles, pending the acquisition, then move here. Scanlan was building a home in East Honolulu last August.

During Scanlan's Kazi days, the company went from an eight-store KFC franchisee to the second-largest KFC franchisee in the United States. Kazi is now a nine-state company that also operates A&W, Burger King, Long John Silvers, Pizza Hut and Taco Bell restaurants.

Officials expect a positive and smooth transition for Hawaii Jack in the Box employees, as has been seen with other company-to-franchise changeovers, Luscomb said.

"I think one of the biggest differences is the familiarity a local operator would have with the community -- and Chris Scanlan is intimately familiar with Hawaii, so I think that is a big benefit," Luscomb said.

"Plus, for employees, working for somebody local is viewed as being a benefit as well."