Jack In The Box 2005 Annual Report Download - page 32

ITEM 7. MANAGEMENT’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of Operations
All comparisons under this heading among 2005, 2004, and 2003 refer to the 52-week periods ended October 2, 2005
and September 28, 2003 and to the 53-week period ended October 3, 2004, unless otherwise indicated.
The Company acquired Qdoba Restaurant Corporation (“Qdoba”), operator and franchisor of Qdoba Mexican Grill, on
January 21, 2003. Qdoba’ s operations are included since the date of acquisition, which includes 36 weeks of operations in fiscal
year 2003.
Overview
As of October 2, 2005, Jack in the Box Inc. (the “Company”) owned, operated, and franchised 2,049 JACK IN THE BOX
quick-service restaurants and 250 Qdoba Mexican Grill (“Qdoba”) fast-casual restaurants, primarily in the western and southern
United States.
The Company’ s primary source of revenue is from the sale of food and beverages at company-operated restaurants.
The Company also derives revenue from distribution sales to JACK IN THE BOX and Qdoba franchises, retail sales from fuel and
convenience stores (“QUICK STUFF”), royalties from franchised restaurants, rents from real estate leased to certain franchisees,
franchise fees, and the sale of company-operated restaurants to franchisees.
The quick-service restaurant industry has become more complex and challenging in recent years. Challenges presently
facing the sector include higher levels of consumer expectations, intense competition with respect to market share, restaurant
locations, labor, and menu and product development, the emergence of the fast-casual restaurant segment, changes in the
economy and trends for healthier eating.
To address these challenges and others, and support our goal of becoming a national restaurant company, management
has developed a three-part strategic plan centered on multifaceted growth, reinvention of the JACK IN THE BOX brand and product
innovation and customer loyalty. Our multifaceted growth strategy includes growing our restaurant base by continuing to grow
through new units and increased sales at existing restaurants, and increasing franchising activities. Brand reinvention initiatives
include product innovations with a focus on higher-quality products, enhancements to the quality of service and renovations to
the restaurant facilities. We believe that brand reinvention will differentiate us from our competition and that our growth strategy
will support us in our objective to become a national restaurant company.
The following summarizes the most significant events occurring in fiscal year 2005:
• Company-operated Restaurant Sales. New product introductions contributed to sales growth at JACK IN THE BOX
restaurants. This positive sales momentum resulted in an increase in same-store sales of 2.4% at JACK IN THE BOX
restaurants and 11.8% at Qdoba restaurants.
• New Restaurant Designs. As planned, the Company continues testing new interior and exterior designs for its
JACK IN THE BOX restaurants. The design enhancements are intended to create a more contemporary atmosphere
and promote more in-restaurant dining.
• Reloadable Gift Cards. We introduced reloadable gift cards at virtually all of our restaurants in November 2004.
The “Jack Cash” gift cards are available in any amount from $5 to $100.
• Health-Care Program. We began offering all JACK IN THE BOX restaurant hourly employees a health-care
program, including vision and dental benefits. As an additional incentive to crew members with more than a year
of service, JACK IN THE BOX will pay a portion of their premiums. We believe this program will help reduce
turnover, as well as training costs and workers’ compensation claims.
• JBX Grill. We decided to end our test of JBX Grill as a stand alone restaurant concept. We believe that the
innovative menu, service initiatives and creative design elements of JBX Grill can be best leveraged across the
existing 2,049 restaurants of our core JACK IN THE BOX brand rather than as a separate concept.
• Repurchase of Common Stock. Pursuant to stock repurchase programs authorized by our Board of Directors, the
Company repurchased approximately 2.6 million shares of its common stock in 2005. In September 2005, the
Company’ s Board of Directors authorized an additional $150 million program to repurchase shares of the
Company’ s common stock over the next three years.
• Interest Rate Swaps. To reduce exposure to rising interest rates, we converted $130 million of our $275 million
term loan at floating rates to a fixed interest rate for the next three years by entering into two-interest rate swap
contracts.
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