Jack In The Box 2012 Annual Report Download - page 10

equipment necessary to decrease the amount of effluent emitted into the air, ground and surface waters.
Many of our Qdoba restaurants sell alcoholic beverages, which require licensing. The regulations governing licensing may impose requirements on
licensees including minimum age of employees, hours of operation, and advertising and handling of alcoholic beverages. The failure of a Qdoba restaurant to
obtain or retain a license could adversely affect the store’s results of operations.
We have processes in place to monitor compliance with applicable laws and regulations governing our operations.
ITEM 1A. RISK FACTORS
We caution you that our business and operations are subject to a number of risks and uncertainties. The factors listed below are important factors that
could cause our actual results to differ materially from our historical results and from projections in the forward-looking statements contained in this report, in
our other filings with the Securities and Exchange Commission (“SEC”), in our news releases and in oral statements by our representatives. However, other
factors that we do not anticipate or that we do not consider significant based on currently available information may also have an adverse effect on our results.
Risks Related to the Food Service Industry. Food service businesses such as ours may be materially and adversely affected by changes in consumer
preferences, national and regional economic, political and socioeconomic conditions and changes in consumer dining habits, whether based on new
information regarding diet, nutrition and health, or otherwise. Adverse economic conditions, such as higher levels of unemployment, lower levels of consumer
confidence and decreased discretionary spending may reduce restaurant traffic and sales and impose practical limits on pricing. If adverse economic
conditions persist for an extended period of time, consumers may make long-lasting changes to their spending behavior. The impact of these factors may be
exacerbated by the geographic profile of our Jack in the Box segment. Specifically, approximately 70% of the restaurants in our Jack in the Box system are
located in the states of California and Texas. Economic conditions, state and local laws, government regulations, weather conditions or natural disasters
affecting those states may therefore more greatly impact our results than would similar occurrences in other locations.
The performance of our business may also be adversely affected by factors such as:
•seasonal sales fluctuations;
•severe weather and other natural disasters;
•unfavorable trends or developments concerning operating costs such as inflation, increased costs of food, labor, fuel, utilities, technology, insurance
and employee benefits (including increases in hourly wages, healthcare costs, workers’ compensation and other insurance costs and premiums);
•the impact of initiatives by competitors and increased competition generally;
•lack of customer acceptance of new menu items or potential price increases necessary to cover higher input costs;
•customers trading down to lower priced items and/or shifting to competitors with lower priced products;
•the availability of qualified, experienced management and hourly employees; and
•failure to anticipate or respond quickly to relevant market trends or to implement successful advertising and marketing programs.
In addition, if economic conditions deteriorate or if our operating results decline unexpectedly, we may be required to record impairment charges, which will
negatively impact our results of operations for the periods in which they are recorded. Due to the foregoing or other factors, results for any one quarter are not
necessarily indicative of results to be expected for any other quarter or for a full fiscal year. These fluctuations may cause our operating results to be below
expectations of public market analysts and investors, and may adversely impact our stock price.
Risks Related to Food and Commodity Costs . We are subject to volatility in food and commodity costs and availability. Accordingly, our profitability
depends in part on our ability to anticipate and react to changes in food costs and availability, including changes in fuel costs and other supply and
distribution costs. For example, prices for feed ingredients used to produce beef, chicken and pork could be adversely affected by changes in worldwide
supply and demand or by regulatory mandates, leading to higher prices. Further, increases in fuel prices could result in increased distribution costs. In recent
years, food and commodity costs increased significantly, outpacing general inflation and industry expectations, and volatile conditions are expected to continue
in the future.
We seek to manage our food and commodity costs, including through extended fixed price contracts and strong category management and purchasing
fundamentals. However, certain commodities such as beef and pork, which represent approximately 20% and 5%, respectively, of our overall commodity
spend, do not lend themselves to fixed price contracts.
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