Jack In The Box 2012 Annual Report Download - page 12

•delays in completion of construction;
•the inability to identify, or the unavailability of suitable sites on acceptable leasing or purchase terms;
•developed properties not achieving desired revenue or cash flow levels once opened;
•the negative impact of a new restaurant upon sales at nearby existing restaurants;
•the challenge of developing in areas where competitors are more established or have greater penetration or access to suitable development sites;
•incurring substantial unrecoverable costs in the event a development project is abandoned prior to completion;
•impairment charges resulting from underperforming restaurants or decisions to curtail or cease investment in certain locations or markets;
•in new geographic markets, where we have limited or no existing locations, the inability to successfully expand or acquire critical market presence for
our brands, acquire name recognition, successfully market our products or attract new customers;
•the challenge of identifying, recruiting and training qualified restaurant managers;
•the inability to obtain all required permits;
•changes in laws, regulations and interpretations, including interpretations of the requirements of the Americans with Disabilities Act; and
•general economic and business conditions.
Although we manage our growth and development activities to help reduce such risks, we cannot assure that our present or future growth and development
activities will perform in accordance with our expectations. Our inability to expand in accordance with our plans or to manage the risks associated with our
growth could have a material adverse effect on our results of operations and financial condition.
Risks Related to Franchisee Financial and Business Operations . The opening and continued success of franchise restaurants depends on various
factors, including the demand for our franchises, the selection of appropriate franchisee candidates, the identification and availability of suitable sites, and
negotiation of acceptable lease or purchase terms for new locations, permitting and regulatory compliance, the ability to meet construction schedules, the
availability of financing, and the financial and other capabilities of our franchisees and developers. See “Growth and Development Risks” above. Despite our
due diligence performed during the recruiting process, we cannot assure you that franchisees and developers planning the opening of franchise restaurants will
have the business abilities or sufficient access to financial resources necessary to open the restaurants required by their agreements, or prove to be effective
operators and remain aligned with us on operations, promotional or capital-intensive initiatives.
Our franchisees are contractually obligated to operate their restaurants in accordance with all applicable laws and regulations, as well as standards set forth
in our agreements with them. However, franchisees are independent third parties whom we cannot and do not control. If franchisees do not successfully operate
restaurants in a manner consistent with applicable laws and required standards, royalty, and in some cases rent, payments to us may be adversely affected. If
customers have negative perceptions or experiences with operational execution, food quality or safety at our franchised locations, our brands' image and
reputation could be harmed, which in turn could negatively impact our business and operating results.
As the number of franchised restaurants has increased and continues to increase, the percentage of our revenues derived from royalties and rents at
franchise restaurants will increase, as will the risk that earnings could be negatively impacted by defaults in the payment of royalties and rents. In addition,
franchisee business obligations may not be limited to the operation of Jack in the Box or Qdoba restaurants, making them subject to business and financial
risks unrelated to the operation of our restaurants. These unrelated risks could adversely affect a franchisee's ability to make payments to us or to make
payments on a timely basis. We cannot assure that franchisees will successfully participate in our strategic initiatives or operate their restaurants in a manner
consistent with our concepts and standards. As compared to some of our competitors, our Jack in the Box brand has relatively fewer franchisees who, on
average, operate more restaurants per franchisee. There are significant risks to our business if a franchisee, particularly one who operates a large number of
restaurants, encounters financial difficulties or fails to adhere to our standards and projects an image inconsistent with our brands.
Risk Relating to Competition, Menu Innovation and Successful Execution of our Operational Strategies and Initiatives. We are focused on increasing
same-store sales and average unit volumes as part of our long-term business plan. These results are subject to a number of risks and uncertainties, including
risks related to competition, menu innovation and the successful execution of our operational strategies and initiatives. The restaurant industry is highly
competitive with respect to price, service, location, personnel, advertising, brand identification and the type, quality and innovativeness of menu items  There
are many well-established competitors. Each of our restaurants competes directly and indirectly with a large number of national and regional restaurant chains,
as well as with locally-owned and/or independent quick-service restaurants, fast-casual restaurants, casual dining restaurants, sandwich shops and similar
types of businesses. The trend toward convergence in grocery, deli and restaurant services may increase the number of our competitors. Such increased
competition could decrease the demand for our products and negatively affect our sales and profitability. Some of our competitors have substantially greater
financial, marketing, operating and other
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