Jack In The Box 2012 Annual Report Download - page 20

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

For an understanding of the significant factors that influenced our performance during the past three fiscal years, we believe our Management’s Discussion
and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Consolidated Financial Statements and
related Notes included in this Annual Report as indexed on page F-1.
Comparisons under this heading refer to the 52-week periods ended September 30, 2012 and October 2, 2011 for 2012 and 2011, respectively, and the 53-
week period ended October 3, 2010 for 2010, unless otherwise indicated.
Our MD&A consists of the following sections:
•Overview — a general description of our business and fiscal 2012 highlights.
•Financial reporting — a discussion of changes in presentation.
•Results of operations — an analysis of our consolidated statements of earnings for the three years presented in our consolidated financial
statements.
•Liquidity and capital resources — an analysis of cash flows including capital expenditures, aggregate contractual obligations, share repurchase
activity, known trends that may impact liquidity, and the impact of inflation.
•Discussion of critical accounting estimates — a discussion of accounting policies that require critical judgments and estimates.
•Future application of accounting principles — a discussion of new accounting pronouncements, dates of implementation and impact on our
consolidated financial position or results of operations, if any.

As of September 30, 2012, we operated and franchised 2,250 Jack in the Box restaurants, primarily in the western and southern United States, and 627
Qdoba restaurants throughout the United States.
Our primary source of revenue is from retail sales at Jack in the Box and Qdoba company-operated restaurants. We also derive revenue from Jack in the
Box and Qdoba franchise restaurants, including royalties (based upon a percent of sales), rents and franchise fees. Historically, we also generated revenue
from distribution sales of food and packaging commodities to franchisees; however this function has been outsourced, and franchisees who previously
utilized our distribution services now purchase product directly from our distribution service providers or other approved suppliers. In addition, we recognize
gains from the sale of company-operated restaurants to franchisees, which are presented as a reduction of operating costs and expenses, net in the
accompanying consolidated statements of earnings.
The following summarizes the most significant events occurring in fiscal 2012 and certain trends compared to prior years:
•Restaurant Sales. Sales at restaurants open more than one year (“same-store sales”) changed as follows:




Company
4.6%
3.1%
(8.6)%
Franchise
3.0%
1.3%
(7.8)%
System
3.4%
1.8%
(8.2)%

Company
2.8%
5.1%
0.8 %
Franchise
1.9%
5.4%
3.6 %
System
2.4%
5.3%
2.8 %
•Commodity Costs. Commodity costs at Jack in the Box and Qdoba company restaurants increased approximately 2.7% and 4.3%, respectively,
as compared to last year. We expect overall commodity costs to increase approximately 2%-3% in fiscal 2013 compared to fiscal 2012.
•New Unit Development. We continued to grow our brands with the opening of new company and franchise-operated restaurants. In 2012, we
opened 37 Jack in the Box and 58 Qdoba locations system-wide.
21