Jack In The Box 2012 Annual Report Download - page 3

PART I
ITEM 1. BUSINESS
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Overview. Jack in the Box Inc., based in San Diego, California, operates and franchises more than 2,800 Jack in the Box® quick-service restaurants
(“QSR”) and Qdoba Mexican Grill® fast-casual restaurants. References to the Company throughout this Annual Report on Form 10-K are made using the first
person notations of “we,” “us” and “our.”
Jack in the Box. The first Jack in the Box restaurant opened in 1951. Jack in the Box is one of the nation’s largest hamburger chains and, based on
number of restaurants, is the second or third largest QSR hamburger chain in each of our top 10 major markets, which comprise approximately 70% of the
total system. As of the end of our fiscal year on September 30, 2012, the Jack in the Box system included 2,250 restaurants in 21 states, of which 547 were
company-operated and 1,703 were franchise-operated.
Qdoba Mexican Grill. To supplement our core growth and balance the risk associated with growing solely in the highly competitive hamburger segment of
the QSR industry, in 2003 we acquired Qdoba Restaurant Corporation, operator and franchisor of Qdoba Mexican Grill. As of September 30, 2012, the
Qdoba system included 627 restaurants in 42 states, as well as the District of Columbia, of which 316 were company-operated and 311 were franchise-
operated. Qdoba is the second largest fast-casual Mexican brand in the United States.
Strategic Plan. Our long-term strategic plan focuses on continued growth of our two restaurant brands, increasing average unit volumes, and improving
restaurant profitability and returns on invested capital. A key element of our plan is to continue expanding our Jack in the Box franchising operations to
generate higher margins and returns for the Company while creating a business model that is less capital intensive and not as susceptible to cost fluctuations.
Through the sale of 97 company-operated Jack in the Box restaurants to franchisees and the development of 18 new franchise restaurants in fiscal 2012, we
increased franchise ownership of the Jack in the Box system to approximately 76% at fiscal year end from approximately 72% at the end of fiscal 2011. We
plan to continue to refranchise our Jack in the Box restaurants and bring our franchise ownership in the Jack in the Box system to approximately 80%.
Through new unit growth and acquisitions of franchised Qdoba restaurants in select markets, and due to the refranchising of Jack in the Box restaurants,
Qdoba has become a more prominent part of our company restaurant operations. As of the end of fiscal 2012, Qdoba comprised approximately 37% of our
total company-operated units as compared with approximately 6% five years ago. We plan to more aggressively build out the number of Qdoba company
locations over the next several years through new unit growth and acquisitions of franchise locations. Accelerating the growth of our Qdoba brand by
increasing market penetration should generate heightened brand awareness.
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Jack in the Box. Jack in the Box restaurants offer a broad selection of distinctive, innovative products targeted primarily at the adult fast-food consumer.
Our menu features a variety of items including hamburgers, tacos, specialty sandwiches, drinks, real ice cream shakes, salads and side items. Jack in the
Box restaurants also offer guests the ability to customize their meals and to order any product, including breakfast items, any time of the day.
The Jack in the Box restaurant chain was the first major hamburger chain to develop and expand the concept of drive-thru restaurants. In addition to
drive-thru windows, most of our restaurants have seating capacities ranging from 20 to 100 persons and are open 18-24 hours a day. Drive-thru sales currently
account for approximately 70% of sales at company-operated restaurants. The average check in fiscal year 2012 was $6.39 for company-operated restaurants.
With a presence in only 21 states, we believe Jack in the Box is a brand with significant growth opportunities. In fiscal 2012, we continued to expand in
both existing and new markets. We opened 19 company-operated restaurants and franchisees opened 18 Jack in the Box restaurants during the year. In fiscal
2013, we plan to open 20-25 new company- and franchise-operated restaurants.
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