Jack In The Box 2006 Annual Report Download - page 28

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or within budget, or that any restaurants will generate our expected returns on investment. Our inability to expand in
accordance with our plans or to manage our growth could have a material adverse effect on our results of operations
and financial condition.
Risks Associated with Growth. Our plans to increase our franchising activities and to further develop Qdoba and
our convenience store/gas station/restaurant co-brand will require the implementation of enhanced operational and
financial systems and will require additional management, operational, and financial resources. For example, we
will be required to recruit franchise sales and administrative personnel; and to recruit and train managers and other
personnel for each new company-owned restaurant, as well as additional development and accounting personnel.
We cannot assure you that we will be able to manage our expanding operations effectively to continue to recognize
value from franchising and co-branding. The failure to implement such systems and add such resources on a cost-
effective basis could have a material adverse effect on our results of operations and financial condition.
Reliance on Certain Geographic Markets. Because our business is regional, with approximately 60% of our
restaurants located in the states of California and Texas, the economic conditions, state and local government
regulations and weather conditions affecting those states may have a material impact upon our results.
Risks Related to Entering New Markets. We cannot assure you that we will be able to successfully expand or
acquire critical market presence for our brands in new geographical markets, as we may encounter well-established
competitors with substantially greater financial resources. We may be unable to find attractive locations, acquire
name recognition, successfully market our products and attract new customers. Competitive circumstances and
consumer characteristics in new market segments and new geographical markets may differ substantially from those
in the market segments and geographical markets in which we have substantial experience. We cannot assure you
that we will be able to profitably operate new company-operated or franchised restaurants in new geographical
markets. Management decisions to curtail or cease investment in certain locations or markets may result in
impairment charges.
Competition. The restaurant industry is highly competitive with respect to price, service, location, personnel and
the type and quality of food,and 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
quick-service restaurants, fast-casual 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 have a material adverse effect on our financial condition and results of operations. Some of our
competitors have substantially greater financial, marketing, operating and other resources than we have, which may
give them a competitive advantage. Certain of our competitors have introduced a variety of new products and
engaged in substantial price discounting in recent years and may continue to do so in the future. We plan to take
various steps in connection with our “brand re-invention” strategy, including introducing new, higher-quality
products, discontinuing certain menu items, testing new service and training initiatives, and making improvements
to facility image at our restaurants. However, there can be no assurance (i) that our facility improvements will foster
increases in sales and yield the desired return on investment, (ii) of the success of our new products, initiatives or
our overall strategies or (iii) that competitive product offerings, pricing and promotions will not have an adverse
effect upon our results of operations and financial condition. Our promotional strategies or other actions during
unfavorable competitive conditions may adversely affect our margins.
Risks Related to Increased Labor Costs. We have a substantial number of employees who are paid wage rates at
or slightly above the minimum wage. As federal and state minimum wage rates increase, we may need to increase
not only the wages of our minimum wage employees but also the wages paid to the employees at wage rates which
are above minimum wage. If competitive pressures or other factors prevent us from offsetting the increased costs by
increases in prices, our profitability may decline. In addition, various proposals that would require employers to
provide health insurance for all of their employees are being considered from time-to-time in Congress and various
states. We offer access to healthcare benefits to our restaurant crew members. If our crew members do not find the
opportunity to obtain this insurance attractive, we may not see the reductions in turnover, training costs and workers’
compensation claims that we expect. The imposition of any requirement that we provide health insurance to all
employees on terms materially different from our existing programs would have a material adverse impact on the
results of operations and financial condition of the Company.