Jack In The Box 2006 Annual Report Download - page 31

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•The practical or psychological effects of terrorist acts or government responses, the on-going conflict in
Iraq and war or the risk of war on consumer behavior may negatively impact our results.
•Litigation trends and potential class actions by consumers and shareholders, and the costs and other effects
of legal claims by employees, franchisees, customers, vendors, stockholders and others, including settlement of
those claims may negatively impact our results.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Of our 2,079 JACK IN THE BOX and 318 Qdoba restaurants, we owned 798 restaurant buildings, including 576
located on leased land. In addition, we leased both the land and building for 1,251 restaurants, including 313
restaurants operated by franchisees. At October 1, 2006, franchisees directly owned or leased 348 restaurants.
Number of restaurants at October 1, 2006
Company-
operated Franchised Total
Company-owned restaurant buildings:
On Company-owned land............................................................. 159 63 222
On leased land .............................................................................. 448 128 576
Subtotal......................................................................................... 607 191 798
Company-leased restaurant buildings on leased land ....................... 938 313 1,251
Franchise directly-owned or directly-leased restaurant buildings .... — 348 348
Total restaurant buildings.............................................................. 1,545 852 2,397
Our leases generally provide for fixed rental payments (with cost-of-living index adjustments) plus real estate
taxes, insurance and other expenses. In addition, many of the leases provide for contingent rental payments of
between 1% and 10% of the restaurant’ s gross sales once certain thresholds are met. We have generally been able to
renew our restaurant leases as they expire at then-current market rates. The remaining terms of ground leases range
from approximately one year to 48 years, including optional renewal periods. The remaining lease terms of our other
leases range from approximately one-year to 41 years, including optional renewal periods. At October 1, 2006, our
leases had initial terms expiring as follows:
Number of restaurants
Ground
leases
Land and
building leases
2007 – 2011 ...................................................................................................................
.
187 329
2012 – 2016 ...................................................................................................................
.
69 305
2017 – 2021 ...................................................................................................................
.
166 407
2022 and later ................................................................................................................
.
154 210
Our principal executive offices are located in San Diego, California in an owned facility of approximately
150,000 square feet. We also own our 70,000 square foot Innovation Center and approximately 4 acres of
undeveloped land directly next to it. Qdoba’ s corporate support center is located in a leased facility in Wheat Ridge,
Colorado. We also own one distribution center and lease six centers, with remaining terms ranging from 11 to 19
years, including optional renewal periods.
Certain of our personal property is pledged as collateral under our credit agreement and certain of our real
property may be pledged as collateral in the event of a ratings downgrade as defined in the credit agreement.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to normal and routine litigation. In the opinion of management, based in part on the
advice of legal counsel, the ultimate liability from all pending legal proceedings, asserted legal claims and known
potential legal claims should not materially affect our operating results, financial position or liquidity.