Jack In The Box 2007 Annual Report Download - page 24

ITEM 1A. RISK FACTORS
Risks Related to the Food Service Industry. Food service businesses may be materially and adversely affected
by changes in consumer tastes, national and regional economic and political conditions, and the impact on
consumer eating habits of new information regarding diet, nutrition and health. The performance of individual
restaurants may be adversely affected by factors such as traffic patterns, demographics and the type, number and
location of competing restaurants, as well as local economic and political conditions, terrorist acts or government
responses, weather conditions and catastrophic events such as earthquakes, fires, floods or other natural disasters.
Multi-unit food service businesses such as ours can also be materially and adversely affected by widespread
negative publicity of any type, particularly regarding food quality, fat content, illness (such as epidemics or the
prospect of a pandemic such as avian flu), obesity, injury or other health concerns with respect to certain foods. To
minimize the risk of food-borne illness, we have implemented a HACCP system for managing food safety and
quality. Nevertheless, the risk of food-borne illness cannot be completely eliminated. Any outbreak of such illness
attributed to our restaurants or within the food service industry or any widespread negative publicity regarding our
brands or the restaurant industry in general could cause a decline in our sales and have a material adverse effect on
our financial condition and results of operations.
Dependence on frequent deliveries of fresh produce and groceries subjects food service businesses, such as
ours, to the risk that shortages or interruptions in supply, caused by adverse weather or other conditions, could
adversely affect the availability, quality and cost of ingredients. In addition, unfavorable trends or developments
concerning factors such as inflation, increased cost of food, labor, fuel, utilities, technology, insurance and
employee benefits (including increases in hourly wages, workers’ compensation and other insurance costs and
premiums), increases in the number and locations of competing restaurants, regional weather conditions and the
availability of experienced management and hourly employees, may also adversely affect the food service industry
in general. Because our restaurants are predominantly company-operated, we may have greater exposure to
operating cost issues than chains that are primarily franchised. Exposure to these fluctuating costs, including
anticipated increases in commodity costs could negatively impact our margins. Changes in economic conditions
affecting our customers could reduce traffic in some or all of our restaurants or impose practical limits on pricing,
either of which could negatively impact profitability and have a material adverse effect on our financial condition
and results of operations. Our continued success will depend in part on our ability to anticipate, identify and respond
to changing conditions.
Risks Associated with Development. We intend to grow by developing additional company-owned restau-
rants and through new restaurant development by franchisees. Development involves substantial risks, including the
risk of (i)the availability of financing for the Company and for franchisees at acceptable rates and terms,
(ii) development costs exceeding budgeted or contracted amounts, (iii) delays in completion of construction, (iv) the
inability to identify, or the unavailability of suitable sites on acceptable leasing or purchase terms, (v) developed
properties not achieving desired revenue or cash flow levels once opened, (vi) competition for suitable development
sites; (vii) incurring substantial unrecoverable costs in the event a development project is abandoned prior to
completion, (viii) the inability to obtain all required governmental permits, including, in appropriate cases, liquor
licenses; (ix) changes in governmental rules, regulations, and interpretations (including interpretations of the
requirements of the Americans with Disabilities Act, and (x) general economic and business conditions.
Although we intend to manage our development to reduce such risks, we cannot assure you that present or
future development will perform in accordance with our expectations. We cannot assure you that we will complete
the development and construction of the facilities, or that any such development will be completed in a timely
manner 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.
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 laws and
government regulations and weather conditions affecting those states may have a material impact upon our results.
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