Jack In The Box 2007 Annual Report Download - page 25

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,
advertising, brand identification 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 decrease the demand for our products and negatively affect
our sales and profitability. 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 the past and may adopt similar
strategies in the future. Our promotional strategies or other actions during unfavorable competitive conditions may
adversely affect our margins. We plan to take various steps in connection with our “brand re-invention” strategy,
including making improvements to the facility image at our restaurants, introducing new, higher-quality products,
discontinuing certain menu items, and implementing new service and training initiatives. 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 sales results and financial condition. We have an
on-going “profit improvement program” which seeks to improve efficiencies and lower costs in all aspects of
operations. Although we have been successful in improving efficiencies and reducing costs in the past, there is no
assurance that we will be able to continue to do so in the future.
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, our labor costs will
increase. 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 currently being considered in Congress and various states. We offer access
to healthcare benefits to our restaurant crew members. 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 our results of operations and financial condition.
Risks Related to Advertising. Some of our competitors have greater financial resources which enable them to
purchase significantly more television and radio advertising than we are able to purchase. Should our competitors
increase spending on advertising and promotion, should the cost of television or radio advertising increase, or our
advertising funds decrease for any reason, including implementation of reduced spending strategies, or should our
advertising and promotion be less effective than our competitors, there could be a material adverse effect on our
results of operations and financial condition. The trend toward fragmentation in the media favored by our target
consumers may dilute the effectiveness of our advertising dollars.
Taxes. Our income tax provision is sensitive to expected earnings and, as expectations change, our income
tax provisions may vary from quarter-to-quarter and year-to-year. In addition, from time to time, we may take
positions for filing our tax returns, which differ from the treatment for financial reporting purposes. The ultimate
outcome of such positions could have an adverse impact on our effective tax rate.
Risks Related to Achieving Increased Franchise Ownership and to Franchise Operations. At September 30,
2007, approximately 33% of the JACK IN THE BOX restaurants were franchised. Our plan to increase the percentage of
franchised restaurants by approximately 5% annually and to move towards a range of franchise ownership more
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