Jack In The Box 2008 Annual Report Download - page 28

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
For an understanding of the significant factors that influenced our performance during the past three fiscal
years, we believe our Management’s Discussion and Analysis of Financial Condition and Results of Operations
(“MD&A”) should be read in conjunction with the Consolidated Financial Statements and related Notes included in
this Annual Report as indexed on page F-1.
All comparisons under this heading among 2008, 2007 and 2006 refer to the 52-week periods ended
September 28, 2008, September 30, 2007, and October 1, 2006, respectively, unless otherwise indicated.
Our MD&A consists of the following sections:
•Overview — a general description of our business, the quick-service dining segment of the restaurant
industry and fiscal 2008 highlights.
•Financial reporting changes — a summary of significant financial statement reclassifications, adjustments
and new accounting pronouncements adopted.
•Results of operations — an analysis of our consolidated statements of earnings for the three years presented
in our consolidated financial statements.
•Liquidity and capital resources — an analysis of cash flows including capital expenditures, aggregate
contractual obligations, share repurchase activity, known trends that may impact liquidity, and the impact of
inflation.
•Discussion of critical accounting estimates — a discussion of accounting policies that require critical
judgments and estimates.
•Future application of accounting pronouncements — a discussion of new accounting pronouncements,
dates of implementation and impact on our consolidated financial position or results of operations, if any.
OVERVIEW
As of September 28, 2008, Jack in the Box Inc. (the “Company”) owned, operated, and franchised 2,158
JACK IN THE BOX quick-service restaurants and 454 Qdoba Mexican Grill (“Qdoba”) fast-casual restaurants,
primarily in the western and southern United States.
Our primary source of revenue is from retail sales at company-operated restaurants. We also derive revenue
from sales of food and packaging to JACK IN THE BOX and Qdoba franchises, and revenue from franchisees including
royalties based upon a percent of sales, franchise fees and rents. In addition, we recognize gains from the sale of
company-operated restaurants to franchisees, which are presented as a reduction of operating costs and expenses in
the accompanying consolidated statements of earnings.
The quick-service restaurant industry is complex and challenging. Challenges presently facing the sector
include higher levels of consumer expectations, intense competition with respect to market share, restaurant
locations, labor, menu and product development, changes in the economy, including costs of commodities, and
trends for healthier eating.
To address these challenges and others, management has developed a strategic plan focused on four key
initiatives. The first initiative is a growth strategy that includes opening new restaurants and increasing same-store
sales. The second initiative is a holistic reinvention of the JACK IN THE BOX brand through menu innovation,
upgrading guest service and re-imaging JACK IN THE BOX restaurant facilities to reflect the personality of Jack — the
chain’s fictional founder and popular spokesman. The third strategic initiative is to expand franchising — through
new restaurant development and the sales of company-operated restaurants to franchisees — to create a business
model that is less capital intensive and not as susceptible to cost fluctuations. The fourth initiative is to improve our
business model as we transition to becoming a predominantly franchised restaurant chain.
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