Jack In The Box 2010 Annual Report Download - page 21

Table of Contents
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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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.
Comparisons under this heading refer to the 53-week period ended October 3, 2010 and the 52-week periods ended September 27,
2009 and September 28, 2008 for 2010, 2009 and 2008, 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 2010
highlights.
• Financial reporting — a discussion of changes in presentation.
• 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 principles — a discussion of new accounting pronouncements, dates of implementation and
impact on our consolidated financial position or results of operations, if any.
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Our primary source of revenue is from retail sales at Jack in the Box and Qdoba company-operated restaurants. We also derive revenue
from Jack in the Box and Qdoba franchise restaurants, including royalties (based upon a percent of sales), rents, franchise fees and
distribution sales of food and packaging commodities. 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, net in the accompanying consolidated statements of
earnings.
The quick-service restaurant industry is complex and challenging. Challenges currently 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 the current recessionary environment, high rates of unemployment, costs of commodities and trends
for healthier eating.
The following summarizes the most significant events occurring in fiscal 2010 and certain trends compared to prior years:
• Restaurant Sales. Sales at Jack in the Box company-operated restaurants open more than one year (“same-store sales”)
decreased 8.6% in fiscal 2010 and 1.2% in 2009. Same-store sales at franchise-operated restaurants decreased 7.8% in fiscal
2010 and 1.3% in 2009. System same-store sales at Qdoba increased 2.8% versus a decrease of 2.3% last fiscal year. Sales at
Jack in the Box restaurants continue to be impacted by high unemployment rates in our major markets for our key customer
demographics.
• Commodity Costs. Pressures from higher commodity costs, which negatively impacted our business in fiscal 2009, moderated
somewhat in 2010. Overall commodity costs at Jack in the Box restaurants decreased approximately 1.4% after increasing
approximately 2.0% in 2009, as lower costs for beef, shortening, poultry and bakery were partially offset by higher costs for
produce and pork.
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