Jack In The Box 2012 Annual Report Download - page 13

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. In an effort to increase same-store sales, we continue to make
improvements to our facilities, to implement new service and training initiatives, and to introduce new products and discontinue other menu items. However,
there can be no assurance that our facility improvements will foster increases in sales and yield the desired return on investment, that our service initiatives or
our overall strategies will be successful, that our menu offerings and promotions will generate sufficient customer interest or acceptance to increase sales, or
that competitive product offerings, pricing and promotions will not have an adverse effect upon our margins, sales results and financial condition. In addition,
the success of our strategy depends on, among other factors, our ability to motivate restaurant personnel and franchisees to execute our initiatives and achieve
sustained high service levels.
Advertising and Promotion Risks. 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 reduced sales or 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. Also, the fragmentation in the media favored by our target consumers, including growing prevalence and importance of social and mobile media,
poses challenges and risks for our marketing, advertising and promotional strategies. Failure to effectively tackle these challenges and risks could also have a
materially adverse effect on our results.
Taxes. Our income tax provision is sensitive to expected earnings and, as those 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 that 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 Reducing Operating Costs . During 2012, we identified strategies and took steps to reduce operating costs to align with the increased
Jack in the Box franchise ownership and further integration of Jack in the Box and Qdoba brands back office functions. These strategies include outsourcing
certain functions, reducing headcount, and increasing shared back office services between our brands. We continue to evaluate and implement further cost-
saving initiatives. However, the ability to reduce our operating costs through these initiatives is subject to risks and uncertainties, and we cannot assure that
these activities, or any other activities that we may undertake in the future, will achieve the desired cost savings and efficiencies. Failure to achieve such
desired savings could adversely affect our results of operations and financial condition.
Risks Related to Loss of Key Personnel. We believe that our success will depend, in part, on our ability to attract and retain the services of skilled
personnel, including key executives. The loss of services of any such personnel could have a material adverse effect on our business.
Risks Related to Government Regulations, Including Regulations Increasing Labor Costs. The restaurant industry is subject to extensive federal, state
and local governmental regulations. We are subject to regulations including but not limited to those related to:
•the preparation, labeling, advertising and sale of food;
•building and zoning requirements;
•sanitation and safety standards;
•employee healthcare requirements, including the implementation and uncertain legal, regulatory and cost implications of the Affordable Care Act;
•labor and employment, including minimum wage, overtime, working conditions, employment eligibility and documentation, and other employee
benefit and fringe benefit requirements;
•the registration, offer, sale, termination and renewal of franchises;
•truth-in-advertising, consumer protection and the security of information;
•Americans with Disabilities Act;
•payment card regulation and related industry rules;
•liquor licenses; and
•climate change, including the potential impact of greenhouse gases, water consumption, or a tax on carbon emissions.
The increasing amount and complexity of regulations may increase our labor costs, costs of compliance and our exposure to regulatory claims which, in
turn, could have a material adverse effect on our business.
Risks Related to Computer Systems, Information Technology and Cyber Security . We increasingly rely on computer systems and information
technology to conduct our business. A material failure or interruption of service or a breach in security of our computer systems could cause reduced efficiency
in operations, loss or misappropriation of data or business interruptions, or could impact delivery of food to restaurants or financial functions such as vendor
payment or employee payroll. We have business
14