Jack In The Box 2013 Annual Report Download - page 15

back office functions, and systems. 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 as described in Item 1 under “Regulation.” 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 recently enacted and proposed minimum wage adjustments, overtime, working conditions, employment eligibility
and documentation, sick leave, 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 the costs to us and our franchisees of labor and compliance, and increase 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 and our franchisees 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 continuity plans that attempt to anticipate and mitigate such failures, but it is possible that significant capital
investment could be required to rectify these problems, or more likely that cash flows could be impacted, in the shorter term. Our security architecture is
decentralized, such that payment card information is primarily confined to the restaurant where the specific transaction took place. However, a security breach
involving our point of sale, personnel, franchise operations reporting or other systems could result in disclosure or theft of confidential customer or employee
or other proprietary data, and potentially cause loss of consumer confidence or potential costs, fines and litigation, including costs associated with consumer
fraud or privacy breach. These risks may be magnified by the increased use of mobile communications and other new technologies, and are subject to
increased and changing regulation. The costs of compliance, including increased investment in technology or personnel in order to protect valuable business or
consumer information, may negatively impact our margins.
Risks Related to the Failure of Internal Controls. We maintain a documented system of internal controls, which is reviewed and monitored by an
Internal Controls Committee and tested by the Company’s full-time internal audit department. The internal audit department reports to the Audit Committee of
the Board of Directors. We believe we have a well-designed system to maintain adequate internal controls on the business; however, we cannot be certain that
our controls will be adequate in the future or that adequate controls will be effective in preventing or detecting all error and all fraud. A control system, no
matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of
any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions. If our internal controls are ineffective, we may not be able to accurately report our
financial results or prevent fraud. Any failures in the effectiveness of our internal controls could have a material adverse effect on our operating results or cause
us to fail to meet reporting obligations.
Environmental and Land Risks and Regulations. We own or lease the real properties on which our Jack in the Box company-operated restaurants are
located, and either own or lease (and subsequently sublease to the franchisee) a majority of our Jack in the Box franchised restaurant sites. We also own or
lease the real properties upon which our company-operated Qdoba restaurants
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