Jack In The Box 2015 Annual Report Download - page 12

ITEM 1A. RISK FACTORS
We caution you that our business and operations are subject to a number of risks and uncertainties. The factors listed below are important factors that
could cause our actual results to differ materially from our historical results and from projections in the forward-looking statements contained in this report, in
our other filings with the SEC, in our news releases and in oral statements by our representatives. However, other factors that we do not anticipate or that we
do not consider significant based on currently available information may also have an adverse effect on our results.
Risks Related to the Food Service Industry. Food service businesses such as ours may be materially and adversely affected by changes in consumer
preferences, national and regional economic, political and socioeconomic conditions, attitudes and changes in consumer dining habits (whether or not based
on new information regarding diet, nutrition or health), as well as by the cost of food at home compared to food away from home, technological innovations,
health-based regulations or other factors. Adverse economic conditions, such as higher levels of unemployment, lower levels of consumer confidence and
decreased discretionary spending may reduce restaurant traffic and sales and impose practical limits on pricing. If adverse or uncertain economic conditions
persist for an extended period of time, consumers may make long-lasting changes to their spending behavior. The impact of these factors may be exacerbated
by the geographic profile of our Jack in the Box brand. Specifically, nearly 70% of the restaurants in our Jack in the Box system are located in the states of
California and Texas. Economic conditions, state and local laws, government regulations, weather conditions or natural disasters affecting those states may
therefore more greatly impact our results than would similar occurrences in other locations.
The performance of our business may also be adversely affected by factors such as:
• seasonal sales fluctuations;
• severe weather and other natural disasters;
• unfavorable trends or developments concerning operating costs such as inflation, increased costs of food, fuel, utilities, technology, labor (including
due to legislated minimum wage increases, labor disruptions, employee relations issues or new administrative interpretations of regulations
impacting labor costs), insurance, or employee benefits (including healthcare, workers’ compensation and other insurance costs and premiums);
• the impact of initiatives by competitors and increased competition generally;
• lack of customer acceptance of new menu items, service initiatives or potential price increases necessary to cover higher input costs;
• customers trading down to lower priced items and/or shifting to competitive offerings with lower priced products;
• the availability of qualified, experienced management and hourly employees; and
• failure to anticipate or respond quickly to relevant market trends or to implement successful advertising and marketing programs, including
technology-based programs.
In addition, if economic conditions deteriorate or are uncertain for a prolonged period of time, or if our operating results decline unexpectedly, we may be
required to record impairment charges, which will negatively impact our results of operations for the periods in which they are recorded. Due to the foregoing
or other factors, results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for a full fiscal year. These
fluctuations may cause our operating results to be below expectations of public market analysts and investors, and may adversely impact our stock price.
Risks Related to Food and Commodity Costs and Availability. We and our franchisees are subject to volatility in food and commodity costs and
availability. Accordingly, our profitability depends in part on our ability to anticipate and react to changes in food costs and availability. For example, prices
for feed ingredients used to produce beef, pork and chicken could be adversely affected by changes in worldwide supply or demand or by regulatory
mandates, leading to higher prices. In recent years, food and commodity costs increased significantly, out-pacing general inflation and industry expectations.
Looking forward, we anticipate volatile or uncertain price conditions to continue.
We seek to manage food and commodity costs, including through extended fixed price contracts, strong category and commodity management, and
purchasing fundamentals. However, certain commodities such as beef and pork, which represent approximately 20% and 6%, respectively, of our
consolidated commodity spend, do not lend themselves to fixed price contracts.
We cannot assure you that we will successfully enter into fixed price contracts on a timely basis or on commercially favorable pricing terms. In addition,
although we have fixed price contracts for produce, we are subject to force majeure clauses resulting from weather or acts of God that may result in temporary
spikes in costs.
Further, we cannot assure you that we or our franchisees will be able to successfully anticipate and react effectively to changing food and commodity
costs by adjusting purchasing practices or menu offerings. We also may not be able to pass along price
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