Jack In The Box 2015 Annual Report Download - page 22

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 52-week periods ended September 27, 2015, September 28, 2014 and September 29, 2013 for fiscal years
2015, 2014 and 2013 respectively, unless otherwise indicated.
Our MD&A consists of the following sections:
•Overview — a general description of our business and fiscal 2015 highlights.
•Financial reporting — a discussion of changes in presentation, if any.
•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, dividends, 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.
•New accounting pronouncements — a discussion of new accounting pronouncements, dates of implementation and impact on our consolidated
financial position or results of operations, if any.
We have included in our MD&A certain performance metrics that management uses to assess Company performance and which we believe will be useful
in analyzing and understanding our results of operations. These metrics include the following:
• Changes in sales at restaurants open more than one year (“same-store sales”) and average unit volumes (“AUVs”) are presented for franchised
restaurants and on a system-wide basis, which includes company and franchise restaurants. Franchise sales represent sales at franchise restaurants
and are revenues of our franchisees. We do not record franchise sales as revenues; however, our royalty revenues and percentage rent revenues are
calculated based on a percentage of franchise sales. We believe franchise and system same-store sales and AUV information is useful to investors
as a significant indicator of the overall strength of our business.
• Company restaurant margin (“restaurant margin”) is defined as Company restaurant sales less expenses incurred directly by our restaurants in
generating those sales (food and packaging costs, payroll and employee benefits, and occupancy and other costs). We also present restaurant
margin as a percentage of Company restaurant sales.
• Franchise margin is defined as total franchise revenues less total franchise costs and is also presented as a percentage of franchise revenues.
Restaurant margin and franchise margin are not measurements determined in accordance with generally accepted accounting principles (“GAAP”) and
should not be considered in isolation, or as an alternative, to income from operations, or other similarly titled measures of other companies.

As of September 27, 2015, we operated and franchised 2,249 Jack in the Box restaurants, primarily in the western and southern United States, including
one in Guam, and 661 Qdoba restaurants throughout the United States and including four in Canada.
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 rental revenue, royalties (based upon a percent of sales) and franchise fees. Historically, we also generated
revenue from distribution sales of food and packaging commodities to franchisees. We completed the outsourcing of this function in the first quarter of fiscal
2013, and franchisees who previously utilized our distribution services now purchase product directly from our distribution service providers or other
approved suppliers. In addition, we recognize gains or losses from the sale of company-operated restaurants to franchisees, which are included as a line item
within operating costs and expenses, net in the accompanying consolidated statements of earnings.
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