Jack In The Box 2015 Annual Report Download - page 53

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
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

Nature of operations — Founded in 1951, Jack in the Box Inc. (the “Company”) operates and franchises Jack in the Box® quick-service restaurants and
Qdoba Mexican Eats® (“Qdoba”) fast-casual restaurants. The following table summarizes the number of restaurants as of the end of each fiscal year:




Company-operated
413
431
465
Franchise
1,836
1,819
1,786
Total system
2,249
2,250
2,251

Company-operated
322
310
296
Franchise
339
328
319
Total system
661
638
615
References to the Company throughout these notes to the consolidated financial statements are made using the first person notations of “we,” “us” and “our.”
Comparisons throughout these notes to the consolidated financial statements 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.
Basis of presentation — The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting
principles and the rules and regulations of the Securities and Exchange Commission (“SEC”). During fiscal 2012, we entered into an agreement to outsource
our Jack in the Box distribution business. In the third quarter of fiscal 2013, we closed 62 Qdoba restaurants (the “2013 Qdoba Closures”) as part of a
comprehensive Qdoba market performance review. The results of operations for our distribution business and for the 2013 Qdoba Closures are reported as
discontinued operations for all periods presented. Refer to Note 2, Discontinued Operations, for additional information. Unless otherwise noted, amounts and
disclosures throughout these notes to the consolidated financial statements relate to our continuing operations.
Reclassifications and adjustments — Certain prior year amounts in these notes and in the consolidated financial statements have been reclassified to
conform to the fiscal 2015 presentation.
In 2015, on our consolidated statements of earnings, we began to separately state our franchise revenues derived from rentals and those derived from royalties
and other. To provide clarity, we additionally have separately stated the associated rental expense and depreciation and amortization related to the rental
income received from franchisees. For comparison purposes, we have reclassified prior year franchise revenue and franchise costs line items to reflect the new
method of presentation.
Principles of consolidation — The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and the accounts
of any variable interest entities (“VIEs”) where we are deemed the primary beneficiary. All significant intercompany accounts and transactions are eliminated.
The Financial Accounting Standards Board (“FASB”) authoritative guidance on consolidation requires the primary beneficiary of a VIE to consolidate that
entity. The primary beneficiary of a VIE is an enterprise that has a controlling financial interest in the VIE. Controlling financial interest exists when an
enterprise has both the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the
right to receive benefits of the VIE that could potentially be significant to the VIE.
The primary entities in which we possess a variable interest are franchise entities, which operate our franchise restaurants. We do not possess any ownership
interests in franchise entities. We have reviewed these franchise entities and determined that we are not the primary beneficiary of the entities and therefore,
these entities have not been consolidated. We hold and consolidate a variable interest in a subsidiary formed for the purpose of operating a franchisee
lending program. For information related to this VIE, refer to Note 15, Variable Interest Entities.
Fiscal year — Our fiscal year is 52 or 53 weeks ending the Sunday closest to September 30. Fiscal years 2015, 2014 and 2013 include 52 weeks.
F-8