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What changed in JACK IN THE BOX INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of JACK IN THE BOX INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+259 added−226 removedSource: 10-K (2022-11-22) vs 10-K (2021-11-23)

Top changes in JACK IN THE BOX INC's 2023 10-K

259 paragraphs added · 226 removed · 175 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeDevelopers may lose their rights to future development if they do not maintain the required opening schedule. To stimulate growth, we have offered a waiver of development fees for new sites, in addition to lower royalty rates or a development loan, to franchisees who open restaurants within a specified timeframe.
Biggest changeWe may offer development agreements to franchisees for construction of one or more new restaurants over a defined period of time and in a defined geographic area. Developers may be required to pay fees for certain company-sourced new sites. Developers may lose their rights to future development if they do not maintain the required opening schedule.
We offer a robust benefits package that includes medical, dental, and vision insurance with health savings account (HSA) employer contributions and an HMO plan; company-paid basic term life insurance; wellness programs; an employee assistance program (EAP); disability insurance; a flexible spending account (FSA); legal services; pet insurance; and a 401(k) with company matching contributions.
We offer a robust benefits package that includes medical, dental, and vision insurance with health savings account (HSA) employer contributions and an HMO plan; company-paid basic term life insurance; wellness programs; an employee assistance program (EAP); life and disability insurance; flexible spending accounts (FSA); legal services; pet insurance; and a 401(k) with company matching contributions.
Our collection or use of personal information about our employees or our guests is regulated at the federal and state levels, including the California Consumer Privacy Act. Our marketing, advertising, and promotional programs are governed by various federal, state, and local laws and regulations concerning consumer protection, including the Telephone Consumer Protection Act.
Our collection or use of personal information about our employees or our guests is regulated at the federal and state levels, including the California Consumer Privacy Act. 7 Our marketing, advertising, and promotional programs are governed by various federal, state, and local laws and regulations concerning consumer protection, including the Telephone Consumer Protection Act.
Our strategies are rooted in two foundational principles: • Shape a High-Performance Culture - When we serve our people and our franchisees well, we will maximize the guest experience for all who interact with the brand. • Leverage Innovation and Technology Platforms - Taking our history of strong innovation on menu and operations, and placing that same forward thinking on digital and technology development.
Business Strategy Our strategies are rooted in two foundational principles: • Shape a High-Performance Culture - When we serve our people and our franchisees well, we will maximize the guest experience for all who interact with the brand. • Leverage Innovation and Technology Platforms - Taking our history of strong innovation on menu and operations and placing that same forward thinking on digital and technology development.
In selling franchises, we compete with many other restaurant franchisors and franchisors generally, some of whom have substantially greater financial resources than we do. 5 Human Capital Management Jack in the Box recognizes and takes care of its employees by offering a wide range of competitive pay, recognition, and benefit programs.
In selling franchises, we compete with many other restaurant franchisors, some of whom have substantially greater financial resources than we do. Human Capital Management Jack in the Box recognizes and takes care of its employees by offering a wide range of competitive pay, recognition, and benefit programs.
In addition, we have registered or applied to register numerous service marks and trade names for use in our businesses, including the Jack in the Box design marks and various product names and designs. Our policy is to pursue registration of our important service marks and trademarks and to vigorously oppose any infringement of them.
In addition, we have registered or applied to register numerous service marks and trade names for use in our businesses, including the Jack in the Box and Del Taco design marks and various product names and designs. Our policy is to pursue registration of our important service marks and trademarks and to vigorously oppose any infringement of them.
Restaurant Management and Operations Jack in the Box restaurants are operated by a company manager or franchise operator who is directly responsible for the operations of the restaurant, including product quality, service, food safety, cleanliness, inventory, cash control, and the conduct and appearance of employees.
Restaurant Management and Operations Jack in the Box and Del Taco restaurants are operated by a company manager or franchise operator who is directly responsible for the operations of the restaurant, including product quality, service, food safety, cleanliness, inventory, cash control, and the conduct and appearance of employees.
We are subject to certain guidelines under the Americans with Disabilities Act of 1990 and various state codes and regulations, which require restaurants and our brand to provide full and equal access to persons with physical disabilities.
We are subject to certain guidelines under the Americans with Disabilities Act of 1990 and various state codes and regulations, which require restaurants and our brands to provide full and equal access to persons with physical disabilities.
Royalty rates are typically 5.0% of gross sales but may range as high as 10.0% of gross sales. Some existing agreements provide for lower royalties for a limited time and may have variable rates.
Royalty rates are typically 5.0% of gross sales but may range as high as 15.0% of gross sales. Some existing agreements provide for lower royalties for a limited time and may have variable rates.
Each restaurant competes directly and indirectly with a large number of national and regional restaurant chains, some of which have significantly greater financial resources, as well as with locally-owned or independent restaurants in the quick-service and the fast-casual segments, and with other consumer options including grocery and specialty stores, catering, and delivery services.
Each Jack in the Box and Del Taco restaurant competes directly and indirectly with a large number of national and regional restaurant chains, some of which have significantly greater financial resources, as well as with locally-owned or independent restaurants in the quick-service and the fast-casual segments, and with other consumer options including grocery and specialty stores, catering, and delivery services.
We employ both full-time and part-time restaurant employees in order to provide the flexibility necessary during peak periods of restaurant operations and meet the individual needs of our employees. As of the end of fiscal 2021, approximately 55% of our restaurant employees were part-time. We have not experienced any significant work stoppages.
We employ both full-time and part-time restaurant employees in order to provide the flexibility necessary during peak periods of restaurant operations and meet the individual needs of our employees. As of the end of fiscal 2022, approximately 91% of our restaurant employees were part-time. We have not experienced any significant work stoppages.
Information Systems Our restaurant software allows for daily polling of sales, inventory, and other data from the restaurants directly. Our company restaurants and traditional-site franchise restaurants use standardized Windows-based touch screen point-of-sale (“POS”) platforms. These platforms allow the restaurants to accept cash, credit cards, and our re-loadable gift cards.
Information Systems Our Jack in the Box and Del Taco restaurant software allows for daily polling of sales, inventory, and other data from the restaurants directly. Our company restaurants and traditional-site franchise restaurants use standardized Windows-based touch screen point-of-sale (“POS”) platforms. These platforms allow the restaurants to accept cash, credit cards, and our re-loadable gift cards.
New restaurants developed by franchisees are constructed to brand standards and specifications using brand approved plans on properties that we have approved. Jack in the Box offers multiple new restaurant prototype designs that feature different configurations and dining room sizes to provide maximum flexibility when considering properties for development.
New restaurants developed by franchisees are built to brand standards that we have approved. Jack in the Box. Jack in the Box offers multiple new restaurant prototype designs that feature different configurations and dining room sizes to provide maximum flexibility when considering properties for development.
We use these principles as a guide while executing on our four strategic pillars: • Build Brand Loyalty by transforming our restaurant design, improving the image of existing restaurants, and enhancing the digital experience for our guests. • Drive Operations Excellence by evolving training efforts in our restaurants, execution of our brand standard systems, and improving speed and consistency. • Grow Restaurant Profits by developing and implementing financial fundamentals, influencing pricing with a dynamic model, and building our data advantage. • Expand Jack’s Reach by creating modular and flexible restaurant designs, building company-operated stores to help seed growth, fostering growth capital, and increasing franchise candidate and restaurant site lead generations.
We use these principles as a guide while executing on our four strategic pillars: • Build Brand Loyalty by transforming our restaurant design, improving the image of existing restaurants, and enhancing the digital experience for our guests. • Drive Operations Excellence by evolving training efforts in our restaurants, execution of our brand standard systems, and improving speed and consistency. • Grow Restaurant Profits by developing and implementing financial fundamentals, influencing pricing with a dynamic model, and building our data advantage. • Expand Our Brands Reach by creating modular and flexible restaurant designs, building company-operated stores to help seed growth, fostering growth capital, and increasing franchise candidate and restaurant site lead generations. 3 This strategy builds on our historical strengths with our Jack in the Box and Del Taco differentiated, challenger brands.
Site Selection, Design, and Construction Site selection for all new restaurants is made after an economic analysis and a review of demographic data and other information relating to population density, traffic, competition, restaurant visibility and access, available parking, surrounding businesses, and opportunities for market penetration.
Site Selection and Design Site selection for all new Jack in the Box and Del Taco restaurants is made after an economic analysis and a review of demographic data and other information relating to population density, traffic, competition, restaurant visibility and access, available parking, surrounding businesses, and opportunities for market penetration.
We are proud to provide our employees, many who begin their career at Jack in the Box with their first entry-level job, the opportunity to grow and advance as we invest in their education and career development.
We are proud to provide our employees, many who begin their career in our restaurants as their first entry-level job, the opportunity to grow and advance as we invest in their education and career development.
Trademarks and Service Marks The JACK IN THE BOX ® name and logos are of material importance to us and are registered trademarks and service marks in the United States and elsewhere.
Trademarks and Service Marks The JACK IN THE BOX ® and DEL TACO ® names and logos are of material importance to us and are registered trademarks and service marks in the United States and elsewhere.
We focus on attracting, selecting, engaging, and retaining employees and franchisees who share our passion for creating long-lasting, successful restaurants. Managers of company-operated restaurant are supervised by district managers, who are overseen by directors of operations, who report to the vice president of company operations.
We focus on attracting, selecting, engaging, and retaining employees and franchisees who share our passion for creating long-lasting, successful restaurants. At both brands, company-operated restaurant managers are supervised by district managers, who are overseen by director of operations, who report to vice president of operations. Jack in the Box.
We are also subject to federal, state, and local laws governing packaging and service ware. We are also subject to federal and state laws regulating the offer and sale of franchises, as well as judicial and administrative interpretations of such laws.
We are also subject to federal and state laws regulating the offer and sale of franchises, as well as judicial and administrative interpretations of such laws.
This strategy builds on our historical strengths as a differentiated, challenger brand. Those strengths include our uniquely broad menu, operational capabilities, passionate and loyal guests, committed team members and franchisees, and ability to invest in development and innovation that will deliver long term growth.
Those strengths include our uniquely broad menu, operational capabilities, passionate and loyal guests, committed team members and franchisees, and ability to invest in development and innovation that will deliver long term growth.
Based on number of restaurants, our top 10 major markets comprise approximately 70% of the total system, and Jack in the Box is at least the second largest QSR hamburger chain in seven of those major markets.
Jack in the Box opened its first restaurant in 1951 and has since become one of the nation’s largest hamburger chains. Based on number of restaurants, our top 10 major markets comprise approximately 70% of the total system, and Jack in the Box is at least the second largest QSR hamburger chain in seven of those major markets.
Each year, we review the median pay of our male and female employees, share the results with the Board of Directors, and take remedial action as appropriate to ensure that male and female employees are paid equally. We are committed to providing market-competitive, high-quality, and affordable benefits to meet the changing needs of our employees.
We share the median pay of our male and female employees in various position classifications with the Board of Directors, and we take remedial action as appropriate to ensure pay equity is maintained. We are committed to providing market-competitive, high-quality, and affordable benefits to meet the changing needs of our employees.
The single POS system for all restaurants helps franchisees and brand managers adapt more quickly to meet consumer demands and introduce new products, pricing, promotions, and technologies such as the Jack in the Box mobile app, third party delivery, or any other business-driving initiative while maintaining a secure, PCI-compliant payment system.
The single POS system for all restaurants helps franchisees and brand managers adapt more quickly to meet consumer demands and introduce new products, pricing, promotions, and technologies such as the Jack in the Box and Del Taco mobile apps, third party delivery, or any other business-driving initiative while maintaining a secure, PCI-compliant payment system. 5 We have business intelligence systems that provide us with visibility to the key metrics in the operation of Jack in the Box and Del Taco company and franchise restaurants.
In addition, our food safety management program uses American National Standards Institute certified food safety training programs to train our company and franchise restaurant management employees on food safety practices for our restaurants. Supply Chain All of our company-operated and franchisee restaurants have a long-term contract with a third-party distributor.
In addition, our food safety management program uses American National Standards Institute certified food safety training programs to train our company and franchise restaurant management employees on food safety practices for our restaurants. Supply Chain At both brands, we contract with a single primary foodservice distributor for substantially all of our food and supplies.
This flexibility enables the Company and franchisees to optimize the layout and configuration of a new restaurant with the property’s specific economic, demographic, geographic, or physical characteristics.
This flexibility enables the Company and franchisees to optimize the layout and configuration of a new restaurant with the property’s specific economic, demographic, geographic, or physical characteristics. In September 2022, we unveiled our new off-premise-only restaurant prototype with the opening of a new location in Tulsa, Oklahoma.
We have business intelligence systems that provide us with visibility to the key metrics in the operation of company and franchise restaurants. These systems play an integral role in enabling us to accumulate and analyze market information. Our company restaurants use labor scheduling systems to assist managers in managing labor hours based on forecasted sales volumes.
These systems play an integral role in enabling us to accumulate and analyze market information. Our restaurants use labor scheduling systems to assist managers in managing labor hours based on forecasted sales volumes. We also have inventory management systems that enable timely and accurate deliveries of food and packaging to our restaurants.
As of October 3, 2021, we had approximately 5,300 employees, of whom 4,900 were restaurant employees, 350 were corporate management and staff, and 40 were field operations management. Most of our employees are paid on an hourly basis, except manager, field operations management, and certain corporate positions.
As of October 2, 2022, we had 12,083 employees, of whom 11,448 were restaurant employees, 546 were corporate management and staff, and 89 were field operations management. Most of our employees are paid on an hourly basis, except manager, field operations management, and certain corporate positions.
As of October 3, 2021, we operated and franchised 2,218 Jack in the Box quick-service restaurants, primarily in the western and southern United States, including one in Guam. Of the 2,218 restaurants at fiscal year-end, 2,055, or 93%, were franchised. The Company operates as a single segment for reporting purposes.
As of October 2, 2022, we operated and franchised 2,181 Jack in the Box quick-service restaurants, primarily in the western and southern United States, including two in Guam. Of the 2,181 restaurants at fiscal year-end, 2,035, or 93%, were franchised. Del Taco.
We also have inventory management systems that enable timely and accurate deliveries of food and packaging to our restaurants. To support order accuracy and speed of service, our drive-thru restaurants use order confirmation screens. Advertising and Promotion We build brand awareness and drive sales through our marketing and advertising programs.
To support order accuracy and speed of service, our drive-thru restaurants use order confirmation screens. Advertising and Promotion Jack in the Box. At Jack in the Box, we build brand awareness and drive sales through our marketing and advertising programs.
Difficulties or failures in obtaining and maintaining any required permits, licenses or approvals, or difficulties in complying with applicable rules and regulations, could result in restricted operations, closures of existing restaurants, delays or cancellations in the opening of new restaurants, increased cost of operations, or the imposition of fines and other penalties. 6 We are subject to federal, state, and local laws governing restaurant menu labeling, as well as laws restricting the use of, or requiring disclosures about, certain ingredients used in food sold at our restaurants.
Difficulties or failures in obtaining and maintaining any required permits, licenses or approvals, or difficulties in complying with applicable rules and regulations, could result in restricted operations, closures of existing restaurants, delays or cancellations in the opening of new restaurants, increased cost of operations, or the imposition of fines and other penalties.
All corporate positions, field operations management, and restaurant management positions, including hourly assistant managers and team leaders, are eligible for performance-based cash incentives. Each incentive plan reinforces and rewards individuals for achievement of specific company and/or restaurant business goals. We strive to ensure pay equity between our female employees and male employees performing equal or substantially similar work.
Each incentive plan reinforces and rewards individuals for achievement of specific company and/or restaurant business goals. 6 We regularly review the pay of our female and male employees to ensure pay equity for performing equal or substantially similar work.
Under this contract, the distributor will provide distribution services to our Jack in the Box restaurants through August 2022 through seven distribution centers in the continental United States. The primary commodities purchased by our restaurants are beef, poultry, pork, cheese, and produce. We monitor and purchase commodities in order to minimize the impact of fluctuations in price and supply.
The primary commodities purchased by Jack in the Box restaurants are beef, poultry, pork, cheese, and produce. Taco meat is the largest commodity purchased by Del Taco. We monitor and purchase commodities in order to minimize the impact of fluctuations in price and supply.
Our Brand Jack in the Box restaurants offer a broad selection of distinctive products including classic burgers like our Jumbo Jack ® and innovative product lines such as Buttery Jack ® burgers.
References to the Company throughout this Annual Report on Form 10-K are made using the first person notations of “we,”, “us” and “our.” Restaurant Brands Jack in the Box. Jack in the Box restaurants offer a broad selection of distinctive products including classic burgers like our Jumbo Jack ® and innovative product lines such as Buttery Jack ® burgers.
In addition to drive-thru windows, most of our restaurants have seating capacities ranging from 20 to 100 people and are open 18-24 hours a day. 3 Franchising Program The franchise agreement generally provides for an initial franchise fee of $50,000 per restaurant for a 20-year term, and royalty and marketing payments generally set at 5.0% of gross sales.
We plan on executing deals with existing Jack in the Box franchisees early in the upcoming year and will provide updates throughout 2023. Franchising Program Jack in the Box. The franchise agreement generally provides for an initial franchise fee of $50,000 per restaurant for a 20-year term, and royalty and marketing payments generally set at 5.0% of gross sales.
District managers and restaurant managers are eligible for quarterly incentives based on growth in restaurant sales and profit and certain other operational performance standards. Company-operated restaurant managers are required to complete an extensive management training program involving a combination of in-restaurant instruction and on-the-job training in specially designated training restaurants.
Restaurant managers are required to complete an extensive management training program involving a combination of in-restaurant instruction and on-the-job training in specially designated training restaurants. Restaurant managers and supervisory personnel train other restaurant employees in accordance with detailed procedures and guidelines using training aids available at each location. Del Taco.
We also collect and respond to guest feedback through social media, restaurant reviews and other feedback sources. 4 Food Safety Our “farm-to-fork” food safety program is designed to maintain high standards for the food products and food preparation procedures used by our vendors and in our restaurants.
The training program is a blended learning approach including self-paced reading, hands-on exercises, and written knowledge validation tests. Food Safety Our “farm-to-fork” food safety program is designed to maintain high standards for the food products and food preparation procedures used by our vendors and in our restaurants.
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ITEM 1. BUSINESS General Jack in the Box Inc., based in San Diego, California, operates and franchises Jack in the Box® quick-service restaurants (“QSRs”). We opened our first restaurant in 1951 and have since become one of the nation’s largest hamburger chains.
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ITEM 1. BUSINESS The Company Overview. Jack in the Box Inc.
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Our revenue is derived from sales by company-operated restaurants and by charging royalties, rent, advertising fees, and franchise and other fees to our franchisees.
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(NASDAQ: JACK), founded and headquartered in San Diego, California, is a restaurant company that operates and franchises Jack in the Box®, one of the nation's largest hamburger chains with approximately 2,200 restaurants across 21 states, and Del Taco®, the second largest Mexican-American quick service restaurants (“QSR”) chain by units in the U.S. with approximately 600 restaurants across 15 states.
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Strategy In June 2021, we held a virtual Investor Day and provided an overview of our growth strategy, including detail on plans for unit growth, transparency on unit economics, debut of our new store prototype, and focus on future investments in digital.
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As previously disclosed, on December 5, 2021, Jack in the Box Inc., a Delaware corporation (the “Company” or “Jack in the Box”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Del Taco Restaurants, Inc., a Delaware corporation (“Del Taco”).
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During our 70 years as a brand, we were the first restaurant and burger chain to develop and expand the concept of drive-thru restaurants.
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On March 8, 2022, Epic Merger Sub Inc., a Delaware corporation and wholly-owned subsidiary of the Company, merged with and into Del Taco (the “Merger”), with Del Taco continuing as the surviving corporation. As a result of the Merger, Del Taco became a wholly-owned subsidiary of Jack in the Box.
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In addition, franchisees who lease an existing restaurant location from us, which primarily relate to when we have refranchised a restaurant, will pay monthly minimum rent, as well as percentage rent based on each month’s gross sales, if applicable. The typical percentage rent is 9.5% of gross sales.
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Del Taco offers a unique variety of both Mexican and American favorites such as burritos and fries, prepared fresh in every restaurant's working kitchen with the value and convenience of a drive-thru.
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Based on a potential property’s geographical location, physical characteristics, local requirements, and size, as well as the prototype building selected for use, typical costs to develop a traditional restaurant, range from approximately $1.4 million to $2.0 million, excluding the land value.
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Del Taco's menu items taste better because they are made with quality ingredients like freshly grilled chicken and carne asada steak, fresh house-made guacamole, freshly grated cheddar cheese, slow-cooked beans made from scratch, and creamy Queso Blanco. Founded in 1964, today Del Taco serves more than three million guests each week at its approximately 600 restaurants.
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The majority of new Company restaurants are constructed on leased land or on land that is purchased and subsequently sold, along with the improvements, in sale and leaseback transactions. Upon completion of a sale and leaseback transaction, the Company’s initial cash investment is reduced to the cost of equipment, which typically ranges from approximately $0.3 million to $0.5 million.
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Del Taco’s commitment to providing guests with the best quality and value for their money originates from cooking, chopping, shredding, and grilling menu items from scratch. As of October 2, 2022, we operated and franchised 591 Del Taco restaurants across 15 states, including one in Guam. Of the 591 restaurants at fiscal year-end, 301, or 51%, were franchised.
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Under our performance system, the vice president is eligible for annual incentive compensation based on achievement of goals related to company-wide performance and restaurant level margin. Directors are eligible for an annual incentive compensation based on achievement of goals related to the sales and profit of their assigned region, and a company-wide performance goal.
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Del Taco Refranchising Strategy On November 2, 2022, we announced that we have partnered with a leading restaurant and franchise investment banking firm, to manage the sale of certain company-owned Del Taco restaurants with three main intentions.
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Restaurant managers and supervisory personnel train other restaurant employees in accordance with detailed procedures and guidelines using training aids available at each location. Customer Satisfaction Company-operated and franchise-operated restaurants devote significant resources toward offering quality food and excellent service at all of our restaurants.
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First, to create a company-wide asset-light model that will benefit from mitigating exposure to macroeconomic pressures; second, to generate incremental development agreements throughout the refranchising process that provide a more robust unit growth pipeline than otherwise achievable; and third, to provide a more efficient capital structure.
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One tool we have used to help us maintain a high level of customer satisfaction is our Voice of Guest program, which provides restaurant managers, district managers, and franchise operators with ongoing feedback from guests who complete a short satisfaction survey via an invitation typically provided on the register receipt.
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Our objective is to be asset light as we navigate market forces in the near term. We will adjust the rate, pace and sequence of refranchising efforts to balance impact to earnings, as we await accelerated new unit openings from incremental development and natural general and administrative reductions.
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In these surveys, guests rate their satisfaction with key elements of their restaurant experience, including friendliness, food quality, cleanliness, speed of service, and order accuracy. Our Guest Relations Department receives feedback that guests provide via phone and our website and communicates that feedback to restaurant managers and franchise operators.
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Developers may lose their rights to future development if they do not maintain the required opening schedule. To stimulate growth, we have offered an incentive program that provides discounted royalty fees for new franchisees who maintain development compliance and sign at least three franchise agreements by March 2023. Del Taco.
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The franchise agreement provides for an initial franchise fee of $35,000 per restaurant for a 20-year term, and royalty and marketing payments generally set at 5.0% and 4.0%, respectively, of gross sales. Some existing agreements provide for lower royalties for a limited time and may have variable rates.
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The new prototype was designed to meet the continued increasing demand for drive-thru service and digital ordering. At only 1,350 square feet, the restaurant features a double y-lane drive-thru, a walk-up window for ordering, dual assembly kitchens and a dedicated pick-up window for mobile and third-party delivery orders.
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The goal of the new prototype is to reduce buildout costs by around 20%, while also increasing real estate flexibility. The new model is designed for free-standing locations but can be adapted to fit in a variety of spaces such as C-stores, travel plazas, and end-cap locations. 4 Del Taco.
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A typical Del Taco restaurant is a free-standing building with drive-thru service that ranges in size from 2,000 to 2,600 square feet. In December 2021, we unveiled the new “Fresh Flex” restaurant prototype with the opening of a new location in Orlando, Florida.
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The new Fresh Flex design offers multiple buildout options, including small footprint drive-thru only sites with no dining rooms, that range in size from 1,200 to 2,400 square feet.
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With innovative additions like third-party pick-up stations and double drive-thru lanes with a dedicated lane for mobile orders and delivery pickups, the future-focused model optimizes operational efficiencies and caters to modern consumers' expectations.
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On the first day of employment, every team member receives the first of three training modules focused on helping the team member clearly understand the brand and their role. Subsequent modules focus on the specifics of how to provide a consistent customer experience.
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In fiscal 2022, Jack in the Box entered into a new long-term contract with this distributor. Under the contract, this distributor will provide distribution services to our Jack in the Box restaurants through July 2027. Our Del Taco brand contract with this distributor provides distribution services to our Del Taco restaurants through September 2023.
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In October 2022, we launched a brand-new ordering website and integrated mobile app featuring a full array of capabilities including full menu ordering, customization options, location finder, product and restaurant information, flexible delivery or pickup options and an integrated loyalty program. Del Taco.
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At Del Taco, we run a highly coordinated marketing and advertising campaign to create customer awareness, engage fans, and maximize positive brand associations. These activities are supported primarily by financial contributions to a marketing fund from all company and franchise restaurants based on a percentage of gross sales.
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We use multiple marketing channels, including television, radio, outdoor and direct mail to broadly drive brand awareness. We advertise on local TV/Cable and local radio in our primary markets, and utilize local radio, print, internet advertising, and billboards for some of the less developed markets.
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In September 2021, we launched our new Del Taco Mobile App, featuring enhanced marketing capabilities including a loyalty program and targeted promotional offers to drive guest frequency.
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All corporate positions, field operations management, and restaurant management positions, including hourly assistant managers and team leaders, are eligible for performance-based cash incentives.
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We are subject to federal, state, and local laws governing restaurant menu labeling, as well as laws restricting the use of, or requiring disclosures about, certain ingredients used in food sold at our restaurants. We are also subject to federal, state, and local laws governing packaging and service ware.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe 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 our produce contracts contain predetermined price limits, we are subject to force majeure clauses resulting from weather or acts of God that may result in temporary spikes in costs.
Biggest changeIn addition, although our produce contracts contain predetermined price limits, we are subject to force majeure clauses resulting from weather or acts of God that may result in temporary spikes in costs. 9 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.
Development involves substantial risks, including the risk of: • the inability to identify suitable franchisees; • limited availability of financing for the Company and for franchisees at acceptable rates and terms; • development costs exceeding budgeted or contracted amounts; • the negative impact of any re-imaging strategy if not adopted by franchisees or embraced by guests; • delays in completion of construction or shortages of any equipment or construction materials; • the inability to identify, or the unavailability of suitable sites at acceptable cost and other leasing or purchase terms; • developed properties not achieving desired revenue or cash flow levels once opened; • the negative impact of a new restaurant upon sales at nearby existing restaurants; • the challenge of developing in areas where competitors are more established or have greater penetration or access to suitable development sites; • incurring substantial unrecoverable costs in the event a development project is abandoned prior to completion; • impairment charges resulting from underperforming restaurants or decisions to curtail or cease investment in certain locations or markets; • in new geographic markets where we have limited or no existing locations, the inability to successfully expand or acquire critical market presence for our brand, acquire name recognition, successfully market our products, or attract new customers; • operating cost levels that reduce the demand for, or raise the cost of, developing new restaurants; • the challenge of identifying, recruiting, and training qualified franchisees or company restaurant management; Although we manage our growth and development activities to help reduce such risks, we cannot assure that our present or future growth and development activities will perform in accordance with our expectations.
Development involves substantial risks, including the risk of: • the inability to identify suitable franchisees; • limited availability of financing for the Company and for franchisees at acceptable rates and terms; • development costs exceeding budgeted or contracted amounts; • the negative impact of any re-imaging strategy if not adopted by franchisees or embraced by guests; • delays in completion of construction or shortages of any equipment or construction materials; • the inability to identify, or the unavailability of suitable sites at acceptable cost and other leasing or purchase terms; • developed properties not achieving desired revenue or cash flow levels once opened; • the negative impact of a new restaurant upon sales at nearby existing restaurants; • the challenge of developing in areas where competitors are more established or have greater penetration or access to suitable development sites; • incurring substantial unrecoverable costs in the event a development project is abandoned prior to completion; • impairment charges resulting from underperforming restaurants or decisions to curtail or cease investment in certain locations or markets; • in new geographic markets where we have limited or no existing locations, the inability to successfully expand or acquire critical market presence for our brands, acquire name recognition, successfully market our products, or attract new customers; • operating cost levels that reduce the demand for, or raise the cost of, developing new restaurants; • the challenge of identifying, recruiting, and training qualified franchisees or company restaurant management; Although we manage our growth and development activities to help reduce such risks, we cannot assure that our present or future growth and development activities will perform in accordance with our expectations.
We could also become subject to fines, penalties, and other costs related to claims that we did not fully comply with all record keeping obligations of federal and state immigration compliance laws. These factors could materially adversely affect our financial results. Franchising Activities Our franchising activities are subject to federal regulations administered by the U.S.
We could also become subject to fines, penalties, and other costs related to claims that we did not fully comply with all record keeping obligations of federal and state immigration compliance laws. These factors could materially adversely affect our financial results. 16 Franchising Activities Our franchising activities are subject to federal regulations administered by the U.S.
If our subsidiaries are unable to implement one or more of these alternatives, they may not be able to meet debt payment and other obligations which could have a material adverse effect on our financial condition. We have a significant amount of debt outstanding.
If our subsidiaries are unable to implement one or more of these alternatives, they may not be able to meet debt payment and other obligations which could have a material adverse effect on our financial condition. 20 We have a significant amount of debt outstanding.
Should our competitors increase spending on marketing, advertising, and promotion, or should the cost of advertising increase or our advertising funds decrease for any reason (including reduced sales, implementation of reduced spending strategies, or a decrease in the percentage contribution to the marketing fund for any reason), our results of operations and financial condition may be materially impacted.
Should our competitors increase spending on marketing, advertising, and promotion, or should the cost of advertising increase or our advertising funds decrease for any reason (including reduced sales, implementation of reduced spending strategies, or a decrease in the percentage contribution to our marketing funds for any reason), our results of operations and financial condition may be materially impacted.
Our reputation as a brand or as an employer could also be adversely affected by these types of security breaches or regulatory violations, which could impair our ability to attract and retain qualified employees. 13 We are subject to risks associated with our increasing dependence on digital commerce platforms and technologies to maintain and grow sales, and we cannot predict the impact that these digital commerce platforms and technologies, other new or improved technologies or alternative methods of delivery may have on consumer behavior and our financial results.
Our reputation as a brand or as an employer could also be adversely affected by these types of security breaches or regulatory violations, which could impair our ability to attract and retain qualified employees. 19 We are subject to risks associated with our increasing dependence on digital commerce platforms and technologies to maintain and grow sales, and we cannot predict the impact that these digital commerce platforms and technologies, other new or improved technologies or alternative methods of delivery may have on consumer behavior and our financial results.
The Series 2019-1 Senior Notes are subject to a series of covenants and restrictions customary for transactions of this type, including (i) that the Master Issuer maintains specified reserve accounts to be used to make required payments in respect of the Series 2019-1 Senior Notes, (ii) provisions relating to optional and mandatory prepayments and the related payment of specified amounts, including specified make-whole payments in the case of the Series 2019-1 Class A-2 Notes under certain circumstances, (iii) certain indemnification payments in the event, among other things, the assets pledged as collateral for the Series 2019-1 Senior Notes are in stated ways defective or ineffective and (iv) covenants relating to record keeping, access to information and similar matters.
The Series 2019-1 and Series 2022-1 Senior Notes (“Senior Notes”) are subject to a series of covenants and restrictions customary for transactions of this type, including (i) that the Master Issuer maintains specified reserve accounts to be used to make required payments in respect of the Senior Notes, (ii) provisions relating to optional and mandatory prepayments and the related payment of specified amounts, including specified make-whole payments in the case of the Class A-2 Notes under certain circumstances, (iii) certain indemnification payments in the event, among other things, the assets pledged as collateral for the Senior Notes are in stated ways defective or ineffective and (iv) covenants relating to record keeping, access to information and similar matters.
If our efforts to protect our intellectual property are inadequate, or if any third party misappropriates or infringes our intellectual property, either in print or on the Internet or a social media platform, the value of our brand may be harmed, which could have a material adverse effect on our business and might prevent our brand from achieving or maintaining market acceptance.
If our efforts to protect our intellectual property are inadequate, or if any third party misappropriates or infringes our intellectual property, either in print or on the Internet or a social media platform, the value of our brands may be harmed, which could have a material adverse effect on our business and might prevent our brands from achieving or maintaining market acceptance.
In addition, perceived uncertainties as to our future direction, strategy or leadership created as a consequence of activist stockholder initiatives may result in the loss of potential business opportunities, harm our ability to attract new investors, customers, employees, and joint venture partners, and cause our stock price to experience periods of volatility or stagnation. ITEM 1B.
In addition, perceived uncertainties as to our future direction, strategy or leadership created as a consequence of activist stockholder initiatives may result in the loss of potential business opportunities, harm our ability to attract new investors, customers, employees, and joint venture partners, and cause our stock price to experience periods of volatility or stagnation.
Adverse publicity in these areas could damage the trust customers place in our brand. The increasingly widespread use of mobile devices and social media platforms has amplified the speed and scope of adverse publicity and could hamper our ability to promptly correct misrepresentations or otherwise respond effectively to negative publicity, whether or not accurate.
Adverse publicity in these areas could damage the trust customers place in our brands. The increasingly widespread use of mobile devices and social media platforms has amplified the speed and scope of adverse publicity and could hamper our ability to promptly correct misrepresentations or otherwise respond effectively to negative publicity, whether or not accurate.
General Business Risks If we fail to maintain an effective system of internal controls, we may not be able to accurately determine our financial results or prevent fraud. As a result, the Company’s stockholders could lose confidence in our financial results, which could harm our business and the value of the Company’s common shares.
If we fail to maintain an effective system of internal controls, we may not be able to accurately determine our financial results or prevent fraud. As a result, the Company’s stockholders could lose confidence in our financial results, which could harm our business and the value of the Company’s common shares.
The Series 2019-1 Senior Notes are also subject to customary rapid amortization events provided for in the Indenture, including events tied to failure to maintain stated debt service coverage ratios, the sum of gross sales for specified restaurants being below certain levels on certain measurement dates, certain manager termination events, an event of default, and the failure to repay or refinance the Series 2019-1 Class A-2 Notes on the applicable scheduled maturity date.
The Senior Notes are also subject to customary rapid amortization events provided for in the Indenture, including events tied to failure to maintain stated debt service coverage ratios, the sum of gross sales for specified restaurants being below certain levels on certain measurement dates, certain manager termination events, an event of default, and the failure to repay or refinance the Class A-2 Notes on the applicable scheduled maturity date.
Any such proceedings could distract our management from running our business and cause us to incur significant unplanned losses and expenses. Consumer perception of our brand could also be negatively affected by these events, which could further adversely affect our financial results.
Any such proceedings could distract our management from running our business and cause us to incur significant unplanned losses and expenses. Consumer perception of our brands could also be negatively affected by these events, which could further adversely affect our financial results.
Unauthorized workers are subject to deportation and may subject us to fines or penalties, and if any of our employees or our franchisees’ employees are found to be unauthorized, we could experience adverse publicity that negatively impacts our brand and may make it more difficult to hire and keep qualified employees.
Unauthorized workers are subject to deportation and may subject us to fines or penalties, and if any of our employees or our franchisees’ employees are found to be unauthorized, we could experience adverse publicity that negatively impacts our brands and may make it more difficult to hire and keep qualified employees.
Any widespread negative publicity regarding the Company, our brand, our vendors and suppliers, and our franchisees, or negative publicity about the restaurant industry in general, whether or not accurate, could cause a decline in restaurant sales, and could have a material adverse effect on our financial results.
Any widespread negative publicity regarding the Company, our brands, our vendors and suppliers, and our franchisees, or negative publicity about the restaurant industry in general, whether or not accurate, could cause a decline in restaurant sales, and could have a material adverse effect on our financial results.
In the event that a rapid amortization event occurs under the Indenture (including, without limitation, upon an event of default under the Indenture or the failure to repay the securitized debt at the end of the applicable term) which would require repayment of the Series 2019-1 Senior Notes, the funds available to us would be reduced or eliminated, which would in turn reduce our ability to operate and/or grow our business.
In the event that a rapid amortization event occurs under the Indenture (including, without limitation, upon an event of default under the Indenture or the failure to repay the securitized debt at the end of the applicable term) which would require repayment of the Senior Notes, the funds available to us would be reduced or eliminated, which would in turn reduce our ability to operate and/or grow our business.
The Series 2019-1 Senior Notes are also subject to certain customary events of default, including events relating to non-payment of required interest, principal, or other amounts due on or with respect to the Series 2019-1 Senior Notes, failure to comply with covenants within certain time frames, certain bankruptcy events, breaches of specified representations and warranties, failure of security interests to be effective, and certain judgments.
The Senior Notes are also subject to certain customary events of default, including events relating to non-payment of required interest, principal, or other amounts due on or with respect to the Senior Notes, failure to comply with covenants within certain time frames, certain bankruptcy events, breaches of specified representations and warranties, failure of security interests to be effective, and certain judgments.
Consumer demand for our products could decrease significantly if any such incidents or other matters create negative publicity or otherwise erode consumer confidence in us, our brand or our products, or in the restaurant industry in general. 10 We are also subject to the risk of negative publicity associated with animal welfare regulations and campaigns.
Consumer demand for our products could decrease significantly if any such incidents or other matters create negative publicity or otherwise erode consumer confidence in us, our brands or our products, or in the restaurant industry in general. We are also subject to the risk of negative publicity associated with animal welfare regulations and campaigns.
Risks Related to the COVID-19 Pandemic The COVID-19 pandemic has disrupted and may continue to disrupt our business, which has affected and could continue to materially affect our operations, financial condition, and results of operations for an extended period of time.
Risks Related to Macroeconomic and Industry Conditions The COVID-19 pandemic has disrupted and may continue to disrupt our business, which has affected and could continue to materially affect our operations, financial condition, and results of operations for an extended period of time.
Such indebtedness, along with the other contractual commitments of our Company or its subsidiaries, could adversely affect our business, financial condition and results of operations, as well as the ability of certain of our subsidiaries to meet debt payment obligations. Under the Indenture, the Master Issuer has approximately $1.3 billion of outstanding debt as of October 3, 2021.
Such indebtedness, along with the other contractual commitments of our Company or its subsidiaries, could adversely affect our business, financial condition and results of operations, as well as the ability of certain of our subsidiaries to meet debt payment obligations. Under the Indenture, the Master Issuer has approximately $1.9 billion of outstanding debt as of October 2, 2022.
The securitized debt instruments issued by certain of our wholly-owned subsidiaries have restrictive terms, and any failure to comply with such terms could result in default, which could harm the value of our brand and adversely affect our business.
Risks Related to Our Capital Structure The securitized debt instruments issued by certain of our wholly-owned subsidiaries have restrictive terms, and any failure to comply with such terms could result in default, which could harm the value of our brand and adversely affect our business.
The COVID-19 outbreak also may have the effect of heightening many other risks disclosed herein, including, but not limited to, those related to consumer confidence, increase in food and commodity costs, supply chain interruptions, labor availability and cost, cybersecurity incidents, increased indebtedness, regulatory and legal complexity, governmental regulations, and our stock price.
The COVID-19 outbreak also may have the effect of heightening many other risks disclosed herein, including, but not limited to, those related to consumer confidence, increase in food and commodity costs, supply chain interruptions, labor availability and cost, cybersecurity incidents, increased indebtedness, regulatory and legal complexity, governmental regulations, and our stock price. 8 Changes in the availability of and the cost of labor could adversely affect our business.
We are impacted by consumer confidence, which is, in turn, influenced by general economic conditions and discretionary income levels. A material decline in consumer confidence or a decline in family “food away from home” spending could cause our financial results to decline.
The restaurant industry depends on consumer discretionary spending. We are impacted by consumer confidence, which is, in turn, influenced by general economic conditions and discretionary income levels. A material decline in consumer confidence or a decline in family “food away from home” spending could cause our financial results to decline.
In addition to its shareholders, Jack in the Box has several key stakeholders, including its independent franchise operators. Third parties such as franchisees are not subject to the control of the Company and may take actions or behave in ways that are adverse to the Company.
In addition to its shareholders, we have several key stakeholders, including its independent franchise operators. Third parties such as franchisees are not subject to the control of the Company and may take actions or behave in ways that are adverse to the Company.
The restaurant and retail industries are subject to extensive federal, state, and local laws and regulations, including regulations relating to: • the preparation, ingredients, labeling, packaging, advertising, and sale of food and beverages; • building and zoning requirements; • sanitation and safety standards; • employee healthcare, including the implementation and legal, regulatory, and cost implications of the Affordable Care Act; • labor and employment, including minimum wage adjustments, overtime, working conditions, employment eligibility and documentation, sick leave, and other employee benefit and fringe benefit requirements, and changing judicial, administrative, or regulatory interpretations of federal or state labor laws; • the registration, offer, sale, termination, and renewal of franchises; • Americans with Disabilities Act; • payment cards; • climate change, including regulations related to the potential impact of greenhouse gases, water consumption, or taxes on carbon emissions; and • consumer protection and privacy obligations, including the California Consumer Privacy Act, the Telephone Consumer Protection Act, and other new or proposed federal and state regulations. 18 The increasing amount and complexity of regulations and their interpretation may increase the costs to us and our franchisees of labor and compliance and increase our exposure to legal and regulatory claims which, in turn, could have a material adverse effect on our business.
The restaurant and retail industries are subject to extensive federal, state, and local laws and regulations, including regulations relating to: • the preparation, ingredients, labeling, packaging, advertising, and sale of food and beverages; • building and zoning requirements; • sanitation and safety standards; • employee healthcare, including the implementation and legal, regulatory, and cost implications of the Affordable Care Act; • labor and employment, including minimum wage adjustments, overtime, working conditions, employment eligibility and documentation, sick leave, and other employee benefit and fringe benefit requirements, and changing judicial, administrative, or regulatory interpretations of federal or state labor laws; • the registration, offer, sale, termination, and renewal of franchises; • Americans with Disabilities Act; • payment cards; • climate change, including regulations related to the potential impact of greenhouse gases, water consumption, or taxes on carbon emissions; and • consumer protection and privacy obligations, including the California Consumer Privacy Act, the Telephone Consumer Protection Act, and other new or proposed federal and state regulations.
We intend to grow the brand primarily through new restaurant development by franchisees, both in existing markets and in new markets.
We intend to grow Jack in the Box and Del Taco primarily through new restaurant development by franchisees, both in existing markets and in new markets.
The enactment of additional state or local minimum wage increases above federal wage rates or regulations related to non-exempt employees has increased and could continue to increase labor costs for employees across our system-wide operations, especially considering our concentration of restaurants in California. Inability to attract, train and retain top-performing personnel could adversely impact our financial results or business.
The enactment of additional state or local minimum wage increases above federal wage rates or regulations related to non-exempt employees has increased and could continue to increase labor costs for employees across our system-wide operations, especially considering our concentration of restaurants in California.
In addition, if any of our distributors, suppliers, vendors, or other contractors fail to meet our quality or safety standards or otherwise do not perform adequately, or if any one or more of them seeks to terminate its agreement or fails to perform as anticipated, or if there is any disruption in any of our distribution or supply relationships or operations for any reason, our business reputation, financial condition, and results of operations may be materially affected. 9 We have a limited number of suppliers for our major products and rely on a distribution network with a limited number of distribution partners for the majority of our national distribution program.
In addition, if any of our distributors, suppliers, vendors, or other contractors fail to meet our quality or safety standards or otherwise do not perform adequately, or if any one or more of them seeks to terminate its agreement or fails to perform as anticipated, or if there is any disruption in any of our distribution or supply relationships or operations for any reason, our business reputation, financial condition, and results of operations may be materially affected.
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 currently represent approximately 16% and 6% respectively, of our commodity spend, do not lend themselves to fixed price contracts.
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 do not lend themselves to fixed price contracts.
Additionally, the trend toward convergence in grocery, deli, delivery, and restaurant services is increasing the number of our competitors. For example, competitive pressures can come from deli sections and in-store cafes of major grocery store chains, including those targeted at customers who desire high-quality food and convenience, as well as from convenience stores and other dining outlets.
For example, competitive pressures can come from deli sections and in-store cafes of major grocery store chains, including those targeted at customers who desire high-quality food and convenience, as well as from convenience stores and other dining outlets.
There are significant risks to our business if a franchisee, particularly one who operates a large number of restaurants, encounters financial difficulties, including bankruptcy, or fails to adhere to our standards, projecting an image inconsistent with our brand or negatively impacting our financial results. 12 We are subject to financial and regulatory risks associated with our owned and leased properties and real estate development projects.
There are significant risks to our business if a franchisee, particularly one who operates a large number of restaurants, encounters financial difficulties, including bankruptcy, or fails to adhere to our standards, projecting an image inconsistent with our brands or negatively impacting our financial results.
We are affected by the cost, compliance and other risks associated with the often conflicting and highly prescriptive regulations, including where inconsistent standards imposed by multiple governmental authorities can adversely affect our business and increase our exposure to litigation or governmental investigations or proceedings. 16 Our success depends in part on our ability to manage the impact of new, potential or changing regulations that can affect our business plans and operations.
We are affected by the cost, compliance and other risks associated with the often conflicting and highly prescriptive regulations, including where inconsistent standards imposed by multiple governmental authorities can adversely affect our business and increase our exposure to litigation or governmental investigations or proceedings.
If our suppliers or distributors are unable to fulfill their obligations under their contracts, it could harm our operations. We contract with a distribution network with a limited number of distribution partners located throughout the nation to provide the majority of our food distribution services. Through these arrangements, our food supplies are largely distributed through several primary distributors.
We contract with a distribution network with a limited number of distribution partners located throughout the nation to provide the majority of our food distribution services. Through these arrangements, our food supplies are largely distributed through several primary distributors.
These actions may hinder our ability to operate in some markets or to offer our full menu in these markets, which could have a material adverse effect on our business. If we fail to comply with such laws and regulations, our business could also experience a material adverse effect.
These actions may hinder our ability to operate in some markets or to offer our full menu in these markets, which could have a material adverse effect on our business.
As of October 3, 2021, approximately 93% of our operating restaurant properties were franchised restaurants; therefore, our success increasingly relies on the financial success and cooperation of our franchisees, yet we have limited influence over their operations.
As of October 2, 2022, approximately 93% of our Jack in the Box restaurants and 51% of Del Taco restaurants were franchised restaurants; therefore, our success increasingly relies on the financial success and cooperation of our franchisees, yet we have limited influence over their operations.
We own or lease the real properties on which most of our restaurants are located and lease or sublease to the franchisee a majority of our franchised restaurant sites. We have engaged and continue to engage in real estate development projects.
We are subject to financial and regulatory risks associated with our owned and leased properties and real estate development projects. We own or lease the real properties on which most of our restaurants are located and lease or sublease to the franchisee a majority of our franchised restaurant sites.
As a result, we may be required to close or relocate a restaurant, which could subject us to construction and other costs and risks and may have an adverse effect on our operating performance. Information and Technology Related Risks We are subject to the risk of cybersecurity breaches, intrusions, data loss, or other data security incidents.
As a result, we may be required to close or relocate a restaurant, which could subject us to construction and other costs and risks and may have an adverse effect on our operating performance.
We believe good managers and crew are a key part of our success, and we devote significant resources to recruiting and training our restaurant managers and crew. We aim to reduce turnover among our restaurant crews and managers in an effort to retain top performing employees and better realize our investment in training new employees.
We aim to reduce turnover among our restaurant crews and managers in an effort to retain top performing employees and better realize our investment in training new employees.
We believe that our continued success will depend, in part, on our ability to attract and retain the services of skilled personnel. The loss of the services of, or our inability to attract and retain, such personnel could have a material adverse effect on our business, including reduced restaurant operating hours.
The loss of the services of, or our inability to attract and retain, such personnel could have a material adverse effect on our business, including reduced restaurant operating hours. We believe good managers and crew are a key part of our success, and we devote significant resources to recruiting and training our restaurant managers and crew.
Any failure to do so may adversely impact our operating results by increasing training costs and making it more difficult to deliver outstanding customer service, which could have a material adverse effect on our financial results. We may not have the same resources as our competitors for marketing, advertising, and promotion.
Any failure to do so may adversely impact our operating results by increasing training costs and making it more difficult to deliver outstanding customer service, which could have a material adverse effect on our financial results. Our business could be adversely affected by increased labor costs. Labor is a primary component of our operating costs.
As small businesses, some of our franchise operators may be negatively and disproportionately impacted by strategic initiatives, capital requirements, inflation, labor costs, employee relations issues, or other causes.
As small businesses, some of our franchise operators may be negatively and disproportionately impacted by strategic initiatives, capital requirements, inflation, labor costs, employee relations issues, or other causes. In addition, franchisees’ business obligations may not be limited to the operation of restaurants, making them subject to business and financial risks unrelated to the operation of our restaurants.
However, there are types of losses that we may incur that cannot be insured against or that we believe are not economically reasonable to insure. Such losses could have a material adverse effect on our business and results of operations.
However, there are types of losses that we may incur that cannot be insured against or that we believe are not economically reasonable to insure.
Nevertheless, it is possible that conflict and disagreements with these or other critical stakeholders could distract management or otherwise have a material adverse effect on the Company’s business.
Nevertheless, it is possible that conflict and disagreements with these or other critical stakeholders could distract management or otherwise have a material adverse effect on the Company’s business. 18 Actions of activist stockholders could cause us to incur substantial costs, divert management’s attention and resources, and have an adverse effect on our business.
While we try to ensure that the quality of our brand is maintained by all franchisees, we cannot assure that all franchisees will uphold brand standards so as not to harm the value of our intellectual property or our reputation. 14 Jack in the Box may be subject to risk associated with disagreements with key stakeholders, such as franchisees.
We franchise our brands to various franchisees. While we try to ensure that the quality of our brands are maintained by all franchisees, we cannot assure that all franchisees will uphold brand standards so as not to harm the value of our intellectual property or our reputation.
Any significant changes in income tax laws, including, but not limited to, income tax rate increases, authoritative interpretations of the tax laws, and/or comprehensive tax reform measures could adversely affect our financial condition or results of operations. Risks Related to Government Regulations Increasing regulatory and legal complexity may adversely affect restaurant operations and our financial results.
Any significant changes in income tax laws, including, but not limited to, income tax rate increases, authoritative interpretations of the tax laws, and/or comprehensive tax reform measures could adversely affect our financial condition or results of operations. We may be subject to risk associated with disagreements with key stakeholders, such as franchisees.
A potentially serious allergic reaction by a guest may result in adverse public communication, media coverage, a decline in restaurant sales, and a material decline in our financial results. Negative publicity relating to our business or industry could adversely impact our reputation.
A potentially serious allergic reaction by a guest may result in adverse public communication, media coverage, a decline in restaurant sales, and a material decline in our financial results. Risks Related to Our Business Model and Strategy We may not achieve our development goals.
Our operating results substantially depend upon our sales volumes, restaurant profitability, and financial stability, and to the extent we and/or our franchisees experience financial distress due to the COVID-19 pandemic, our operating results may be adversely impacted, potentially materially affecting our liquidity, financial condition, or results of operations. 7 Our business could be further disrupted if any of our company or franchised restaurant employees are diagnosed with COVID-19 since this could require us or our franchisees to quarantine some or all of a restaurant’s employees, disinfect the restaurant’s facilities, and/or reduce restaurant operating hours.
Our operating results substantially depend upon our sales volumes, restaurant profitability, and financial stability, and to the extent we and/or our franchisees experience financial distress due to the COVID-19 pandemic, our operating results may be adversely impacted, potentially materially affecting our liquidity, financial condition, or results of operations.
Our competition includes a large number of national and regional restaurant chains, as well as locally owned and independent businesses. In particular, we operate in the quick service restaurant chain segment, in which we face a number of established competitors, as well as frequent new entrants to the segment nationally and in regional markets.
In particular, we operate in the quick service restaurant chain segment, in which we face a number of established competitors, as well as frequent new entrants to the segment nationally and in regional markets. Some of our competitors have significantly greater financial, marketing, technological, personnel, and other resources than we do.
We may not be able to adequately protect our intellectual property, which could harm the value of our brand and adversely affect our business.
If we fail to comply with such laws and regulations, our business could also experience a material adverse effect. 17 We may not be able to adequately protect our intellectual property, which could harm the value of our brands and adversely affect our business.
Although we believe that alternative supply and distribution sources are available, there can be no assurance that we will be able to identify or negotiate with such sources on terms that are commercially reasonable to us. Food safety and food-borne illness concerns may have an adverse effect on our business by reducing demand and increasing costs.
Although we believe that alternative supply and distribution sources are available, there can be no assurance that we will be able to identify or negotiate with such sources on terms that are commercially reasonable to us. Risks Related to Legal and Regulatory Risks Increasing regulatory and legal complexity may adversely affect restaurant operations and our financial results.
The expenses associated with any modifications we may be required to undertake with respect to our restaurants or services, or any damages, legal fees, and costs associated with litigating or resolving claims under the ADA or similar state laws, could be material.
The expenses associated with any modifications we may be required to undertake with respect to our restaurants or services, or any damages, legal fees, and costs associated with litigating or resolving claims under the ADA or similar state laws, could be material. 15 Consumer Protection and Privacy Laws We are subject to various federal, state, and local laws and regulations concerning consumer protection and privacy as it relates to our marketing, advertising, and promotional programs, including, but not limited to, the California Consumer Privacy Act and the Telephone Consumer Protection Act.
If new debt or other liabilities are added to our current consolidated debt levels, the related risks that it now faces could intensify. 15 The securitization transaction documents impose certain restrictions on our activities or the activities of our subsidiaries, and the failure to comply with such restrictions could adversely affect our business.
The securitization transaction documents impose certain restrictions on our activities or the activities of our subsidiaries, and the failure to comply with such restrictions could adversely affect our business.
If we fail to adapt to changes in customer preferences and trends, we may lose customers and our sales and the rents, royalties, and marketing fees we receive from franchisees may deteriorate. 8 Changes in consumer confidence and declines in general economic conditions could negatively impact our financial results. The restaurant industry depends on consumer discretionary spending.
If we fail to adapt to changes in customer preferences and trends, we may lose customers and our sales and the rents, royalties, and marketing fees we receive from franchisees may deteriorate. Negative publicity relating to our business or industry could adversely impact our reputation.
We also cannot predict what environmental laws or laws regarding packaging will be enacted in the future, how existing or future environmental or packaging laws will be administered or interpreted, or the amount of future expenditures that we may need to make to comply with, or to satisfy claims relating to, such laws. 17 Employment and Immigration Laws We and our franchisees are subject to the federal labor laws, including the Fair Labor Standards Act, as well as various state and local laws governing such matters as minimum wages, exempt status classification, overtime, breaks, schedules, and other working conditions for employees.
Employment and Immigration Laws We and our franchisees are subject to the federal labor laws, including the Fair Labor Standards Act, as well as various state and local laws governing such matters as minimum wages, exempt status classification, overtime, breaks, schedules, and other working conditions for employees.
Our inability to expand in accordance with our plans or to manage the risks associated with our growth could have a material adverse effect on our results of operations and financial condition. Our highly-franchised business model presents a number of risks, and the failure of our franchisees to operate successful and profitable restaurants could negatively impact our business.
Our highly-franchised business model presents a number of risks, and the failure of our franchisees to operate successful and profitable restaurants could negatively impact our business.
These include regulations affecting product packaging, marketing, the nutritional content and safety of our food and other products, labeling and other disclosure practices.
Our success depends in part on our ability to manage the impact of new, potential or changing regulations that can affect our business plans and operations. These include regulations affecting product packaging, marketing, the nutritional content and safety of our food and other products, labeling and other disclosure practices.
The impending federal vaccine mandate may also materially impact our results if we or our franchised restaurants were to lose employees and/or incur additional costs for testing as a result of the mandate. Our business has been disrupted and could be further disrupted to the extent our suppliers, distributors, and/or third-party delivery partners are adversely impacted by the COVID-19 pandemic.
Our business has been disrupted and could be further disrupted to the extent our suppliers, distributors, and/or third-party delivery partners are adversely impacted by the COVID-19 pandemic.
The impact of these factors may be exacerbated by our geographic profile, as nearly 70% of our restaurants are located in the states of California and Texas. 11 Risks Related to Our Business Strategy We may not achieve our development goals.
The impact of these factors may be exacerbated by our geographic profile, as nearly 70% of our restaurants are located in the states of California and Texas. 12 Risks Relating to Health and Safety Food safety and food-borne illness concerns may have an adverse effect on our business by reducing demand and increasing costs.
Risks Related to Operating in the Restaurant Industry We face significant competition in the food service industry and our inability to compete may adversely affect our business. The food service industry is highly competitive with respect to price, service, location, product offering, image and attractiveness of the facilities, personnel, advertising, brand identification, and food quality.
The food service industry is highly competitive with respect to price, service, location, product offering, image and attractiveness of the facilities, personnel, advertising, brand identification, and food quality. Our competition includes a large number of national and regional restaurant chains, as well as locally owned and independent businesses.
Some of our competitors have significantly greater financial, marketing, technological, personnel, and other resources than we do. In addition, many of our competitors have greater name recognition nationally or in some of the local or regional markets in which we have restaurants.
In addition, many of our competitors have greater name recognition nationally or in some of the local or regional markets in which we have restaurants. Additionally, the trend toward convergence in grocery, deli, delivery, and restaurant services is increasing the number of our competitors.
We cannot assure you that our franchisees will successfully participate in our strategic or marketing initiatives or operate their restaurants in a manner consistent with our requirements, standards, and expectations. As compared to some of our competitors, our brand has relatively fewer franchisees who, on average, operate more restaurants per franchisee.
These unrelated risks could adversely affect a franchisee’s ability to make payments to us or to make payments on a timely basis. We cannot assure you that our franchisees will successfully participate in our strategic or marketing initiatives or operate their restaurants in a manner consistent with our requirements, standards, and 14 expectations.
Such media reports and negative publicity could impact guest perception of our brand or industry and can have a material adverse effect on our financial results. Our business could be adversely affected by increased labor costs. Labor is a primary component of our operating costs.
Such media reports and negative publicity could impact guest perception of our brands or industry and can have a material adverse effect on our financial results. 11 We may not have the same resources as our competitors for marketing, advertising, and promotion.
We and our franchisees rely on computer systems and information technology to conduct our business.
Information and Technology Related Risks We are subject to the risk of cybersecurity breaches, intrusions, data loss, or other data security incidents. We and our franchisees rely on computer systems and information technology to conduct our business.
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If a significant percentage of our or our franchisees’ workforce is unable to work, whether because of illness, quarantine, limitations on travel or other government regulations or restrictions in connection with COVID-19, our results may be adversely impacted, potentially materially affecting our liquidity, financial condition, or results of operations.
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Our business could be adversely impacted by increases in labor costs, including those increases triggered by regulatory actions regarding wages, scheduling and benefits; increased health care and workers’ compensation insurance costs; increased wages and costs of other benefits necessary to attract and retain high quality employees with the right skill sets and increased wages, benefits and costs related to the COVID-19 pandemic and inflationary and other pressure on wages now being experienced.
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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.
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The growth of our business can make it increasingly difficult to locate and hire sufficient numbers of employees, to maintain an effective system of internal controls, and to train employees to deliver a consistently high-quality product and customer experience, which could materially harm our business and results of operations.
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In addition, franchisees’ business obligations may not be limited to the operation of Jack in the Box restaurants, making them subject to business and financial risks unrelated to the operation of our restaurants. These unrelated risks could adversely affect a franchisee’s ability to make payments to us or to make payments on a timely basis.
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Furthermore, we have experienced, and could continue to experience, a shortage of labor for restaurant positions, including due to concerns around and illnesses arising from COVID-19 and its various novel variants and other factors, which could decrease the pool of available qualified talent for key functions and require restaurants to operate on reduced hours.
Removed
As is the case with any owner or operator of real property, we are subject to eminent domain proceedings that can impact the value of investments we have made in real property, and we are subject to other potential liabilities, cost and damages arising out of owning, operating, leasing, or otherwise having interests in real property.
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Such labor shortages could be further exacerbated by expanded federal, state and local COVID-19 vaccination requirements. In addition, our wages and benefits programs may be insufficient to attract and retain the top performing employees especially in a rising wage market. Changes in consumer confidence and declines in general economic conditions could negatively impact our financial results.
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In addition, we may incur additional indebtedness in the future.
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We cannot assure you that we will successfully enter into fixed price contracts on a timely basis or on commercially favorable pricing terms.
Removed
Consumer Protection and Privacy Laws We are subject to various federal, state, and local laws and regulations concerning consumer protection and privacy as it relates to our marketing, advertising, and promotional programs, including, but not limited to, the California Consumer Privacy Act and the Telephone Consumer Protection Act.
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Risks Related to Human Capital Inability to attract, train and retain top-performing personnel could adversely impact our financial results or business. We believe that our continued success will depend, in part, on our ability to attract and retain the services of skilled personnel.
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Risks Related to Our Common Stock Our quarterly results and, as a result, the price of our common stock, may fluctuate significantly and could fall below the expectations of securities analysts and investors due to various factors.
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In September 2022, California passed legislation establishing a council to set sector-wide standards on wages, hours and working conditions related to the health, safety, and welfare of fast-food restaurant workers. This law and other labor related laws enacted at the federal, state, provincial or local level could increase our and our franchisees’ labor costs and decrease profitability.
Removed
Our quarterly results and the price of our common stock may each fluctuate significantly and could fail to meet the expectations of securities analysts and investors because of factors including: • actual or anticipated fluctuations in our operating results; • changes in earnings estimated by securities analysts or our ability to meet those estimates; • the operating and stock price performance of comparable companies; • changes in our stockholder base; • volatility of the stock market in general; • changes to the regulatory and legal environment in which we operate; and • general domestic and worldwide economic conditions.
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Such losses could have a material adverse effect on our business and results of operations. 10 Risks Related to the Restaurant Industry We face significant competition in the food service industry and our inability to compete may adversely affect our business.
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As a result of these factors, results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for any year.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changePROPERTIES The following table sets forth information about our restaurant locations (by state) for all restaurants in operation as of October 3, 2021: Company- Operated Franchise Total Arizona 5 168 173 California 107 835 942 Colorado — 17 17 Hawaii — 30 30 Idaho — 33 33 Illinois — 12 12 Indiana — 3 3 Kansas 3 2 5 Louisiana — 16 16 Missouri 1 54 55 Nevada — 77 77 New Mexico — 8 8 North Carolina — 18 18 Ohio — 2 2 Oklahoma 8 8 16 Oregon 16 34 50 South Carolina — 9 9 Tennessee — 9 9 Texas 23 569 592 Utah — 3 3 Washington — 147 147 Guam — 1 1 163 2,055 2,218 Of the total 2,218 restaurants, our interest in restaurant properties consists of the following: Company- Operated Franchise Total Company-owned restaurant buildings: On company-owned land 10 196 206 On leased land 57 555 612 Subtotal 67 751 818 Company-leased restaurant buildings on leased land 96 1,011 1,107 Franchise directly-owned or directly-leased restaurant buildings — 293 293 Total restaurant buildings 163 2,055 2,218 Our restaurant leases generally provide for fixed rental payments (with cost-of-living index adjustments) plus real estate taxes, insurance, and other expenses.
Biggest changePROPERTIES The following table sets forth information about our restaurant locations (by segment, by state) for all restaurants in operation as of October 2, 2022: 21 Del Taco Jack in the Box Company- Operated Franchise Total Company- Operated Franchise Total Alabama — 1 1 — — — Arizona — 39 39 5 170 175 California 228 135 363 101 843 944 Colorado — 20 20 — 17 17 Florida 1 3 4 — — — Georgia 14 10 24 — — — Hawaii — — — — 28 28 Idaho — 10 10 — 34 34 Illinois — — — — 11 11 Indiana — — — — 3 3 Kansas — — — 5 — 5 Louisiana — — — — 16 16 Michigan — 10 10 — — Missouri — — — 3 36 39 Nevada 37 9 46 — 78 78 New Mexico — 12 12 — 8 8 North Carolina — — — — 18 18 Ohio — 3 3 — 2 2 Oklahoma 10 — 10 8 7 15 Oregon — 9 9 — 41 41 South Carolina — — — — 8 8 Tennessee — — — 2 2 4 Texas — — — 22 561 583 Utah — 34 34 — 3 3 Washington — 5 5 — 147 147 Guam — 1 1 — 2 2 290 301 591 146 2,035 2,181 Of the total 591 Del Taco and 2,181 Jack in the Box restaurants, our interest in restaurant properties consists of the following: Del Taco Jack in the Box Company- Operated Franchise Total Company- Operated Franchise Total Company-owned restaurant buildings: On company-owned land — — — 10 179 189 On leased land 1 — 1 51 546 597 Subtotal 1 — 1 61 725 786 Company-leased restaurant buildings on leased land 289 50 339 85 996 1,081 Franchise directly-owned or directly-leased restaurant buildings — 251 251 — 314 314 Total restaurant buildings 290 301 591 146 2,035 2,181 Our restaurant leases generally provide for fixed rental payments (with cost-of-living index adjustments) plus real estate taxes, insurance, and other expenses.
In addition to the restaurant locations, we own our corporate headquarters located in San Diego, California, which consists of approximately 70,000 square feet and approximately four acres of undeveloped land directly adjacent to it.
We have generally been able to renew our restaurant leases as they expire at then-current market rates. 22 In addition to the restaurant locations, we own our corporate headquarters located in San Diego, California, which consists of approximately 70,000 square feet and approximately four acres of undeveloped land directly adjacent to it.
In addition, approximately 14% of our leases provide for contingent rental payments between 1% and 12% of the restaurant’s gross sales once certain thresholds are met. We have generally been able to renew our restaurant leases as they expire at then-current market rates.
In addition, approximately 17% of our leases provide for contingent rental payments between 1% and 12% of the restaurant’s gross sales once certain thresholds are met.
Added
We lease our Del Taco office, consisting of approximately 40,000 square feet in Lake Forest, California.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeHe has over ten years of experience in leadership roles as Chief People Officer and Human Resource Officer. He most recently served as the Chief Human Resources Officer at GNC Holdings, LLC, a health, wellness, and nutrition brand, from January 2018 to April 2021. Prior to that, Mr.
Biggest changeHe most recently served as the Chief Human Resources Officer at GNC Holdings, LLC, a health, wellness, and nutrition brand, from January 2018 to April 2021. Prior to that, Mr. Piano was the Chief Human Resource Officer for MoneyGram International Inc., an American cross-border P2P payments and money transfer company, from August 2009 until April 2017. Mr.
From February 2011 to May 2017, he served as the Vice President of Operation of Panera, LLC, an American chain store of bakery-café casual restaurants. Mr. Darden received his Bachelor of Arts, Interpersonal Communications from Azusa Pacific University. 22 Mr. Gordon has been Senior Vice President, Chief Supply Chain Officer since November 2019.
From February 2011 to May 2017, he served as the Vice President of Operation of Panera, LLC, an American chain store of bakery-café casual restaurants. Mr. Darden received his Bachelor of Arts, Interpersonal Communications from Azusa Pacific University. Mr. Gordon has been Senior Vice President, Chief Supply Chain Officer since November 2019.
Linderman has been Senior Vice President, Chief Franchise and Corporate Development Officer since August 2021, and previously held the position of SVP, Franchise and Corporate Development since October 2020. He has over 18 years of experience in the franchise industry.
Linderman has been Senior Vice President, Chief Development Officer since April 2022, and previously held the position of Senior Vice President, Chief Franchise and Corporate Development Officer since August 2021. He held the position of Senior Vice President, Franchise and Corporate Development from October 2020 through July 2021. He has over 18 years of experience in the franchise industry.
Information about our Executive Officers The following table sets forth the name, age, position, and years with the Company of each person who is an executive officer of Jack in the Box Inc. as of October 3, 2021: Name Age Positions Years with the Company Darin Harris 52 Chief Executive Officer 1 Tim Mullany 46 Executive Vice President, Chief Financial Officer — Ryan Ostrom 46 Executive Vice President, Chief Marketing Officer — Tony Darden 51 Senior Vice President, Chief Operating Officer — Dean Gordon 59 Senior Vice President, Chief Supply Chain Officer 12 Tim Linderman 52 Senior Vice President, Chief Franchise and Corporate Development — Steven Piano 56 Senior Vice President, Chief People Officer — Sarah Super 45 Senior Vice President, Chief Legal and Risk Officer 8 The following sets forth the business experience of each executive officer for at least the last five years: Mr.
Information about our Executive Officers The following table sets forth the name, age, position, and years with the Company of each person who is an executive officer of Jack in the Box Inc. as of October 2, 2022: Name Age Positions Years with the Company Darin Harris 53 Chief Executive Officer 2 Tim Mullany 47 Executive Vice President, Chief Financial Officer 1 Ryan Ostrom 47 Executive Vice President, Chief Marketing Officer 1 Doug Cook 49 Senior Vice President, Chief Technology Officer — Tony Darden 52 Senior Vice President, Chief Operating Officer 1 Dean Gordon 60 Senior Vice President, Chief Supply Chain Officer 13 Tim Linderman 53 Senior Vice President, Chief Franchise and Corporate Development 1 Steven Piano 57 Senior Vice President, Chief People Officer 1 Sarah Super 46 Senior Vice President, Chief Legal and Risk Officer 9 The following sets forth the business experience of each executive officer for at least the last five years: Mr.
Gordon also held a number of positions at Prandium, Inc., an operator of multiple restaurant concepts, from October 1994 to August 2000. Mr. Gordon has over 25 years of Supply Chain Management experience. Mr. Piano has been Senior Vice President, Chief People Officer since April 2021.
Gordon also held a number of positions at Prandium, Inc., an operator of multiple restaurant concepts, from October 1994 to August 2000. Mr. Gordon has over 25 years of Supply Chain Management experience. Mr.
Ostrom also has held roles at Kenmore, Craftsman & DieHard at Sears Holding Corporation, and Reebok. Mr. Darden has been Senior Vice President and Chief Operating Officer since June 2021. He has more than 20 years of cross functional executive leadership experience.
Ostrom also has held roles at Kenmore, Craftsman & DieHard at Sears Holding Corporation, and Reebok. 23 Mr. Cook has been Senior Vice President and Chief Technology Officer since October 2021. He has more than 20 years of industry experience leading guest and employee-facing platforms. Mr.
Super has been Senior Vice President, Chief Legal and Risk Officer since March 2020, served as Senior Vice President, General Counsel since November 2019, and previously served as Vice President and Associate General Counsel from May 2018 until November 2019. Prior to joining the Company in December 2013, she was a partner at the law firm of Gordon & Rees.
Piano has also held leadership positions with Lehman Brothers, Citibank, and others. Ms. Super has been Senior Vice President, Chief Legal and Risk Officer since March 2020, served as Senior Vice President, General Counsel since November 2019, and previously served as Vice President and Associate General Counsel from May 2018 until November 2019.
Before that, he was the Director of Franchise Development for Primrose School Franchising Company, and held that same position at Arby’s. Ms.
Before that, he was the Director of Franchise Development for Primrose School Franchising Company and held that same position at Arby’s. Mr. Piano has been Senior Vice President, Chief People Officer since April 2021. He has over ten years of experience in leadership roles as Chief People Officer and Human Resource Officer.
Ms. Super has more than 15 years of legal experience. 23 PART II
Prior to joining the Company in December 2013, she was a partner at the law firm of Gordon & Rees. Ms. Super has more than 15 years of legal experience. 24 PART II
Removed
Piano was the Chief Human Resource Officer for MoneyGram International Inc., an American cross-border P2P payments and money transfer company, from August 2009 until April 2017. Mr. Piano has also held leadership positions with Lehman Brothers, Citibank, and others. Mr.
Added
Cook served as interim CTO of Jack in the Box from July 2021 to October 2021, leading the technology team and strategy. Prior to that, Mr. Cook served as Chief Information Officer at Pizza Hut from July 2019 to December 2020. From 1999 to June 2019, Mr.
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Cook held several positions at Sonic, applying leading-edge technologies and analytics to grow the company’s innovation and market position. Mr. Darden has been Senior Vice President and Chief Operating Officer since June 2021. He has more than 20 years of cross functional executive leadership experience.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIn its annual review of the Peer Group Index used to benchmark executive compensation for our executive officers, the Compensation Committee of the Board of Directors, in consultation with its independent compensation consultant, approved changes to the Peer Group Index to include companies that more closely aligned with our financial selection criteria and are highly-franchised. 2016 2017 2018 2019 2020 2021 Jack in the Box Inc. $100 $108 $90 $100 $89 $110 S&P 500 Index $100 $119 $140 $146 $168 $218 2020 Peer Group (1) $100 $100 $133 $155 $203 $275 2021 Peer Group (2) $100 $116 $154 $148 $176 $220 ________________________ (1) The 2020 Peer Group Index comprises the following companies: BJ’s Restaurants, Inc.; Bloomin’ Brands, Inc.; Brinker International, Inc.; The Cheesecake Factory Inc.; Chipotle Mexican Grill Inc.; Cracker Barrel Old Country Store, Inc.; Denny’s Corp.; Dine Brands Global Inc.; Domino’s Pizza, Inc.; Papa John's Int'l, Inc.; Red Robin Gourmet Burgers, Inc.; Texas Roadhouse, Inc.; and The Wendy’s Company.
Biggest changeIn its annual review of the Peer Group Index used to benchmark executive compensation for our executive officers, the Compensation Committee of the Board of Directors, in consultation with its independent compensation consultant, approved changes to the Peer Group Index to include companies that more closely aligned with our financial selection criteria and are highly-franchised. 2017 2018 2019 2020 2021 2022 Jack in the Box Inc. $100 $84 $93 $82 $102 $80 S&P 500 Index $100 $118 $123 $142 $184 $156 2021 Peer Group (1) $100 $135 $131 $155 $194 $138 2022 Peer Group (2) $100 $119 $144 $164 $209 $166 ________________________ (1) The 2021 Peer Group Index comprises the following companies: BJ's Restaurants Inc.; The Cheesecake Factory Inc.; Chuy's Holdings Inc.; Cracker Barrel Old Country Store, Inc.; Denny's Corp.; Dine Brands Global Inc.; Domino's Pizza, Inc.; El Pollo Loco Holdings Inc.; Noodles & Co; Papa John's Int’l Inc.; Red Robin Gourmet Burgers, Inc.; Ruth's Hospitality Group Inc.; Shake Shack Inc.; Texas Roadhouse, Inc.; The Wendy’s Company; and Wingstop Inc.
The following table sets forth information on our share repurchases of our common stock during the fourth quarter of 2021 ( dollars in thousands, except per share data ).
The following table sets forth information on our share repurchases of our common stock during the fourth quarter of 2022 ( dollars in thousands, except per share data ).
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information. Our common stock is traded on the NASDAQ Global Select Market under the symbol “JACK.” Dividends. In fiscal 2021, the Board of Directors declared four cash dividends of $0.40, $0.40, $0.44, and $0.44, respectively.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information. Our common stock is traded on the NASDAQ Global Select Market under the symbol “JACK.” Dividends. In fiscal 2022, the Board of Directors declared four cash dividends of $0.44.
The below comparison assumes $100 was invested on September 30 , 2016 in the Company’s common stock and in the comparison groups and assumes reinvestment of dividends. The Company uses a Peer Group to assess the competitive pay levels of our senior executives, and to evaluate program design element s.
The below comparison assumes $100 was invested on September 30, 2017 i n the Company’s common stock and in the comparison groups and assumes reinvestment of dividends. The Company uses a Peer Group to assess the competitive pay levels of our senior executives, and to evaluate program design element s.
The weighted-average exercise price in column (b) includes the weighted-average exercise price of stock options. (2) For a description of our equity compensation plans, refer to Note 13, Share-Based Employee Compensation , of the notes to the consolidated financial statements. 24 Performance Graph.
The weighted-average exercise price in column (b) includes the weighted-average exercise price of stock options. (2) For a description of our equity compensation plans, refer to Note 13, Share-Based Employee Compensation , of the notes to the consolidated financial statement 25 Performance Graph.
(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) (b) Weighted-average exercise price of outstanding options (1) (c) Number of securities remaining for future issuance under equity compensation plans (excluding securities reflected in column (a)) Equity compensation plans approved by security holders (2) 318,874 $92.44 1,898,901 ________________________ (1) Includes shares issuable in connection with our outstanding stock options, performance share awards, nonvested stock units, and non-management director deferred stock equivalents.
(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) (b) Weighted-average exercise price of outstanding options (1) (c) Number of securities remaining for future issuance under equity compensation plans (excluding securities reflected in column (a)) Equity compensation plans approved by security holders (2) 455,382 $92.80 1,796,504 ________________________ (1) Includes shares issuable in connection with our outstanding stock options, performance share awards, nonvested stock units, and non-management director deferred stock equivalents.
Stockholders. As of November 17, 2021, there were 517 stockholders of record. Securities Authorized for Issuance Under Equity Compensation Plans . The following table summarizes the equity compensation plans under which Company common stock may be issued as of October 3, 2021. Stockholders of the Company have approved all plans requiring such approval.
As of November 16, 2022, there were 533 stockholders of record. Securities Authorized for Issuance Under Equity Compensation Plans . The following table summarizes the equity compensation plans under which Company common stock may be issued as of October 2, 2022. Stockholders of the Company have approved all plans requiring such approval.
(2) The 2021 Peer Group Index comprises the following companies: BJ's Restaurants Inc.; The Cheesecake Factory Inc.; Chuy's Holdings Inc.; Cracker Barrel Old Country Store, Inc.; Del Taco Restaurants Inc.; Denny's Corp.; Dine Brands Global Inc.; Domino's Pizza, Inc.; El Pollo Loco Holdings Inc.; Noodles & Co; Papa John's Int’l Inc.; Red Robin Gourmet Burgers, Inc.; Ruth's Hospitality Group Inc.; Shake Shack Inc.; Texas Roadhouse, Inc.; The Wendy’s Company; and Wingstop Inc.
(2) The 2022 Peer Group Index comprises the following companies: BJ's Restaurants Inc.; Carrols Restaurant Group, Inc.; The Cheesecake Factory Inc.; Chipotle Mexican Grill, Inc.; Cracker Barrel Old Country Store, Inc.; Denny's Corp.; Dine Brands Global Inc.; Domino's Pizza, Inc.; El Pollo Loco Holdings Inc.; Krispy Kreme, Inc.; Papa John's Int’l Inc.; Red Robin Gourmet Burgers, Inc.; Restaurant Brands Int’l Inc.; Shake Shack Inc.; Texas Roadhouse, Inc.; The Wendy’s Company; and Wingstop Inc.
(a) Total number of shares purchased (b) Average price paid per share (c) Total number of shares purchased as part of publicly announced programs (d) Maximum dollar value that may yet be purchased under these programs (1) $ 70,032 July 5, 2021 - August 1, 2021 18,453 $ 110.14 18,453 $ 68,000 August 2, 2021 - August 29, 2021 489,464 $ 102.43 489,464 $ 17,863 August 30, 2021 - October 3, 2021 169,211 $ 105.57 169,211 $ — Total 677,128 677,128 _____________________ (1) On November 19, 2021, the Board of Directors authorized an additional $200.0 million stock buy-back program that expires on November 20, 2023.
(a) Total number of shares purchased (b) Average price paid per share (c) Total number of shares purchased as part of publicly announced programs (d) Maximum dollar value that may yet be purchased under these programs $ 200,000 July 11, 2022 - August 7, 2022 — $ — — $ 200,000 August 8, 2022 - September 4, 2022 275,746 $ 90.66 275,746 $ 175,000 September 5, 2022 - October 2, 2022 — $ — — $ 175,000 Total 275,746 275,746 Stockholders.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeInsurance costs decreased $1.4 million in 2021 versus the prior year primarily due to more favorable trends in the current year related to expected losses associated with workers’ compensation claims. 31 Impairment and Other Gains, Net Impairment and other gains, net is comprised of the following ( in thousands ): 2021 2020 Gains on disposition of property and equipment, net (6,888) (9,768) Costs of closed restaurants and other 1,907 1,872 Accelerated depreciation 1,592 235 Restructuring costs 7 1,168 $ (3,382) $ (6,493) Impairment and other gains, net decreased $3.1 million in 2021 versus the prior year primarily due to lower gains on the disposition of property and equipment of $2.9 million.
Biggest changeOther Operating Expense (Income), Net Other operating expense (income), net is comprised of the following ( in thousands ): 2022 2021 Acquisition, integration, and restructuring costs 20,081 7 Costs of closed restaurants and other 4,290 1,907 Restaurant impairment charges 5,927 — Accelerated depreciation 1,124 1,592 Gains on disposition of property and equipment, net $ (30,533) $ (6,888) $ 889 $ (3,382) Other operating expense (income), net increased $4.3 million in 2022 versus the prior year primarily due to $20.1 million of costs incurred during the year relating to the acquisition and integration of Del Taco, higher restaurant impairment charges of $5.9 million primarily due to closures of certain Jack in the Box company and franchise restaurants; partially offset by higher gains on the disposition of property and equipment of $23.6 million from the sale of Jack in the Box restaurant properties to franchisees.
Our MD&A consists of the following sections: • Overview — a general description of our business and fiscal 2021 highlights. • Results of Operations — an analysis of our consolidated statements of earnings for fiscal 2021 compared to fiscal 2020. • Liquidity and Capital Resources — an analysis of our cash flows, including capital expenditures, share repurchase activity, dividends, and known trends that may impact liquidity. • Critical Accounting Estimates — a discussion of accounting policies that require critical judgments and estimates.
Our MD&A consists of the following sections: • Overview — a general description of our business. • Results of Operations — an analysis of our consolidated statements of earnings for fiscal 2022 compared to fiscal 2021. • Liquidity and Capital Resources — an analysis of our cash flows, including capital expenditures, share repurchase activity, dividends, and known trends that may impact liquidity. • Critical Accounting Estimates — a discussion of accounting policies that require critical judgments and estimates.
The quarterly principal payment of $3.25 million on the Class A-2 Notes may be suspended when the specified leverage ratio, which is a measure of outstanding debt to earnings before interest, taxes, depreciation, and amortization, adjusted for certain items (as defined in the Indenture), is less than or equal to 5.0x.
The quarterly principal payment on the Class A-2 Notes may be suspended when the specified leverage ratio, which is a measure of outstanding debt to earnings before interest, taxes, depreciation, and amortization, adjusted for certain items (as defined in the Indenture), is less than or equal to 5.0x.
In 2021 and 2020, we contributed $6.1 million and $6.2 million, respectively, to our pension and postretirement plans. We do not anticipate making any contributions to our qualified defined benefit pension plan in fiscal 2022. For additional information, refer to Note 12, Retirement Plans , of the notes to the consolidated financial statements. Investing Activities .
In 2022 and 2021, we contributed $6.7 million and $6.1 million, respectively, to our pension and postretirement plans. We do not anticipate making any contributions to our qualified defined benefit pension plan in fiscal 2023. For additional information, refer to Note 12, Retirement Plans , of the notes to the consolidated financial statements. Investing Activities .
We generally reinvest available cash flows from operations to invest in our business, service our debt obligations, pay dividends and repurchase shares of our common stock. Our primary sources of short-term and long-term liquidity are expected to be cash flows from operations and available borrowings under our Variable Funding Notes.
We generally reinvest available cash flows from operations to invest in our business, service our debt obligations, pay dividends and repurchase shares of our common stock. Our primary sources of short-term and long-term liquidity are expected to be cash flows from operations and available borrowings under our credit facilities.
In 2021, the increase was primarily driven by average check growth, menu price increases, an increase in the average number of restaurants and the impact of the 53rd week, partially offset by a decline in traffic.
In 2022, the increase was primarily menu price increases and an increase in the average number of restaurants, partially offset by the impact of the 53rd week and a decline in traffic and average check.
As of October 3, 2021, we were in compliance with all of our debt covenant requirements and were not subject to any rapid amortization events.
As of October 2, 2022, we were in compliance with all of our debt covenant requirements and were not subject to any rapid amortization events.
Comparisons under this heading refer to the 53-week period ended October 3, 2021 and 52-week period ended September 27, 2020 for fiscal 2021 and fiscal 2020, respectively. A comparison of our results of operations and cash flows for fiscal 2020 compared to fiscal 2019 can be found under Part II, “Item 7.
Comparisons under this heading refer to the 52-week period ended October 2, 2022 for the fiscal year 2022 and 53-week period ended October 3, 2021 for the fiscal year 2021. A comparison of our results of operations and cash flows for fiscal 2021 compared to fiscal 2020 can be found under Part II, “Item 7.
The following table summarizes the increases (decreases) in company-operated same-store sales: 2021 vs. 2020 Transactions (6.3) % Average check (1) 12.4 % Change in same-store sales 6.1 % ________________________ (1) Includes price increases of 3.5% in 2021.
The following table summarizes the increases (decreases) in company-operated same-store sales: 2022 vs. 2021 Transactions (1.7) % Average check (1) 5.4 % Change in same-store sales 3.7 % ________________________ (1) Includes price increases of 8.4% in 2022.
The following table presents the approximate impact of these items on company restaurant sales in 2021 ( in millions ): 2021 vs 2020 AUV increase $ 24.0 Increase in the average number of restaurants 7.5 53rd week 7.3 Total change in company restaurant sales $ 38.8 29 Same-store sales at company-operated restaurants increased 6.1% in 2021 compared to a year ago.
The following table presents the approximate impact of these items on company restaurant sales in 2022 ( in millions ): 2022 vs 2021 AUV increase $ 22.7 Increase in the average number of restaurants 11.1 53rd week (7.3) Total change in company restaurant sales $ 26.5 29 Same-store sales at company-operated restaurants increased 3.7% in 2022 compared to a year ago.
Same-store sales, system restaurant sales, franchised restaurant sales, AUVs, and Adjusted EBITDA are not measurements determined in accordance with GAAP and should not be considered in isolation, or as an alternative to earnings from operations, or other similarly titled measures of other companies.
Same-store sales, system restaurant sales, franchised restaurant sales, AUVs, and Adjusted EBITDA are not measurements determined in accordance with GAAP and should not be considered in isolation, or as an alternative to earnings from operations, or other similarly titled measures of other companies. OVERVIEW Our Business Founded in 1951, Jack in the Box Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended September 27, 2020.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended October 3, 2021.
We believe franchise and system same-store sales, franchised and system-wide sales, and AUV information are useful to investors as they have a direct effect on the Company’s profitability. • Adjusted EBITDA represents net earnings on a generally accepted accounting principles (“GAAP”) basis excluding gains or losses from discontinued operations, income taxes, interest expense, net, gains on the sale of company-operated restaurants, impairment and other (gains) charges, net, depreciation and amortization, amortization of tenant improvement allowances and other, and pension settlement charges.
We believe franchise and system same-store sales, franchised and system-wide sales, and AUV information are useful to investors as they have a direct effect on the Company’s profitability. • Adjusted EBITDA represents net earnings on a generally accepted accounting principles (“GAAP”) basis excluding income taxes, interest expense, net, gains on the sale of company-operated restaurants, other operating expense (income), net, depreciation and amortization, amortization of favorable and unfavorable leases and subleases, net, and amortization of franchise tenant improvement allowances and incentives.
Payroll and employee benefit costs as a percentage of company restaurant sales increased to 30.7% in 2021 compared with 30.5% a year ago primarily due to labor inflation, higher incentive compensation costs and a change in the mix of restaurants due to franchisee acquisitions. Labor inflation was approximately 7.2% in the current fiscal year.
Payroll and employee benefit costs as a percentage of company restaurant sales increased to 33.3% in 2022 compared with 30.7% a year ago primarily due to labor inflation and a change in the mix of restaurants due to franchisee acquisitions. Labor inflation was approximately 12.3% in the current fiscal year.
As of October 3, 2021, the Master Issuer had restricted cash of $18.2 million, which primarily represented cash collections and cash reserves held by the trustee to be used for payments of interest and commitment fees required for the Class A-1 and A-2 Notes. 34 Covenants and Restrictions — The Notes are subject to a series of covenants and restrictions customary for transactions of this type, including (i) that the Master Issuer maintains specified reserve accounts to be used to make required payments in respect of the Notes, (ii) provisions relating to optional and mandatory prepayments and the related payment of specified amounts, including specified make-whole payments in the case of the Class A-2 Notes under certain circumstances, (iii) certain indemnification payments in the event, among other things, the assets pledged as collateral for the Notes are in stated ways defective or ineffective and (iv) covenants relating to recordkeeping, access to information and similar matters.
Covenants and Restrictions — The Notes are subject to a series of covenants and restrictions customary for transactions of this type, including (i) that the Master Issuer maintains specified reserve accounts to be used to make required payments in respect of the Notes, (ii) provisions relating to optional and mandatory prepayments and the related payment of specified amounts, including specified make-whole payments in the case of the Class A-2 Notes under certain circumstances, (iii) certain indemnification payments in the event, among other things, the assets pledged as collateral for the Notes are in stated ways defective or ineffective and (iv) covenants relating to recordkeeping, access to information and similar matters.
Repurchases of Common Stock — In fiscal 2021, the Company purchased 1.9 million shares of its common stock for an aggregate cost of $200.0 million. As of October 3, 2021, there was no remaining amount under share repurchase programs authorized by the Board of Directors.
Repurchases of Common Stock — In fiscal 2022, the Company purchased 0.3 million shares of its common stock for an aggregate cost of $25.0 million. As of October 2, 2022, there was $175.0 million remaining under share repurchase programs authorized by the Board of Directors.
Income Taxes The income tax provisions reflect effective tax rates of 25.2% and 26.8% in fiscal years 2021 and 2020, respectively.
Income Taxes The income tax provisions reflect effective tax rates of 28.5% and 25.2%, in fiscal years 2022 and 2021, respectively.
Selling, General and Administrative (“SG&A”) Expenses The following table presents the increase (decrease) in SG&A expenses in 2021 compared with the prior year ( in thousands ): 2021 vs. 2020 Advertising (excluding 53rd week) $ 2,083 Incentive compensation (including share-based compensation and related payroll taxes) 2,585 Cash surrender value of COLI policies, net (6,206) Litigation matters 1,162 Insurance (1,351) 53rd week 1,844 Other 1,776 $ 1,893 Advertising costs represent company contributions to our marketing fund and are generally determined as a percentage of company-operated restaurant sales.
Selling, General and Administrative (“SG&A”) Expenses The following table presents the increase (decrease) in SG&A expenses in 2022 compared with the prior year ( in thousands ): 2022 vs. 2021 Advertising (excluding 53rd week) $ 12,443 Incentive compensation (including share-based compensation and related payroll taxes) (2,011) Cash surrender value of COLI policies, net 19,053 Litigation matters (4,881) Insurance 1,963 53rd week (1,844) Other 24,141 $ 48,864 Advertising costs represent company contributions to our marketing funds and are generally determined as a percentage of company-operated restaurant sales.
The cash surrender value of our Company-owned life insurance (“COLI”) policies, net of changes in our non-qualified deferred compensation obligation supported by these policies, are subject to market fluctuations.
The cash surrender value of our Company-owned life insurance (“COLI”) policies, net of changes in our non-qualified deferred compensation obligation supported by these policies, are subject to market fluctuations. The changes in market values had a negative impact of $19.1 million versus the prior year.
LIQUIDITY AND CAPITAL RESOURCES General Our primary sources of liquidity and capital resources are cash flows from operations and borrowings available under our securitized financing facility. Our cash requirements consist principally of working capital, general corporate needs, capital expenditures, income tax payments, debt service requirements, franchise tenant improvement allowance distributions, dividend payments, and obligations related to our benefit plans.
Our cash requirements consist principally of working capital, general corporate needs, capital expenditures, income tax payments, debt service requirements, franchise tenant improvement allowance and incentive distributions, dividend payments, and obligations related to our benefit plans.
The following table summarizes changes in same-store sales for company-operated, franchised, and system restaurants: 2021 2020 Company 6.1 % 3.1 % Franchise 10.7 % 4.0 % System 10.3 % 4.0 % The following table summarizes the changes in the number and mix of company and franchise restaurants: 2021 2020 Company Franchise Total Company Franchise Total Beginning of year 144 2,097 2,241 137 2,106 2,243 New — 14 14 — 27 27 Acquired from franchisees 20 (20) — 8 (8) — Closed (1) (36) (37) (1) (28) (29) End of year 163 2,055 2,218 144 2,097 2,241 % of system 7 % 93 % 100 % 6 % 94 % 100 % 28 The following table summarizes the restaurant sales for company-operated, franchised, and total systemwide restaurants (in thousands) : 2021 2020 Company-operated restaurant sales $ 387,766 $ 348,987 Franchised restaurant sales (1) 3,767,574 3,323,745 Systemwide sales (1) $ 4,155,340 $ 3,672,732 ________________________ (1) Franchised restaurant sales represent sales at franchised restaurants and are revenues of our franchisees.
RESULTS OF OPERATIONS FOR FISCAL 2022 AND 2021 The following table summarizes changes in same-store sales for Jack in the Box company-operated, franchised, and system restaurants: Jack in the Box: 2022 2021 Company 3.7 % 6.1 % Franchise 0.6 % 10.7 % System 0.9 % 10.3 % The following table summarizes changes in the number and mix of Jack in the Box company and franchise restaurants: 2022 2021 Jack in the Box: Company Franchise Total Company Franchise Total Beginning of year 163 2,055 2,218 144 2,097 2,241 New — 17 17 — 14 14 Acquired from franchisees 13 (13) — 20 (20) — Refranchised (15) 15 — — — — Closed (15) (39) (54) (1) (36) (37) End of year 146 2,035 2,181 163 2,055 2,218 % of system 7 % 93 % 100 % 7 % 93 % 100 % 28 The following table summarizes restaurant sales for Jack in the Box company-operated, franchised, and systemwide sales ( in thousands ): Jack in the Box: 2022 2021 Company-operated restaurant sales $ 414,225 $ 387,766 Franchised restaurant sales (1) 3,696,817 3,767,574 Systemwide sales (1) $ 4,111,042 $ 4,155,340 ________________________ (1) Franchised restaurant sales represent sales at franchised restaurants and are revenues of our franchisees.
Incentive compensation increased by $2.6 million in 2021 primarily due to higher achievement levels compared to the prior year for the Company’s annual incentive plan, partially offset by a $0.3 million decrease in stock-based compensation as a result of turnover at the executive level in the prior year.
Incentive compensation decreased by $2.0 million in 2022 primarily due to a $5.1 million decrease from lower achievement levels compared to the prior year for the Company’s annual incentive plan; partially offset by an increase in stock-based compensation of $3.1 million due to a higher number of executive stock awards outstanding compared to the prior year.
Franchise Operations The following table presents franchise revenues and costs in each fiscal year and other information we believe is useful in analyzing the change in franchise operating results ( dollars in thousands ): 2021 2020 Franchise rental revenues $ 346,634 $ 320,647 Royalties 193,908 171,407 Franchise fees and other 10,817 6,912 Franchise royalties and other 204,725 178,319 Franchise contributions for advertising and other services 204,545 173,553 Total franchise revenues $ 755,904 $ 672,519 Franchise occupancy expenses $ 214,913 $ 210,038 Franchise support and other costs 13,052 13,059 Franchise advertising and other services expenses 210,328 180,794 Total franchise costs $ 438,293 $ 403,891 Franchise costs as a percentage of total franchise revenues 58.0 % 60.1 % Average number of franchise restaurants 2,066 2,084 Franchised restaurant sales $ 3,767,574 $ 3,323,745 Franchise restaurant AUV (1) $ 1,790 $ 1,595 Royalties as a percentage of total franchise restaurant sales 5.1 % 5.2 % ________________________ (1) 2021 AUV is adjusted to exclude the 53rd week for the purpose of comparison to prior year.
Jack in the Box Franchise Operations The following table presents franchise revenues and costs in each fiscal year and other information we believe is useful in analyzing the change in franchise operating results ( dollars in thousands ): 2022 2021 Franchise rental revenues $ 335,936 $ 346,634 Royalties 188,902 193,908 Franchise fees and other 14,309 10,817 Franchise royalties and other 203,211 204,725 Franchise contributions for advertising and other services 197,816 204,545 Total franchise revenues $ 736,963 $ 755,904 Franchise occupancy expenses $ 211,260 $ 214,913 Franchise support and other costs 15,622 13,052 Franchise advertising and other services expenses 206,192 210,328 Total franchise costs $ 433,074 $ 438,293 Franchise costs as a percentage of total franchise revenues 58.8 % 58.0 % Average number of franchise restaurants 2,031 2,066 Franchised restaurant sales $ 3,696,817 $ 3,767,574 Franchise restaurant AUV (1) $ 1,820 $ 1,790 Royalties as a percentage of total franchise restaurant sales 5.1 % 5.1 % ________________________ (1) 2021 AUV is adjusted to exclude the 53rd week for comparison purposes.
Because lawsuits are inherently unpredictable, and unfavorable resolutions could occur, assessing contingencies is highly subjective and requires judgment about future events. As a result, the amount of ultimate loss may differ from those estimates.
Because lawsuits are inherently unpredictable, and unfavorable resolutions could occur, assessing contingencies is highly subjective and requires judgment about future events.
Occupancy and other costs as a percentage of company restaurant sales increased to 15.9% in 2021 from 15.5% a year ago due primarily to higher costs for delivery fees as we grow our delivery sales mix, higher costs for utilities and the acquisition of 20 restaurants with lower than average sales volumes; partially offset by leverage from higher same-store sales.
Occupancy and other costs as a percentage of company restaurant sales increased to 17.9% in 2022 from 15.9% a year ago primarily due to the acquisition of 13 restaurants since a year ago with lower than average sales volumes, and higher costs for maintenance and repair and utilities.
We derive revenue from retail sales at Jack in the Box company-operated restaurants and rental revenue, royalties (based upon a percent of sales), franchise fees and contributions for advertising and other services from franchisees.
We derive revenue from retail sales at company-operated restaurants and rental revenue, royalties (based upon a percent of sales), franchise fees and contributions for advertising and other services from franchisees. 27 Impact of COVID-19 The COVID-19 pandemic has continued to have varying degrees of disruption on our business.
Food and packaging costs as a percentage of company restaurant sales decreased by 0.3% to 29.1% in 2021 from 29.4% a year ago, primarily due to favorable sales mix of 0.8% and menu price increases of 0.9%, partially offset by a 1.3% increase in commodities.
Food and packaging costs as a percentage of company restaurant sales increased by 3.2% to 32.3% in 2022 from 29.1% a year ago, primarily due to an increase in commodities of 3.5% and unfavorable sales mix of 2.2%; partially offset by a 2.5% menu price increase. Commodity costs increased in the current fiscal year by approximately 14.4%.
Below is a reconciliation of Non-GAAP Adjusted EBITDA to the most directly comparable GAAP measure, net earnings (in thousands) : 2021 2020 Net earnings - GAAP $ 165,755 $ 89,764 Earnings from discontinued operations, net of income taxes — (370) Income taxes 55,852 32,727 Interest expense, net 67,458 66,743 Pension settlement charges — 39,218 Gains on the sale of company-operated restaurants (4,203) (3,261) Impairment and other gains, net (3,382) (6,493) Depreciation and amortization 46,500 52,798 Amortization of franchise tenant improvement allowances and other 3,450 3,028 Adjusted EBITDA - Non-GAAP $ 331,430 $ 274,154 Company Restaurant Operations The following table presents company restaurant sales and costs as a percentage of the related sales (dollars in thousands) : 2021 2020 Company restaurant sales $ 387,766 $ 348,987 Company restaurant costs: Food and packaging $ 113,006 29.1 % $ 102,449 29.4 % Payroll and employee benefits $ 119,033 30.7 % $ 106,540 30.5 % Occupancy and other $ 61,743 15.9 % $ 54,157 15.5 % Company restaurant sales increased $38.8 million, or 11.1%, in 2021 as compared with the prior year.
Below is a reconciliation of Non-GAAP Adjusted EBITDA to the most directly comparable GAAP measure, net earnings (in thousands) : Consolidated: 2022 2021 Net earnings - GAAP $ 115,781 $ 165,755 Income taxes 46,111 55,852 Interest expense, net 86,075 67,458 Gains on the sale of company-operated restaurants (3,878) (4,203) Other operating expense (income), net 889 (3,382) Depreciation and amortization 56,100 46,500 Amortization of favorable and unfavorable leases and subleases, net 1,120 — Amortization of franchise tenant improvement allowances and other 4,446 3,450 Adjusted EBITDA - Non-GAAP $ 306,644 $ 331,430 Jack in the Box Brand Company Restaurant Operations The following table presents company restaurant sales and costs as a percentage of the related sales (dollars in thousands) : 2022 2021 Company restaurant sales $ 414,225 $ 387,766 Company restaurant costs: Food and packaging $ 133,815 32.3 % $ 113,006 29.1 % Payroll and employee benefits $ 138,038 33.3 % $ 119,033 30.7 % Occupancy and other $ 74,337 17.9 % $ 61,743 15.9 % Company restaurant sales increased $26.5 million, or 6.8%, in 2022 as compared with the prior year.
Capital Expenditures — The composition of capital expenditures in each fiscal year is summarized in the table below ( in thousands ): 2021 2020 Restaurants: Remodel / refresh programs $ 9,018 $ 6,000 Restaurant facility expenditures 7,491 3,495 Purchases of assets intended for sale and leaseback 15,538 440 Restaurant information technology 3,503 4,417 35,550 14,352 Corporate Services: Information technology 1,485 3,506 Corporate facilities 3,973 1,670 5,458 5,176 Total capital expenditures $ 41,008 $ 19,528 In 2021, capital expenditures increased by $21.5 million compared to a year ago primarily due to a $15.1 million increase in purchases of assets intended for sale and leaseback.
Cash flows used in investing activities increased $557.7 million in 2022 compared to 2021, primarily due to $580.8 million paid for the acquisition of Del Taco, partially offset by $19.4 million higher proceeds received on the sale of property and equipment, primarily due to the sale of restaurant properties to franchisees in 2022. 33 Capital Expenditures — The composition of capital expenditures in each fiscal year is summarized in the table below ( in thousands ): 2022 2021 Restaurants: Remodel / refresh programs $ 8,823 $ 9,018 New restaurants 2,887 — Restaurant facility expenditures 21,469 7,491 Purchases of assets intended for sale and leaseback 1,986 15,538 Restaurant information technology 6,350 3,503 41,515 35,550 Corporate Services: Information technology 3,524 1,485 Corporate facilities 1,436 3,973 4,960 5,458 Total capital expenditures $ 46,475 $ 41,008 In 2022, capital expenditures increased by $5.5 million compared to a year ago, primarily due to Del Taco capital expenditures of $14.9 million, partially offset by a decrease in purchases of assets intended for sale and leaseback of $13.6 million.
Exceeding the leverage ratio of 5.0x does not violate any covenant related to the Class A-2 Notes. In 2021, the Company’s actual leverage ratio was under 5.0x, and as a result, quarterly principal payments were not required.
Exceeding the leverage ratio of 5.0x does not violate any covenant related to the Class A-2 Notes.
The major components of the year-over-year change in tax rates were a decrease in the impact of non-deductible compensation for certain officers, a decrease in nondeductible costs resulting from a California Private Attorney General Act lawsuit settled in the prior year, and an increase in non-taxable gains from the market performance of insurance products used to fund certain non-qualified retirement plans, partially offset by an adjustment to state taxes recorded in the second quarter of fiscal year 2021.
The major components of the year-over-year change in tax rates were non-deductibles losses in the current year versus non-taxable gains in the prior year from the market performance of insurance products used to fund certain non-qualified retirement plans, a decrease in the impact of excess tax benefit on stock compensation, and an increase in non-deductible transaction costs resulting from the Del Taco acquisition, partially offset by an adjustment related to state taxes recorded in the second quarter of fiscal year 2021. 32 LIQUIDITY AND CAPITAL RESOURCES General Our primary sources of liquidity and capital resources are cash flows from operations and borrowings available under our securitized financing facility.
Refer to Note 16, Commitments and Contingencies , of the notes to the consolidated financial statements for additional information.
Refer to Note 9, Other Operating Expense (Income), Net, of the notes to the consolidated financial statements for additional information.
For fiscal 2022, we expect annual wage inflation to be up 8% to 10% compared with fiscal 2021.
For fiscal 2023, we expect annual wage inflation on a company-wide basis to be up 3% to 6% compared with fiscal 2022.
OVERVIEW Our Business As of October 3, 2021, we operated and franchised 2,218 Jack in the Box quick-service restaurants, primarily in the western and southern United States, including one in Guam.
(the “Company”) operates and franchises Jack in the Box ® quick-service restaurants. As of October 2, 2022, we operated and franchised 2,181 Jack in the Box quick-service restaurants, primarily in the western and southern United States, including two in Guam. On March 8, 2022, we completed the acquisition of Del Taco Restaurants, Inc.
Based upon current levels of operations and anticipated growth, we expect that cash flows from operations, combined with our securitized financing facility including our Variable Funding Notes, will be sufficient to meet our capital expenditure, working capital and debt service requirements for at least the next twelve months and the foreseeable future. 32 Cash Flows The table below summarizes our cash flows from continuing operations activities for each of the last two fiscal years ( in thousands ): 2021 2020 Total cash provided by (used in): Operating activities $ 201,122 $ 143,525 Investing activities (20,929) 29,123 Financing activities (343,545) (87,289) Net cash flows $ (163,352) $ 85,359 Operating Activities .
Based upon current levels of operations and anticipated growth, we expect that cash flows from operations, combined with our securitized financing facility, will be sufficient to meet our capital expenditure, working capital and debt service requirements for at least the next twelve months and the foreseeable future.
In connection with the issuance of the Class A-2 Notes, the Master Issuer also entered into a revolving financing facility of Series 2019-1 Variable Funding Senior Secured Notes, Class A-1 (the “Variable Funding Notes”), which allows for the drawing of up to $150.0 million under the Variable Funding Notes and the issuance of letters of credit.
The Company also entered into a revolving financing facility of Series 2022-1 Variable Funding Senior Secured Notes (the “Variable Funding Notes”), which permits borrowings up to a maximum of $150.0 million, subject to certain borrowing conditions, a portion of which may be used to issue letters of credit.
Other Developments As previously announced, a franchisee that operated 68 restaurants in the Midwest filed for chapter 11 bankruptcy in February 2021. Of the 68 restaurants, we sublease 50 of the locations to the franchisee and own the land and building for the remaining 18 locations.
We expect these operating margin pressures due to labor and supply chain challenges to continue in fiscal 2023. Other Developments As previously announced, a franchisee that operated 68 restaurants in Missouri and Illinois filed for chapter 11 bankruptcy in February 2021.
The legal final maturity date of the Class A-2 Notes is in August 2049, but it is expected that, unless earlier prepaid to the extent permitted under the Indenture, the anticipated repayment dates of the Class A-2-I Notes, the Class A-2-II Notes and the Class A-2-III Notes will be August 2023, August 2026, and August 2029, respectively (the “Anticipated Repayment Dates”).
Interest payments on the 2022 Notes are payable on a quarterly basis. The anticipated repayment dates of the Class A-2-I Notes and the Class A-2-II Notes will be February 2027 and February 2032, respectively, unless earlier prepaid to the extent permitted under the indenture that will govern the 2022 Notes.
Advertising costs, on a comparable 52-week basis, increased $2.1 million primarily due to higher company-operated restaurant sales and a decrease in the contribution percentage in the prior year.
Advertising costs, on a comparable 52-week basis, increased $12.4 million primarily due to the acquisition of Del Taco which resulted in higher advertising costs of $11.6 million during the year.
Franchise occupancy expenses, primarily rent, increased $4.9 million in 2021, primarily due to additional costs of approximately $4.0 million from a 53rd week.
Franchise occupancy expenses, primarily rent, decreased $3.7 million, or 1.7% in 2022, primarily due to higher costs of $4.0 million in the prior year from the 53rd week; partially offset by higher property taxes in the current year.
Interest Expense, Net Interest expense, net, is comprised of the following ( in thousands ): 2021 2020 Interest expense $ 67,600 $ 67,273 Interest income (142) (530) Interest expense, net $ 67,458 $ 66,743 Interest expense, net, increased $0.7 million in 2021 primarily due to interest from the 53rd contributing an additional $1.2 million and lower interest income of $0.4 million; partially offset by lower average borrowings as a result of paying down our Variable Funding Notes in 2021.
Interest Expense, Net Interest expense, net, is comprised of the following ( in thousands ): 2022 2021 Interest expense $ 86,524 $ 67,600 Interest income (449) (142) Interest expense, net $ 86,075 $ 67,458 Interest expense, net, increased $18.6 million in 2022 primarily due to a loss on early extinguishment of debt of $7.7 million recognized during the current year as well as higher average borrowings resulting in higher interest expense of $14.1 million; partially offset by a lower average borrowing rate in the current year resulting in a $3.0 million decrease.
Operating cash flows increased $57.6 million compared with a year ago, primarily due to an increase in net income adjusted for non-cash items of $27.4 million and favorable changes in working capital of $30.2 million, primarily due to a favorable change in accounts receivable of $32.9 million, as a result of the repayment of franchise marketing and rent deferrals provided in the prior year, a favorable change in accrued liabilities of $24.8 million mainly from an increase in deferred rent income driven by collections of October rent in the 53rd week in fiscal 2021; partially offset by an unfavorable change in operating lease right-of-use assets and lease liabilities of $25.3 million due to payment of October rent in the 53rd week and the repayment of deferrals we received from our landlords in the prior year.
Operating cash flows decreased $38.2 million compared with a year ago, primarily due to lower net income adjusted for non-cash items of $20.7 million and an unfavorable change in working capital of $17.5 million, primarily due to favorable collections in the prior year from the repayment of franchise marketing and rent payment deferrals provided in 2020 in response to the economic burden associated with the COVID-19 pandemic.
Additionally, fees received in connection with the early termination of franchise agreements increased by $3.3 million. 30 Franchise contributions for advertising and other services increased $31.0 million, or 17.9%, primarily due to higher marketing contributions of $29.9 million, as a result of higher AUVs, additional contributions of approximately $3.5 million from a 53rd week, and a reduction in contribution percentages for March 2020 and April 2020 marketing fees in response to the pandemic which contributed to lower fees of $7.9 million in the prior year.
Franchise contributions for advertising and other services decreased $6.7 million, or 3.3%, primarily due to higher contributions in the prior year of approximately $3.5 million from a 53rd week, a decrease in the number of franchise restaurants and deferrals in connection with the franchisee bankruptcy matter.
Franchise advertising and other service expenses increased $29.5 million, or 16.3% in 2021 primarily due to an increase in marketing contributions of $29.9 million. Depreciation and Amortization Depreciation and amortization decreased $6.3 million in 2021 as compared with the prior year, primarily due to certain of our franchise building assets becoming fully depreciated.
Company-Wide Results Depreciation and Amortization Depreciation and amortization increased $9.6 million in 2022 as compared with the prior year, primarily due to the acquisition of Del Taco, contributing an additional $16.2 million of depreciation in the year; partially offset by lower Jack in the Box depreciation as a result of certain franchise buildings becoming fully depreciated.
Cash flows used in financing activities increased by $256.3 million compared with a year ago, primarily due to our repayment during the second quarter of $107.9 million of 2020 borrowings on our Variable Funding Notes and an increase in stock repurchases of $44.4 million.
Cash flows provided by financing activities increased by $821.7 million compared with a year ago, primarily as a result of an increase in net borrowings of $650.0 million, driven by the issuance of the 2022 Notes, and lower share repurchases of $175.0 million compared to prior year.
In 2021, gains related to the sale of restaurant properties versus a gain on the sale of one of our corporate office buildings in the prior year. Refer to Note 9, Impairment and Other (Gains) Charges, Net, of the notes to the consolidated financial statements for additional information.
In 2021, gains recognized pertained to Jack in the Box restaurants sold in a prior year. Refer to Note 4, Summary of Refranchisings and Franchise Acquisitions, of the notes to the consolidated financial statements for additional information.
Franchise support and other costs remained flat in 2021, primarily to lower bad debt expense of $1.7 million related to specific franchise situations that occurred in the prior year, offset by higher costs related to a franchise business conference and brand standard audits.
Franchise support and other costs increased $2.6 million, or 19.7% in 2022, primarily due to an increase in franchise bad debt expense of $4.1 million as a result of two specific franchise matters; partially offset by lower costs for outside services in the current year.
Litigation matters increased by $1.2 million in 2021 primarily due to a $3.8 million favorable settlement received in the prior year from a class action lawsuit related to credit card interchange fees, partially offset by $2.6 million lower costs on certain employee and other litigation matters.
Litigation matters decreased by $4.9 million in 2022 primarily due to a $2.6 million favorable settlement received in the current year as well as lower costs on certain employee and other litigation matters compared to the prior year. Refer to Note 16, Commitments and Contingencies , of the notes to the consolidated financial statements for additional information.
As of October 3, 2021, we had no outstanding borrowings and $110.5 million of available borrowing capacity under our Variable Funding Notes, net of letters of credit issued of $39.5 million.
The Company’s existing revolving financing facility of Series 2019-1 Class A-1 Notes was terminated in connection with the transaction. As of October 2, 2022, we had outstanding borrowings of $50.0 million and available borrowing capacity of $58.0 million under our 2022 Variable Funding Notes, net of letters of credits issued of $42.0 million.
Franchise rental revenues increased $26.0 million, or 8.1%, in 2021 compared to the prior year, primarily due to higher AUVs resulting in an increase in revenues from percentage rent. In 2021, additional rent revenue of approximately $6.5 million from a 53rd week also contributed to the increase.
Franchise rental revenues decreased $10.7 million, or 3.1%, in 2022 compared to the prior year, primarily due to additional rent revenue of approximately $6.5 million from a 53rd week in the prior year as well as a decrease of $3.3 million in connection with a franchisee in bankruptcy proceedings for which revenue will be recognized upon payment. 30 Franchise royalties and other decreased $1.5 million, or 0.7%, primarily due to additional royalties in the prior year of approximately $3.6 million from a 53rd week and a deferral of $1.0 million in connection with a franchisee bankruptcy matter; partially offset by higher termination fees of $3.9 million in the current year.
As of October 3, 2021, the Company had $73.6 million of cash and restricted cash on its balance sheet and $110.5 million of borrowing availability under its Variable Funding Notes.
As of October 2, 2022, the Company had $136.0 million of cash and restricted cash on its consolidated balance sheet and available borrowings of $117.9 million under our $150.0 million Variable Funding Notes and our $75.0 million revolving credit facility. The Company continually assesses the optimal sources and uses of cash for our business.
On July 8, 2019, Jack in the Box Funding, LLC (the “Master Issuer”), a limited-purpose, bankruptcy-remote, wholly owned indirect subsidiary of the Company, completed its securitization transaction and issued $575.0 million of its Series 2019-1 3.982% Fixed Rate Senior Secured Notes, Class A-2-I (the “Class A-2-I Notes”), $275.0 million of its Series 2019-1 4.476% Fixed Rate Senior Secured Notes, Class A-2-II (the “Class A-2-II Notes”) and $450.0 million of its Series 2019-1 4.970% Fixed Rate Senior Secured Notes, Class A-2-III (the “Class A-2-III Notes”) and together with the Class A-2-I Notes and the Class A-2-II Notes, (the “Class A-2 Notes”), in an offering exempt from registration under the Securities Act of 1933, as amended.
Securitized Refinancing Transaction — On February 11, 2022, the Company completed the sale of $550.0 million of its Series 2022-1 3.445% Fixed Rate Senior Secured Notes, Class A-2-I (the “Class A-2-I Notes”) and $550.0 million of its Series 2022-1 4.136% Fixed Rate Senior Secured Notes, Class A-2-II (the “Class A-2-II” and, together with the Class A-2-I Notes, the “2022 Notes”).
On November 19, 2021, the Board of Directors authorized an additional $200.0 million stock buy-back program that expires on November 20, 2023. Dividends — In fiscal 2021, the Board of Directors declared four quarterly cash dividends of $0.40 per share in the first and second quarter and $0.44 per share in the third and fourth quarter, totaling $37.6 million.
Dividends — In fiscal 2022, the Board of Directors declared four quarterly cash dividends of $0.44 per share, totaling $37.2 million. Future dividends are subject to approval by our Board of Directors.
Removed
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. 26 Impact of COVID-19 The COVID-19 pandemic has continued to have varying degrees of disruption on our business.
Added
(“Del Taco”), the nation’s second largest Mexican quick service restaurant chain by number of restaurants and as of October 2, 2022 has 591 restaurants across 15 states, including one in Guam.
Removed
Throughout the pandemic substantially all of our restaurants have remained open, with the majority of our dining rooms closed and locations operating in an off-premise capacity, leveraging our drive-thru, carryout and delivery capabilities.
Added
Our business has continued to be challenged by availability and cost of labor resulting in occasional temporarily closed restaurants and reduced operating hours. We have continued to have limited shortages in our supply chain; however, inflationary pressures have continued to have a significant impact on our business.
Removed
We have continued to follow the guidance of expert health authorities to ensure precautionary steps are taken to protect the health and safety of our employees and guests. Our drive-thru, carryout, and delivery capabilities have positioned us to continue our strong systemwide sales growth in 2021; however, our business has been challenged by COVID-19 related labor availability and wage inflation.
Added
On July 18, 2022, the Court approved the franchisee’s plan of reorganization with the same terms we previously agreed to in May 2022.
Removed
As a result of labor challenges, we and our franchisees have had to reduce hours of operations and keep dining rooms closed at certain locations. While we have not had significant disruptions in our supply chain, we have experienced some product shortages and higher costs and inflationary pressures. The pandemic has affected consumer behavior with increased focus on digital sales.
Added
The reorganization plan includes a waiver of a portion of damages associated with the rejected locations, reduced royalties following plan confirmation, and the settlement of the remaining cure costs via a secured note upon emergence from bankruptcy, in addition to deferring all amounts owed under the franchise agreements starting in February through the bankruptcy resolution date.
Removed
We have seen significant growth in our digital sales and continue to support enhancements of our digital ordering and off-premise channels, such as delivery. While we do not know the future impact COVID-19 will have on our business, we expect labor and supply chain challenges and inflation to continue into at least fiscal 2022.
Added
The secured note provides for repayment based on a calculation of net free cash flows generated from the franchisee’s restaurants. To the extent future net free cash flows are insufficient to satisfy the secured note at a future specified date, then we agreed to waive any remaining balance due to the Company.
Removed
Through the bankruptcy proceedings, the franchisee may reject the franchise agreements and leases for a number of these locations, resulting in potential impairment costs related to future lease obligations. On May 5, 2021 the franchisee filed a motion with the court rejecting three of the locations, two of which were permanently closed in fiscal 2020.
Added
Based on the events above, we concluded that the collectability of the deferrals starting in February 2022 were doubtful and therefore no revenue has been recognized. Furthermore, we increased our bad debt reserve related to this matter to fully reserve the $3.8 million owed to the Company.
Removed
On August 26, 2021, in response to a subsequent motion to reject two additional locations, the court authorized such rejections as of the dates previously agreed upon by the parties. On November 15, 2021, the franchisee filed an additional motion with the court rejected a total of 5 more locations.
Added
The inflation we have experienced is across all categories with the greatest impact seen in proteins, sauces, and oils. For fiscal 2023, we expect annual commodity cost inflation on a company-wide basis to be up 9% to 11% compared with fiscal 2022.
Removed
The franchisee’s remaining restaurants continue to operate with the franchisee remaining current with their obligations to us. The Company does not expect to acquire and operate any restaurants as part of the sale of these restaurants and our current expectation is the remaining restaurants will be transferred to one or more other franchise partners.
Added
Franchise advertising and other service expenses decreased $4.1 million, or 2.0% in 2022 primarily due to marketing contributions of $4.0 million from the 53rd week in the prior year. Del Taco Brand As of October 2, 2022, there were 290 company-operated and 301 franchise-operated Del Taco restaurants.
Removed
Financial Highlights for Fiscal 2021 • Systemwide sales for the year increased 13.1% as compared to 2020. The increase is inclusive of the favorable 53rd week in the fourth quarter of 2021, which resulted in incremental systemwide sales of $77.9 million.
Added
For the periods subsequent to the acquisition that are included in our 2022 results, system same-store sales increased 3.7% and total revenues and segment operating profit were $316.9 million and $28.0 million, respectively.
Removed
Excluding the 53rd week, systemwide sales in fiscal 2021 increased 11.0%. • System same-store sales for the year increased 10.3%. • Total revenues for the year increased 12.0%.
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Insurance costs increased $2.0 million in 2022 versus the prior year primarily due to more favorable trends in the prior year related to expected losses associated with workers’ compensation claims. 31 The increase in other is primarily due to the acquisition of Del Taco in the second quarter which resulted in an increase of additional general and administrative costs of $21.4 million in 2022 compared to the prior year.
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The increase is inclusive of the favorable 53rd week in the fourth quarter of 2021, which resulted in incremental revenue of approximately $21.3 million. • Earnings from operations for the year increased 25.7%. • Net earnings and Diluted EPS increased 84.7% and 90.9%, respectively. • Adjusted EBITDA increased in 2021 to $331.4 million from $274.2 million, or 21%.
Added
Gains on the Sale of Company-Operated Restaurants In 2022, gains on the sale of company-operated restaurants included additional proceeds of $1.4 million related to Jack in the Box restaurants sold in prior year, in addition to gains of $2.5 million on the sale of 15 Jack in the Box restaurants during the year.
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The increase is inclusive of the favorable 53rd week in the fourth quarter of 2021, which resulted in incremental Adjusted EBITDA of $5.6 million. • Net units down 1.0% with 37 closures and 14 store openings during the year. 27 RESULTS OF OPERATIONS FOR FISCAL 2021 AND 2020 The following table presents certain income and expense items included in our consolidated statements of earnings as a percentage of total revenues, unless otherwise indicated.
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Since closing the Del Taco acquisition, we have undertaken a process to review our balance sheet for any undervalued assets, and to pursue opportunities for capital sources, including sales of Jack in the Box real estate assets identified in its portfolio, and refranchising, primarily for Del Taco in the near term.
Removed
Percentages may not add due to rounding. 2021 2020 Revenues: Company restaurant sales 33.9 % 34.2 % Franchise rental revenues 30.3 % 31.4 % Franchise royalties and other 17.9 % 17.5 % Franchise contributions for advertising and other services 17.9 % 17.0 % 100.0 % 100.0 % Operating costs and expenses, net: Food and packaging (1) 29.1 % 29.4 % Payroll and employee benefits (1) 30.7 % 30.5 % Occupancy and other (1) 15.9 % 15.5 % Franchise occupancy expenses (2) 62.0 % 65.5 % Franchise support and other costs (3) 6.4 % 7.3 % Franchise advertising and other services expenses (4) 102.8 % 104.2 % Selling, general and administrative expenses 7.2 % 7.9 % Depreciation and amortization 4.1 % 5.2 % Impairment and other gains, net (0.3) % (0.6) % Gains on the sale of company-operated restaurants (0.4) % (0.3) % Earnings from operations 25.4 % 22.6 % Income tax rate (5) 25.2 % 26.8 % ________________________ (1) As a percentage of company restaurant sales.
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The Company intends to use the net proceeds from these transactions to pay down debt, provide additional liquidity and, when market conditions normalize, for other corporate purposes including investments in growth initiatives and potential share repurchases.
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(2) As a percentage of franchise rental revenues. (3) As a percentage of franchise royalties and other. (4) As a percentage of franchise contributions for advertising and other services. (5) As a percentage of earnings from continuing operations and before income taxes.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk — The Company is exposed to interest rate increases under its $150.0 million Variable Funding Notes; however, the Company had no outstanding borrowings under its Variable Funding Notes as of October 3, 2021.
Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk — We are exposed to interest rate risk on borrowings under our $150.0 million Variable Funding Notes and our $75.0 million revolving credit facility. As of October 2, 2022, we had outstanding variable rate borrowings of $50.0 million.
Commodity Price Risk — The Company is also exposed to the impact of commodity and utility price fluctuations. Many of the ingredients we use are commodities or ingredients that are affected by the price of other commodities, weather, seasonality, production, availability, and various other factors outside our control.
Many of the ingredients we use are commodities or ingredients that are affected by the price of other commodities, weather, seasonality, production, availability, and various other factors outside our control.
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A 100 basis point increase in the effective interest rate applied to these borrowings would result in additional interest expense of approximately $0.5 million on an annualized basis. Commodity Price Risk — The Company is also exposed to the impact of commodity and utility price fluctuations.

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