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What changed in JACK IN THE BOX INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of JACK IN THE BOX INC's 2023 and 2024 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 2024 report.

+210 added−211 removedSource: 10-K (2023-11-21) vs 10-K (2022-11-22)

Top changes in JACK IN THE BOX INC's 2024 10-K

210 paragraphs added · 211 removed · 164 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe 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.
Biggest changeThe 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. Royalty rates are typically 5.0% of gross sales with some legacy agreements at higher rates.
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.
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 or convenience stores, catering, and delivery services.
We make available free of charge at this website (under the caption “Investors — SEC Filings”) all of our reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, including our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K, and amendments to those reports.
We make available free of charge at this website (under the caption “Investors — Financials — SEC Filings”) all of our reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, including our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K, and amendments to those reports.
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.
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. 6 We are committed to providing market-competitive, high-quality, and affordable benefits to meet the changing needs of our employees.
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.
New restaurants developed by franchisees are built to brand standards that we have approved. Jack in the Box. Jack in the Box offers multiple restaurant designs that feature different configurations and dining room sizes to provide maximum flexibility when considering properties for development.
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.
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 restaurants.
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.
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, 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.
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 food service distributor for substantially all of our food and supplies.
We allow our guests to customize meals to their tastes and order any product on the menu when they want it, including breakfast at night, or burgers and chicken in the morning. Our trademark of variety and innovation has led to the development of five true dayparts: breakfast, lunch, snack, dinner, and late night.
We allow our guests to customize meals to their tastes and order any product on the menu when they want it, including breakfast at night, or burgers and chicken in the morning. Our trademark of variety and innovation has led to the development of five true day parts: breakfast, lunch, snack, dinner, and late night.
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 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 and Del Taco recognizes and takes care of their employees by offering a wide range of competitive pay, recognition, and benefit programs.
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.
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 certain mental or physical impairments.
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.
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 third largest QSR hamburger chain in each of those major markets.
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.
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 2023, approximately 95% of our restaurant employees were part-time. We have not experienced any significant work stoppages.
Available Information The Company’s corporate website can be found at www.jackintheboxinc.com.
Available Information The Company’s corporate website can be found at www.jackinthebox.com.
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.
The training program is a blended learning approach including e-learning courses, hands-on exercises, and online 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.
(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.
(NASDAQ: JACK), a Delaware corporation (the “Company” or “Jack in the Box”), 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 22 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 16 states.
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.
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. Our objective is to be asset-light as we navigate market forces.
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.
As of October 1, 2023, we operated and franchised 2,186 Jack in the Box quick-service restaurants, primarily in the western and southern United States, including two in Guam. Of the 2,186 restaurants at fiscal year-end, 2,044, or 94%, were franchised. Del Taco.
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.
We also provide an 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.
Additional costs relate primarily to the necessity of obtaining more land, landscaping, storm drainage control, and the cost of more expensive equipment necessary to decrease the amount of effluent emitted into the air, ground, and surface waters.
The cost of complying with these laws increases the cost of operating existing restaurants and developing new restaurants. Additional costs relate primarily to the necessity of obtaining more land, landscaping, storm drainage control, and the cost of more expensive equipment necessary to decrease the amount of effluent emitted into the air, ground, and surface waters.
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.
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 1, 2023, we operated and franchised 592 Del Taco restaurants across 16 states. Of the 592 restaurants at fiscal year-end, 421, or 71%, were franchised.
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.
Del Taco also has the ‘Fresh Flex’ design, which offers multiple build out options, including small footprint drive-thru only sites with no dining rooms, that range in size from 1,200 to 2,400 square feet.
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.
To support order accuracy and speed of service, our Jack in the Box drive-thru restaurants use order confirmation screens. Advertising and Promotion Our brands run a highly coordinated marketing and advertising campaigns to create customer awareness, engage fans, and maximize positive brand associations. We build brand awareness and drive sales through our marketing and advertising programs.
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.
Throughout 2024, we will continue to adjust the rate, pace and sequence of our refranchising efforts to balance the impact to earnings, as we await accelerated new unit openings from incremental development and natural general and administrative reductions. Franchising Program Jack in the Box.
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 menus, 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. Del Taco Refranchising Strategy In fiscal year 2023, we embarked on our refranchising strategy with three main intentions.
All corporate positions, field operations management, and restaurant management positions, including hourly assistant managers and team leaders, are eligible for performance-based cash incentives.
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.
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.
We regularly review the pay of our female and male employees to ensure pay equity for performing equal or substantially similar work.
We may offer development agreements to franchisees (referred to in this context as “Developers”) 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.
Some existing agreements provide for lower royalties for a limited time and may have variable rates. We may offer development agreements to franchisees (referred to in this context as “Developers”) for construction of one or more new restaurants over a defined period of time and in a defined geographic area.
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 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.
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.
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.
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 1, 2023, for our combined brands, we had 9,523 employees, of whom 8,888 were restaurant employees, 542 were corporate management and staff, and 93 were field operations management. Most of our employees are paid on an hourly basis, except manager, field operations management, and certain corporate positions.
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.
Every team member receives training modules focused on helping the team member clearly understand the brand and their role as well as modules focusing on the specifics of how to provide a consistent customer experience, how to complete specific tasks for their assigned position and ensure food safety.
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.
Jack in the Box is in the second year of a five-year contract with their distributor. Under the contract, this distributor will provide distribution services to our Jack in the Box restaurants through July 2027. Our Del Taco brand contracts with the same distributor and provides distribution services to our Del Taco restaurants through December 2023.
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.
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. The goal of this design is to reduce build out costs by around 20%, while also increasing real estate flexibility.
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.
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. We use multiple marketing channels to broadly drive brand awareness, which include, but are not limited to, television, connected TV, radio, digital and social media, outdoor and direct mail.
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.
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. Jack in the Box offers an off-premise-only restaurant, which is designed to meet the continued increasing demand for drive-thru service and digital ordering.
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.
The 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. 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.
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.
Additionally, Del Taco is in the final stages of executing a long-term extension with this same distributor through September of 2028. 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.
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.
To stimulate growth, we have offered an incentive program that provides discounted royalty fees for new franchisees who maintain development compliance and sign a Development Agreement for a minimum of three restaurants to be developed and opened under the development schedule during the timeframe specified under the Development Agreement. Del Taco.
Contracts are entered into and commodity market positions may be secured when we consider them to be advantageous. However, certain commodities remain subject to price fluctuations. Most, if not all essential food and beverage products are available or can be made available upon short notice from alternative qualified suppliers.
We monitor and purchase commodities in order to minimize the impact of fluctuations in price and supply. Contracts are entered into and commodity market positions may be secured when we consider them to be advantageous. However, certain commodities remain subject to price fluctuations.
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.
On March 8, 2022, the Company acquired Del Taco Restaurants, Inc. (“Del Taco”) for cash according to the terms and conditions of the Agreement and Plan of Merger, dated as of December 5, 2021. As a result, Del Taco became a wholly-owned subsidiary of Jack in the Box.
We are also subject to various federal, state, and local laws regulating the discharge of materials into the environment. The cost of complying with these laws increases the cost of operating existing restaurants and developing new restaurants.
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. 7 We are also subject to various federal, state, and local laws regulating the discharge of materials into the environment.
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.
We may utilize local radio, print, internet advertising, and billboards for some of the less developed markets, reaching consumers through our branded mobile app and delivery partnerships.
Removed
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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We refranchised 111 Del Taco restaurants in fiscal year 2023, and added 109 new Del Taco development commitments as a result of the refranchising effort, across both brands.
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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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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.
Removed
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.
Added
To stimulate growth, we have offered an incentive program that provides discounted royalty fees for multi-unit franchisees who agree to develop multiple restaurants pursuant to a Development Agreement in certain markets we have identified for further development and that we deem, in our sole determination, to be undeveloped, underdeveloped, or emerging in terms of the Del Taco brand’s market penetration; it is not available in markets we deem to be mature in terms of the Del Taco brand’s market penetration.
Removed
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.
Added
General managers, shift managers and team leaders are certified through a series of online and on the job training modules.
Removed
Activities to build brand equity, advertise products, and attract customers include, but are not limited to, system-wide and regional campaigns on television, digital and social media, radio, and print media, as well as reaching consumers through our branded mobile app and delivery partnerships.
Added
Most, if not all, essential food and beverage products are available or can be made available upon short notice from alternative qualified suppliers. 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.
Removed
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.
Removed
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.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeDevelopment 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.
Biggest changeDevelopment 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; • competition for quality cost-efficient property that has a favorable zoning classification allowing drive-thru sales; • negative impact of delays due to lengthy supply chain lead times for building components and systems; • negative impact of delays due to longer timelines for permit review and field inspections with the municipal agencies; • negative impact of delays due to longer than usual design, permitting, approval, procurement, and field installation timelines for utility service providers to supply primary services on new restaurant development projects (i.e. electrical, gas, sewer, water, etc.) • 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.
Our income arises from two sources: fees from franchised restaurants (e.g., rent and royalties based on a percentage of sales) and, to a lesser degree, profit from our remaining Company-operated restaurants. Our franchisees manage their businesses independently, and therefore are responsible for the day-to-day operation of their restaurants.
Our income arises from two sources: fees from franchised restaurants (e.g., royalties and rent based on a percentage of sales) and, to a lesser degree, profit from our remaining Company-operated restaurants. Our franchisees manage their businesses independently, and therefore are responsible for the day-to-day operation of their restaurants.
Because the ultimate interests of franchisees and the Company are largely aligned around maximizing restaurant profits, the Company does not believe that any areas of disagreement between the company and franchisees are likely to create material risk to the Company or its shareholders.
Because the ultimate interests of franchisees and the Company are largely aligned around maximizing restaurant profits, the Company does not believe that any areas of disagreement between the Company and its franchisees are likely to create material risk to the Company or its shareholders.
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.
Risks Related to Information and Technology 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.
The difficulties of combining the operations of the companies, include, among others: • diversion of management attention to integration matters; • difficulties in integrating operations and systems, including intellectual property and communications systems, administrative and information technology infrastructure, supplier and vendor arrangements and financial reporting and internal control systems; • challenges in conforming standards, controls, procedures and accounting and other policies, business cultures and compensation structures between the two companies; • differences in control environments and cultures, and the potential identification of material weaknesses while we work to integrate and align policies, principles and practices; • alignment of key performance measurements may result in a greater need to communicate and manage clear expectations while we work to integrate and align policies and practices; • difficulties in integrating employees and attracting and retaining key personnel; • the transition to a combined management team, and the need to address possible differences in corporate cultures and management philosophies; • challenges in retaining existing customers and obtaining new customers; • difficulties in achieving anticipated cost savings, synergies, accretion targets, business opportunities, financing plans and growth prospects from the combination; and • difficulties in managing the expanded operations of a significantly larger and more complex company.
The difficulties of combining the operations of the companies, include, among others: • diversion of management attention to integration matters; • difficulties in integrating operations and systems, including intellectual property and communications systems, administrative and information technology infrastructure, supplier and vendor arrangements and financial reporting and internal control systems; • challenges in conforming standards, controls, procedures and accounting and other policies, business cultures and compensation structures between the two companies; • differences in control environments and cultures, and the potential identification of material weaknesses while we work to integrate and align policies, principles and practices; • alignment of key performance measurements may result in a greater need to communicate and manage clear expectations while we work to integrate and align policies and practices; • difficulties in integrating employees and attracting and retaining key personnel; 13 • the transition to a combined management team, and the need to address possible differences in corporate cultures and management philosophies; • challenges in retaining existing customers and obtaining new customers; • difficulties in achieving anticipated cost savings, synergies, accretion targets, business opportunities, financing plans and growth prospects from the combination; and • difficulties in managing the expanded operations of a significantly larger and more complex 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.
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; 16 • 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.
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.
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 8 talent for key functions and require restaurants to operate on reduced hours.
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.
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.
For example, the Indenture and the Management Agreement contain covenants that, among other things, restrict, subject to certain exceptions, the ability of certain subsidiaries to: • incur or guarantee additional indebtedness; • sell certain assets; • alter the business conducted by our subsidiaries; • create or incur liens on certain assets; or • consolidate, merge, sell or otherwise dispose of all or substantially all of the assets held within the securitization entities.
For example, the Indenture and the Management Agreement contain covenants that, among other things, restrict, subject to certain exceptions, the ability of certain subsidiaries to: • incur or guarantee additional indebtedness; • sell certain assets; • alter the business conducted by our subsidiaries; • create or incur liens on certain assets; or 20 • consolidate, merge, sell or otherwise dispose of all or substantially all of the assets held within the securitization entities.
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. 13 Our business and Del Taco’s business may not be integrated successfully, or such integration may be more difficult, time consuming, or costly than expected.
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 business and Del Taco’s business may not be integrated successfully, or such integration may be more difficult, time consuming, or costly than expected.
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.
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. 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.
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.
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. 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.
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.
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 expectations.
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.
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.
Specifically, nearly 70% of our restaurants are located in the states of California and Texas. Economic conditions, state and local laws, or government regulations affecting those states may therefore more greatly impact our results than would similar occurrences in other locations.
Specifically, nearly 70% of our systemwide restaurants are located in the states of California and Texas. Economic conditions, state and local laws, or government regulations affecting those states may therefore more greatly impact our results than would similar occurrences in other locations.
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.
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. 12 Risks Related to Our Business Model and Strategy We may not achieve our development goals.
Our restaurants currently have an ingredient mix that can be exposed to one or more food allergens, such as eggs, wheat, milk, fish, shellfish, tree nuts, peanuts, and soy.
Our restaurants currently have an ingredient mix that can be exposed to one or more food allergens, such as eggs, wheat, milk, fish, shellfish, tree nuts, peanuts, sesame and soy.
Americans with Disabilities Act and Similar State Laws We are subject to the Americans with Disabilities Act (“ADA”) and similar state laws that give civil rights protections to individuals with disabilities in the context of employment, public accommodations, and other areas.
Americans with Disabilities Act and Similar State Laws We are subject to the Americans with Disabilities Act and similar state laws that give civil rights protections to individuals with disabilities in the context of employment, public accommodations, and other areas.
High gasoline prices, increased healthcare costs, declining home prices, and political unrest, foreign or domestic, may potentially contribute to an economic downturn, as may regional or local events, including natural disasters or local regulation. The impact of these factors may be exacerbated by the geographic profile of our brand.
High gasoline prices, increased healthcare costs, declining home prices, and political unrest, foreign or domestic, may potentially contribute to an economic downturn, as may regional or local events, including natural disasters or local regulation. The impact of these factors may be exacerbated by the geographic profile of our brands.
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.
In addition to shareholders, we have several key stakeholders, including our 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 failure of these systems and processes to operate effectively, including an interruption or degradation in such systems or services, could be harmful and cause delays in customer service, loss of digital sales, reduce efficiency or cause delays in operations. Significant capital investments may be required to remediate any such problems.
The failure of these systems and processes to operate effectively, including an interruption or degradation in such systems or services, or if such systems or services become outdated, could be harmful and cause delays in customer service, loss of digital sales, reduce efficiency or cause delays in operations. Significant capital investments may be required to remediate any such problems.
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.
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 $1.8 billion of outstanding debt as of October 1, 2023.
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.
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.
Any damages, legal fees, or costs associated with litigating or resolving claims under any such law could be material. Food Regulation The Food Safety Modernization Act granted the FDA new authority regarding the safety of the entire food system, including through increased inspections and mandatory food recalls.
Any damages, legal fees, or costs associated with litigating or resolving claims under any such law could be material. Food Regulation The Food Safety Modernization Act granted the U.S. Food and Drug Administration new authority regarding the safety of the entire food system, including through increased inspections and mandatory food recalls.
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.
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.
A material failure or interruption of service, or a breach in the security of our computer systems caused by malware, ransomware or other attack, could cause reduced efficiency in operations, or other business interruptions; could negatively impact delivery of food to restaurants, or financial functions such as vendor payment, employee payroll and scheduling, franchise operations reporting, or our ability to receive customer payments through our POS or other systems, or could result in the loss or misappropriation of customer or employee data.
However, we cannot control or prevent every cybersecurity risk. 18 A material failure or interruption of service, or a breach in the security of our computer systems caused by malware, ransomware or other attack, could cause reduced efficiency in operations, or other business interruptions; could negatively impact delivery of food to restaurants, or financial functions such as vendor payment, employee payroll and scheduling, franchise operations reporting, or our ability to receive customer payments through our POS or other systems, or could result in the loss or misappropriation of customer or employee data.
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.
As of October 1, 2023, approximately 94% of our Jack in the Box restaurants and 71% of Del Taco restaurants were franchised; therefore, our success increasingly relies on the financial success and cooperation of our franchisees, yet we have limited influence over their operations.
In addition, regardless of whether any claims against us are valid or whether we are found to be liable, claims may be expensive to defend, and may divert management’s attention away from our operations and hurt our performance. Further, adverse publicity resulting from claims against us or our franchisees may harm our business or that of our franchisees.
In addition, regardless of whether any claims against us are valid or whether we are found to be liable, claims may be expensive to defend, and may divert management’s attention away from our operations and hurt our performance.
Regulatory bodies may enact new laws or promulgate new regulations that are adverse to our business, or they may view matters or interpret laws and regulations differently than they have in the past or in a manner adverse to our business.
Regulatory bodies may enact new laws or promulgate new regulations that are adverse to our business, or they may view matters or interpret laws and regulations differently than they have in the past or in a manner adverse to our business. These new laws or regulations could negatively impact our financial results or affect restaurant operations.
We and our franchisees also may not be able to pass along price increases to our customers as a result of adverse economic conditions, competitive pricing, or other factors. Therefore, variability of food and other commodity costs could adversely affect our profitability and results of operations.
We and our franchisees also may not be able to pass along price increases to our customers as a result of adverse economic conditions, competitive pricing, or other factors.
Acceptance of this or similar arguments by the courts in California or elsewhere could impact our financial results or affect restaurant operations. Governmental regulation, including in one or more of the following areas, may adversely affect our existing and future operations and results, including by harming our ability to profitably operate our restaurants.
Governmental regulation, including in one or more of the following areas, may adversely affect our existing and future operations and results, including by harming our ability to profitably operate our restaurants.
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.
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. Labor related laws enacted at the federal, state, provincial or local level could increase our and our franchisees’ labor costs and decrease profitability.
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.
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.
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.
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.
We cannot be certain that we will be successful in maintaining adequate internal controls over our financial reporting and financial processes in the future. We may in the future discover areas of our internal controls that need improvement.
Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal controls over financial reporting. We cannot be certain that we will be successful in maintaining adequate internal controls over our financial reporting and financial processes in the future. We may in the future discover areas of our internal controls that need improvement.
Failure to receive scheduled deliveries of high-quality food ingredients and other supplies could harm our operations and reputation.
Therefore, variability of food and other commodity costs could adversely affect our profitability and results of operations. 9 Failure to receive scheduled deliveries of high-quality food ingredients and other supplies could harm our operations and reputation.
Environmental Laws We are subject to federal, state, and local environmental laws and regulations concerning the discharge, storage, handling, release, and disposal of hazardous or toxic substances, as well as local ordinances restricting the types of packaging we can use in our restaurants.
In addition, stringent and varied requirements of local regulators with respect to zoning, land use, and environmental factors could delay or prevent development of new restaurants in particular locations. 15 Environmental Laws We are subject to federal, state, and local environmental laws and regulations concerning the discharge, storage, handling, release, and disposal of hazardous or toxic substances, as well as local ordinances restricting the types of packaging we can use in our restaurants.
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.
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. 14 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.
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.
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. The restaurant industry depends on consumer discretionary spending.
We also have business continuity plans that attempt to anticipate and mitigate failures. However, we cannot control or prevent every cybersecurity risk.
We also have business continuity plans that attempt to anticipate and mitigate failures.
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.
Additionally, the success of certain of our strategic initiatives, including to expand our consumer-facing digital capabilities to connect with customers and drive growth, is highly dependent on our technology systems and digital service providers. 19 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.
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.
We may not be able to adequately protect our intellectual property, which could harm the value of our brands and adversely affect our business.
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.
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.
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.
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. Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud.
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. 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.
We cannot assure you that we will successfully enter into fixed price contracts on a timely basis or on commercially favorable pricing terms. In addition, although 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.
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.
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.
Removed
We cannot assure you that we will successfully enter into fixed price contracts on a timely basis or on commercially favorable pricing terms.
Added
Changes in the availability of and the cost of labor could adversely affect our business.
Removed
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.
Added
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.
Removed
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. If our suppliers or distributors are unable to fulfill their obligations under their contracts, it could harm our operations.
Added
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 Americans with Disabilities Act or similar state laws, could be material.
Removed
For example, a recently enacted law in California purports to codify an employment classification test set forth by the California Supreme Court that established a new standard for determining employee or independent contractor status.
Added
Further, adverse publicity resulting from claims against us or our franchisees may harm our business or that of our franchisees. 17 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.
Removed
Although we would argue that the law does not change the status of franchisees or their employees, it has been suggested that the law could be read to, for example, make franchisors legally liable for the conduct of franchisee employees.
Added
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.
Removed
In addition, stringent and varied requirements of local regulators with respect to zoning, land use, and environmental factors could delay or prevent development of new restaurants in particular locations.
Removed
Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal controls over financial reporting.
Removed
Additionally, the success of certain of our strategic initiatives, including to expand our consumer-facing digital capabilities to connect with customers and drive growth, is highly dependent on our technology systems and digital service providers.

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 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.
Biggest changePROPERTIES The following table sets forth information about our restaurant locations (by segment, by state) for all restaurants in operation as of October 1, 2023: Del Taco Jack in the Box Company- Operated Franchise Total Company- Operated Franchise Total Alabama — 1 1 — — — Arizona — 39 39 5 173 178 California 148 210 358 97 846 943 Colorado — 20 20 — 17 17 Florida 1 6 7 — — — Georgia 12 11 23 — — — Hawaii — — — — 28 28 Idaho — 11 11 — 33 33 Illinois — — — — 11 11 Indiana — — — — 3 3 Kansas — — — 5 — 5 Kentucky — — — 1 — 1 Louisiana — — — — 16 16 Michigan — 10 10 — — — Mississippi — 1 1 — — — Missouri — — — 3 34 37 Nevada — 45 45 — 79 79 New Mexico — 13 13 — 8 8 North Carolina — — — — 18 18 Ohio — 4 4 — 2 2 Oklahoma 10 — 10 8 7 15 Oregon — 9 9 — 41 41 South Carolina — — — — 8 8 Tennessee — — — — 4 4 Texas — — — 22 563 585 Utah — 35 35 1 5 6 Washington — 6 6 — 146 146 Guam — — — — 2 2 171 421 592 142 2,044 2,186 Of the total 592 Del Taco and 2,186 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 — — — 11 178 189 On leased land 1 — 1 49 543 592 Subtotal 1 — 1 60 721 781 Company-leased restaurant buildings on leased land 170 153 323 82 987 1,069 Franchise directly-owned or directly-leased restaurant buildings — 268 268 — 336 336 Total restaurant buildings 171 421 592 142 2,044 2,186 22 Our restaurant leases generally provide for fixed rental payments (with cost-of-living index adjustments) plus real estate taxes, insurance, and other expenses.
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.
We have generally been able to renew our restaurant leases as they expire at then-current market rates. 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 lease our Del Taco office, consisting of approximately 40,000 square feet in Lake Forest, California.
We also lease an office, consisting of approximately 40,000 square feet in Lake Forest, California.
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.
For Jack in the Box, approximately 13% of the leases provide for contingent rental payments between 1% and 10% of the restaurant’s gross sales once certain thresholds are met. For Del Taco, approximately 31% of the leases provide for contingent rental payments between 2% and 12% of the restaurant’s gross sales once certain thresholds are met.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeMullany has more than 20 years of experience leading large companies as well as hyper-growth concepts, both public and private. He served as Chief Financial Officer of Body Firm Aerobics Inc d/b/a VASA Fitness from August 2018 until December 2020. Prior to that, Mr.
Biggest changeMr. Scott has more than 20 years of experience leading large companies, both public and private. Mr. Scott most recently served as the Chief Financial Officer of ShiftKey and prior to that he served as Chief Financial Officer of AMN Healthcare for over 10 years. In his prior roles, Mr.
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.
Ostrom also has held roles at Kenmore, Craftsman & DieHard at Sears Holding Corporation, and Reebok. 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.
He was also a prior franchise operator of multiple Papa John’s Pizza and Qdoba Mexican Grill restaurants from November 2002 to June 2005. Mr. Harris has more than 25 years of leadership experience in the restaurant industry encompassing operations, franchising, brand strategy and restaurant development. Mr. Mullany has been Executive Vice President and Chief Financial Officer since January 2021. Mr.
He was also a prior franchise operator of multiple Papa John’s Pizza and Qdoba Mexican Grill restaurants from November 2002 to June 2005. Mr. Harris has more than 25 years of leadership experience in the restaurant industry encompassing operations, franchising, brand strategy and restaurant development. Mr. Scott was hired as Executive Vice President and Chief Financial Officer in August 2023.
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.
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 1, 2023: Name Age Positions Years with the Company Darin Harris 54 Chief Executive Officer 3 Brian Scott 54 Executive Vice President, Chief Financial Officer — Ryan Ostrom 48 Executive Vice President, Chief Marketing Officer 2 Doug Cook 50 Senior Vice President, Chief Technology Officer 1 Tony Darden 53 Senior Vice President, Chief Operating Officer 2 Dean Gordon 61 Senior Vice President, Chief Supply Chain Officer 14 Dawn Hooper 53 Senior Vice President, Controller 23 Tim Linderman 54 Senior Vice President, Chief Development Officer 2 Steven Piano 58 Senior Vice President, Chief People Officer 2 Sarah Super 47 Senior Vice President, Chief Legal and Risk Officer 10 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.
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. Ms. Hooper has been Senior Vice President, Controller since December 2022, and has been with Jack in the Box since October 2000.
Mullany received a Master of Business Administration from Columbia Business School and holds a Bachelor of Science from Villanova University. Mr. Ostrom has been Executive Vice President and Chief Marketing Officer since February 2021. Mr. Ostrom has over 15 years of marketing and branding experience.
Scott received his bachelor’s degree in accounting from California Polytechnic State University, San Luis Obispo and a Master of Business Administration from the McCombs School of Business at the University of Texas at Austin. 23 Mr. Ostrom has been Executive Vice President and Chief Marketing Officer since February 2021. Mr. Ostrom has over 15 years of marketing and branding experience.
Removed
Mullany served as the Chief Financial Officer of RAVE Restaurant Group, Inc., which owns, operates, franchises, and/or licenses Pie Five Pizza Co. and Pizza Inn restaurants and Pizza Inn Express kiosks domestically and internationally, from May 2014 to July 2018. Previously, from October 2011 to April 2014, Mr.
Added
Scott oversaw accounting, finance, corporate financial planning and analysis, capital funding, investor relations and internal audit functions as well as certain shared services operations. Mr. Scott started his career with KPMG LLP and was also a partner in a mid-sized CPA firm. Mr. Scott currently serves on the private-equity backed boards of Thriveworks and Hueman. Mr.
Removed
Mullany held the Chief Financial Officer role at Restaurants Unlimited, Inc, an American food and beverage firm, and from April 2009 to February 2011, he held the Chief Financial Officer role at Consumer Capital Partners, a private investment, concept development, and strategic advisory firm that franchises and operates Smashburger and Quizno brands, among others. Mr.
Added
She previously held positions of increasing responsibility in accounting since joining the Company in 2000, including Interim CFO, Controller, Assistant Controller, Vice President of Financial Reporting and Senior Manager of Corporate Accounting. Prior to joining the company, she began her career with KPMG LLP where she worked from September 1993 to September 2000. Ms.
Added
Hooper has more than 29 years in experience in accounting and finance. Ms. Hooper received her bachelor’s degree in accounting from University of San Diego from the Knauss School of Business. Mr.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest change(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.
Biggest changeThe following table sets forth information on our share repurchases of our common stock during the fourth quarter of 2023 ( dollars in thousands, except per share data ): (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 $ 114,971 July 10, 2023 - August 6, 2023 — $ — — $ 114,971 August 7, 2023 - September 3, 2023 353,993 $ 80.43 353,993 $ 86,499 September 4, 2023 - October 1, 2023 18,833 $ 81.11 18,833 $ 84,971 Total 372,826 372,826 Stockholders.
The following graph compares the cumulative return to holders of the Company’s common stock at September 30th of each year to the yearly weighted cumulative return of a Peer Group Index and to the Standard & Poor’s (“S&P”) 500 Index for the same period.
The following graph compares the five-year cumulative return to holders of the Company’s common stock at September 30th of each year to the yearly weighted cumulative return of a Peer Group Index and to the Standard & Poor’s (“S&P”) 500 Index for the same period.
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.
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 2023, the Board of Directors declared four cash dividends of $0.44.
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.
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. 25 Performance Graph.
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 below comparison assumes $100 was invested on September 30, 2018 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.
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.
As of November 16, 2023, 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 1, 2023. Stockholders of the Company have approved all plans requiring such approval.
(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.
(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) 587,641 $94.92 2,597,343 ________________________ (1) Includes shares issuable in connection with our outstanding stock options, performance share awards, nonvested stock units, and non-management director deferred stock equivalents.
(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.
(2) The 2023 Peer Group Index includes the following seventeen companies: BJ's Restaurants Inc.; Bloomin’ Brands, Inc.; Brinker Int’l, Inc.; 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.; Restaurant Brands Int’l Inc.; Shake Shack Inc.; Texas Roadhouse, Inc.; Wendy’s Company; and Wingstop Inc.
In 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.
In 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. 2018 2019 2020 2021 2022 2023 Jack in the Box Inc. $100 $111 $98 $122 $95 $91 S&P 500 Index $100 $104 $120 $156 $132 $160 2022 Peer Group (1) $100 $121 $138 $176 $139 $168 2023 Peer Group (2) $100 $120 $137 $175 $138 $167 ________________________ (1) The 2022 Peer Group Index includes the following seventeen companies: BJ's Restaurants Inc.; Carrols Restaurant Group, Inc.; 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.; Wendy’s Company; and Wingstop Inc.
Removed
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 7. Management's Discussion & Analysis

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

54 edited+33 added−28 removed31 unchanged
Biggest changeRESULTS 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.
Biggest changeThe following tables summarize changes in the number and mix of company and franchise restaurants for our two brands: 2023 2022 Jack in the Box: Company Franchise Total Company Franchise Total Beginning of year 146 2,035 2,181 163 2,055 2,218 New 2 18 20 — 17 17 Acquired from franchisees — — — 13 (13) — Refranchised (5) 5 — (15) 15 — Closed (1) (14) (15) (15) (39) (54) End of year 142 2,044 2,186 146 2,035 2,181 % of system 6 % 94 % 100 % 7 % 93 % 100 % 2023 2022 (1) Del Taco: Company Franchise Total Company Franchise Total Beginning of year 290 301 591 296 306 602 New — 14 14 1 2 3 Refranchised (111) 111 — — — — Closed (8) (5) (13) (7) (7) (14) End of year 171 421 592 290 301 591 % of system 29 % 71 % 100 % 49 % 51 % 100 % ________________________ (1) Fiscal 2022 full year restaurant activity figures are shown for information purposes only. 28 The following tables summarize restaurant sales for company-operated, franchised, and systemwide sales for our two brands ( in thousands ): Jack in the Box: 2023 2022 Company-operated restaurant sales $ 413,748 $ 414,225 Franchised restaurant sales (1) 4,005,985 3,696,817 Systemwide sales (1) $ 4,419,733 $ 4,111,042 Del Taco: 2023 2022 (2) Company-operated restaurant sales $ 432,530 $ 484,347 Franchised restaurant sales (1) 541,913 472,682 Systemwide sales (1) $ 974,443 $ 957,029 ________________________ (1) Franchised restaurant sales represent sales at franchised restaurants and are revenues of our franchisees.
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.
In 2022, 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.
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.
Since 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.
Benefit Obligations — Refer to Note 12, Retirement Plans , of the notes to the consolidated financial statements for further information regarding our obligations and the timing of expected payments under our non-qualified defined benefit plan and postretirement healthcare plans. 35 DISCUSSION OF CRITICAL ACCOUNTING ESTIMATES We have identified the following as our most critical accounting estimates, which are those that are most important to the portrayal of the Company’s financial condition and results, and that require management’s most subjective and complex judgments.
Benefit Obligations — Refer to Note 12, Retirement Plans , of the notes to the consolidated financial statements for further information regarding our obligations and the timing of expected payments under our non-qualified defined benefit plan and postretirement healthcare plans. 37 DISCUSSION OF CRITICAL ACCOUNTING ESTIMATES We have identified the following as our most critical accounting estimates, which are those that are most important to the portrayal of the Company’s financial condition and results, and that require management’s most subjective and complex judgments.
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.
Same-store sales, system restaurant sales, franchised restaurant sales and AUVs 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.
System sales include company and franchised restaurant sales. We do not record franchised sales as revenues; however, our royalty revenues, marketing fees and percentage rent revenues are calculated based on a percentage of franchised sales. We believe franchised and system restaurant sales information is useful to investors as they have a direct effect on the Company's profitability.
Systemwide sales include company and franchised restaurant sales. We do not record franchised sales as revenues; however, our royalty revenues, marketing fees and percentage rent revenues are calculated based on a percentage of franchised sales. We believe franchised and systemwide sales information is useful to investors as they have a direct effect on the Company's profitability.
Significant assumptions used to determine fair value under the relief from royalty method include future trends in sales, a royalty rate, an estimated income tax rate, and a discount rate to be applied to the forecast revenue stream. In the fourth quarter of 2022, we performed quantitative tests using the approaches described above.
Significant assumptions used to determine fair value under the relief from royalty method include future trends in sales, a royalty rate, an estimated income tax rate, and a discount rate to be applied to the forecast revenue stream. In the third quarter of 2023, we performed quantitative tests using the approaches described above.
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.
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 $15.9 million versus the prior year.
Goodwill and Indefinite-Lived Intangible Assets — We evaluate goodwill and indefinite-lived intangibles for impairment in the fourth quarter, or more frequently, if indicators of impairment are present. Goodwill is evaluated for impairment by determining whether the fair value of our reporting units exceed their carrying values.
Goodwill and Indefinite-Lived Intangible Assets — We evaluate goodwill and indefinite-lived intangibles for impairment in the third quarter of each year, or more frequently, if indicators of impairment are present. Goodwill is evaluated for impairment by determining whether the fair value of our reporting units exceed their carrying values.
(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.
(the “Company”) operates and franchises Jack in the Box ® quick-service restaurants. As of October 1, 2023, we operated and franchised 2,186 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.
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.
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.
The fair value of our Jack in the Box reporting unit was substantially in excess of its respective carrying value as of the testing date. The fair value of our Del Taco reporting unit and indefinite-lived trademarks were in excess of their carrying values by approximately 8% and 7%, respectively, as of the testing date.
The fair value of our Jack in the Box reporting unit was substantially in excess of its respective carrying value as of the testing date. The fair value of our Del Taco reporting unit and indefinite-lived trademarks were in excess of their carrying values by approximately 9% and 13%, respectively, as of the testing date.
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.
The Company intends to use the net proceeds from these transactions to pay down debt, provide additional liquidity and for other corporate purposes including investments in growth initiatives and potential share repurchases.
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.
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 2, 2022.
As of October 2, 2022, the Master Issuer had restricted cash of $27.2 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-2 Notes and Variable Funding Notes.
As of October 1, 2023, the Master Issuer had restricted cash of $28.3 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-2 Notes and Variable Funding Notes.
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.
Comparisons under this heading refer to the 52-week periods ended October 1, 2023 and October 2, 2022, respectively. A comparison of our results of operations and cash flows for fiscal 2022 compared to fiscal 2021 can be found under Part II, “Item 7.
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.
As of October 1, 2023, the Company had $185.9 million of cash and restricted cash on its consolidated balance sheet and available borrowings of $175.5 million under both the $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.
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.
Based upon current levels of operations and anticipated growth, we expect that cash flows from operations, borrowings available under our Variable Funding Notes and revolving credit 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.
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 summarizes the changes in company-operated same-store sales: 2023 vs. 2022 Transactions 2.5 % Average check (1) 6.3 % Change in same-store sales 8.8 % ________________________ (1) Includes price increases of 8.5% in 2023.
Income Taxes The income tax provisions reflect effective tax rates of 28.5% and 25.2%, in fiscal years 2022 and 2021, respectively.
Income Taxes The income tax provisions reflect effective tax rates of 30.9% and 28.5%, in fiscal years 2023 and 2022, respectively.
NEW ACCOUNTING PRONOUNCEMENTS See Note 1, Nature of Operations and Summary of Significant Accounting Policies , of the notes to the consolidated financial statements for a discussion of the impact of new accounting pronouncements on our consolidated financial statements.
As a result, the amount of ultimate loss may differ from those estimates. 38 NEW ACCOUNTING PRONOUNCEMENTS See Note 1, Nature of Operations and Summary of Significant Accounting Policies , of the notes to the consolidated financial statements for a discussion of the impact of new accounting pronouncements on our consolidated financial statements.
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.
The following table presents the approximate impact of these items on company restaurant sales in 2023 ( in millions ): 2023 vs. 2022 AUV increase $ 32.4 Decrease in the average number of restaurants (32.9) Total change in company restaurant sales $ (0.5) Same-store sales at company-operated restaurants increased 8.8% in 2023 compared to a year ago.
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.
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 2023 compared to fiscal 2022. • 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. • New accounting pronouncements — a discussion of new accounting pronouncements, dates of implementation and the impact on our consolidated financial position or results of operations, if any. • Cautionary statements regarding forward-looking statements — a discussion of the risks and uncertainties that may cause our actual results to differ materially from any forward-looking statements made by management.
In 2022, we completed sales-leaseback transactions involving four restaurant properties with proceeds of $10.8 million and completed the sale of properties to franchisees and other third parties during the year with proceeds of $31.2 million. Financing Activities .
In 2023, we completed one sales-leaseback transaction involving a restaurant property with proceeds of $3.7 million and completed the sale of properties to franchisees and other third parties during the year with proceeds of $25.2 million. Financing Activities .
Contractual Obligations Our cash requirements greater than twelve months from contractual obligations and commitments include: Debt Obligations and Interest Payments — Refer to Note 7, Indebtedness , of the notes to the consolidated financial statements for further information of our obligations and the timing of expected payments.
As of October 1, 2023, we were in compliance with all of our debt covenant requirements and were not subject to any rapid amortization events. 36 Contractual Obligations Our cash requirements greater than twelve months from contractual obligations and commitments include: Debt Obligations and Interest Payments — Refer to Note 7, Indebtedness , of the notes to the consolidated financial statements for further information of our obligations and the timing of expected payments.
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.
Incentive compensation increased by $17.7 million in 2023 primarily due to a $13.7 million increase from higher achievement levels compared to the prior year for the Company’s annual incentive plan, as well as an increase in stock-based compensation of $4.1 million due to a higher number of executive stock awards outstanding compared to the prior year.
The net proceeds from the sale of the 2022 Notes were used to repay in full $570.7 million in aggregate outstanding principal amount of the Company’s Series 2019-1 Class A-2-I Notes, together with the applicable make-whole premium and unpaid interest, and was used to fund a portion of the Company’s acquisition of Del Taco Restaurants, Inc. 34 The 2022 Notes were issued in a privately placed securitization transaction pursuant to which certain of the Company’s revenue-generating assets, consisting principally of franchise-related agreements, real estate assets, and intellectual property and license agreements for the use of intellectual property, are held by the Master Issuer and certain other limited-purpose, bankruptcy remote, wholly owned indirect subsidiaries of the Company that act as Guarantors of the Notes and that have pledged substantially all of their assets, excluding certain real estate assets and subject to certain limitations, to secure the Notes.
The 2022 Notes were issued in a privately placed securitization transaction pursuant to which certain of the Company’s revenue-generating assets, consisting principally of franchise-related agreements, real estate assets, and intellectual property and license agreements for the use of intellectual property, are held by the Master Issuer and certain other limited-purpose, bankruptcy remote, wholly owned indirect subsidiaries of the Company that act as Guarantors of the Notes and that have pledged substantially all of their assets, excluding certain real estate assets and subject to certain limitations, to secure the Notes.
Cash Flows The table below summarizes our cash flows from continuing operations activities for each of the last two fiscal years ( in thousands ): 2022 2021 Total cash provided by (used in): Operating activities $ 162,882 $ 201,122 Investing activities (578,588) (20,929) Financing activities 478,178 (343,545) Net cash flows $ 62,472 $ (163,352) Operating Activities .
Cash Flows The table below summarizes our cash flows for each of the last two fiscal years ( in thousands ): 2023 2022 Total cash provided by (used in): Operating activities $ 215,006 $ 162,882 Investing activities 42,219 (578,588) Financing activities (207,358) 478,178 Net cash flows $ 49,867 $ 62,472 34 Operating Activities .
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%.
Food and packaging costs, as a percentage of company restaurant sales, decreased to 31.6% in 2023 from 32.3% a year ago, primarily due to a 2.4% impact from pricing leverage and 0.6% from favorable menu item mix, partially offset by 2.3% from commodity inflation. Commodity costs increased in the current fiscal year by approximately 8.4%.
Other 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.
Other Operating Expense (Income), Net Other operating expense (income), net is comprised of the following ( in thousands ): 2023 2022 Acquisition, integration and strategic initiatives 9,112 20,081 Costs of closed restaurants and other 4,786 4,290 Restaurant impairment charges 4,569 5,927 Accelerated depreciation 541 1,124 Gains on disposition of property and equipment, net $ (8,171) $ (30,533) Other operating expense (income), net $ 10,837 $ 889 Other operating expense (income), net increased $9.9 million in 2023 versus the prior year primarily due to the lower gains on disposition of property and equipment of $22.4 million in connection with the sale of restaurant properties to franchisees, partially offset by a decrease in Del Taco acquisition and integration costs.
Restricted Cash — In accordance with the terms of the Indenture, certain cash accounts have been established with the Indenture trustee for the benefit of the note holders and are restricted in their use.
Exceeding the leverage ratio of 5.0x does not violate any covenant related to the Class A-2 Notes. Restricted Cash — In accordance with the terms of the Indenture, certain cash accounts have been established with the Indenture trustee for the benefit of the note holders and are restricted in their use.
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.
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 ): 2023 2022 Franchise rental revenues $ 351,283 $ 335,936 Royalties 207,064 188,902 Franchise fees and other 7,226 14,309 Franchise royalties and other 214,290 203,211 Franchise contributions for advertising and other services 215,990 197,816 Total franchise revenues $ 781,563 $ 736,963 Franchise occupancy expenses $ 216,452 $ 211,260 Franchise support and other costs 10,072 15,622 Franchise advertising and other services expenses 227,868 206,192 Total franchise costs $ 454,392 $ 433,074 Franchise costs as a percentage of total franchise revenues 58.1 % 58.8 % Average number of franchise restaurants 2,035 2,031 Franchised restaurant sales $ 4,005,985 $ 3,696,817 Franchise restaurant AUV $ 1,968 $ 1,820 Royalties as a percentage of total franchise restaurant sales (1) 5.2 % 5.1 % ________________________ (1) Excluding the impact of the $7.3 million termination fee in the first quarter of the current year, royalties as a percentage of total franchised restaurant sales would be 5.0% year-to-date for the period ended October 1, 2023.
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.
Capital Expenditures — The composition of capital expenditures in each fiscal year is summarized in the table below ( in thousands ): 2023 2022 Restaurants: Remodel / refresh programs $ 9,159 $ 8,823 New restaurants 8,159 2,887 Restaurant facility expenditures 22,592 21,469 Purchases of assets intended for sale and leaseback 14,960 1,986 Restaurant information technology 13,037 6,350 67,907 41,515 Corporate Services: Information technology 6,752 3,524 Corporate facilities 295 1,436 7,047 4,960 Total capital expenditures $ 74,954 $ 46,475 In 2023, capital expenditures increased by $28.5 million compared to a year ago, primarily due to an increase in the purchases of Jack in the Box restaurant properties intended for sale and leaseback of $13.0 million, an increase in information technology for both restaurant and corporate of $9.9 million, as well as new restaurant openings of $5.3 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.
As of October 1, 2023, there was $85.0 million remaining under share repurchase programs authorized by the Board of Directors which expired on November 20, 2023. 35 Dividends — In fiscal 2023, the Board of Directors declared four quarterly cash dividends of $0.44 per share, totaling $36.2 million. Future dividends are subject to approval by our Board of Directors.
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.
Cash flows used in financing activities increased by $685.5 million compared with a year ago, primarily as a result of a decrease in net borrowings of $621.4 million and a $65.0 million increase in share repurchases compared with a year ago.
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.
The inflation we have experienced is across all categories with the greatest impact seen in potatoes, produce, sauces, and beverages. 29 Payroll and employee benefit costs, as a percentage of company restaurant sales, decreased to 30.8% in 2023 compared with 33.3% a year ago primarily due to a change in the mix of restaurants and sales leverage, partially offset by labor inflation of approximately 5.8% in the current fiscal year.
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 .
As of the date of our last actuarial funding valuation for our qualified pension plan, there was no minimum contribution funding requirement. In 2023 and 2022, we contributed $6.2 million and $6.7 million, respectively, to our pension and postretirement plans. We do not anticipate making any contributions to our qualified defined benefit pension plan in fiscal 2024.
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.
In the prior year, gains on the sale of company-operated restaurants totaled $3.9 million and were related to the refranchising of 15 Jack in the Box restaurants.
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.
Insurance costs increased $3.9 million in 2023 versus the prior year primarily due to more favorable trends in the prior year related to expected losses associated with workers’ compensation claims.
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.
Occupancy and other costs, as a percentage of company restaurant sales, decreased to 16.7% in 2023 from 17.9% a year ago primarily due to sales leverage and a change in the mix of restaurants, partially offset by higher other operating costs including utilities, delivery fees and security.
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.
(“Del Taco”), the nation’s second largest Mexican quick service restaurant chain by number of restaurants and as of October 1, 2023 has 592 restaurants across 16 states. 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.
Refer to Note 9, Other Operating Expense (Income), Net, 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. Gains on the Sale of Company-Operated Restaurants In 2023, gains on the sale of company-operated restaurants totaled $18.0 million and were related to the refranchising of 111 Del Taco restaurants and five Jack in the Box restaurants.
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.
Franchise occupancy expenses, primarily rent, increased $5.2 million, or 2.5% in 2023, primarily due to higher operating lease costs. Franchise support and other costs decreased $5.6 million, or 35.5% in 2023, mainly in connection with lower bad debt expense of $6.6 million as a result of rolling over bad debt expense associated with two specific franchise matters last year.
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.
As of October 1, 2023, we did not have any outstanding borrowings and had available borrowing capacity of $100.5 million under our 2022 Variable Funding Notes, net of letters of credits issued of $49.5 million.
Pension and Postretirement Contributions — Our policy is to fund our pension plans at or above the minimum required by law. As of the date of our last actuarial funding valuation for our qualified pension plan, there was no minimum contribution funding requirement.
For additional information related to Torrez, refer to Note 16, Commitments and Contingencies , of the notes to the consolidated financial statements. Pension and Postretirement Contributions — Our policy is to fund our pension plans at or above the minimum required by law.
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.
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.
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.
Company-Wide Results Depreciation and Amortization Depreciation and amortization increased $6.2 million in 2023 as compared with the prior year, primarily due to the timing of the acquisition of Del Taco in the second quarter of 2022 resulting in an increase of $10.1 million, partially offset by a decrease in Jack in the Box franchise assets depreciation of $3.9 million as these assets become fully depreciated. 32 Selling, General and Administrative (“SG&A”) Expenses The following table presents the amounts for each fiscal period as well as the increase (decrease) in SG&A expenses in 2023 compared with the prior year ( in thousands ): 2023 2022 Advertising $ 38,753 $ 32,557 Incentive compensation (including share-based compensation and related payroll taxes) 31,756 14,014 Cash surrender value of COLI policies, net (5,953) 9,911 Litigation matters 7,001 (995) Insurance 5,991 2,049 Other 95,324 73,287 $ 172,872 $ 130,823 Advertising costs represent company contributions to our marketing funds and are generally determined as a percentage of company-operated restaurant sales.
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.
These increases were partially offset by a decrease in early termination fees of $6.5 million as compared to the prior year. Franchise contributions for advertising and other services increased $18.2 million, or 9.2%, primarily due to higher marketing contributions of $16.8 million in connection with higher franchise same store sales of 7.1%.
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.
The major components of the year-over-year increase in tax rates were the impact of non-deductible goodwill related to the sale of company-operated restaurants, partially offset by non-taxable gains in the current year as opposed to non-deductible losses in the prior year from the market performance of insurance products used to fund certain non-qualified retirement plans.
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.
Franchise advertising and other service expenses increased $13.6 million, or 112.4% in 2023 compared to the prior year, primarily due to the increase in operating weeks, as well as higher marketing contributions of $2.4 million related to the increase in the number of franchise restaurants due to our refranchising strategy.
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.
Advertising costs increased $6.2 million compared to the prior year primarily due to the increase in Del Taco operating weeks from 30 to 52 in the current year.
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.
Interest expense decreased $1.9 million due in part to the prior year $7.7 million loss on early extinguishment of debt not recurring in the current year, partially offset by increased expense of $6.2 million due to higher average debt levels year-over-year. Additionally, interest income increased in the current year primarily due to the higher cash balances throughout the 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.
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) : 2023 2022 Company restaurant sales $ 413,748 $ 414,225 Company restaurant costs: Food and packaging $ 130,904 31.6 % $ 133,815 32.3 % Payroll and employee benefits $ 127,357 30.8 % $ 138,038 33.3 % Occupancy and other $ 69,215 16.7 % $ 74,337 17.9 % Company restaurant sales decreased $0.5 million, or 0.1%, in 2023 as compared with the prior year due to a decrease in the average number of restaurants, partially offset by an increase in traffic and average check.
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.
Franchise occupancy expenses, primarily rent, increased $8.8 million, or 202.4% in 2023 compared to the prior year, primarily due higher franchise rent expense of $5.1 million related to the restaurants refranchised in 2023, as well as the increase in operating weeks.
Removed
We are presenting Adjusted EBITDA because we believe that it provides a meaningful supplement to net earnings of the Company's core business operating results, as well as a comparison to those of other similar companies.
Added
Refranchising of Del Taco In fiscal year 2023, we embarked on our refranchising strategy with three main intentions.
Removed
Management believes that Adjusted EBITDA, when viewed with the Company's results of operations in accordance with GAAP and the accompanying reconciliations within MD&A, provides useful information about operating performance and period-over-period change, and provides additional information that is useful for evaluating the operating performance of the Company's core business without regard to potential distortions.
Added
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. Our objective is to be asset-light as we navigate market forces.
Removed
Additionally, management believes that Adjusted EBITDA permits investors to gain an understanding of the factors and trends affecting our ongoing cash earnings, from which capital investments are made and debt is serviced.
Added
We refranchised 111 Del Taco restaurants in fiscal year 2023, and added 109 new development commitments as a result of the refranchising effort. 27 RESULTS OF OPERATIONS FOR FISCAL 2023 AND 2022 The following tables summarize changes in same-store sales for Jack in the Box and Del Taco company-operated, franchised, and system restaurants: Jack in the Box: 2023 2022 Company 8.8 % 3.7 % Franchise 7.1 % 0.6 % System 7.3 % 0.9 % Del Taco: 2023 2022 (1) Company 2.0 % 2.9 % Franchise 1.4 % 5.0 % System 1.7 % 3.9 % ________________________ (1) Fiscal 2022 full year same store sales figures are shown for information purposes only.
Removed
(“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.
Added
(2) Fiscal 2022 full year systemwide sales figures are shown for information purposes only.
Removed
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.
Added
For fiscal 2024, we expect annual wage inflation to be approximately 10% to 12% compared with fiscal 2023. New regulations, such as AB 1228, which goes into effect April 2024, are expected to increase labor costs, especially considering our concentration of restaurants in California.
Removed
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.
Added
Franchise rental revenues increased $15.3 million, or 4.6%, in 2023 compared to the prior year, primarily due to an increase in percentage rent of $10.6 million, driven by higher sales, and higher minimum rent of $4.8 million.
Removed
On July 18, 2022, the Court approved the franchisee’s plan of reorganization with the same terms we previously agreed to in May 2022.
Added
Franchise royalties and other increased $11.1 million, or 5.5%, mainly in connection with higher franchise restaurant sales driving royalties higher by approximately $10.7 million. Additionally, a $7.3 million termination fee paid by a franchise operator who sold his restaurants to a new franchisee in the current year also contributed to the increase.
Removed
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.
Added
Franchise advertising and other service expenses increased $21.7 million, or 10.5% in 2023 primarily due to higher marketing contributions resulting from an increase in franchise sales. Del Taco Brand Jack in the Box Inc. acquired Del Taco on March 8, 2022.
Removed
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.
Added
Fiscal 2022 results include approximately 30 weeks of operating results compared with 52 weeks in fiscal 2023. 30 Company Restaurant Operations The following table presents company restaurant sales and costs as a percentage of the related sales (dollars in thousands) : 2023 2022 Company restaurant sales $ 432,530 $ 286,845 Company restaurant costs: Food and packaging $ 119,931 27.7 % $ 82,531 28.8 % Payroll and employee benefits $ 147,241 34.0 % $ 94,212 32.8 % Occupancy and other $ 94,057 21.7 % $ 61,465 21.4 % Company restaurant sales increased $145.7 million or 50.8%, in 2023 as compared with the prior year primarily due to 52 weeks of operating results in 2023 versus 30 weeks last year and an increase in average check, partially offset by a decrease in sales in connection with current year refranchising activity and a decline in transactions.
Removed
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.
Added
The following table presents the approximate impact of these items on company restaurant sales ( in millions ): 2023 vs. 2022 Increase in number of operating weeks $ 158.9 AUV increase 0.4 Decrease in the average number of restaurants (13.6) Total change in company restaurant sales $ 145.7 Same-store sales at company-operated restaurants increased 2.0% in 2023 compared to a year ago.
Removed
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.
Added
The following table summarizes the increases (decreases) in company-operated same-store sales: 2023 vs. 2022 Average check (1) 6.0 % Transactions (4.0) % Change in same-store sales 2.0 % ________________________ (1) Includes price increases of approximately 9.6% in 2023.
Removed
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.
Added
Food and packaging costs, as a percentage of company restaurant sales, decreased to 27.7% in 2023 from 28.8% a year ago primarily due to a 2.5% benefit from pricing leverage, partially offset by 1.6% from commodity inflation. Commodity costs inflation was 5.9% in 2023.
Removed
For fiscal 2023, we expect annual wage inflation on a company-wide basis to be up 3% to 6% compared with fiscal 2022.
Added
The largest sources of inflation in the current year were due to tortillas, shells and potatoes, and was partially offset by favorability in chicken, cheese and produce. Payroll and employee benefit costs, as a percentage of company restaurant sales, increased to 34.0% in 2023 compared with 32.8% a year ago primarily due to labor inflation.

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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 changeMany 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.
Biggest changeCommodity 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.
ITEM 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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk — We would be 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 1, 2023, we had no outstanding variable rate borrowings.
Removed
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.

Other JACK 10-K year-over-year comparisons