What changed in this filing

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Item 1. Business

2023-11-21 compared with 2022-11-22 · 41 added, 44 removed, 144 unchanged (37% of the section changed)

Jack in the Box Inc.

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.

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.

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”).

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.

References to the Company throughout this Annual Report on Form 10-K are made using the first person notations of “we”, “us” and “our.”

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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:

Our trademark of variety and innovation has led to the development of five true day parts:

breakfast, lunch, snack, dinner, and late night.

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.

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.

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.

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Del Taco's menu items taste better because they are made with quality ingredients like freshly grilled chicken and carne asada steak, fresh house-made guacamole, freshly grated cheddar cheese, slow-cooked beans made from scratch, and creamy Queso Blanco.

Founded in 1964, today Del Taco serves more than three million guests each week at its approximately 600 restaurants.

Founded in 1964, today Del Taco serves more than three million guests each week at its restaurants.

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.

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.

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This strategy builds on our historical strengths with our Jack in the Box and Del Taco differentiated, challenger brands.

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

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.

In fiscal year 2023, we embarked on our refranchising strategy with three main intentions.

First, to create a company-wide asset-light model that will benefit from mitigating exposure to macroeconomic pressures;

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and third, to provide a more efficient capital structure.

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.

We plan on executing deals with existing Jack in the Box franchisees early in the upcoming year and will provide updates throughout 2023.

Our objective is to be asset-light as we navigate market forces.

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.

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

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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.

Royalty rates are typically 5.0% of gross sales but may range as high as 15.0% of gross sales.

Royalty rates are typically 5.0% of gross sales with some legacy agreements at higher rates.

Some existing agreements provide for lower royalties for a limited time and may have variable rates.

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Developers may lose their rights to future development if they do not maintain the required opening schedule.

To stimulate growth, we have offered an incentive program that provides discounted royalty fees for new franchisees who maintain development compliance and sign at least three franchise agreements by March 2023.

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.

The franchise agreement provides for an initial franchise fee of $35,000 per restaurant for a 20-year term, and royalty and marketing payments generally set at 5.0% and 4.0%, respectively, of gross sales.

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Developers may lose their rights to future development if they do not maintain the required opening schedule.

To stimulate growth, we have offered an incentive program that provides discounted royalty fees for 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.

Site Selection and Design

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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.

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.

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.

The new prototype was designed to meet the continued increasing demand for drive-thru service and digital ordering.

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.

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 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.

The goal of this design is to reduce build out costs by around 20%, while also increasing real estate flexibility.

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.

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.

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.

With innovative additions like third-party pick-up stations and double drive-thru lanes with a dedicated lane for mobile orders and delivery pickups, the future-focused model optimizes operational efficiencies and caters to modern consumers' expectations.

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Restaurant managers and supervisory personnel train other restaurant employees in accordance with detailed procedures and guidelines using training aids available at each location.

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.

The training program is a blended learning approach including self-paced reading, hands-on exercises, and written knowledge validation tests.

General managers, shift managers and team leaders are certified through a series of online and on the job training modules.

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.

The training program is a blended learning approach including e-learning courses, hands-on exercises, and online knowledge validation tests.

Our “farm-to-fork” food safety program is designed to maintain high standards for the food products and food preparation procedures used by our vendors and in our restaurants.

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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.

At both brands, we contract with a single primary foodservice distributor for substantially all of our food and supplies.

In fiscal 2022, Jack in the Box entered into a new long-term contract with this distributor.

At both brands, we contract with a single primary food service distributor for substantially all of our food and supplies.

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 contract with this distributor provides distribution services to our Del Taco restaurants through September 2023.

Our Del Taco brand contracts with the same distributor and provides distribution services to our Del Taco restaurants through December 2023.

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.

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We also have inventory management systems that enable timely and accurate deliveries of food and packaging to our restaurants.

To support order accuracy and speed of service, our drive-thru restaurants use order confirmation screens.

To support order accuracy and speed of service, our Jack in the Box 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.

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.

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.

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.

At Del Taco, we run a highly coordinated marketing and advertising campaign to create customer awareness, engage fans, and maximize positive brand associations.

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.

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, 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.

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.

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.

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.

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.

Competition and Markets

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Key elements of competition in the industry are the quality and innovation in the food products offered, price and perceived value, quality of service experience (including technological and other innovations), speed of service, personnel, advertising and other marketing efforts, name identification, restaurant location, and image and attractiveness of the facilities.

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.

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.

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 proud to provide our employees, many who begin their career in our restaurants as their first entry-level job, the opportunity to grow and advance as we invest in their education and career development.

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.

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.

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We are also subject to federal immigration laws requiring compliance with work authorization documentation and verification procedures.

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.

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.

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Available Information

The Company’s corporate website can be found at www.jackintheboxinc.com.

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.

The Company’s corporate website can be found at www.jackinthebox.com.

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.

These reports are made available on the website as soon as reasonably practicable after their filing with, or furnishing to, the Securities and Exchange Commission (“SEC”).

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business