Variable Interest Entities

6 Months Ended

Apr. 14, 2013

Variable Interest Entities ("VIEs") [Abstract]

Variable Interest Entities

VARIABLE INTEREST ENTITIES

In January 2011, we formed Jack in the Box Franchise Finance, LLC (“FFE”) for the purpose of operating a franchisee lending program to assist Jack in the Box franchisees in re-imaging their restaurants. We are the sole equity investor in FFE. The lending program was comprised of a $20.0 million commitment from the Company in the form of a capital note and an $80.0 million Senior Secured Revolving Securitization Facility entered into with a third party. The lending period and the revolving period expired in June 2012 and the third party facility repayments were completed in August 2012.

We have determined that FFE is a VIE. We considered a variety of factors in identifying the primary beneficiary of FFE including, but not limited to, who holds the power to direct matters that most significantly impact FFE’s economic performance (such as determining the underwriting standards and credit management policies), as well as what party has the obligation to absorb the losses of FFE. Based on these considerations, we have determined that the Company is the primary beneficiary and have reflected the entity in the accompanying condensed consolidated financial statements.

FFE’s assets consolidated by the Company represent assets that can be used only to settle obligations of the consolidated VIE. Likewise, FFE’s liabilities consolidated by the Company do not represent additional claims on the Company’s general assets; rather they represent claims against the specific assets of FFE. The impacts of FFE’s results were not material to the Company’s condensed consolidated statements of earnings or cash flows. The FFE’s balance sheet consisted of the following at the end of each period (in thousands):

	April 14, 2013			September 30, 2012
Cash	$	—		$	444
Other current assets (1)	2,323			2,536
Other assets, net (1)	9,835			11,051
Total assets	$	12,158		$	14,031
Current liabilities	$	89		$	14
Other long-term liabilities (2)	12,338			14,428
Retained earnings	(269		)	(411		)
Total liabilities and stockholders’ equity	$	12,158		$	14,031

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(1) Consists primarily of amounts due from franchisees.

(2) Consists primarily of the capital note contributions from Jack in the Box which are eliminated in consolidation.

The Company’s maximum exposure to loss is equal to its outstanding contributions as of April 14, 2013. This amount represents estimated losses that would be incurred should all franchisees default on their loans without any consideration of recovery. To offset the credit risk associated with the Company’s variable interest in FFE, the Company holds a security interest in the assets of FFE subordinate and junior to all other obligations of FFE.