10-K: Jack in the Box Sells Del Taco, Discontinues Dividend Amid Losses

Jack in the Box Inc. reported a significant net loss for fiscal 2025, driven by impairment charges and declining sales, while announcing the sale of its Del Taco brand for $115 million and discontinuing its dividend.

Summary

• Reported a net loss of $80.7 million for fiscal year 2025, compared to a net loss of $36.7 million in fiscal 2024.
• Total revenues decreased to $1,465.3 million in 2025 from $1,571.3 million in 2024.
• Operating loss was $18.1 million in 2025, a significant decline from operating earnings of $82.5 million in 2024.
• Incurred $209.6 million in impairment charges for goodwill and intangible assets in 2025, primarily related to the Del Taco brand, following $162.6 million in 2024.
• Entered into a Stock Purchase Agreement on October 15, 2025, to sell Del Taco Holdings Inc. for $115 million in cash, subject to adjustments, with closing anticipated in Q1 2026.
• Discontinued its cash dividend, having declared two quarterly dividends of $0.44 per share in fiscal 2025, totaling $16.7 million.
• Jack in the Box system-wide same-store sales decreased by 4.2% in 2025 (company -3.7%, franchise -4.3%).
• Del Taco system-wide same-store sales decreased by 3.7% in 2025 (company -2.4%, franchise -4.1%).
• Cash flows from operating activities increased to $162.4 million in 2025 from $68.8 million in 2024, largely due to favorable working capital changes.
• Repurchased 0.1 million shares of common stock for $5.0 million in fiscal 2025, a substantial decrease from $70.0 million in 2024.
• Total outstanding debt was approximately $1.716 billion as of September 28, 2025.

Sentiment

Score: 3

Explanation: The overall sentiment is negative due to significant net and operating losses, substantial impairment charges on the Del Taco brand, declining same-store sales for both brands, and the discontinuation of dividends. While the Del Taco sale is a strategic move, it comes with an anticipated material loss. The increase in operating cash flow is a positive, but it's largely driven by working capital changes rather than core operational improvements, and the underlying sales trends are concerning. The company is also facing ongoing labor cost pressures and high debt levels.

Positives

• Cash flows from operating activities significantly increased to $162.4 million in fiscal 2025 from $68.8 million in fiscal 2024, driven by favorable working capital changes.
• Successfully overturned a jury verdict in the J&D Restaurant Group legal matter on appeal, affirming the trial court's "take nothing" judgment in favor of the company.
• Maintained compliance with all debt covenant requirements and was not subject to any rapid amortization events as of September 28, 2025.
• Implemented a comprehensive information security program following industry standards like NIST Cybersecurity Framework, with Board Audit Committee oversight.

Negatives

• Reported a net loss of $80.7 million in fiscal 2025, worsening from a $36.7 million net loss in fiscal 2024.
• Experienced an operating loss of $18.1 million in fiscal 2025, a significant deterioration from operating earnings of $82.5 million in fiscal 2024.
• Incurred substantial impairment charges of $209.6 million in 2025, primarily for Del Taco goodwill ($25.3 million) and trademark ($177.9 million), indicating a significant decline in the brand's value.
• Total revenues decreased by $106 million, or 6.7%, from $1,571.3 million in 2024 to $1,465.3 million in 2025.
• Jack in the Box system-wide same-store sales declined by 4.2% in 2025, with company-operated sales down 3.7% and franchised sales down 4.3%.
• Del Taco system-wide same-store sales declined by 3.7% in 2025, with company-operated sales down 2.4% and franchised sales down 4.1%.
• Discontinued its cash dividend, signaling a shift in capital allocation priorities away from shareholder returns.
• Share repurchases significantly decreased to $5.0 million in 2025 from $70.0 million in 2024.
• Payroll and employee benefit costs, as a percentage of company restaurant sales, increased for both Jack in the Box (to 33.8% from 31.5%) and Del Taco (to 38.6% from 36.7%) due to wage inflation, particularly from California's AB 1228.
• Occupancy and other costs, as a percentage of company restaurant sales, increased for both brands due to sales deleverage, higher rent, utilities, and delivery fees.
• Accrued $19.6 million for legal matters, including $10.1 million for estimated prejudgment and post-judgment interest and fees related to the Gessele v. Jack in the Box Inc. lawsuit.
• The leverage ratio for securitized debt instruments was greater than 5.0x, requiring the company to resume scheduled principal payments on its 2022 Notes and Series 2019-1 Notes.

Risks

• Changes in the availability of and the cost of labor could adversely affect the business, including increases triggered by regulatory actions regarding wages, scheduling, and benefits, and increased healthcare and workers' compensation insurance costs.
• Changes in consumer confidence and declines in general economic conditions could negatively impact financial results, as the restaurant industry depends on consumer discretionary spending, with approximately 70% of systemwide restaurants located in California and Texas.
• Increases in food and commodity costs could decrease profit margins or result in a modified menu, due to factors like general economic conditions, inflation, labor shortages, weather, energy costs, global demand, and trade policies.
• Failure to receive scheduled deliveries of high-quality food ingredients and other supplies could harm operations and reputation, due to dependence on frequent deliveries and a limited number of primary distributors.
• Inability to attract, train, and retain top-performing personnel could adversely impact financial results or business, increasing training costs and making it difficult to deliver consistent customer service.
• Unionization activities or labor disputes may disrupt operations and affect profitability, potentially leading to significantly different compensation arrangements or harm to brand and reputation.
• Insurance may not provide adequate levels of coverage against claims, as certain losses may be uninsurable or not economically reasonable to insure.
• Significant competition in the food service industry from national and regional chains, as well as local businesses, some with greater financial resources, could decrease demand for products.
• Changes in demographic trends and in customer tastes and preferences, including dietary concerns or environmental/animal welfare issues, could cause sales and royalties to decline.
• Negative publicity relating to the business or industry, particularly regarding food quality, safety, health issues, or employee relations, could adversely impact reputation and sales, amplified by social media.
• May not have the same resources as competitors for marketing, advertising, and promotion, potentially leading to less effective campaigns or increased costs.
• Adverse impact from severe weather conditions, natural disasters, terrorist acts, or civil unrest, which could result in property damage, injury, and lost restaurant sales, especially given geographic concentration.
• Food safety and food-borne illness concerns may have an adverse effect on the business by reducing demand and increasing costs, despite extensive food safety programs.
• May not achieve development goals due to risks such as inability to identify suitable franchisees/sites, financing limitations, cost overruns, construction delays, and market penetration challenges.
• The highly-franchised business model presents risks, as success relies on the financial success and cooperation of franchisees, over whom there is limited influence.
• Subject to financial and regulatory risks associated with owned and leased properties and real estate development projects, including ongoing lease obligations for closed or underperforming locations.
• Limited number of suppliers for major products and reliance on a distribution network with a limited number of partners, risking supply interruptions if relationships are disrupted.
• The pending sale of Del Taco may not be completed on the anticipated terms or timeline, or at all, and may involve risks and uncertainties that could adversely affect the business, financial condition, and results of operations.
• Increasing regulatory and legal complexity may adversely affect restaurant operations and financial results, including regulations affecting product packaging, marketing, nutritional content, and employment laws.
• May not be able to adequately protect intellectual property, which could harm the value of brands and adversely affect the business.
• Subject to increasing legal complexity and may be subject to claims or lawsuits that are costly to defend and could result in payment of substantial damages or settlement costs.
• Failure to maintain an effective system of internal controls could lead to inaccurate financial results or fraud, reducing market value of common stock.
• Changes in tax laws, interpretations of existing tax law, or adverse determinations by tax authorities could adversely affect income tax expense and income tax payments.
• Risk associated with disagreements with key stakeholders, such as franchisees, which could distract management or have a material adverse effect.
• Actions of activist stockholders could cause substantial costs, divert management's attention and resources, and have an adverse effect on the business.
• Subject to the risk of cybersecurity breaches, intrusions, data loss, or other data security incidents, impacting operations, cash flows, reputation, and leading to potential costs, fines, and litigation.
• Subject to risks associated with increasing dependence on digital commerce platforms and technologies to maintain and grow sales, and cannot predict the impact of these technologies on consumer behavior and financial results.
• The securitized debt instruments issued by certain wholly-owned subsidiaries have restrictive terms, and any failure to comply with such terms could result in default, harming brand value and adversely affecting the business.
• A significant amount of debt outstanding ($1.7 billion) could adversely affect the business, financial condition, and results of operations, and limit available cash flow for working capital, capital expenditures, and acquisitions.

Future Outlook

The company anticipates closing the sale of Del Taco in the first quarter of fiscal 2026 and expects to record a material loss on sale. It does not anticipate making any contributions to its Qualified Plan in fiscal 2026, as the minimum required contribution may be satisfied by available funding balances. The company continually assesses optimal sources and uses of cash and expects cash flows from operations, combined with its securitized financing facility and revolving credit facility, to be sufficient to meet capital expenditure, working capital, and debt service requirements for at least the next twelve months and the foreseeable future.

Management Comments

• Our business strategies are rooted in our foundational principle of building a caring, high-performance culture that serves our franchisees and people well.
• We use this foundational principle as a guide while executing on our four strategic pillars: Strengthen Our Foundation, Build Brand Loyalty, Drive Operations Excellence, and Grow Restaurant Profits.
• We believe that our continued success will depend, in part, on our ability to attract and retain the services of skilled personnel.
• We believe good managers and crew are a key part of our success, and we devote significant resources to recruiting and training our restaurant managers and crew.
• We aim to reduce turnover among our restaurant crews and managers in an effort to retain top performing employees and better realize our investment in training new employees.
• Food safety is a top priority for our company, and we expend significant resources on food safety programs to ensure that our customers are able to enjoy safe and high-quality food products.
• We continually assess the optimal sources and uses of cash for our business. We review our balance sheet for any undervalued assets and pursue opportunities for capital sources, including the sale of our owned properties and potential for refranchising.
• Based upon current levels of operations and anticipated growth, we expect that cash flows from operations, combined with our securitized financing facility 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.

Industry Context

The restaurant industry remains highly competitive and is significantly impacted by macroeconomic conditions, including consumer confidence, discretionary spending, and rising labor and commodity costs. Jack in the Box's strategic decision to divest Del Taco reflects a broader trend among multi-brand restaurant operators to streamline portfolios and focus on core, higher-performing assets amidst challenging market dynamics. The emphasis on digital engagement, drive-thru optimization, and cost savings aligns with industry-wide efforts to adapt to evolving consumer preferences and operational efficiencies. The impact of California's AB 1228 on labor costs highlights the increasing regulatory pressures faced by quick-service restaurants in key markets.

Comparison to Industry Standards

• The company's system-wide same-store sales declines for both Jack in the Box (-4.2%) and Del Taco (-3.7%) in fiscal 2025 are worse than the performance of some peers in the 2025 Peer Group (which includes Domino's Pizza, Inc., Wingstop Inc., and The Wendy's Company), which showed a cumulative return of $128 on a $100 investment, suggesting some peers are managing to grow or maintain value more effectively.
• The significant impairment charges on Del Taco's goodwill and trademark suggest that the brand's performance and future prospects were below internal and market expectations, potentially indicating underperformance relative to its quick-service Mexican-American QSR competitors.
• The increase in payroll and employee benefit costs as a percentage of sales, particularly due to California's AB 1228, indicates that the company is facing similar labor cost pressures as other restaurant chains operating in high-wage states, potentially impacting profitability more severely than competitors in lower-cost regions.
• The discontinuation of dividends and reduced share repurchases, while part of a strategic plan to accelerate cash flow and pay down debt, contrasts with companies that maintain or grow shareholder returns, potentially signaling a more challenging financial position compared to more stable industry leaders.

Management Changes

Corporate Governance

Legal Proceedings

• Gessele v. Jack in the Box Inc.: Litigation initiated in August 2010 by former employees in Oregon alleging federal Fair Labor Standards Act and Oregon wage and hour law violations (unpaid meal breaks, improper payroll deductions). A jury awarded approximately $6.4 million in damages and penalties on October 24, 2022. The company continues to dispute liability and the damage award, with both parties filing appeals. As of September 28, 2025, the company has accrued $19.6 million for all legal matters, including $10.1 million for estimated prejudgment and post-judgment interest and fee awards related to this case.
• J&D Restaurant Group: Complaint filed on April 17, 2019, by a trustee for a bankrupt former franchisee alleging wrongful termination of franchise agreements and unreasonable denial of prospective purchasers. A jury initially found for the plaintiff on breach of implied covenant of good faith and fair dealing, awarding $8.0 million in damages on February 8, 2023. However, on May 9, 2023, the court granted the company's post-trial motion, overturning the jury verdict. The plaintiff appealed, and on October 9, 2025, the appellate court affirmed the trial court's "take nothing" judgment in favor of the company. The company has accrued an amount commensurate with attempts to resolve the claims as of September 28, 2025.

Related Party Transactions

• The filing mentions a Stock Purchase Agreement with Yadav Enterprises, Inc. and Anil Yadav (Buyer Guarantor) for the sale of Del Taco. Anil Yadav is the Buyer Guarantor, implying a relationship with the buyer entity. No other related party transactions are explicitly detailed beyond this sale.

Stakeholder Impact

• Shareholders: Negative impact from significant net losses, declining sales, discontinuation of dividends, and reduced share repurchases. The Del Taco sale, while strategic, is expected to result in a material loss. The Stockholder Rights Plan and Nomination and Cooperation Agreement indicate active engagement with shareholders, including an activist investor, potentially influencing future strategic direction and value.
• Employees: Impacted by wage inflation, particularly in California due to AB 1228, increasing payroll costs. The company emphasizes attracting, training, and retaining top-performing personnel and offers competitive wages and benefits. Potential for work stoppages or unionization activities remains a risk.
• Franchisees: Directly impacted by declining same-store sales for both brands, affecting their revenues and profitability. The company's refranchising efforts and development agreements aim to stimulate growth, but franchisees face risks related to financing, development costs, and adherence to brand standards. The Del Taco sale will remove that brand from the company's direct franchise system.
• Customers: Affected by changes in menu offerings, pricing, and service experience. The company focuses on brand loyalty, product innovation, and digital guest experience. Food safety and quality remain critical for customer trust.
• Creditors: The company has a significant amount of outstanding debt ($1.7 billion) under securitized debt instruments with restrictive covenants. While currently in compliance, the leverage ratio being above 5.0x requires scheduled principal payments, indicating a higher debt burden. The Del Taco sale proceeds could be used for debt paydown, as per the "Accelerate Cash Flow" initiative.
• Suppliers: Dependence on a limited number of primary food service distributors and vulnerability to commodity price fluctuations and supply chain disruptions.

Next Steps

• Close the sale of Del Taco Holdings Inc. to Yadav Enterprises, Inc. in the first quarter of fiscal 2026.
• Finalize the accounting for the Del Taco sale and anticipate recording a material loss on sale.
• Continue to evaluate contributions to the Qualified Plan based on changes in pension assets.
• Continue to monitor compliance with all applicable laws and regulations governing company operations.
• Address any identified safety and security issues reported through risk management or the asset protection helpline.
• Address any ethics issues reported through the ethics hotline.
• Continue to pursue registration of important service marks and trademarks and vigorously oppose any infringement.
• Continue to evaluate the potential implications of the H.R.1 (the One Big Beautiful Bill Act) legislation.
• Continue to assess the optimal sources and uses of cash, including the sale of owned properties and potential for refranchising.
• Management and Board will continue to respond to the proxy contest with an activist stockholder and any related activities.

Key Dates

Recommendation

The company's fiscal 2025 results show a significant deterioration in financial performance, marked by a widening net loss, an operating loss, and substantial impairment charges related to the Del Taco brand. Both Jack in the Box and Del Taco experienced negative same-store sales growth, indicating declining customer demand. The strategic decision to divest Del Taco, while potentially streamlining operations, is expected to result in a material loss. The discontinuation of dividends and reduced share repurchases signal a shift away from direct shareholder returns, likely to prioritize debt reduction given the high leverage. Persistent labor cost inflation, particularly in California, and intense industry competition further pressure profitability. While operating cash flow improved, it was largely due to working capital adjustments rather than fundamental operational strength. The overall financial trajectory and strategic repositioning suggest a challenging period ahead, warranting a 'sell' recommendation for investors seeking growth or stability.

Keywords

Jack in the Box, Del Taco, Restaurant Industry, QSR, Fast Food, SEC Filing, 10-K, Financial Results, Same-Store Sales, Divestiture, Asset Sale, Dividend Discontinuation, Impairment Charges, Goodwill Impairment, Trademark Impairment, Franchising, Labor Costs, Supply Chain, Cybersecurity, Corporate Governance, Debt, Securitization, Restaurant Development, California AB 1228, Yadav Enterprises