Carol A. DiRaimo - Vice President of Investor Relations & Corporate Communications Leonard A.

Comma - Chairman, Chief Executive Officer, President and Chairman of Executive Committee Jerry P. Rebel - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Brian J. Bittner - Oppenheimer & Co.

Inc., Research Division Alexander Slagle - Jefferies LLC, Research Division Joseph T. Buckley - BofA Merrill Lynch, Research Division David E.

Tarantino - Robert W. Baird & Co.

Incorporated, Research Division Jeffrey Andrew Bernstein - Barclays Capital, Research Division John S. Glass - Morgan Stanley, Research Division Robert M.

Derrington - Wunderlich Securities Inc., Research Division Christopher T. O'Cull - KeyBanc Capital Markets Inc., Research Division Nick Setyan - Wedbush Securities Inc., Research Division Keith Siegner - UBS Investment Bank, Research Division Jeffrey D.

Farmer - Wells Fargo Securities, LLC, Research Division

Thank you, Ana, and good morning, everyone. Joining me on the call today are Chairman and CEO, Lenny Comma; and Executive Vice President and CFO, Jerry Rebel.

During this morning's session, we'll review the company's operating results for the first quarter of fiscal 2014, as well as some of the guidance we issued yesterday for the second quarter and full fiscal year. In our comments this morning, per share amounts refer to the diluted earnings per share, and operating earnings per share is defined as diluted EPS from continuing operations on a GAAP basis, excluding restructuring charges and gains from refranchising.

Following today's presentation, we'll take questions from the financial community. Please be advised that during the course of our presentation and our question-and-answer session today, we may make forward-looking statements that reflect management's expectations for the future, which are based on current information.

Actual results may differ materially from these expectations based on risks to the business. The Safe Harbor statement in yesterday's news release and the cautionary statement in the company's most recent Form 10-K are considered a part of this conference call.

Material risk factors, as well as information relating to company operations, are detailed in our most recent 10-K, 10-Q and other public documents filed with the SEC. These documents are available on the Investors section of our website at www.jackinthebox.com.

A few calendar items to note. Jack in the Box management will be presenting at the Bank of America Merrill Lynch Consumer and Retail Conference in New York on March 12 and at the UBS Global Consumer Conference in Boston on March 13.

Our second quarter ends on April 13, and we tentatively plan to announce results on May 14 after the market close, and our conference call is tentatively scheduled to be held at 8:30 a.m. Pacific Time on May 15.

And with that, I'll turn the call over to Lenny.

Thank you, Carol, and good morning. We're very pleased with first quarter results that Jack in the Box reported yesterday.

Operating earnings increased 27% versus the year-ago period, driven by solid same-store sales growth at both Jack in the Box and Qdoba, as well as a 130-basis-point improvement in consolidated margin and lower overhead. Our Jack in the Box company restaurants are growing sales and generating higher AUVs and margins, while our franchise business is generating higher EBITDA from 2 sources: royalties and reps.

And steps we've taken to strengthen our Qdoba operations are contributing to higher sales for that brand. Same-store sales for Jack in the Box company restaurants increased 2.1% for the quarter, driven by growth in both late-night and breakfast dayparts.

Our franchisees are -- also made solid gains during the quarter with a 1.8% increase. We continue to take market share according to NPD data, and same-store sales accelerated sequentially on both a 1- and 2-year basis for both company and franchise restaurants.

Sales trends to date in the second quarter have been solid despite the impact of winter weather in our Texas, Midwest and Southeast markets, which comprise more than 40% of both company and franchise units. The new late-night campaign that we rolled out last September is resonating with the segment of our customers we call the other 9-5ers.

This daypart has a lot of upside potential for us, and on the strength of a comprehensive campaign promoting our new Munchie Meals and an integrated restaurant experience, the late-night daypart was a significant contributor to the same-store sales increase we experienced during the quarter. The increase in sales, along with the benefit of refranchising and lower food and packaging cost, improved our operating margin for the Jack In The Box brand by 200 basis points to over 19%.

Improving speed of service remains a key priority. Since March 2011, we've improved our speed of service by nearly 1 minute, which is building trust with our guests, driving additional visits and contributing to higher guest satisfaction scores.

We believe we have about another minute of opportunity to lower our speed of service. About half of that will come by improving the outlier restaurants to be more in line with our faster-running units, and the other 0.5 minute will really come from process reengineering, which will include some equipment that should both speed up cook times and extend hold times.

We're actively testing new equipment and procedural changes that are yielding positive results. Another major catalyst for growth for Jack in the Box is in the area of menu innovation.

Recent introductions like our Bacon Insider Burger and 2 new Monster Tacos have been very popular with our guests. Along with other initiatives underway, our pipeline of new products and LTOs is stronger than it's been in several years.

Turning to Qdoba, our company-operated restaurants reported a 2% increase in same-store sales in the first quarter, which reflected a significant reduction in discounting and continued growth in catering. Our franchisees experienced even better results, with same-store sales increasing 2.6%.

Despite the weather impact, sales-to-date in the second quarter for Qdoba have been solid. We've talked about the brand strategy and positioning work underway at Qdoba.

We've been working with Boston Consulting Group to better understand how consumers perceive us, and how we can better differentiate ourselves from our competitors so that we can generate higher same-store sales and grow the brand successfully. Through BCG's research, we've identified clear opportunities to reposition the Qdoba brand to generate greater differentiation, to continue to attract and retain our core guests and to appeal to those consumers who have simply not put us in their consideration set.

In the near term, you can expect to see more new product innovation, including limited time offers. A pair of new Quesos we launched systemwide last week are great examples, Queso Diablo and Queso Verde, leveraging one of our most popular and differentiating menu items, our original 3-cheese Queso.

All in all, I'd say the first quarter turned out to be a pretty good start to the fiscal year for both brands. I'm really pleased with the pace and direction of the BCG work that's happening at Qdoba, and we're optimistic about the company's performance for the rest of the year.

And now I'd like to turn the call over to Jerry for a more detailed look at our first quarter results and outlook for the remainder of the year. Jerry?

Thank you, Lenny, and good morning, everyone. First quarter operating EPS from continuing operations of $0.75 was the same as on a GAAP basis, up 27% for the quarter, even with a significantly higher tax rate than last year's first quarter.

Our results for the quarter reflect the transformation of our business model from the Jack in the Box brands and the annuity-like cash flows that franchising produces. With positive same-store sales growth at both brands and the benefit of refranchising, we were able to leverage margins and SG&A.

Consolidated restaurant operating margin of 18.3% of sales for the quarter was 130 basis points higher than last year's first quarter results. Jack in the Box margins improved 200 basis points to 19.1% in Q1.

The improvement was due primarily to sales leverage, the benefit of refranchising and lower food and packaging cost. The decrease in food and packaging cost as a percentage of sales resulted from the benefit of price increases and favorable product mix changes, which partially offset commodity inflation of approximately 1.7%.

When we complete our refranchising strategy, we expect to operate roughly 400 company Jack in the Box restaurants, and the brand to ultimately be between 80% and 85% franchised. This leaves us with roughly 60 Jack in the Box restaurants that we have targeted to refranchise by the end of fiscal 2014, including the remainder of the Southeast.

As we said last quarter, we estimate our pro forma restaurant operating margin for Jack in the Box brand for fiscal 2013, when excluding the restaurants we refranchised during last year, would have been approximately 17.5%, or about 70 basis points higher than our reported Jack in the Box margins of 16.8% last year. Our company average unit volumes would have been about 1.66 million versus 1.6 million as reported.

Looking forward, we estimate that restaurant operating margin for our Jack in the Box brand should increase by more than 100 basis points beginning in 2015, due to the refranchising of the remaining 60 restaurants we plan to sell by the end of 2014. Qdoba margins decreased 30 basis points to 16.4% of sales, due primarily to higher maintenance and repair costs and credit card fees, which were partially offset by the benefit of less discounting and higher catering sales.

In addition, we had minimal pricing in the quarter versus 2% price last June. SG&A expenses for the first quarter decreased by $7.5 million.

The decrease was due primarily to a $5.3 million decrease in pension expense resulting from higher discount rates and the benefit of other actions we have taken, including the sunsetting of the plan and offering participants early retirement and lump-sum payments. In addition, advertising costs decreased by $2.2 million, resulting primarily from the Jack in the Box refranchising strategy, but were also lower at Qdoba due to changes in the timing of advertising activities.

G&A as a percent of systemwide sales improved by 60 basis points to 3.65% for the quarter as compared to our full year guidance of approximately 3.8%. Our full year guidance does not assume any additional mark-to-market adjustments, which reduced G&A by $1.4 million in the quarter.

In the first quarter, we bought back $77 million worth of stock, or nearly 1.6 million shares, at an average price of $48.80 per share. As a result of an additional $200 million authorized by our Board of Directors last week, we now have $259.7 million remaining under stock buyback authorizations expiring in November of 2015.

As far as commodities are concerned, overall, we expect commodity cost for the full year to increase by approximately 1%. Beef has the potential to be the least predictable, but we currently expect these costs to increase approximately 2% to 3% for the full year.

Most of our other major commodities are locked for a good portion of the year, including chicken, cheese and bakery. Now here's our current thinking on guidance for the balance of the year.

We are expecting same-store sales growth at company restaurants in the second quarter of 1.5% to 2.5% for Jack in the Box and 2% to 3% for Qdoba. The only changes made to our full year guidance were, delayed -- we delayed some of our company Qdoba openings to enable us to incorporate the learning from the brand positioning work.

As a result, we have reduced our CapEx guidance for the year. Restaurant operating margin for the full year is now expected to range from approximately 18% to 18.5%, depending on same-store sales and commodity inflation.

The increase from our prior guidance reflects our Q1 results. As a reminder, Q4 margins will be negatively impacted by roughly 60 basis points as a result of the minimum wage increase in California that will go into effect in our fiscal fourth quarter.

Primarily as a result of our higher margin guidance, operating earnings per share are now expected to range from $2.20 to $2.35 in fiscal 2014 compared to operating earnings per share of $1.82 in fiscal 2013. In summary, it was a very good quarter, which highlighted the nearly complete transformation of our Jack in the Box business model.

You'll see in our 10-Q, that we would expect to file later today or tomorrow, that we've adopted a new segment reporting structure to reflect our shared service model, whereby each brand's results of operations are assessed separately and do not include costs related to certain corporate functions which support both brands. That concludes our prepared remarks.

I'd now like to turn the call over to the operator to open it up for questions. Ana?

First question is on Jack in the Box. This late-night momentum that you're talking about from the new menu and marketing, is this something that's been really just kind of sustaining since that launch in late September of the Munchie Meal?

And if you can just outline the opportunity that you see here over the next year, maybe the tangible opportunity here, that would be helpful.

Yes, Brian, this is Lenny. Couple of things.

First off, obviously, when we've got the late-night daypart and the new product associated with it on media, we're going to perform a little higher. But we have seen that the results have been very strong and continue to be so even coming out of the promotional period.

We think what's driving that is we sort of rebranded the late-night experience in the restaurants and added 4 new products to really have it stand out. So if I compare what we're doing in that daypart to other dayparts, we typically have new product news.

It'll go on media, it might be an LTO, it might be a permanent item. But the news is really about the product itself.

I think in late-night, what we try to do is make the news about the entire experience, not just the product. So we've got everything from new packaging and new products to lighting and music that take place during that daypart.

And we really are trying to get those folks that are out and are looking for that 24-hour business that they can frequent during the times of night when they're out having a great time. So we think there's -- that this daypart has a lot of legs for us.

We're going to continue to freshen the new product news over time so that we can have new news associated with that daypart, and we'll also continue to do things through social media to keep it alive. But yes, we think it's an opportunity for us, and we think it's really just capitalizing on something that has been an equity for Jack in the Box for a very long time.

I think what you see is us just sort of owning it and being very deliberate about what our target is. So yes, we do think it's a long-term opportunity.

Okay. And I just have a follow-up.

Kind of a nitpicky question for Jerry here. With the franchise comps at Jack in the Box positive almost 2%, I just would've expected a little bit more leverage out of that rent royalty line.

Can you just explain why the franchise restaurant costs slightly outpace the rent and royalty revenues, and we didn't get more margin expansion in the franchise profit line?

Yes, Brian, some of that is -- if you look at the EBITDA associated with that, the EBITDA was better than the EBIT. It's just when we sell the restaurants to franchisees, the depreciation associated with that building or with those properties is then charged into the franchise cost line.

So that's probably what you're seeing, but the cash flow in those was extraordinarily good. And then if you look at the earnings flow-through over last year, the franchise side of the Jack in the Box business drove about an equal amount of the Jack in the Box company portion of the business in terms of earnings growth over the prior year.

Wanted to ask you if you had any additional color that you can provide on initial perspective you're getting from the Qdoba brand review, if there's anything you haven't touched on yet that you want to highlight. And really, a question on the nontraditional opportunities for Qdoba, just a talk [ph] of success in the airport locations, where you stand in terms of ramping up this nontraditional part of your business, and are there any opportunities to start participating in a more meaningful way, even on a company-owned basis?

So Alex, this is Lenny. I'll take the question on the brand work and then Jerry will speak to you a little bit about nontraditional.

We obviously haven't shared very much about the work with BCG, and don't intend to sort of get ahead of ourselves. We want to prove this thing out.

We want to do some concept testing starting later this year and make sure that what we're seeing through the research will actually translate into sales. Very optimistic about it.

A few things I can share is that as we've analyzed the business, we realized a couple of key points. One, we won't be able to differentiate the business based on food quality.

Food quality is something that, through the analysis, we can see very clearly is simply a consumer requirement. And it is so of all fast casual players.

And so what you can look forward to is that the space that we will try to occupy and the differentiation that we will try to create will be based on other cues that the brand can send off. And there's just too much to be tested and analyzed for us to sort of narrow that down at this point, but what I can tell you is, through the research, we have clearly identified a couple of white spaces that we think will deliver for us, and that's what we intend to test later in this year.

Yes, Alex, on the non-trad piece, as I think you know, we announced last year that we had signed a multiunit deal with both Sodexo and ARAMARK, 2 of the largest players in the space. And one of the reasons that we believe that we have a significant opportunity on this is our -- is the franchise side of that Qdoba business model.

Many times you -- a company-operated business will not be able to do that unless you fall into one of the disadvantaged business groups. And so many of the franchisees that we have offer that, as well as those associated with Sodexo and ARAMARK.

So we're very comfortable with that. We're very happy about that.

We think it's a big opportunity for us. We have begun to ramp up the support and the infrastructure here in our shared service model, as we also anticipate some opportunities to develop Jack in the Box restaurants in the non-trad space also.

So we're pretty bullish on that, and again we are going to staff that appropriately to drive that part of the business.

Lenny, could you talk about the speed of service? You mentioned about half of the minute goal being sort of achievable if you can move to best practices, but the other half requiring some changes in the processes.

Is there likely to be capital spending around the second half? And maybe for the first half, what are the key metrics that the outliers have to change to get your speed of service more in line with the better-performing restaurants?

Sure, Joe. Let's talk about the first half, which is really moving the outlier performance up.

I think to simplify what's going on there, you have essentially 2 things. One, a lack of proficiency, where the employees in those units are not proficient at multiple workstations.

So when you're looking at low levels of labor deployment where someone needs to slide from one position to back up another, they just don't have the proficiency to be able to do that and keep pace. So that's really a training opportunity.

It's a proficiency opportunity that we have there. The second part of it is more the uglier place, which is they're simply not following procedures.

And in those facilities, it's really going in and reinforcing what's to be gained by following procedures. Typically what you find, and this exists both in company and franchise restaurants so it's not to any one particular channel, is that when there's a lack of belief in the systems, potentially, there's a fear that they're going to have too much product waste and drive up food cost, and they try to short-change the system.

And when they do that, it actually slows down the speed of service. So what we need to go in there is really just show and prove to folks that following the systems is the way to go.

So it's basic blocking and tackling. I wish it was -- I wish I could say something a little more magical than that, but it really is basic blocking and tackling in those facilities.

When we look at the equipment package, to answer the capital question first, yes, there's likely to be some capital investment, but we're not looking at real big dollars there. I mean, Jerry can speak a little bit to some ranges of what we might expect in the future.

And we're not expecting a one-size-fits-all, and so we do need to do some work to figure out in the various configurations what equipment's actually going to be necessary. For example, we have very large kitchens and we have some very small kitchens.

Well, in the small ones, time and motion is really not an issue and -- but yet capacity is. So certain pieces of equipment are going to help us in those facilities and others won't contribute, so it doesn't make sense to invest there.

But when you go to the bigger facilities, we're going to have to look at time and motion and process just as much as we're looking at equipment. Because you can have a fast piece of equipment but if there's too much time and motion, you never get the return on the investment of that equipment.

So a little more work to do there, but we are actively testing a good handful of facilities, and every kitchen style is being tested. So we'll be able to determine through the testing what's appropriate.

But so far, so good. We're seeing some improvement and we feel optimistic about being able to get the 30 seconds out of that investment.

Joe, just the size that for the equipment packages, you put all of the components in, it's about $20,000 a restaurant, so about -- if we did all of the components for each Jack in the Box that we intend to continue to operate, it's about $8 million. I don't know that we'll have them all in this year but even if we did, that would well fit within the range of CapEx we've already guided to.

So I wouldn't expect any large amount of incremental spend there. But I would also say that some of the equipment will also help to reduce waste with respect to the holding equipment, and others will actually have some lower utility costs.

So not just all incremental expense to the overall restaurant space.

A couple of questions on unit growth and the outlook, perhaps after 2014. First on Qdoba.

It's understandable that you'd want to slow down the pace of openings to take advantage of some of the brand work you're doing. I'm wondering, how does that play out as you look to 2015?

And it sounds like you're going to be testing a lot of the elements later this fiscal year. Does this suggest that maybe you'd take a slower pace of growth for next year as a result of wanting to incorporate what you learn from the test?

Hey, David, let me lead off with just sort of philosophically how we're going to approach that, and then if there's some detailed numbers well, Jerry, can share some of those with you. But I think that the Qdoba brand and the investment that we make there needs to be done in a smart way.

And so this year you've seen us sort of taper back some of the development because we think there's some things to be learned, and we'd like to incorporate those learnings into as many of the new facilities as we can. I'd also offer up that if we learned some things through the concept testing that give us a compelling reason to adjust growth next year, we will do that, and that growth being adjusted up or down, if that's the smart thing to do.

But ultimately, as we sort of crack the code on Qdoba, what you can expect at that point is for us to more aggressively look to grow that brand. So I would say this year and into next year, we're going to sort of remain flexible.

We have some targets out there, but we're going to remain flexible based on what we learn. And then we look to have some pretty firm targets beyond that, based on what we think we can do with that brand.

Great. And maybe a question on Jack in the Box in the same vein.

In terms of some of the longer-term targets, you've given 1% to 2% system growth for Jack in the Box, and I know the franchisees have been absorbing all the acquisitions as of late. But just curious to know whether you think you can get to that kind of 1% to 2% growth rate as you look out to 2015 and beyond, and kind of where the franchise base stands in terms of unit development.

Yes, I think -- first off, yes, I do think we can get to 1% to 2% growth in 2015 time frame. Our franchisees want to grow, and when we speak to them about sort of value creation, they are actively looking at their -- the management of their capital and how they can buy down their debt and get to a place where they can start to invest in growing their units.

And so -- and some of them are at that place, and the ones that are, are looking to grow, whether it be in their existing markets or even looking at a new market. So we would anticipate being able to make the growth rate of 1% to 2%.

We anticipate franchisees continuing to be interested in growing, and Jack in the Box company operations will continue to grow as well. So I think it's actually a pretty conservative number, but it makes sense for us to be in that place with all the focus that we need to put into Qdoba at this time.

So I think more to come on the Jack in the Box brand, but at this point, we think it's probably the right place to be.

Two questions. The first one, a little bit of a follow-up on that last one.

But Lenny, with the refranchising, it seems like near completion now at 80% to 85%. Just wondering, now that you're at the helm, do you believe that to be the appropriate mix?

I'm just curious whether the refranchising came with the promise of remodels our new unit growth, because as the follow-on to that last question, I seems like it's a modest 10 new units in fiscal '14. It would seem like there's a fairly big opportunity when you're at kind of 2,300 units today, to grow even faster than that 1% to 2%.

Perhaps you were alluding to that when you said more to come, but just whether you view yourself as a regional brand or whether there is more potential to go national? And then I have a follow-up.

Yes, I think, first off, yes, there's potential to go national, and that's our goal. I think in order to go national, we're going to have to be in a place where the sales-to-investment ratio is very attractive to our franchisees, our existing franchisees as well as new franchisees that will come into the system.

And I think that we need to do a little work in that area to make the franchise opportunity a little more attractive. So if we want to exceed 1% to 2%, I think we just need to own that the investment needs to be more attractive to exceed those targets.

But the folks who are part of the system, they know how to make money with this, and so that's where most of our growth projections would come from. In our core markets, we have the #2 market share and so we're a very strong brand in those markets, and I would say that it makes us strong, yes, as a regional player.

But if you look at what we're able to do in those markets versus other brands that don't have market penetration, it gives us a huge opportunity for growth, both in same-store sales and then in new markets. So I think ultimately, if you look at what we'll try to achieve, it's going to be: One, let's get this model a little more attractive so that we can push the growth beyond 1% to 2%.

But until we are able to do that, let's not make any promises, and let's stay in the range of what we think our existing franchisees and company operations can generate.

And it's 80% to 85%. Do you think we now stick at that level for the next few years or do you think there's opportunity to push it further?

I think that's the right place to be. If you look at what we generate through our company operations, I think that's a healthy sort of value creation for our overall entity for us to hold onto those high AUV, high-restaurant operating margin location.

It also keeps us as a franchisor with some skin in the game. So when we're asking our franchisees to do things, whether it be investment business or invest in a new promotion, I think the franchisees feel that we understand what that means to the business because we're running some of the operations ourselves.

So I see it as the right place to be. We'll keep open minds.

But at this point, we can't see a compelling reason to go beyond that.

Got it. And then just a follow-up and more of a long-term guidance as a company perspective.

It looks like we're now doing 20% to 30% earnings growth in fiscal '14, which is obviously impressive, especially what your lapping, with now both brands seemingly in kind of a better place. I'm just wondering how that translates into kind of a sustainable longer-term earnings growth rate now that, I guess, that the refranchising is pretty much done, the Qdoba store closures are complete.

When we look out into the out-years, what is Jack's long-term, more normalized growth rate relative to the outsized growth we've seen over the past couple of years, including this year?

Yes. So, Jeff, we gave some key assumptions on 2015 to 2017 outlook on our November call.

And I think we're still in that place where we are comfortable with that 2% to 3% Jack in the Box same-store sales growth, we're in that 3% to 4% Qdoba same-store sales growth and the unit growth that we talked about and that Lenny talked about. We also talked about a restaurant operating margin in the 18.5% to 19.5% range.

You get a lot of flow-through on incremental sales growth at that time. So I think one of the key catalysts, for us, is going to be keeping the same-store sales growth in a healthy place, such as we've described, but also keeping the franchisee same-store sales growth in that same place.

Because we're getting a significant flow-through on that for every incremental sales dollar. It can be as high as 14.5%, as we've talked about before.

Also, we like the opportunities that we have, that we talked a little bit about earlier, with respect to the nontraditional growth that we have for -- particularly for the Qdoba brand, but we also think it's an opportunity for the Jack in the Box brand. And then, also, we do intend to utilize the significant amount of free cash flow that we're generating to continue to buy back stock, which will also add to EPS growth.

And as you know, we just announced another $200 million worth of share authorization, which would indicate now that we have just under $260 million to repurchase by the end of November 2015. And assuming that we do not let that expire unused, and we haven't had that happen yet, that would indicate an acceleration of the rate of repurchases.

Which would also, quite honestly, indicate a comfort level with some additional leverage also within the mix as a result of the company's performance and the increasing level of EBITDA that we continue to generate.

Got it. But that doesn't necessarily translate -- you don't have like a bottom line, like you said...

No, we have not -- we haven't communicated what the EPS growth rate is. But you are -- clearly the math works as what you said, and that's on top of the 39% last year and a 41% the year before that.

So we're pretty happy with where the trends are. And we think that if we continue along the lines that we've described in terms of those components there, as you model it in, I'm sure you're going to see a quite healthy ongoing operating EPS growth.

First, Lenny, I just want to see -- to go back to the comp question, the outperformance this quarter versus the peers. And if you can disaggregate it a little bit.

When you look at your business, is it mostly late-night that's driving it and the rest of the business is in line, or is the entire business outperforming? And maybe you could also maybe parse it geographically?

Are you more favorable weather markets or more favorable geographic markets, economically, that might have helped you versus the peer group?

Sure, John. I'll give you a little color there.

First off, if you look at really what contributed to sales growth in the first quarter, it was both late-night and breakfast dayparts, and both about half. So without breaking it down further than that, essentially it was breakfast daypart promotional activity and new product news.

And it was the late-night new products driving sales up in those dayparts. So those were the major contributors.

And really, if we sort of look at what we can expect from that as compared to the other dayparts, it's not that we don't believe we can grow the other dayparts, but we believe we need to put a stake in the ground on the equity we had in late-night. And so that's why you saw our focus there.

But you will see throughout the year a focus on the other dayparts. Arguably, the Bacon Insider, more of a lunch and dinner item, as well as the new Monster Tacos.

So I hope that gives you a little bit of color as to what was driving sales in Q1. You have it -- and then regional.

Sorry, you asked about regional. Just a little breakdown.

California was definitely stronger than the other markets because it was not impacted by weather. And so, if we use California as sort of the bellwether state, I would say that, certainly, we felt the impact outside of that marketplace, but I think we were simply able to overcome it.

And compared to other brands not having a presence in the Northeast, we are a little less impacted by weather than some of the other brands. When I look at the beat -- the NPD beat, although we're happy to see those types of numbers, we're certainly not gloating about our performance versus the other competitors, because we do realize that some of that is, for some of them, a more significant weather impact.

That's helpful. And then just a follow-up, Jerry, you talked about store margin target over time of 18.5% to 19.5%.

Given you raised your current year forecast, and then there's presumably still that 100 basis points on top of that once you refranchise the Southeast, you're likely to be at the top end of that range even as we begin next fiscal year. So can you just talk about what limiters there are on getting beyond that?

For example, is the better minimum wage a significant concern for you, given where you are? And what percentage of your stores do you have right now that are well above 19.5%?

Maybe to give us a sense of how achievable it is.

Sure. Let me answer the first part -- the first question first.

So the 18.5% to 19.5% assumes, going forward, that there'll be the impact of the Affordable Care Act, which we estimate to be about $10,000 per company unit at Jack in the Box, I think $6,000 for company unit at Qdoba. That's in that 18.5% to 19.5% number.

As well as the California minimum wage increase is also in there, which goes to $9 on July 1 and then up to $10 pretty quickly thereafter. And so, again, those are in the sauce, so to speak.

So -- and what we have indicated that the federal minimum wage would be about 20 basis points consolidated this year within the numbers, and in the fourth quarter, it's 80 basis points for the Jack in the Box brand.

[indiscernible]

Yes, if I said federal, I misspoke, I meant California. Thank you, Carol, for correcting that.

So the California -- let me just restate that, California's about 20 basis points this year, it's only 1 quarter, and that's on the Jack In The Box level margins. That is -- again, that is in the numbers for 2015 and forward.

We do have -- in our 2015 numbers, we've assumed that we will take some price to offset the California minimum wage, which we estimate to be about 1.4%, this is just for California restaurants, and a little less than 1% if we take it across the entire system. So -- and then on the second part of the question, can you restate that one again?

Just trying to understand, holding aside any additional minimum wage increases, what portion of your system currently has store margins above 20%, if that's kind of a...

Yes, we haven't disclosed that. But if you look at the current quarter, which came in at 19.1%, and we've already said that the refranchising of the additional restaurants would add [ph] at least 100%, that would tell you that a good portion of those 400 unit sales margins that are north of 20% right there, although we haven't disclosed what that exact number is.

A couple of items. One, first as a clarification, Jerry, if you could help us.

Could you give us the menu pricing traffic mix for each of the company -- the brands, company restaurants? Did you give that to us already?

No, we did not. Price for Jack in the Box in Q1 was 2.6%.

And -- but I would tell you most of that is rollover, there was very little new price in the quarter. And Qdoba had virtually no price.

It was less than 0.5 point of price for Qdoba.

Got you. Lenny, specifically, as you look at the Qdoba brand, and it's pretty exciting to see some of the momentum that brand's already rekindled, x a lot of the learnings that you're going to ultimately incorporate.

I'm just trying to understand how that influences the company's view on franchising? Obviously, with Jack in the Box, you're mostly franchised.

The returns are so good at Qdoba, you're somewhat more reluctant there. I'm just wondering, is there an opportunity that you could find much more franchise development with Qdoba as you continue to make refinements to it and add that as an increased development opportunity?

Bob, I think you're right. I think as we sort out the Qdoba brand and how we're going to generate greater sales, both from existing and new units, what you're going to find is a natural attraction to the investment from new franchisees, as well as existing.

It's a strong model already for the investment that franchisees are asked to make. So you can imagine that if sales ramp up, we would change our projections on franchise growth as we saw those interested parties come to bear.

So we -- it's not something that's in our forecast. I don't think we should get aggressive on that number until we're in a place where we can say we've got interested parties and we've got a model that's generating that type of activity.

Then you would see it.

My second question, if I may. Jerry, real quick.

On the segment reporting, the new format or style that you'll have within the Q. We love information, don't get me wrong.

I'm just curious, what's the genesis for the change from what it had been?

Yes, I think in the past, Bob, we had some what we now call shared services functions in both the Jack in the Box and the Qdoba brands. And as of the end of 2013, the kind of triggering activity there was we've essentially completed this shared service activity, where we just have one accounting group, one IT group, one supply chain function, one legal department, and one HR people organization.

So we've consolidated all of that. And so we no longer have that burdening one brand or the other.

So we felt the best way to really show what the performance of the brands were was just to show the brand-level performance with only that direct G&A. And that direct G&A would include things like POC [ph] provisions.

It would also include training and the like, that is specific to that particular brand. Other functions are going to be reported out as a shared service number.

I guess you couldn't see it. If you find it helpful, Bob, we think it is -- that was the intention.

But we're open to feedback.

It's actually Chris O'Cull. Lenny, just as a follow-up to Bob's question about the Qdoba franchise activity, if the returns are good, then why aren't we seeing more franchise openings?

I think one of the things we're seeing is that the changes that were made early on with Qdoba, with Tim Casey joining the team, it really puts the franchisees in a place where they want to participate in sort of this next-generation or evolution of that brand. And very much like us, they're not going to rush to make those investments until they know what their future -- what the future holds.

And we actually applaud that. So they are actively involved in the work that's happening with BCG, the strategy work that's happening.

And in large part, they are champions of what that work can do for us going forward. So we would anticipate that as we come through the concept testing that will start later this year and into 2015, as our franchisees see that end game, here is what the model is, here is what we're executing operationally, we would anticipate that they would start to grow a little faster.

And that's sort of what we're hearing from them as well through to process. So I would say, just as you've seen us take a more conservative approach to growth until we figure out this next evolution, you're seeing the same thing from them.

Fair. And then you mentioned that Qdoba would be using an LTO strategy going forward.

Do you expect to use TV advertising to support that effort?

We don't at this time think that TV is the right move for Qdoba, but we will look to social media and out-of-home as a way to bring the Qdoba brand to life. Radio is also already used for the Qdoba brand.

Okay. And then, Jerry, I believe there were some additional labor costs at Qdoba from employees at closed stores that will be transferred to new stores.

How much is that impacting the Qdoba margin right now?

So, impact -- the way I would look at the Qdoba margin is -- by the way, Qdoba, it was 30 basis points lower than last year, generally in line with our expectations. But I will tell you, part of what we did through the shared service integration was we also integrated shared services for facility maintenance.

And so we had some startup and some integration-related charges that impacted the Qdoba P&L in the quarter by about 50 basis points. So their numbers would've been 16.9% without that work, and we do not expect that to be a headwind going forward.

We actually expect maintenance and repair costs to come down as a result of that integration. So just that's just a little nuance in the numbers.

But if you look at Qdoba from the first half of the quarter to the second half of the quarter, the margin rates improved rather significantly. So the labor issues that we talked about with the overhang from some of the closed locations, that has been fixed.

There is a new incentive program with respect to restaurant-level management at Qdoba, which we expect will also improve performance, will also drive down costs. That is also in place now.

And so I don't think we have any more issues that's related to the Qdoba labor going forward. I think all those issues have been addressed appropriately.

Just to -- trying to understand sort of the Qdoba book top lines for the margin trend, sort of at least in the near to medium term. The comp of 2%, obviously the geographic mix on the Qdoba side is much more in such a way that weather must have been a much greater impact than, say, Jack in the Box.

And with the sort of competitors with similar type of unit mix, we've seen the impact being something north of 200 basis points. I mean -- and that February wasn't much better in terms of weather.

So can we -- and kind of thinking about what the trends are, the underlying trends are, I mean, is that type of magnitude the right way to think about the sort of underlying trend at Qdoba?

Nick, just a general comment there. I think yes, Qdoba is more impacted by weather.

So we haven't broken that down and shared the specifics on the weather impact to each brand. But in general, yes, Qdoba is more impacted by weather.

And if you look at what we project into quarter 2, quarter 2 would have less of a weather impact. And you do see an acceleration in sales at Qdoba, which I think is reflective of what you described.

Yes. Also, Nick, just to add just a little bit to that, there were a few markets that were significantly impacted by the weather, which contributed to the 2% number that Qdoba saw.

And I think the guidance that we have out there now with 2% to 3% is reflective of us anticipating there will be less weather. We had many markets that were well above that company-operated comp number of 2%.

Got it. And also just kind of going forward, how do we think about pricing?

I think previously you said you'll take something in the neighborhood of 2% or so pricing in the second half. How is your thinking around that going forward now?

Nick, we didn't give any forward-looking pricing guidance for either brand.

Yes, what we said, Nick, is that we were going to be cautious on price and look at where competitive pricing was, but also look at food at-home inflation, because that's a key indicator also.

Got it. Okay.

So we may actually see no pricing on Qdoba throughout the year?

No. What we said, we'll be cautious on price.

I don't think you'll see us take large price increases, but we'll be cautious.

Got it. Okay.

And then just kind of thinking about the strategic changes or the strategic review around Qdoba, we've put unit growth on somewhat of a hiatus. Is the appetite around franchisee acquisitions on the Qdoba side still there?

Or has that kind of -- in conjunction with the unit growth, kind of CapEx been put on hiatus for a little bit?

No. Nick, I would tell you that we have appetite to reacquire some franchised markets.

Franchisees don't have any appetite to sell. So I think that gets back to, I think, the question that Chris O'Cull asked earlier, that Lenny responded to, with the franchisees are actively part of the brand positioning, brand strategy work.

And I think they're fairly excited about what the prospects look like. And we don't have anybody who's willing to sell back to us at this point.

Lenny, a question for you. Considering or -- I should say, against the backdrop of the whole menu being offered all day and the strength in late-night and breakfast, I'm just curious.

Is there a mix impact from strength in those dayparts, or is it not really meaningful to the mix as those dayparts grow?

Keith, I'm not sure I understand exactly what you're asking. Maybe give me a little more color.

I guess what I was -- very often what you find is breakfast is a lower-check daypart. So if you grow your same-store sales more aggressively at breakfast, it could have a slight negative mix impact.

What I was wondering was, do you have any -- is there an impact on mix from having a majority of your same-store sales growth come from breakfast and late-night?

Oh, okay. Yes.

So what I would tell you is a little bit about our approach. So first off, mix was positive this quarter, and the way that we try to set up the promotional activity is really to balance that out.

We don't want to be in a place where we're either promoting very high-ticket, high-food-cost items. And we don't -- we also don't want to be in a place where we're doing all value, single-value items, so we try to set it up in a way to balance the impact that mix will have to the business.

So if you look at average check this year, it was $6.75. In Q1 last year, $6.52.

And I think most of that was due to what we set up promotionally and how it would impact mix.

Okay. Very helpful.

And then lastly, Jerry, just one quick one for you. In terms of the SG&A cadence for the first quarter compared to the full year guidance, it sounds like the $1.4 million of benefit you saw in the first quarter, that really was the only piece of difference.

Is that right?

$1.4 million in the mark-to-market?

Yes.

Yes, I think that's correct. But that was the same number as it was last year.

So if you look at it on a year-to-year comparison, it had no impact. Although we do expect to have about, call it, $0.02 or so -- $0.02, $0.025 worth of Qdoba advertising, that was timing related, that we would expect to reverse back out into quarter 2, 3 and 4, and that is all considered in our guidance for the year.

But on the G&A piece, at 3.65% for the quarter versus the guidance of 3.8%, is there anything else influencing that dynamic?

No. That's it.

I know we're running late here, so I'll try to be quick. First off, just a follow-up question.

Really just looking for your thoughts on the sustainability of the breakfast and late-night same-store sales momentum. There's been a lot of conversation about that this morning.

But as we look forward, any reason to think that, that momentum won't continue?

Yes, Jeff, it's Lenny. No, we think it will continue.

I'll speak a little bit about where I think we differ from our competitors. Breakfast, first off, we are cracking fresh eggs at the majority of our locations.

And so we do think that the way we prepare the breakfast is a differentiator for us, and we think that our consumers recognize it. And we have seen that even with competitive intrusion in the breakfast daypart, breakfast continues to be one of our faster growing dayparts.

So I think we have some equity there, and by continuing to bring new news to that market, we've been able to sort of fend off the competitive tax on breakfast. So we're pretty optimistic it's a place that, if we continue to invest, then it will pay off.

And then with late-night, I would say that we were probably the first brand to establish equity in the late-night marketplace. I think that we, for a very long time, did not have late-night as part of our messaging.

We were not reinforcing to the consumer that late-night was an equity for us and should continue to be. And I think by doing the entire late-night campaign and bringing those new products there, it was a way for us to say to the consumer, "Do you know who we are at late-night?

You've always known who we are at late-night and we're doubling down on it. So feel free to come to the original late-night facility, which is Jack in the Box."

And I think that will continue to pay off for us in the same way that breakfast has, whereas we continue to refresh late-night with new news, new product news, we should be able to hold onto that equity and grow it.

All right. Very helpful.

And then very last question. So the natural gas prices are starting to -- the natural gas price question is starting to come in a lot more frequently.

And I don't think you guys touched on this, but it looks like 2009 was the last time we really saw a spike in natural gas prices. So based on what you know about, historically, how your consumers have behaved, is there any segment of your customer base that you're worried about maybe sort of retrenching a little bit as these natural gas prices jump and their discretionary spending might get pinched a little bit?

Have you seen that influence demand historically, when we see things like this happen?

You're right. I think the last time was in the late 2000 time frame.

But we didn't see a correlation of rising natural gas prices with change in consumer demand. Also, remembering what natural gas is really used for and where most of our restaurants are, they're not in heavy weather-impacted, high natural-gas-usage states anyway.

So with 70% being between Texas and California, we're not going to have quite the impact there.

Yes, very true. But I guess the question came up -- just one for you in the sense that with the high Texas exposure, Texas has seen something like 10 to 12 degrees cooler temperatures this January and February than they did 1 year ago and how that might influence that heating bill.

So...

Yes, I think it's more -- I think what impacts that more, Jeff, is that in Texas, when it gets like that, and having lived there for a couple of years, when it's that cold, nobody goes anywhere. And so I think it probably -- the weather itself probably impacted the sales more so than the natural gas costs and the heating bills.

Thanks, everyone, for joining us today. For those of you that are going to be in the West Coast next week for another analyst meeting, I encourage you to check out the late-night up in the Huntington Beach area, and you can kind of see what we're doing with that daypart.