UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
---------

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

FOR THE FISCAL YEAR ENDED OCTOBER 1, 1995
---------------SEPTEMBER 29, 1996
------------------

COMMISSION FILE NUMBER 1-9390
-------------

FOODMAKER, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

Delaware 95-2698708
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(State of incorporation) (IRS Employer Identification No.)

9330 Balboa Avenue, San Diego, CA 92123
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(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (619) 571-2121
--------------

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which registered
- ---------------------------- -----------------------------------------
Common Stock, $.01 par value New York Stock Exchange, Inc.

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]

The aggregate market value of the voting stock held by non-affiliates of
the registrant as of December 15, 1995,13, 1996, computed by reference to the closing
price reported in the New York Stock Exchange-Composite Transactions, was
approximately $188.5$305.4 million.

Number of shares of common stock, $.01 par value, outstanding as of the
close of business December 15, 199513, 1996 - 38,802,195.38,846,945.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement to be filed with the Securities and Exchange
Commission in connection with the 19961997 Annual Meeting of Stockholders are
incorporated by reference into Part III hereof.

ITEM 1. BUSINESS
--------

The Company

Foodmaker, Inc. (the "Company") owns, operates and franchises Jack In The Box,JACK IN THE
BOX restaurants, a fast food chain of
fast-food restaurants located principally in the western and
southwestern United States. Until January 27, 1994, Foodmakerthe Company also owned
Chi-Chi's, Inc. ("Chi-Chi's"), a chain of full-service, casual Mexican
restaurants located primarily in the midwestern and midatlantic United
States.

On January 27, 1994, Foodmaker, Apollo FRI Partners, L.P. ("Apollo") and
Green Equity Investors, L.P., whose general partner is Leonard Green &
Partners, acquired Restaurant Enterprises Group, Inc. ("REGI"), a company
that owns, operatesowned, operated and franchisesfranchised various restaurant chains including El
Torito, Carrows and Coco's. Contemporaneously, REGI changed its name to
Family Restaurants, Inc. ("FRI"). Concurrently, Foodmaker contributed its
entire Chi-Chi's Mexican restaurant chain to FRI in exchange for a 39% equity
interest in FRI and other consideration. Pursuant to an agreement dated
November 20, 1995, Foodmaker transferred its entire equity interest in FRI to
Apollo and entered into a mutual release with the other principal
shareholders of FRI. SeeFRI, as described in Note 32 to the consolidated financial
statements.

Jack In The BoxJACK IN THE BOX

Overview. Jack In The BoxJACK IN THE BOX is a leading regional competitor in the
fast-food segment of the restaurant industry with system-wide sales of
$1,123.7$1,229.0 million in 1995.1996. At October 1, 1995,September 29, 1996, there were 1,252 Jack In The
Box1,270
JACK IN THE BOX restaurants, of which 863879 were operated by the Company
and 389391 were franchised.

Jack In The Box's menuMenu and marketing strategies for JACK IN THE BOX restaurants are
principally directed toward adult fast-food customers. Jack In The BoxJACK IN THE BOX
offers a wider menu selection than most of its major fast-food competitors. The Jack In The Box
menu featurescompetitors
featuring foods (such as the Teriyaki Bowl, Philly Cheesesteak and
Stuffed Jalapenos) that are not commonly offered in the fast-food hamburger
segment (such as the Chicken Teriyaki Bowl and Philly Cheesesteak), as well
as more traditional fast-food products (such as hamburgers and french fries).
The Company believes that a key competitive strength of Jack In The BoxJACK IN THE BOX is
its ability to introduce new and distinctive, high quality menu items that
appeal to the changing preferences of its adult guests.

Jack In The BoxJACK IN THE BOX was the first restaurant chain to develop and expand the
concept of drive-thru only restaurants, and drive-thru sales presentlycurrently
account for approximately 63%more than 60% of the sales byat Company-operated restaurants. Over
the years the Jack In The BoxJACK IN THE BOX concept has evolved to include more inside
seating in its restaurants. Most restaurants are located in freestanding
buildings with seating capacities ranging from 24 to 85 persons and are open
approximately 18 hours a day.

History. The first Jack In The BoxJACK IN THE BOX restaurant, which offered only
drive-thru service, commenced operationopened in 1950, and Jack in the BoxJACK IN THE BOX chain expanded its
operations through the late 1960's to approximately 300 restaurants in 1968. After Ralston Purina
Company purchased the Company in 1968, Jack In The BoxJACK IN THE BOX underwent a major
expansion program in an effort to penetrate the eastern and midwestern
markets, and the business grew to over 1,000 units by 1979. In 1979, Foodmakerthe
Company's management decided to concentrate its efforts and resources in the
western and southwestern markets, which it believed offered the greatest
growth and profit potential. Accordingly, Foodmakerthe Company sold 232 restaurants
in the eastern and midwestern markets and redeployed the sale proceeds in its
western and southwestern markets where the Company had a well-established
market position and better growth prospects.

Operating Strategy. Jack In The Box'sJACK IN THE BOX's operating strategy is to:
(i) increase per store average sales through the continued introduction and promotion of
distinctive, high quality menu items; (ii) focus on improving sales and
margins through increased emphasis on guest service, food quality and safety,
and cost management; and (iii) increase the number of Jack In The BoxJACK IN THE BOX
restaurants through the addition of Company-operated and franchise-developed
restaurants in Jack In The Box'sJACK IN THE BOX's existing and contiguous markets.

-1-

MenuFood Strategy. Jack In The Box'sJACK IN THE BOX's menu strategy is to provide new anda variety
of distinctive, high quality products that represent good value and appeal to
the changing preferences of its targeted customers. The Jack In The BoxJACK IN THE BOX menu
features a wide variety of approximately 45-50 fast-food menu items,
including hamburgers, specialty sandwiches, salads, Mexican foods, finger
foods, breakfast foods, side items and desserts.

Management believes that Jack In The Box'sJACK IN THE BOX's ability to develop new and
unique menu items has been a traditional strength of the Company. Jack In
The BoxJACK IN
THE BOX continuously develops and tests new items for its menu and seeks to
improve existing products. New products are developed in a corporate test
kitchen and then introduced in one or more of Foodmaker's research and
developmenttest restaurants
to ensure that product consistency, high quality standards and profitability
can be maintained and to determine preliminary guest response. Operating and
training systems have been developed that enable Jack In The BoxJACK IN THE BOX to respond
quickly to implement menu changes while achieving quality and profit
objectives. If a new item proves successful at the research and development
level, it is generally tested in selected markets, both with and without
marketing support, and if it proves successful, the item is incorporated into
the standard Jack In The BoxJACK IN THE BOX menu. Jack In The BoxJACK IN THE BOX has introduced over 50 new
products in the last ten years. In addition, Jack In The BoxJACK IN THE BOX pursues menu
strategies involving product reintroductions, limited-time only product
promotions and products which target the value segment of the business.

Hamburgers represent the largest segment of the fast-food industry;
accordingly, Jack In The BoxJACK IN THE BOX continues to maintainoffer hamburgers as principal menu
items. Hamburgers, including the Grilled Sourdough Burger and the Ultimate
Cheeseburger, accounted for approximately 27%one quarter of Jack In The Box'sJACK IN THE BOX's
fiscal 19951996 sales. However, management believes that, as a result of its
diverse menu, Jack In The BoxJACK IN THE BOX restaurants are less dependent on the commercial
success of one or a few products than other fast-food chains, and that Jack In The Box'sJACK
IN THE BOX's menu appeals to a broad range of food preferences.

ExpansionGrowth Strategy. The Company's goal is to achieve targeted levels of
media pressure in Jack In The Box'sJACK IN THE BOX's existing major markets through the
construction of new restaurants primarily by the Company and, to a lesser
extent, by franchisees. The Company's current plan calls for opening
approximately 250-300400-450 new Company-operated restaurants (approximately one-third
of the new development is expected to be on non-traditional sites) as well as
approximately 3020 new domestic and 100 new international franchise-operated restaurants over the next five years.
The Company has historically acquired and will continue to consider the
acquisition of existing restaurants for conversion to Jack In The BoxJACK IN THE BOX
restaurants.

The following table sets forth the growth in Company-operated and
franchised Jack In The BoxJACK IN THE BOX restaurants since the beginning of fiscal year 1991:1992:

Fiscal year
--------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Company-operated restaurants:
OpenedOpened. . . . . . . . . . . 26 21 54 10 51
46
Sold to franchisees . . . . - (6) (4) (11) (18)
(7)
ClosedClosed. . . . . . . . . . . (15) (4) (9) (4) (4)
(7)
Acquired from franchisees . 5 42 44 10 7
2
Ending number . . . . . . . 879 863 810 725 720
684
Franchised restaurants:
OpenedOpened. . . . . . . . . . . 10 12 8 13 21
16
Acquired from Company . . . -- 6 4 11 18
7
ClosedClosed. . . . . . . . . . . (3) (1) (1) (2) (2)
(1)
Sold to Company . . . . . . (5) (42) (44) (10) (7)
(2)
Ending number . . . . . . . 391 389 414 447 435
405
System totaltotal. . . . . . . . . 1,270 1,252 1,224 1,172 1,155 1,089

-2-

The following table summarizes the locations of the Jack In The BoxJACK IN THE BOX
restaurants at October 1, 1995:September 29, 1996:

Number of restaurants Number of restaurants
---------------------- ---------------------------------------------
Company- Company-
operated Franchised operated Franchised
-------- ---------- -------- ----------
Arizona. . . . . 61. 62 45 Oregon.Texas. . . . . 1 2270 56
California . . . 364. 377 241 TexasWashington . . . . . 260 58
Colorado . . . . 10 -- Washington. . . 6769 --
Hawaii . . . . . 30 4 Egypt . 27 2 China. . . . . -- 2
Idaho. . . . . . . 8 -- Egypt. . . . . -- 1
Idaho.Illinois . . . . . 6 -- Hong Kong . . . -- 7
Illinois . . . . 12 -- Indonesia .Hong Kong. . . -- 17
Louisiana. . . . . -- 5 Mexico.Indonesia. . . -- 1
Missouri . . . . . 38 3 Mexico . . . . -- 10
Missouri . . . . 38 3 Philippines . . -- 2
Nevada . . . . . . 14 8 --- ---9 Philippines. . -- 4
New Mexico . . . . -- 2 TotalSingapore. . . -- 1
Oregon . . . . 863 389
=== ===. . 2 2 Total. . . . 879 391

Site selections for all new Jack In The BoxJACK IN THE BOX restaurants are made after an
extensive review of demographic data and other information relating to
population density, restaurant visibility and access, available parking,
surrounding businesses and opportunities for market concentration. Jack In
The BoxJACK IN
THE BOX restaurants to be developed by franchisees are built to Company
specifications on sites which have been approved by the Company.

The Company currently uses twoseveral configurations in building new Jack In
The BoxJACK IN
THE BOX restaurants. The largerlargest restaurants seat an average of 8290 customers and
require a larger customer base to justify the required investment of
approximately $1.3 million, including land. The smallersmallest restaurants seat
an
average of 4844 customers, require significantly less land, on which to build, and cost approximately $150,000$35,000 less to build
and equip than do the larger restaurants. Management believes that the
flexibility affordedprovided by the alternative configurations enables the Company to
match the restaurant configuration with specific demographic, economic and
geographic characteristics of the site.

Restaurant Operations. Significant resources are devoted to ensuringensure that
all Jack In The BoxJACK IN THE BOX restaurants offer the highest quality of food and
service. Emphasis is placed on ensuring that quality ingredients are
delivered to the restaurants, restaurant food production systems are
continuously developed and improved, and all employees are dedicated to
delivering consistently high quality food and service. Through its network
of corporate quality assurance, facilities services and restaurant management
personnel, including regional vice presidents, area managers and restaurant
managers, the Company standardizes specifications for the preparation and
service of its food, the maintenance and repair of its premises and the
appearance and conduct of its employees. Operating specifications and
procedures are documented in a series of manuals and video presentations.
Most restaurants, including franchised units, receive approximately 6 full
inspections and 26 limited reviews each year.

Each Jack In The BoxJACK IN THE BOX restaurant is operated by a Company-employed manager
or franchisee who normally receives a minimum of eight weeks of management
training. Foodmaker's management training program involves a combination of
classroom instruction and on-the-job training in specially designated
training restaurants. Restaurant managers and supervisory personnel train
other restaurant employees in accordance with detailed procedures and
guidelines prescribed by Foodmaker, utilizing training aids including video
equipment available at each location. The restaurant managers are directly
responsible for the operation of the restaurants, including product quality,
food handling safety, cleanliness, service, inventory, cash control and the
appearance and conduct of employees.

Restaurant managers are supervised by approximately 45 area managers, each
of whom is responsible for an average of 20 restaurants. The area managers are
under the supervision of 7 regional vice presidents who are supervised in
turn by a vice president of operations. Under the Company's performance
system, area and restaurant managers are eligible for quarterly bonuses based
on a percentage of location operating profit and regional vice presidents are
eligible for bonuses based on profit improvement and achievement of
established goals and objectives.

-3-

Jack In The Box'sJACK IN THE BOX's quality assurance program is designed to maintain high
standards for the food and materials and food preparation procedures used by
Company-operated and franchised restaurants. Foodmaker maintains product
specifications and approves sources for obtaining such products. The Company
has developed a comprehensive, restaurant-based Hazard Analysis & Critical
Control Points ("HACCP") system for managing food safety and quality. HACCP
combines employee training, meat testing by suppliers, and detailed attention
to product quality at every stage of the food preparation cycle. Products
are randomly inspected by the Company's quality assurance personnel as they
arrive at Foodmaker's distribution centers to ensure that they conform to
Foodmaker standards. These items then are distributed to individual
restaurants through a network of Company-operated delivery trucks.

Foodmaker provides purchasing, warehouse and distribution services for
both Company-operated and some franchised restaurants. While substantially all
Jack In The Boxprior years,
most JACK IN THE BOX franchisees have utilized these services to the full extent
available even though they arewere permitted to purchase products directly
from any approved source. The Company believes that the service, pricesRecently, JACK IN THE BOX franchisees formed a
purchasing cooperative and terms offeredcontracted with another supplier for distribution
services. This transition occurred during fiscal 1996 and has resulted in a
substantial decline in sales to its Jack In The Box franchisees through its distribution centers are
competitive with that which franchisees could obtain from third parties.franchisees. Some products, primarily dairy
and bakery items, are delivered to both Company-operated and franchised
restaurants directly by approved suppliers.

Recently, Jack In The Box franchisees informed the Company that they have
formed a purchasing cooperative and contracted with another supplier for
distribution services. This transition is expected to occur during fiscal
1996.

The primary commodities purchased by Jack In The BoxJACK IN THE BOX restaurants are beef,
poultry seafood and produce. The Company monitors the current and future
prices and availability of the primary commodities purchased by the Company
in order to minimize the impact of fluctuations in price and availability,
and makes advance purchases of commodities when considered to be
advantageous. However, the Company remains subject to price fluctuations in
certain commodities, particularly produce.commodities. All essential food and beverage products are available,
or upon short notice can be made available, from alternative qualified
suppliers.

Foodmaker maintains centralized financial and accounting controls for
Company-operated Jack In The BoxJACK IN THE BOX restaurants which it believes are important
in analyzing profit margins. Jack In The BoxJACK IN THE BOX utilizes a specially designed
computerized reporting and cash register system on a Company-wide basis which
provides point-of-sale transaction data and accumulation of pertinent
marketing information. Sales data are collected and analyzed on a weekly
basis by management.

Franchising Program. Jack In The Box'sJACK IN THE BOX's franchising strategy is directed
toward franchisee development of restaurants in existing non-primary markets
and selected primary markets. The Company offers development agreements for
construction of one or more new restaurants over a defined period of time and
in a defined geographic area. Multi-unit developers are required to prepay
one-half of the franchise fees for restaurants to be opened in the future and
may forfeit such fees and lose their rights to future developments if they do
not maintain the required schedule of openings. At present, most franchisees
operate no more than three restaurants. The Company's strategy is to grant
franchises in a smaller metropolitan area to a single franchisee in order to
achieve operating efficiencies and to grant franchises for a larger
metropolitan area to several franchisees in order to maximize development of
the area.

Another important aspect of the franchising program has been the conversion of
existing Company-operated restaurants to franchised restaurants. Although
franchised units totaled 389391 of Jack In The Box's
1,252JACK IN THE BOX's 1,270 restaurants at
October 1, 1995,September 29, 1996, the ratio of franchised to Company-operated restaurants
is still low relative to Jack In The Box'sJACK IN THE BOX's major competitors. The Company
views its non-franchised Jack In The BoxJACK IN THE BOX units as a potential resource which,
on a selected basis, can be sold to a franchisee to generate additional
immediate cash flow and earnings while still maintaining future cash flows
and earnings through franchise rents and royalties.

Jack In The Box'sJACK IN THE BOX's current franchise agreement provides for an initial
franchise fee of $25,000$50,000 (formerly $25,000) per restaurant. This agreement
generally provides for royalties of 5% (formerly 4%) of gross sales, (royalties are 2% of gross sales for the
first two years of the agreement and 4% of gross sales thereafter under
agreements with respect to certain franchisee-built restaurants), a marketing
fee of 5% of gross sales (although some existing agreements provide for a 4%
rate) and a 20-year term. In connection with the conversion of a
Company-operated restaurant, the restaurant equipment and the
-4-

right to do
business at that location, known as "Trading Area Rights," are sold to the
franchisee, in most cases for cash. The aggregate price is equal
to the negotiated fair market value of the restaurant as a going concern,
which depends on
-4-

various factors including the history of the facility, its location and its cash
flow potential. In addition, the land and building are leased or subleased to
the franchisee at a negotiated rent, generally equal to the greater of a
minimum base rent or a percentage of gross sales (typically 8 1/2%). The
franchisee is required to pay property taxes, insurance and maintenance costs.

Advertising and Promotion. Jack In The BoxJACK IN THE BOX engages in substantial
marketing programs and activities. Advertising costs are paid from a fund
created by the marketing fees paid by franchisees together with an amount
contributed each year by the Company equal to at least 5% of the gross sales of
its Company-operated restaurants. Jack In The Box'sJACK IN THE BOX's use of advertising media
is limited to regional and local campaigns both on spot television and radio
and in print media. Jack In The BoxJACK IN THE BOX does not advertise nationally.
Jack In The BoxJACK IN THE BOX spent approximately $96$60 million on advertising and promotions
in fiscal 1995,1996, including franchisee contributions and contributions from
certain of its suppliers under co-operative advertising programs. Jack In
The Box'scontributions. JACK IN THE BOX's current
advertising campaign promotes new and established Jack In
The BoxJACK IN THE BOX products on
an individual basis in a series of creative 30 second television and radio
spot advertisements. The Company also allocates fundsallocated $1.7 million in 1996 for
local marketing purposes. Franchisees are encouraged to, and generally do,
spend funds in addition to those expended by the Company for local marketing
programs.

Employees. At October 1, 1995, Jack In The BoxSeptember 29, 1996, JACK IN THE BOX had approximately 25,78524,800
employees, of whom 24,08523,130 were restaurant employees, 410420 were corporate
personnel, 355300 were distribution employees and 935950 were field management and
administrative personnel. Employees are paid on an hourly basis, except
restaurant managers, corporate and field management, and administrative
personnel. A majority of Jack In The Box'sJACK IN THE BOX's restaurant employees are employed
on a part-time, hourly basis to provide services necessary during peak
periods of restaurant operations. Jack In The BoxJACK IN THE BOX has not experienced any
significant work stoppages and believes its labor relations are good.

Jack In The BoxJACK IN THE BOX competes in the job market for qualified employees and
believes its wage rates are comparable to those of its competitors.

Trademarks and Service Marks

The Jack In The BoxJACK IN THE BOX name is of material importance to the Company and is a
registered trademark and service mark in the United States and in certain
foreign countries. In addition, the Company has registered numerous service
marks and trademarks for use in its business, including the Jack In The BoxJACK IN THE BOX
logo, Breakfast Jack and Jumbo Jack names and Crescent Breakfast name and
design.

Competition and Markets

In general, the restaurant business is highly competitive and is affected
by competitive changes in a geographic area, changes in the public's eating
habits and preferences and local and national economic conditions affecting
consumer spending habits, population trends and traffic patterns. Key
competitive factors in the industry are the quality and value of the food
products offered, quality and speed of service, advertising, name
identification, restaurant location and attractiveness of facilities.

Each Jack In The BoxJACK IN THE BOX restaurant competes directly and indirectly with a
large number of national and regional chain operators as well as with
locally-owned fast-food restaurants and coffee shops. In selling franchises,
Jack In The BoxJACK IN THE BOX competes with many other restaurant franchisors, and some of
its competitors have substantially greater financial resources and higher total
sales volume.

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Regulation

Each Company-operated and franchised restaurant is subject to regulation by
federal agencies and to licensing and regulation by state and local health,
sanitation, safety, fire and other departments. Difficulties or failures in
obtaining any required licensing or approval could result in delays or
cancellations in the opening of new restaurants.

The Company is also subject to federal and a substantial number of state
laws regulating the offer and sale of franchises. Such laws impose registration
and disclosure requirements on franchisors in the offer and sale of
franchises and may also apply substantive standards, including limitations on
the ability of franchisors to terminate franchisees and alter franchise
arrangements, to the relationship between franchisor and franchisee. The
Company believes it is operating in substantial compliance with applicable
laws and regulations governing its operations.

The Company is subject to the Fair Labor Standards Act and various state
laws governing such matters as minimum wages, overtime and other working
conditions. A significant number of the Company's food service personnel are
paid at rates related to the federal and state minimum wage, and accordingly,
increases in the minimum wage increase the Company's labor costs.

In addition, various proposals which would require employers to provide
health insurance for all of their employees are being considered from
time-to-time in Congress and various states. The imposition of any
requirement that the Company provide health insurance to all employees would
have a material adverse impact on the consolidated operations and financial
condition of the Company and the restaurant industry.

The Company is subject to certain guidelines under the Americans with
Disabilities Act of 1990 and various state codes and regulations which
require restaurants to provide full and equal access to persons with physical
disabilities. To comply with such laws and regulations, the cost of
remodeling and developing restaurants has increased, principally due to the
need to provide certain older restaurants with ramps, wider doors, enlarged
restrooms and other conveniences.

The Company is also subject to various federal, state and local laws
regulating the discharge of materials into the environment. The cost of
developing restaurants has increased as a result of the Company's compliance
with such laws. Such costs relate primarily to the necessity of obtaining
more land, landscaping and below surface storm drainage and the cost of more
expensive equipment necessary to decrease the amount of effluent emitted into
the air and ground.

Cautionary Statements Regarding Forward-Looking Statements

The Company wishes to caution readers that the forward-looking statements
involve known and unknown risks and uncertainties which may cause the actual
results, performance or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by any forward-looking statements made by or on behalf of the
Company. In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company is filing the following
cautionary statements identifying important factors that in some cases have
affected, and in the future could cause, the Company's actual results to
differ materially from those expressed in any such forward-looking
statements.

In addition to factors discussed in this Form 10-K, among the other factors
that could cause the Company's results to differ materially are: the
effectiveness and cost of advertising and promotional efforts; the degree of
success of the Company's new and unique product offerings; weather
conditions; difficulties in obtaining ingredients and variations in
ingredient costs; the Company's ability to control operating,
general and administrative costs and to raise prices sufficiently to offset
cost increases; the Company's ability to recognize value from any current or
future co-branding efforts; competitive products and pricing and promotions;
the impact of any wide-spread negative publicity; the impact on consumer eating
habits of new scientific information regarding diet, nutrition and health;
competition for labor; general economic conditions; changes in consumer tastes
and in travel and dining-out habits; the impact on operations and the costs to
comply with laws and regulations and other activities of governing entities;

-6-

the costs and other effects of legal claims by franchisees, customers, vendors
and others, including settlement of those claims; and the effectiveness of
management strategies and decisions.

There can be no assurance that the Company or its franchisees, domestic and
international, will achieve growth objectives or that new restaurants will be
profitable. The opening and profitability of restaurants are subject to
various risk factors including the identification, availability and lease or
purchase terms of suitable sites, both traditional and non-traditional; the
ability of the Company and its franchisees to finance new restaurant
development;the ability to meet construction schedules, permitting and
regulatory compliance; and the sales and cost performance of the individual
new restaurants.

The growth of JACK IN THE BOX restaurants outside the United States is
subject to a number of additional factors. The Company has limited
experience with international franchise development. The growth and
profitability of international restaurants are subject to the financial,
development and operational capabilities of franchisees, the franchisees'
ability to develop a support structure and adequately support subfranchisees,
the franchisees' adherence to the Company's operational standards, as well as
currency regulations and fluctuations.

Because the Company's business is regional, with approximately 75% of its
company-operated and franchised restaurants located in the states of
California and Texas, the economic conditions and weather conditions
affecting those states may have a material impact upon the Company's results.
The Company has a substantial number of minimum wage employees and employees
who are paid at wage rates slightly above the minimum wage. As
federal and/or state minimum wage rates increase, the Company may need
to increase not only the wages of its minimum wage employees but also the
wages paid to the employees at wage rates which are above minimum wage. If
competitive pressures or other factors prevent the Company from offsetting
the increased costs by increases in prices, the Company's profitability may
decline.

The Company has been required under SFAS 109, because of operating losses
incurred over the past several years, to establish valuation allowances
against deferred tax assets recorded for net operating losses, tax credit
carryforwards and various other items. Until there is sufficient available
evidence that the Company will be able to realize such deferred tax assets
through future taxable earnings, the Company's tax provision will be highly
sensitive to the expected annual level of earnings, the impact of the
alternative minimum tax under the Internal Revenue Code and the limited
current recognition of the deferred tax assets. As a result of changing
expectations, the relationship of the Company's income tax provision to
pre-tax earnings will vary more significantly from quarter to quarter and
year to year than companies that have been continuously profitable. However,
the Company's effective tax rates are likely to increase in the future.

The Company is highly leveraged. Its substantial indebtedness may limit
the Company's ability to respond to changing business and economic conditions.
The contracts under which the Company acquired its debt impose significant
operating and financial restrictions which limit the Company's ability to
borrow money, sell assets or make capital expenditures or investments without
the approval of certain lenders. In addition to cash flows generated by
operations, other financing alternatives may be required in order to repay
the Company's substantial debt as it comes due. There can be no assurance that
the Company will be able to refinance its debt or obtain additional financing
or that any such financing will be on terms favorable to the Company.

-7-

ITEM 2. PROPERTIES
----------

At October 1, 1995,September 29, 1996, Foodmaker owned 544 Jack In The Box538 JACK IN THE BOX restaurant
buildings, including 327326 located on land covered by ground leases. In
addition, it leased 602620 restaurants where both the land and building are
leased. Some of these restaurants are operated by franchisees. The
remaining lease terms of ground leases range from approximately one year to
5049 years, including renewal option periods. The remaining lease terms of
Foodmaker's other leases range from approximately one year to 4140 years,
including renewal option periods. In addition, at October 1, 1995,September 29, 1996,
franchisees directly owned or leased 106112 restaurants.

Company- Franchise-
operated operated Total
restaurants restaurants restaurants
----------- ----------- -----------
Company-owned restaurant buildings:
On Company-owned land 144 73 217. . . . . . . . . . 141 71 212
On ground-leased land 278. . . . . . . . . . 277 49 327
--- --- -----326
Subtotal 422 122 544. . . . . . . . . . . . . . . . 418 120 538
Company-leased restaurant buildings
on leased land 441 161 602. . . . . . . . . . . . . 461 159 620
Franchise directly-owned or directly-leased
restaurant buildingsbuildings. . . . . . . . . . . -- 106 106112 112
--- --- -----
Total restaurant buildings 863 389 1,252buildings. . . . . . . . . 879 391 1,270
=== === =====

-6-

The Company's leases generally provide for the payment of fixed rentals
(with cost-of-living index adjustments) plus real estate taxes, insurance and
other expenses; in addition, many of the leases provide for contingent rentals
of between 2% and 10% of the restaurant's gross sales. The Company has
generally been able to renew its restaurant leases as they expire at then
current market rates. At October 1, 1995,September 29, 1996, the leases had initial terms
expiring as follows:

Number of restaurants
-----------------------------------------------
Years initial Land and
lease term Ground building
expires leases leases
--------- ------ --------
1996-2000.1997-2001. . . . . . . . . . . 110 137
2001-2005.. . . . . . . . . 114 124
2002-2006. . . . . . . . . . . 106 162
2006-2010.. . . . . . . . . 112 181
2007-2011. . . . . . . . . . . . . . . . . . . . 63 210
2011241
2012 and later . . . . . . . . 48 93. . . . . . . . . 37 74
--- ---
327 602326 620
=== ===

In addition, the Company owns its principal executive offices in San Diego,
California, consisting of approximately 150,000 square feet.

The Company owns one warehouse and leases an additional seven with
remaining terms ranging from two yearsone year to 2221 years, including renewal option
periods.

Substantially all the Company's real and personal property are pledged as
collateral for various components of the Company's long-term debt.

-8-

ITEM 3. LEGAL PROCEEDINGS
-----------------
Various claims and legal proceedings are pending against the Company in variousa
federal court and in state and federal courts. Many of those proceedings arecourts in the statesstate of California, Washington, Nevada, Idaho and Oregon, seeking
monetary damages for personal injuries relating to the outbreak of food-borne
illness (the "Outbreak") attributed to hamburgers served at Jack In The BoxJACK IN THE BOX
restaurants. The Company, in consultation with its insurance carriers and
attorneys, does not anticipate that the total liability on all such lawsuits
and claims will exceed the coverage available under its applicable insurance
policies.

Actions were filed on July 2, 1993,The Company is engaged in litigation with the Superior Court of California,
County of San Diego, by certain of the Company's franchisees against the
Company, The Vons Companies, Inc., ("Vons") and other suppliers (Syed Ahmad,
et al, versus Foodmaker, Inc., et al), claiming damages from reduced sales
and profits due to the Outbreak. After extensive negotiations, settlements
were reached with the plaintiff franchisees, and all but one of the domestic
franchisees who did not join in suing the Company in this lawsuit. During
1993, the Company provided approximately $44.5 million to cover the
settlements and associated costs, including the settlement with the remaining
franchisee. On January 14, 1994, the non-settling franchisee filed suit
against the Company and The Vons Companies in Superior Court of California,
County of San Diego and in Federal Court, Southern District of California
(Ira Fischbein, et al versus Foodmaker, Inc., et al) claiming damages from
reduced sales, lost profits and reduced value of the franchise due to the
Outbreak. After extensive negotiations, the Company reached an agreement
under the terms of which on February 3, 1995, the Company settled all claims
of the franchisee against the Company and acquired 27 operating restaurants
and the development rights to the Las Vegas and Denver markets.
-7-

The Company on July 19, 1993, filed a cross-complaint against Vons
and other suppliers seeking reimbursement for all damages, costs and expenses
incurred in connection with the Outbreak. On or about January 18, 1994,The initial litigation was filed
by the Company on February 4, 1993. Vons has filed a cross-complaintcross-complaints against
Foodmakerthe Company and others in this action alleging certain contractual, indemnification and tort
liabilities andliabilities; seeking damages in unspecified amounts and a declaration of the
rights and obligations of the parties. SubstantiallyThe claims of the same claims were madeparties arise out
of two separate lawsuits which have been consolidated and are now set for
trial in the Los Angeles Superior Court, Los Angeles, California in July
1997.

On April 6, 1996 an action was filed by one of the Company's international
franchisees, Wolsey, Ltd., in the United States District Court in San Diego,
California against the Company and its directors, its international
franchising subsidiary, and certain officers of the Company and others. The
complaint alleges certain contractual, tort and law violations related to the
franchisees' development rights in the Far East and seeks damages in excess
of $25 million, injunctive relief, attorneys fees and costs. The Company has
successfully dismissed portions of the complaint, including the single claim
alleging wrongdoing by the partiesCompany's outside directors. Management believes
the remaining allegations are without foundation and intends to vigorously
defend the action.

On November 5, 1996 an action was filed by the "National JIB Franchisee
Association, Inc." (the "Association") and several of the Company's
franchisees in a separate lawsuit
inthe Superior Court of California, County of Los Angeles. On May 17, 1995 it
was determined the litigation between the Company, Vons, and other defendants
would be heardSan Diego in Los Angeles. The cases have been consolidated and are set
for trial in November 1996.

In April 1993, a class action, In re Foodmaker, Inc./Jack In The Box
Securities Litigation, was filed in Federal Court, Western District of
Washington at SeattleSan
Diego, California, against the Company its Chairman, and the Presidentothers. The lawsuit alleges that
certain Company policies are unfair business practices and violate sections
of the JackCalifornia Corporations Code regarding material modifications of
franchise agreements and interfere with franchisees' right of association.
It seeks injunctive relief, a declaration of the rights and duties of the
parties, unspecified damages and recission of alleged material modifications
of plaintiffs' franchise agreements. The complaint also alleges fraud,
breach of a fiduciary duty and breach of a third party beneficiary contract
in connection with certain payments that the Company received from suppliers
and seeks unspecified damages, interest, punitive damages and an accounting.
Management believes that its policies are lawful and that it has satisfied
any obligation to its franchisees in regard to such supplier payments.

On December 10, 1996, a suit was filed by the Company's Mexican licensee,
Foodmex, Inc., in the United States District Court in San Diego, California
against the Company and its international franchising subsidiary. Foodmex
formerly operated several JACK IN THE BOX franchise restaurants in Mexico, but
its licenses were terminated by the Company for, among other reasons, chronic
insolvency and failure to meet operational standards. Foodmex's suit alleges
wrongful termination of its master license, breach of contract and unfair
competition and seeks an injunction to prohibit termination of its license as
well as unspecified monetary damages. The Company believes its termination of
the Foodmex license was proper, and that there is no merit to the Foodmex
claims. The Company intends to vigorously defend the action.

On February 2, 1995, an action by Christina Jorgensen was filed against the
Company in the U.S. District Court in San Francisco, California alleging that
restrooms at a JACK IN THE BOX restaurant failed to comply with laws
regarding disabled persons and seeking damages in unspecified amounts,
punitive damages, injunctive relief, attorneys fees and prejudment interest.
In The Box Divisionan amended complaint damages are also sought on behalf of all physically
disabled persons who acquired the
Company's common stock between March 4, 1992 and January 22, 1993 seeking
damages in an unspecified amount as well as punitive damages. In general
terms, the complaint alleges that there were false and misleading statements
in the Company's March 4, 1992 prospectus and in certain public statements
and filings in 1992 and 1993, including claims that the defendants
disseminated false information regarding the Company's food quality standards
and internal quality control procedures. After extensive negotiations
through a mediation process, a settlement was reached and subsequently
approved by the Court. Under the terms of the settlement the Company paid $8
million into an escrow account, disbursements from which are subject to Court
approval. The $8 million payment was reflected in the results of operations
for the first quarter of fiscal 1995.

The Federal Trade Commission ("FTC") is investigating whether the
Company violated the Hart-Scott-Rodino Antitrust Improvements Act of 1976
(the "HSR Act") when the Company's former subsidiary, Chi-Chi's, Inc.,
acquired Consul Restaurant Corporation in October 1992 without first
complying with the reporting and waiting requirements of the HSR Act. The
Company later made the filing as it was preparing for the sale of Chi-Chi's.
The Company has engaged counsel in connection with the investigation and on
August 17, 1994, counsel for the Company received a request, preliminary in
nature, for information and documents. A subpoena covering the preliminary
material supplied and additional information and documents was issued on
January 19, 1995. Sworn statements have been givendenied access to restrooms at the FTC by various
people, including certain officersrestaurant.
A motion has been filed, but has not been heard, to permit the lawsuit to
proceed as a class action and former officers of the Company and
Chi-Chi's. The HSR Act provides for a penalty of up to $10,000 per day for
failure to comply with the above requirements. Management believes that any
potential penalty, if assessed, will not have a material impact on the
Company.include all Company-operated restaurants.

-9-

legal proceedings, asserted legal claims and known potential legal claims which
are probable of assertion should not materially affect the consolidated
financial position of the Company.

The U.S. Internal Revenue Service ("IRS") had proposed adjustments to
tax liabilities of $17 million (exclusive of interest) for the Company's
federal income tax returns for fiscal years 1986 through 1988. A final
report has not been issued but agreement has been reached to satisfy these
proposed adjustments at approximately $.6 million (exclusive of $.4 million
interest). The IRS examinations of the Company's federal income tax returns
for fiscal years 1989 and 1990 resulted in the issuance of proposed
adjustments to tax liabilities aggregating $2.2 million (exclusive of $.7
million interest). The Company has filed a protest with the Regional Office
of Appeals of the IRS contesting the proposed assessments. Management
believes that adequate provision for income taxes has been made.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
No matters were submitted to a vote of security holders during the fourth
quarter ended October 1, 1995.
-8-

September 29, 1996.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
---------------------------------------------------------------------
The following table sets forth the high and low closing sales prices for
the common stock during the quarters indicated, as reported on the New York
Stock Exchange-Composite Transactions:

12 weeks ended
16 weeks ended --------------------------------------------
Jan. 23, 1994 Apr. 17, 1994 Jul. 10, 1994 Oct. 2, 1994
------------- ------------- ------------- ------------
High . . . . . 10 1/4 10 1/2 8 6
Low. . . . . . 8 7/8 7 5/8 5 1/4 5 1/8

12 weeks ended
16 weeks ended
--------------------------------------------
Jan. 22, 1995 Apr. 16, 1995 Jul.July 9, 1995 Oct. 1, 1995
------------- ------------- ------------------------- ------------
High . . . . . 5 5/8 4 3/8 5 5/8 6 7/8
Low. . . . . . 3 7/8 3 3/8 3 7/8 5 1/4

16 weeks ended 12 weeks ended
----------------------------------------------
Jan. 21, 1996 Apr. 14, 1996 July 7, 1996 Sept. 29, 1996
------------- ------------- ------------ --------------
High . . . . . 6 1/8 7 3/4 8 7/8 10 1/8
Low. . . . . . 5 5 7/8 6 7/8 6 3/4

Foodmaker has not paid any cash or other dividends (other than the
issuance of the Rights) during its last two fiscal years and does not anticipate
paying dividends in the foreseeable future. The Company's credit agreements
prohibit and its public debt instruments restrict the Company's right to
declare or pay dividends or make other distributions with respect to shares of
its capital stock.

As of October 1, 1995,September 29, 1996, there were approximately 725800 holders of record.

-9--10-

ITEM 6. SELECTED FINANCIAL DATA
-----------------------
The selected data presented in the following table summarizes certain
consolidated financial information concerning the Company and is derived from
financial statements which have been audited by KPMG Peat Marwick LLP,
independent certified public accountants. Chi-Chi's results of operations
are included through January 27, 1994, the date of Chi-Chi's sale. The
capital structure changed as the result of the 1992 recapitalization of the
Company. The Company's fiscal year is 52 or 53 weeks, ending the Sunday
closest to September 30.

52 weeks 52 weeks 5352 weeks 5253 weeks 52 weeks
ended ended ended ended ended
Statement of Operations Data: 9/26/95 10/1/95 10/2/94 10/3/93 9/27/92 9/29/91
- ----------------------------- ------- ------- ------- ------- -------

Revenues:
Restaurant sales. . . . . . . . . . $ 892,029 $ 804,084 $ 843,038 $1,088,269 $1,061,904 $1,019,927
Distribution sales. . . . . . . . . 132,421 179,689 171,711 108,546 104,041 94,815
Franchise rents and royalties . . . 34,048 32,530 33,740 35,232 38,803 35,277
Other revenues. . . . . . . . . . . 4,324 2,413 4,837 8,680 14,585
7,140
--------- --------- --------- --------- ------------------- ---------- ---------- ---------- ----------
Total revenues. . . . . . . . . . . 1,062,822 1,018,716 1,053,326 1,240,727 1,219,333
1,157,159
--------- --------- --------- --------- ------------------- ---------- ---------- ---------- ----------
Costs of revenues (1) . . . . . . . . 871,335 928,511 1,124,918 1,004,467 962,212919,211 903,479 950,952 1,147,157 1,018,330
Equity in loss of FRI (2) . . . . . . -- 57,188 2,108 -- -- --
Selling, general and administrative
expenses (3) . . . . . . . . . . . . . 110,188 100,764 124,422 103,697 95,09572,134 78,044 78,323 102,183 89,834
Interest expense. . . . . . . . . . . 46,126 48,463 55,201 57,586 72,455
93,573
--------- --------- --------- --------- ------------------- ---------- ---------- ---------- ----------
Earnings (loss) before income taxes
(benefit), extraordinary item, and
cumulative effect of changes in
accounting principles. . . . . . . . 25,351 (68,458) (33,258) (66,199) 38,714 6,279
Income taxes (benefit). . . . . . . . 5,300 500 3,010 (22,071) 16,818
5,930
--------- --------- --------- --------- ------------------- ---------- ---------- ---------- ----------
Earnings (loss) before extraordinary
item and cumulative effect of
changes in accounting principles . . 20,051 (68,958) (36,268) (44,128) 21,896
Extraordinary item - loss on early
extinguishment of debt, net of
income taxes . . . . . . . . . . . . -- -- (3,302) -- (63,651)
Cumulative effect on prior years of
adopting SFAS 106 and SFAS 109 . . . -- -- -- (53,980) --
---------- ---------- ---------- ---------- ----------
Net earnings (loss) . . . . . . . . . $ 20,051 $ (68,958) $ (39,570) $ (98,108) $ (41,755)
========== ========== ========== ========== ==========
Earnings (loss) per share before
extraordinary item and cumulative
effect of changes in accounting
principles . . . . . . (68,958) (36,268) (44,128) 21,896 349
Extraordinary item - loss on early
extinguishment of debt, net of income
taxes. . . . . . . . . . . . . . . . -- (3,302) -- (63,651) --
Cumulative effect on prior years of
adopting SFAS 106 and SFAS 109 . . . -- -- (53,980) -- --
--------- --------- --------- --------- ---------
Net earnings (loss) . . . . . . . . . $ (68,958).51 $ (39,570)(1.77) $ (98,108)(.94) $ (41,755)(1.15) $ 349
========= ========= ========= ========= =========.67
Earnings (loss) per share . . . . . . $ .51 $ (1.77) $ (1.03) $ (2.55) $ (1.28)

Balance Sheet Data (at end of period):
- -------------------------------------
Current assets. . . . . . . . . . . . $ 96,476 $ 97,889 $ 107,486 $ 93,534 $ 106,311 $ 71,534
Current liabilities . . . . . . . . . 147,063 132,017 140,238 202,194 153,851 185,022
Total assets. . . . . . . . . . . . . 653,638 662,674 740,285 897,280 915,487 864,848
Long-term debt. . . . . . . . . . . . 396,340 440,219 447,822 500,460 501,083 629,291
Stockholders' equity. . . . . . . . . 51,384 31,253 100,051 139,132 246,933 50,535
- -------------------------------------

Reflects a provision of $44.5 million for the year ended October 3, 1993 to cover franchisee settlements
and associated costs related to the Outbreak of food-borne illness.
Reflects the complete write-downwrite-off of the Company's $57.2 million investment in Family Restaurants, Inc.
for the year ended October 1, 1995.
Includes the recognition of an $8 million stockholders' lawsuit settlement for the year ended October 1,
1995.

-10--11-

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
-------------

Results of Operations

FiscalAll comparisons under this heading between 1996, 1995 Comparedand 1994 refer to
Fiscal 1994.the 52-week periods ended September 29, 1996, October 1, 1995 and October 2,
1994, respectively, unless otherwise indicated. On January 27, 1994, the
Company contributed its entire Chi-Chi's Mexican restaurant chain to FRI in
exchange for an approximatea 39% equity interest in FRI and other consideration, including
cash, debt assumption and a warrant to acquire additional shares as described
in Note 32 to the consolidated financial statements. The 1996 and 1995
consolidated statements of operations, therefore, do not include Chi-Chi's
results of operations and 1994 only includes Chi-Chi's for the first fiscal
quarter, while it was a subsidiary of the Company.

Revenues

increased $89.3JACK IN THE BOX Company-operated restaurant sales were $892.0 million,
$804.1 million and $719.8 million in 1996, 1995 and 1994, respectively. The
sales improvements from the prior year of $87.9 million, or 9.6%10.9%, to $1,018.7 million in 1995
from $929.4 million in 1994, excluding Chi-Chi's revenues of $123.9 million
in the first quarter of 1994.

Jack In The Box Company-operated restaurants sales increased1996
and $84.3 million, or 11.7%, to $804.1 million in 1995 from $719.8 million in 1994 due
toreflect increases in both per store
average sales and in the average number of restaurants and in perrestaurants. Per store average
sales.("PSA") sales for comparable restaurants increased compared to the prior year
7.2% in 1996 and 3.5% in 1995. Sales improved under the Company's two-tier
marketing strategy offering customers premium sandwiches and hamburgers as well
as value-priced product alternatives and which features a compelling
advertising campaign. The average number of Company-operated restaurants increased
towere
868, 839 in 1995 fromand 761 in 1996, 1995 and 1994, reflecting the addition of 21 new
restaurants and the acquisition of 42 restaurants from franchisees during the
fiscal year. Per store average sales for comparable restaurants ("PSA"),
which increased 3.5% in 1995 as compared to 1994, were strengthened by the
execution of the Company's marketing strategies, including a new advertising
campaign, successful new product introductions and aggressive value-priced
product alternatives.respectively. Chi-Chi's restaurant
sales were $123.2 million in the first quarter of 1994.

Distribution sales of food and supplies increased $8.0were $132.4 million, $179.7
million and $171.7 million in 1996, 1995 and 1994, respectively.
Distribution sales to franchise-operated restaurants decreased $31.3 million
to $179.7$67.3 million in 1996 from $98.6 million in 1995 from $171.7as JACK IN THE BOX
franchisees transitioned to their recently-formed purchasing cooperative
which contracts with another supplier for distribution services. Most
franchisees have elected to participate in the cooperative, which has and
will result in a substantial decline in distribution sales. The loss of
these extremely low profit margin sales is not expected to have a material
effect on the profits of the Company. Distribution sales to FRI and others
have also declined $16.0 million to $65.1 million in 1996 from $81.1 million
in 1995. The $8.0 million sales improvement in 1995 as compared to 1994 is
primarily due to the inclusion ofrecording sales to Chi-Chi's restaurants in the first
quarter of 1995 and notexcluding them as intercompany sales in the same quarter
of 1994. Distribution sales to1994 since Chi-Chi's in the first quarter
of 1994, while it was a subsidiary of the Company at that time.

JACK IN THE BOX franchise rents and royalties were eliminated$34.0 million, $32.5
million and $33.6 million in consolidation. Distribution1996, 1995 and 1994, respectively, at just
slightly more than 10% of sales of franchise-operated restaurants in each of
those years. Franchise restaurant sales increased approximately 5% to franchisees and others declined $4.6$337.0
million in 1996 from $319.6 million in 1995, as compared to 1994, principally due to PSA sales
increases at domestic franchise-operated restaurants, which were also helped
by the marketing initiatives that contributed to sales improvements at
Company-operated restaurants. Franchise restaurant sales declined
approximately 3% in 1995 from $330.1 million in 1994, as PSA sales increases
in 1995 were insufficient to offset a 6.5% decrease in the average number of
franchise-operated restaurants.

Jack In The Box franchise rents and royalties decreased $1.1 million to
$32.5 million in 1995 from $33.6 million in 1994, reflecting a decrease in
the average number of domestic franchise-operated restaurants to 378 in 1995
from 412 in 1994, principally due to the Company's acquisition from
franchisees of franchised42 restaurants by the Company.in 1995 and 44 restaurants in 1994. Chi-Chi's
franchise rents and royalties were $.1 million in the first quarter of 1994.

OtherJACK IN THE BOX other revenues, for Jack In The Box declined $1.9which include interest income on
investments and notes, as well as franchise development fees, were $4.3
million, to $2.4 million in 1995 fromand $4.3 million in 1996, 1995 and 1994, respectively.
Other revenues were greater in 1996 and 1994 principally due to interest
earned on higher investment interest income
earnedlevels of invested cash in 1994, primarily on the cash proceeds from the sale of Chi-Chi's.those years. Chi-Chi's other
revenues were $.5 million in the first quarter of 1994.

Jack In The BoxCosts and Expenses

JACK IN THE BOX restaurant costs of sales, increased $14.2which include food and
packaging costs, were $291.0 million, to
$226.1$258.6 million and $234.3 million in
1996, 1995 from $211.9 million inand 1994, due to increased
Company-operated restaurant sales. Costs of sales decreased 1.3% asrespectively. As a percent of restaurant sales, to 28.1%cost of
sales were
-12-

32.6% in 1996, 32.2% in 1995 from 29.4%and 32.6% in 19941994. Restaurant costs
of sales percentages increased in 1996 compared to 1995 principally due to
the lower foodhigher packaging costs of certain promotions and the impact of lowerdeclined in 1995 compared to 1994 principally due
to favorable ingredient costs. Chi-Chi's restaurant costs of sales were
$32.7 million in the first quarter of 1994.

Jack In The BoxJACK IN THE BOX restaurant operating costs increased $33.1were $478.0 million, to
$447.7$447.2
million in 1995 fromand $414.6 million in 1996, 1995 and 1994, due to increases in both
the average number of Company-operated restaurants and variable costs
associated with improved sales volume. Restaurant operating costs declined
asrespectively. As a
percent of restaurant sales, operating costs were 53.6% in 1996, 55.6% in
1995 as comparedand 57.6% in 1994, declining each year principally due to 1994 primarily due tolabor
efficiencies and lower percentages of occupancy and other operating expenses.
While occupancy and other operating expenses increase with the addition of
each new restaurant, and operations labor and related administrative
costs.such expenses for existing restaurants have increased at
a slower rate than the increase in PSA restaurant sales. Chi-Chi's
restaurant operating costs were $80.7 million in the first quarter of 1994.

Costs of distribution sales increased $9.8were $130.2 million to $175.6in 1996, $175.7 million
in 1995 fromand $165.8 million in 1994, consistent withreflecting the increasechanges in distribution
sales. Costs of distribution sales have increased as a percent of
distribution sales to 98.4% in 1996 from 97.8% in 1995 as comparedand 96.6% in 1994.
Decreases in distribution margins are due primarily to 1994 duethe effect of the loss
of franchise business and declining sales to changes in product mix which
generated slightly higher product costs.
-11-

Jack In The BoxChi-Chi's.

JACK IN THE BOX franchised restaurantsrestaurant costs, which consist principally
of rents and depreciation on properties leased to franchisees and other
miscellaneous costs, decreased $.8were $20.0 million, to $21.9 million in 1995 fromand $22.7 million in
1996, 1995 and 1994, primarily due to therespectively. The decline in such costs reflects a
decrease in the average number of domestic
franchise-operated restaurants to 388 in
1996 from 395 in 1995 as compared toand 423 in 1994. Chi-Chi's franchised restaurantsrestaurant costs
were $.1 million in the first quarter of 1994.

Jack In The BoxJACK IN THE BOX selling, general and administrative expenses increased
$18.5were $72.1
million, to $110.2$78.0 million and $69.2 million in 1996, 1995 from $91.7 million inand 1994,
principally due to increased advertising and promotions costs and to an $8.0
million settlement with stockholders in the first quarter of 1995 as
described in Note 8 to the consolidated financial statements.respectively. Advertising and promotion costs increased $11.6 millionhave declined progressively as
a percent of restaurant sales to $77.3 million5.3% in 1996 from 5.6% in 1995 from
$65.7 millionand 6.0% in
1994, dueas the Company reduced its extra contributions to aggressive promotional discountingthe marketing fund and
its use of productslocal promotions. In 1996 the Company received from suppliers
cooperative advertising funds of $4.8 million, or 0.5% of revenues, which
formerly had been contributed directly to the marketing fund. In 1995
general, administrative and increased advertisingother costs include an $8.0 million litigation
settlement with stockholders and a $1.9 million gain on the curtailment of
postretirement benefits, a net increase to such expenses of $6.1 million, or
0.6% of revenues. Excluding the above items, general, administrative and
other costs as a percent of revenues were approximately 2.8% of revenues in
1995.each year. Chi-Chi's selling, general and administrative expenses were
$9.1 million in the first quarter of 1994.

In the first quarter ofInterest expense was $46.1 million, $48.5 million and $55.2 million in
1996, 1995 the Company recorded a $57.2 million loss
relating to its equity in the operations of FRI, resulting from the
complete write-down of the Company's investment in FRI due to the write-off
by FRI of the goodwill attributable to Chi-Chi's. Inand 1994, the Company
recognized a loss of $2.1 million relating to its 39% equity in the
operations of FRI. Subsequent to fiscal year end, the Company transferred
its entire equity interest in FRI to Apollo. See Note 3 to
the consolidated financial statements.respectively. Interest expense decreased $6.7from the prior
year by $2.4 million to $48.5in 1996 and $6.7 million in 1995, from
$55.2 million in 1994principally due to a
reduction in total debt outstanding.outstanding and lower other financing costs. Total
debt at September 29, 1996 was $398.2 million compared to $533.6 million at
the beginning of fiscal year 1994. Interest expense in 1996 reflects
interest savings associated with the early retirement of $42.8
million of the Company's 14 1/4% senior subordinated notes, due in May 1998.
With the sale of Chi-Chi's in 1994, the Company eliminated Chi-Chi's debt and
used proceeds from the sale to repay the bank credit line, the 13p% Senior Notes13 1/2% senior
notes and the 12x% Senior Notes.12 3/4% senior notes.

The 1996 tax provision reflects the effective annual tax rate of 21% of
pretax earnings. The low effective annual income tax rate results from the
Company's ability to realize previously unrecognized tax benefits. Although
the Company incurred a loss in 1995, income taxes wereof $.5 million were
provided due to required minimum taxes and the Company's inability under SFAS
109 to
recognize the benefit from the carryover of losses to future years.
Considering the saleyears under
Statement of Chi-Chi's combined with the Company's losses, the
Company was required to provide in the second quarter of 1994 a non-cash
valuation allowanceFinancial Accounting Standards ("SFAS") 109, Accounting for
previously recognized tax benefits, resulting in
income tax expense in 1994 of $3.0 million rather than a tax benefit.

Fiscal 1994 Compared to Fiscal 1993. Fiscal 1994 includes 52 weeks;
fiscal 1993 includes 53 weeks. As previously indicated, the consolidated
statements of operations include Chi-Chi's results of operations only while
it was a subsidiary of the Company, which includes the first fiscal quarter
of 1994 and all of fiscal 1993 .

Sales by Jack In The Box Company-operated restaurants increased $36.0
million, or 5.3%, to $719.8 million in 1994 from $683.8 million in 1993,
principally due to an increase in the average number of Company-operated
restaurants to 761 in 1994 from 717 in 1993, partially offset by the
inclusion of an additional week of sales in 1993. The increase in average
number of Company-operated restaurants was principally due to opening 54 new
Company restaurants and acquiring 44 restaurants from franchisees. PSA sales
for comparable restaurants increased approximately 2.7% in 1994 as compared
to 1993, as sales recovered from the depressed levels subsequent to January
1993 when Jack In The Box was linked to an outbreak of food-borne illness.
Chi-Chi's sales included in the consolidated financial statements were $123.2
million in 1994 and $404.5 million in 1993.

Distribution sales of food and supplies to franchisees and others
increased $63.2 million to $171.7 million in 1994 from $108.5 million in 1993
primarily due to the recognition of $63.6 million in sales to Chi-Chi's
subsequent to its sale to FRI in January 1994. Distribution sales to
Chi-Chi's while it was a subsidiary of the Company were previously eliminated
in consolidation.
-12-

Jack In The Box franchise rents and royalties decreased to $33.6 million
in 1994 from $34.0 million in 1993. PSA increases at franchise-operated
restaurants were more than offset by a decline in the average number of
domestic franchise-operated restaurants to 412 in 1994 from 439 in 1993,
which was principally due to the purchase by the Company of 44 franchised
restaurants. Chi-Chi's franchise rents and royalties included in the
consolidated financial statements were $.1 million in 1994 and $1.2 million
in 1993.

Other revenues for Jack In The Box increased to $4.3 million in 1994
from $4.1 million in 1993. The increase is principally due to a $2.2 million
increase in interest earned on cash proceeds from the sale of Chi-Chi's,
offset by a $2.1 million decline in gains and fees realized from the
conversion of Company-operated Jack In The Box restaurants to franchises,
which decreased to 4 in 1994 from 11 in 1993. Chi-Chi's other revenues
included in the consolidated financial statements were $.5 million in 1994
and $4.6 million in 1993.

Jack In The Box restaurant costs of sales increased $10.9 million, or
5.4%, to $211.9 million in 1994 from $201.0 million in 1993, principally due
to the increase in restaurant sales. Restaurant costs of sales were 29.4% of
restaurant sales in both 1994 and 1993. Chi-Chi's restaurant costs of sales
included in the consolidated financial statements were $32.7 million in 1994
and $106.9 million in 1993.

Jack In The Box restaurant operating costs increased $23.9 million, or
6.1%, to $414.6 million in 1994 from $390.7 million in 1993, primarily due to
the increase in the average number of Company-operated restaurants, variable
costs associated with increased sales in 1994, and in part due to increased
occupancy costs. Chi-Chi's restaurant operating costs included in the
consolidated financial statements were $80.7 million in 1994 and $253.7
million in 1993.

Costs of distribution sales increased $61.0 million to $165.8 million in
1994 from $104.8 million in 1993, consistent with the increase in
distribution sales.

Jack In The Box franchised restaurant costs, which normally consist of
rents and depreciation on properties leased to franchisees and other
miscellaneous costs, decreased $44.4 million to $22.7 million in 1994 from
$67.1 million in 1993, principally due to the inclusion in 1993 of $44.5
million of settlements and assistance provided to franchisees as described in
Note 8 to the consolidated financial statements. Chi-Chi's franchised
restaurant costs included in the consolidated financial statements were $.1
million in 1994 and $.6 million in 1993.

Selling, general and administrative expenses for Jack In The Box
decreased to $91.7 million in 1994 from $93.2 million in 1993, principally
due to a $5.7 million gain recognized from the sale of Chi-Chi's. Expenses
in 1994 also reflect the recognition of (1) a charge of $3.5 million
principally for the write-down of assets to net realizable values and
providing for costs of closing seven older, under-performing restaurants with
short remaining lease terms, (2) $2.0 million in severance expenses and
associated costs resulting from the elimination of approximately 80
administrative positions, and (3) $1.1 million for write-offs principally
associated with replacement of signs at substantially all of the
Company-operated restaurants in conjunction with the exterior enhancement
project. Chi-Chi's selling, general and administrative expenses included in
the consolidated financial statements were $9.1 million in 1994 and $31.2
million in 1993.

The Company recognized a loss of $2.1 million relating to its 39% equity
in the operations of FRI for the eight months from January 27, 1994, the date
of FRI's acquisition, through September 25, 1994, the end of FRI's third
quarter. See Note 3 to the consolidated financial statements.

Interest expense decreased $2.4 million to $55.2 million in 1994 from
$57.6 million in 1993 due to the repayment of $79 million of bank debt offset
partially by the addition of an approximate $70 million finance lease
obligation.Income Taxes. Considering the sale of Chi-Chi's combined with the Company's
losses, the rules under SFAS 109 required the Company to provide in 1994 a
non-cash valuation allowance of approximately $14$14.0 million for previously
recognized -13-

tax benefits, resulting in an income tax expense of $3.0 million in
1994, rather than a tax benefit associated withrelated to the Company's loss for 1994.

Thepretax loss.

In 1994 the Company incurred an extraordinary loss of $5.1 million, less
currently recognizable
income tax benefits of $1.8 million, on the early extinguishment of debt. The Company utilized cash proceeds from the sale of
Chi-Chi's to repay all ofsenior
notes and the debt outstanding under its then existing bank credit facility,
which was terminated, and all of the remaining 13p% Senior
Notes.then terminated.

-13-

Liquidity and Capital Resources

Cash and cash equivalents increased $6.1 million to $42.0 million at
September 29, 1996 from $35.9 million at the beginning of the fiscal year.
The Company's primary sources of liquidity are expected to be cash flowsincrease reflects cash flow from operations the revolving bank credit facility described below,of $84.1 million in
1996, principal payments on debt of $44.7 million and the
sale and leasebackcapital expenditures of
restaurant properties. An additional potential source
of liquidity is the conversion of Company-operated Jack In$33.2 million.

The Box
restaurants to franchised restaurants. The Company requires capital
principally to construct new restaurants, to maintain, improve and refurbish
existing restaurants, and for general corporate purposes.

At October 1, 1995, the Company's working capital deficit had increased slightly$16.5 million to $50.6
million at September 29, 1996 from $34.1 million from $32.8 million at October 2, 1994.the end of 1995,
principally due to increases in insurance, advertising and payroll
liabilities and a decline in accounts receivable as franchisees transitioned
to another distributor and repaid other obligations to the Company. The
Company, and the restaurant business does not require the maintenanceindustry in general, maintain relatively low
levels of significant
receivables orand inventories and it is common to receivevendors grant trade credit from
vendors for
purchases such as food and supplies. In addition, theThe Company and generally the industry,also continually invests in
its business through the addition of new units and refurbishment of existing
units, which are reflected as long-term assets and not as part of working
capital.

AtTotal debt outstanding declined $43.9 million to $398.2 million at
September 29, 1996 from $442.1 million at October 1, 1995,1995. On May 15, 1996,
the Company had $35.9used $43.5 million of available cash to prepay the 14 q% senior
subordinated notes due in cash on hand.

At October 1, 1995, theMay 1998.

The Company's total debt outstanding was $442.1
million. In early January 1994, the Company completed financing arrangements
(see Note 4 to the consolidated financial statements), which added an
approximate $70 million finance lease obligation to the Company's debt,
enabling the Company to repay approximately $28 million in bank borrowings
and fund certain capital expenditures. With the sale of Chi-Chi's on January
27, 1994, the Company reduced its outstanding debt, including full repayment
of all bank borrowings and termination of the then existing bank credit
facility.

On July 26, 1994, the Company entered into a revolving bank credit agreement, expiring July 26, 1997, which was amended and
restated March 15, 1996, expires December 31, 1998 and provides for a credit
facility of up to $52.5$60 million, including letters of credit for the account of the Company
in an aggregate amount of up to $25
million. At October 1, 1995,September 29, 1996, the Company had a total ofno borrowings and
approximately $46.9$50.9 million of unused credit available under the agreement. Covenants contained in the agreement limitThe
Company is subject to a number of covenants under its various credit
agreements including limitations on additional borrowings, capital
spendingexpenditures, lease commitments and require the Companydividend payments, and requirements to
maintain specifiedcertain financial ratios, and to meet
certain requirements regarding maximum leverage and minimum fixed charges,
cash flows interest coverage and net worth. The Company intends to use the
revolving line to fund expansion efforts and for general operating purposes. Substantially
all of the Company's real estate and machinery and equipment is and is expected to continue to be, pledged to
its lenders.lenders under the credit agreement and other secured notes.

The Company's primary sources of liquidity are expected to be cash flows
from operations, the revolving bank credit facility, and the sale and
leaseback of restaurant properties. An additional potential source of
liquidity is the conversion of Company-operated restaurants to franchised
restaurants. The Company requires capital principally to grow the business
through new restaurant construction, as well as to maintain, improve and
refurbish existing restaurants, and for general operating purposes.

Based upon current levels of operations and anticipated growth, the
Company expects that sufficient cash flowflows will be generated from operations
so that, combined with other financing alternatives available, to it,
including the bank credit facility, the
utilization of cash on hand, the bank credit facility and the sale and
leaseback of restaurants, the Company will be able to meet all of its debt
service, requirements, as well as its capital expendituresexpenditure and working capital requirements, for the foreseeable future.requirements.

On August 7, 1992, the Board of Directors of the Company authorized the
purchase of up to 2 million shares of the Company's outstanding common stock
in the open market, for an aggregate amount not to exceed $20 million. At
October 1, 1995,September 29, 1996, the Company had acquired 1,412,654 shares for an
aggregate cost of $14.5 million, none of which were acquired in 1995.
-14-

1996.

Seasonality

The Company's restaurant sales and profitability are subject to seasonal
fluctuations and are traditionally higher during the spring and summer months
because of factors such as increased travel and improved weather conditions
which affect the public's dining habits.

-14-

New Accounting Standards

In March 1995, the Financial Accounting Standards Board issued Statement
of FinancialSFAS 121,
Accounting Standards No. ("SFAS") 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of",Of, effective for fiscal years beginning after December 15,
1995. SFAS 121 requires impairment losses to be recorded on long-lived
assets used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less
than the assets' carrying amount. SFAS 121 also addresses the accounting for
long-lived assets that are expected to be disposed of. The Company does not
believe, based on current circumstances, the effect of adoption of SFAS 121
will be material.

In October 1995, the Financial Accounting Standards Board issued SFAS 123,
"AccountingAccounting for Stock-Based Compensation",Compensation, effective for fiscal years beginning
after December 15, 1995. SFAS 123 establishes the fair value based method of
accounting for stock-based compensation arrangements, under which
compensation cost is determined using the fair value of the stock option at
the grant date and the number of options vested, and is recognized over the
periods in which the related services are rendered. If theThe Company wereplans to
retain its current intrinsic value based method, as allowed by SFAS 123, itand
will be required to disclose the pro forma effect of adopting the fair value
based method.

To date, the Company has not made a decision to adopt the fair
value based method.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------

The consolidated financial statements and related financial information
required to be filed are indexed on page F-1 and are incorporated herein.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------

Not applicable.

-15-

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------

The following table provides certain information about each of the
Company's current directors and executive officers as of January 1996:1, 1997:

Name Age Position with the Company(6)
---- --- ----------------------------
Jack W. Goodall(1) 57 Chairman of the Board,Robert J. Nugent(1) 55 President, Chief Executive Officer and President
Robert J. Nugent 54 Executive Vice President; President and
Chief Operating Officer of
Jack In The Box Division and
Director
Charles W. Duddles 5556 Executive Vice President, Chief
Financial Officer, Chief Administrative
Officer and Director
Kenneth R. Williams 53 Senior Vice President;54 Executive Vice President-MarketingPresident, Marketing and
Operations
of
Jack In The Box DivisionLawrence E. Schauf 51 Executive Vice President, Corporate
Counsel and Corporate Secretary
William E. Rulon 6364 Senior Vice President
and Secretary
DonDonald C. Blough 48 Vice President, Management Information
Systems
Bruce N. Bowers 4950 Vice President, Purchasing and
Distribution
Carlo E. Cetti 5152 Vice President, Human Resources and
Strategic Planning
BradleyBradford R. Haley 3738 Vice President; Vice President-MarketingPresident, Marketing
Communications of Jack In The Box
Division
William F. Motts 5253 Vice President; Vice President-President, Restaurant Development of
Jack In The Box Division
Paul L. Schultz 4142 Vice President; Vice President-President, Operations
of Jack In The Box Division
David M. Theno, 45Ph.D. 46 Vice President, Quality Assurance,
Research and Development and
Product Safety
Linda A. Vaughan 38 Vice President, New Products and
Promotions
Darwin J. Weeks 4950 Vice President, Controller and
Chief Accounting Officer
Jack W. Goodall(1)(3) 58 Chairman of the Board
Michael E. Alpert(5) 53Alpert 54 Director
Paul T. Carter(2)(5) 73 74 Director
Edward Gibbons(1)(2)(3)(4)(5) 5960 Director
Leonard I. Green(1)(2)Green(2)(3)(4) 62(5) 63 Director
L. Robert Payne(1)(2)(4)Payne(2)(5) 6263 Director
Christopher V. Walker 4950 Director
- ----------------------------------------------------------------------
(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Stock Option and Compensation Committee.
(4) Member of the InvestmentStock Option Committee.
(5) Member of the Corporate OversightInvestment Committee.
(6) Directors and officers are elected annually. Each director and officer
holds his office until his successor has been elected and qualified or
until he resigns or is removed.

-16-

Mr. GoodallNugent has been President of the Company since April 1970,and Chief Executive Officer of the Company
since February 1979 and Chairman since
October 1985.April 1996. He was a director of Grossmont Bank, a wholly-owned subsidiary
of Bancomer, S.A., from 1980 until October 1995, and has been a director of
Van Camp Seafood Company, Inc. since April 1992 and a director of TCH Corp.
since October 1992. He has been a director of Ralcorp Holdings, Inc. since
March 1994 and was a Vice President of Ralston Purina Company from July 1981
to October 1985.

Mr. Nugent has been Executive Vice President of the Company sincefrom
February 1985 to April 1996 and President and Chief Operating Officer of the
Jack In The
BoxJACK IN THE BOX Division of the Company sincefrom May 1988. He was Executive Vice
President-Operations and Marketing from February 1985 to May 1988. He was
previously Division Vice President of the Company from August 19791988 to April 1982 and Corporate Vice President-Restaurant Operations from April 1982
through January 1985.1996. He has
been a director since February 1988.

Mr. Duddles has been Executive Vice President and Chief Administrative
Officer of the Company since May 1988. He has been Chief Financial Officer
of the Company since October 1985 and was Senior Vice President from October
1985 to May 1988. He was previously Vice President and Controller of the
Company from August 1979 to July 1981 and Senior Vice President, Finance and
Administration from August 1981 to October 1985. He has been a director
since February 1988.

Mr. Williams has been Executive Vice President of the Company since
May 1996. He was Senior Vice President of the Company sincefrom January 1993 to
May 1996 and Executive Vice President of Marketing and Operations,
Jack In The
BoxJACK IN THE BOX Division sincefrom November 1994.1994 to May 1996. He was Executive
Vice President of Operations, Jack In The BoxJACK IN THE BOX Division from May 1988 until
November 1994. He was temporarily President and Chief Executive Officer of
Chi-Chi's from June 1992 to January 1993. He was previously Vice President
of the Company and Vice President, Operations-Division I from January 1985
to May 1988.

Mr. Schauf has been Executive Vice President, Corporate Counsel and
Corporate Secretary of the Company since August 1996. Prior to joining
Foodmaker he was Senior Vice President, General Counsel and Secretary of
Wendy's International, Inc. from February 1991 to August 1996. He was
a Zone Manager from August 1979 to May 1981 and Divisionpreviously Vice President, General Counsel and Zone General ManagerSecretary of Wendy's
International, Inc. from May 1981 through January 1985.September 1987 to February 1991.

Mr. Rulon has been Senior Vice President and Secretary of the Company since October 1985.
He was Secretary of the Company from October 1985 to August 1996 and was
previously Secretary and Treasurer of the Company from March 1976 to July
1981 and Senior Vice President, Secretary and Treasurer from July 1981 to
October 1985. Mr. Rulon is also a trustee of Income Managers Trust,
Neuberger & Berman Income Funds and Neuberger & Berman Income Trust.

Mr. Blough has been Vice President, Management Information Systems of the
Company since August 1993 and was previously Division Vice President, Systems
Development from June 1990 to August 1993 and Director of Systems Development
and POS Support from December 1984 to June 1990.

Mr. Bowers has been Vice President, Purchasing and Distribution of the
Company, since April 1982 and previously held various other positions with
the Company relating to manufacturing, purchasing and distribution from
September 1975 to April 1982.

Mr. Cetti has been Vice President, Human Resources and Strategic Planning
of the Company since March 1994. He was previously Vice President, Training
and Risk Management, from December 1992 to March 1994, Division Vice President,
Training and Risk Control from October 1991 to December 1992 and Director of
Management and Franchise Training from April 1981 to October 1991.

Mr. Haley has been a Vice President of the Company and Vice President of
Marketing Communications of Jack In The BoxJACK IN THE BOX Division since February 1995 and1995. He
was previously Division Vice President, Marketing Communications from October
1992 until February 1995. Prior to joining Foodmaker, he was a marketing
consultant, principally on the development of new retail food products, from
November 1991 to October 1992.

Previously, he was a marketing manager for the
California State Lottery from April 1989 to November 1991.

Mr. Motts has been Vice President of the Company and Vice President of
Restaurant Development of Jack In The BoxJACK IN THE BOX Division since September 1988 and1988. He
was previously Director, Restaurant Construction from April 1983 to August
1984 and Division Vice President, Restaurant Construction from August 1984 through
August 1988.
-17-

1988 and was Director, Restaurant Construction from April 1983 to
August 1984.

Mr. Schultz has been Vice President of the Company since May 1988 and Vice
President of Operations, Jack In The BoxJACK IN THE BOX Division since November 1994. He
was Vice President of Domestic Franchising, Jack In The BoxJACK IN THE BOX Division from
October 1993 until November 1994. He was previously Vice President of Jack
In The BoxJACK
IN THE BOX
-17-

Operations-Division I from May 1988 to October 1993, temporarily Vice President
of Jack In The BoxJACK IN THE BOX Operations and Domestic Franchising from June 1992 to January
1993, Regional Manager of Los Angeles from August 1985 to May 1988, and Regional Manager of San Diego from January 1985 to August
1985.1988.

Dr. Theno has been Vice President, Quality Assurance, Research and
Development and Product Safety of the Company since April 1994. He was Vice
President, Quality Assurance and Product Safety from March 1993 to April
1994. Prior to joining Foodmaker, he was previously Managing Director and
Chief Executive Officer of Theno & Associates, Inc., an agribusiness
consulting firm, from January 1990 to March 1993 and Director of Technical
Services for Foster Farms from March 1982 to December 1989.

Ms. Vaughan has been Vice President, New Product and Promotions of the
Company since February 1996. She was Division Vice President, New Products
and Promotions from November 1994 until February 1996. Previously, she was
Manager, Product Marketing from October 1993 until November 1994 and Manager
Franchise Analysis from November 1992 to October 1993. She was Senior
Financial Analyst, Franchise Analysis, from October 1991 until November 1992.

Mr. Weeks has been Vice President, Controller and Chief Accounting Officer
of the Company since August 1995 and was previously Division Vice President and
Assistant Controller for the Company from April 1982 through July 1995.

Mr. Goodall has been Chairman of the Board since October 1985. For more
than five years prior to his retirement in April 1996, he was President and
Chief Executive Officer of the Company. Mr. Goodall is a director of Van Camp
Seafood Company, Inc., Thrifty Payless, Inc. and Ralcorp Holdings, Inc.

Mr. Alpert has been a director of the Company since August 1992.
Mr. Alpert was a partner in the San Diego Office of the law firm of Gibson,
Dunn & Crutcher for more than 5 years prior to his retirement on August 1, 1992.
He is currently Advisory Counsel to Gibson, Dunn & Crutcher. Gibson, Dunn &
Crutcher provides legal services from time to time to the Company.

Mr. Carter has been a director of the Company since June 1991. Mr. Carter
has been an insurance consultant for the Government Division of Corroon &
Black Corporation since February 1987. From February 1987 until December
1990, he was also a consultant to the San Diego Unified School District on
insurance matters. He retired in February 1987 as Chairman and Chief
Executive Officer of Corroon & Black Corporation, Southwestern Region and as
Director and Senior Vice President of Corroon & Black Corporation, New York.

Mr. Gibbons has been a director of the Company since October 1985 and has
been a general partner of Gibbons, Goodwin, van Amerongen ("GGvA"), successor
to Gibbons, Green, van Amerongen ("Gibbons Green"), an investment banking
firm specializing in management buyouts, for more than five years preceding
the date hereof. Mr. Gibbons is also a director of Robert Half
International, Inc.

Mr. Green has been a director of the Company since October 1985 and has
been a general partner of Leonard Green & Partners, an investment firm, since
June 1989. Until June 28, 1989 and forFor more than five years preceding that date, he was a partner of
Gibbons Green. Mr. Green is also a director of Horace Mann Companies, Kash n' Karry Food Stores, Inc., Australian Resources
N.L., Carr-GottsteinBig 5 Corporation, Carr-
Gottstein Foods Co., Thrifty Payless,Communications & Power Industries, Inc. and United
Merchandising Corp.Horace Mann
Educators Corporation.

Mr. Payne has been a director of the Company since August 1986, having
served as a consultant to the Board1986. He has
been President and Chief Executive Officer of DirectorsMulti-Ventures, Inc. since
November 1985. HeFebruary 1976 and was Chairman of the Board of Grossmont Bank, a wholly-owned
subsidiary of Bancomer, S.A., from February 1974 until October 1995, and President and
Chief Executive Officer of Multi-Ventures, Inc. since February 1976.1995.
Multi-Ventures, Inc. is a real estate development and investment company that
is also the managing partner of the San Diego Mission Valley Hilton.Hilton and the
Hanalei Hotel. He was a principal in the Company prior to its acquisition by
its former parent Ralston Purina Company in 1968.

Mr. Walker has been a director of the Company since February 1988. Mr.
Walker has been a Managing Director of Trust Company of the West since April
1995. He was a general partner of Leonard Green & Partners, an

-18-

investment firm from September 1989 until March 1995. He was associated with
Gibbons Green from November 1985 and was a partner thereof from January 1989
until September 1989. Prior to joining Gibbons Green, Mr. Walker worked from March
1984 to October 1985 for Zimmerman Holdings, Inc., a California based private
holding company engaged in the acquisition and operation of manufacturing
companies.
-18-

That portion of Foodmaker's definitive Proxy Statement appearing under the
captions "Information About the Board of Directors and Committees of the
Board" and "Nonconforming Securities and Exchange Commission Filings" to be
filed with the Commission pursuant to Regulation 14A within 120 days after
October 1, 1995September 29, 1996 and to be used in connection with its 19961997 Annual Meeting
of Stockholders is hereby incorporated by reference.

ITEM 11. EXECUTIVE COMPENSATION
----------------------

That portion of Foodmaker's definitive Proxy Statement appearing under the
caption "Executive Compensation" to be filed with the Commission pursuant to
Regulation 14A within 120 days after October 1, 1995September 29, 1996 and to be used in
connection with its 19961997 Annual Meeting of Stockholders is hereby
incorporated by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------

That portion of Foodmaker's definitive Proxy Statement appearing under the
caption "Security Ownership of Certain Beneficial Owners and Management" to
be filed with the Commission pursuant to Regulation 14A within 120 days after
October 1, 1995September 29, 1996 and to be used in connection with its 19961997 Annual Meeting
of Stockholders is hereby incorporated by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------

That portion of Foodmaker's definitive Proxy Statement appearing under the
caption "Certain Transactions" to be filed with the Commission pursuant to
Regulation 14A within 120 days after October 1, 1995September 29, 1996 and to be used in
connection with its 19961997 Annual Meeting of Stockholders is hereby
incorporated by reference.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
---------------------------------------------------------------

ITEM 14(a)(1) Financial Statements. See the index to consolidated financial
statements on page F-1 of this report.

ITEM 14(a)(2) Financial Statement Schedules. Not applicable.

-19-

ITEM 14(a)(3) Exhibits.

Number Description
- ------ -----------
3.1 Restated Certificate of Incorporation(4)Incorporation
3.2 Restated Bylaws(4)
4.1 Warrant Agreement dated as of December 8, 1988, by and among PDV
Holding, Inc., Foodmaker, Inc., Fulcrum III Limited Partnership and
State Street Bank and Trust Company(2)Bylaws(8)
4.2 Indenture for the 9 1/4% Senior Notes due 1999(6)1999(4)
4.3 Indenture for the 9 3/4% Senior Subordinated Notes due 2002(6)2002(4)

(Instruments with respect to the registrant's long-term debt not
in excess of 10% of the total assets of the registrant and its
subsidiaries on a consolidated basis have been omitted. The
registrant agrees to furnish supplementally a copy of any such
instrument to the Commission upon request.)

10.1 Amended and Restated Revolving Credit Agreement dated as of
July 26, 1994,March 15, 1996, as amended as of April 5, 1996 by the Agreement
to Add Banks, among Foodmaker, Inc. and the Banks and Agents, as defined therein(8)named
therein(7)
10.1.1 First Amendment dated as of December 14, 1994November 26, 1996 to the Amended
and Restated Revolving Credit Agreement dated as of July 26, 1994March 15,
1996, as amended as of April 5, 1996 by the Agreement to Add
Banks, among Foodmaker, Inc. and the Banks and Agents, as defined therein(8)
10.1.2 Second Amendment dated as of January 24, 1995 to the Revolving
Credit Agreement dated as of July 26, 1994 among Foodmaker, Inc.
and the Banks and Agents, as defined therein(9)
10.1.3 Third Amendment dated as of February 15, 1995 to the Revolving
Credit Agreement dated as of July 26, 1994 among Foodmaker, Inc.
and the Banks and Agents, as defined therein(9)
10.1.4 Waiver and Amendment dated as of November 20, 1995 to the Revolving
Credit Agreement dated as of July 26, 1994 among Foodmaker, Inc.
and the Banks and Agents, as definednamed therein
10.2 Purchase Agreements dated as of January 22, 1987 between
Foodmaker, Inc. and FFCA/IIP 1985 Property Company and FFCA/IIP
1986 Property Company(1)
10.3 Land Purchase Agreements dated as of February 18, 1987, by and
between Foodmaker, Inc. and FFCA/IPI 1984 Property Company and
FFCA/IPI 1985 Property Company and Letter Agreement relating
thereto(1)
10.4 1992 Employee Stock Incentive Plan(5)Plan(3)
10.5 Capital Accumulation Plan for Executives(3)Executives(2)
10.6 Supplemental Executive Retirement Plan(3)Plan(2)
10.7 Performance Bonus Plan(7)Plan(5)
10.8 Deferred Compensation Plan for Non-Management Directors(10)Directors(6)
10.9 Non-Employee Director Stock Option Plan(10)Plan(6)
10.10 ExchangeForm of Compensation and Benefits Assurance Agreement dated as of November 20, 1995, by and between
Foodmaker, Inc. and Apollo FRI Partners, L.P.
21 Subsidiaries(3)for
Executives
23.1 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule (included only with electronic filing)
- -----------------------------
(1) Previously filed and incorporated herein by reference from registrant's
Registration Statement on Form S-1 (No. 33-10763) filed
February 24, 1987.
(2) Previously filed and incorporated herein by reference from Amendment
No. 2 to registrant's Registration Statement on Form S-1 (No. 33-27670)
filed June 30, 1989.
(3) Previously filed and incorporated herein by reference from
registrant's
Annual Report on Form 10-K for the fiscal year ended September 30, 1990.
(4) Previously filed and incorporated herein by reference from Amendment
No. 1 to registrant's Registration Statement on Form S-1 (No. 33-44198)
filed February 3, 1992.
(5)(3) Previously filed and incorporated herein by reference from registrant's
Quarterly Report on Form 10-Q for the quarter ended January 19, 1992.
-20-

Number Description
- ------ -----------
(6)(4) Previously filed and incorporated herein by reference from registrant's
Quarterly Report on Form 10-Q for the quarter ended April 12, 1992.
(7)(5) Previously filed and incorporated herein by reference from registrant's
Annual Report on form 10-K for the fiscal year ended September 27, 1992.
(8) Previously filed and incorporated herein by reference from
registrant's Annual Report on Form 10-K for the fiscal year ended
October 2, 1994.
(9) Previously filed and incorporated herein by reference from
registrant's Quarterly Report on Form 10-Q for the quarter ended
January 22, 1995.
(10)(6) Previously filed and incorporated herein by reference from registrant's
Definitive Proxy Statement dated January 17, 1995 for the Annual Meeting
of Stockholders on February 17, 1995.
ITEM 14(b) The Company did not file any reports(7) Previously filed and incorporated herein by reference from registrant's
Quarterly Report on Form 10-Q for the quarter ended April 14, 1996.
(8) Previously filed and incorporated herein by reference from registrant's
Current Report on Form 8-K as of July 26, 1996.

-20-

ITEM 14(b) During the fourth quarter ended September 29, 1996, the Company
filed with the Securities and Exchange Commission duringa report on Form 8-K under
item 5 thereof, the fourth quarter ended October 1,
1995.amendment of the Bylaws of the Company and the adoption
of a Stockholder Rights Plan.

ITEM 14(c) All required exhibits are filed herein or incorporated by
reference as described in Item 14(a)(3).

ITEM 14(d) All supplemental schedules are omitted as inapplicable or because
the required information is included in the consolidated financial statements
or notes thereto.

-21-

SIGNATURES
----------

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrantregistrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

FOODMAKER, INC.

By: JACKCHARLES W. GOODALL
-------------------------
JackDUDDLES
---------------------
Charles W. Goodall
Chairman of the Board,Duddles
Executive Vice President,
Chief ExecutiveFinancial Officer, Chief
Administrative Officer and PresidentDirector
Date: December 28, 199523, 1996

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

Signature Title Date
--------- ----- ----
JACK W. GOODALL Chairman of the Board Chief December 28, 199523, 1996
- ----------------------
Executive Officer and President
Jack W. Goodall

ROBERT J. NUGENT President, Chief Executive Officer December 23, 1996
- ---------------------- and Director
Robert J. Nugent (Principal Executive Officer)

CHARLES W. DUDDLES Executive Vice President, December 23, 1996
- ---------------------- Chief December 28, 1995
- --------------------- AdministrativeFinancial Officer, Chief
Charles W. Duddles FinancialAdministrative Officer and Director
(Principal Financial Officer)

DARWIN J. WEEKS Vice President, Controller and December 28, 199523, 1996
- ------------------------------------------- Chief Accounting Officer
Darwin J. Weeks (Principal Accounting Officer)

ROBERT J. NUGENT Executive Vice President, December 28, 1995
- --------------------- President and Chief Operating
Robert J. Nugent Officer of Jack In The Box Division
and Director

MICHAEL E. ALPERT Director December 28, 199523, 1996
- -------------------------------------------
Michael E. Alpert

PAUL T. CARTER Director December 28, 199523, 1996
- -------------------------------------------
Paul T. Carter

-22-

EDWARD GIBBONS - --------------------- Director December 28, 199523, 1996
- ----------------------
Edward Gibbons

- ---------------------

Director December , 19951996
- ----------------------
Leonard I. Green

L. ROBERT PAYNE Director December 28, 199523, 1996
- -------------------------------------------
L. Robert Payne

CHRISTOPHER V. WALKER Director December 28, 1995, 1996
- -------------------------------------------
Christopher V. Walker

-23-

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Foodmaker, Inc. and Subsidiaries Consolidated Financial Statements for the
52-week periods ended September 29, 1996, October 1, 1995 and
October 2, 1994, and the 53-week
period ended October 3, 1993.1994.

Page
----
Independent Auditors' Report .Report. . . . . . . . . . . F-2

Consolidated Balance Sheets.Sheets . . . . . . . . . . . F-3

Consolidated Statements of Operations.Operations . . . . . . F-4

Consolidated Statements of Cash Flows . . . . . . F-5

Consolidated Statements of Cash Flows.Stockholders' Equity . . . . . . F-6
Consolidated Statements of Stockholders' Equity. . F-7

Notes to Consolidated Financial StatementsStatements. . . . . F-8F-7

F-1

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Foodmaker, Inc.:

We have audited the accompanying consolidated balance sheets of Foodmaker,
Inc. and subsidiaries as of September 29, 1996 and October 1, 1995, and October 2, 1994, and the
related consolidated statements of operations, cash flows and stockholders'
equity for the fifty-two weeks ended September 29, 1996, October 1, 1995 and
October 2, 1994, and
the fifty-three weeks ended October 3, 1993.1994. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Foodmaker, Inc. and subsidiaries as of September 29, 1996 and October 1,
1995, and October 2, 1994, and the results of their operations and their cash flows for the fifty-twofifty-
two weeks ended September 29, 1996, October 1, 1995 and October 2, 1994 and the fifty-three weeks
ended October 3, 1993, in
conformity with generally accepted accounting principles.

As discussed in Notes 2, 7 and 10 to the consolidated financial statements,
the Company changed its methods of accounting for postretirement benefits and
income taxes to adopt the provisions of the Financial Accounting Standards
Board's Statements of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" and No. 109,
"Accounting for Income Taxes" in 1993.

KPMG PEAT MARWICK LLP

San Diego, California
November 7, 1995,5, 1996, except for the lastfifth paragraph
of Note 3,12, which is as of November 20, 1995December 10, 1996
F-2

FOODMAKER, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)

ASSETS
September 29, October 1,
October 2,1996 1995
1994
---------- ------------------ --------

Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . $ 41,983 $ 35,865
$ 35,965

Receivables, including notesAccounts receivable, of $5,698
and $6,772, less allowance for doubtful
accounts of $4,531 and $4,173, respectively.net . . . . . . . . . . . . . . 12,482 25,272 31,167
Inventories. . . . . . . . . . . . . . . . . . . . . 20,850 22,385 25,319
Prepaid expenses . . . . . . . . . . . . . . . . . . 21,161 14,367
15,035
------- --------------- --------
Total current assets. . . . . . . . . . . . . . 97,889 107,486
------- -------
Investment in FRI.assets . . . . . . . . . . . . . . . . . . - 57,188
------- -------
Trading area rights, net of accumulated
amortization of $15,618 and $12,775, respectively. . 69,761 62,932
------- -------
Lease acquisition costs, net of accumulated
amortization of $18,580 and $16,096, respectively. . 25,003 27,660
------- -------
Other assets, net of accumulated
amortization of $16,316 and $17,774, respectively. . 36,310 46,041
------- -------
Property at cost:96,476 97,889
-------- --------

Property:
Land . . . . . . . . . . . . . . . . . . . . . . . . 90,890 90,594 90,036
Buildings. . . . . . . . . . . . . . . . . . . . . . 293,690 287,265 264,560
Restaurant and other equipment . . . . . . . . . . . 213,159 201,240 180,115
Construction in progress . . . . . . . . . . . . . . 13,017 10,543
39,874
------- --------------- --------
610,756 589,642
574,585

AccumulatedLess accumulated depreciation and amortization.amortization . . . 177,817 155,931
-------- --------
432,939 433,711
-------- --------

Other assets, net. . . . . . (155,931) (135,607)
------- -------
433,711 438,978
------- -------. . . . . . . . . . . . . 124,223 131,074
-------- --------
$653,638 $662,674
$740,285
======= =======

See accompanying notes to consolidated financial statements.
F-3

FOODMAKER, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY

October 1, October 2,
1995 1994
---------- ----------

Current liabilities:
Current maturities of long-term debt . . . . . . . . $ 1,8361,812 $ 1,3461,836
Accounts payable . . . . . . . . . . . . . . . . . . 29,293 32,015
36,915

Accrued payroll and related taxes. . . . . . . . . . 26,372 22,101

Other accrued taxes.liabilities. . . . . . . . . . . . . . . . . 9,922 9,713

Accrued advertising.115,958 98,166
-------- --------
Total current liabilities. . . . . . . . . . . . . 147,063 132,017
-------- --------

Long-term debt, net of current maturities. . . . . . . 396,340 440,219

Other long-term liabilities. . . . . . . . . . . . . . . . . 7,487 9,050

Accrued insurance. . . . . . . . . . . . . . . . . . 32,406 25,533

Accrued interest . . . . . . . . . . . . . . . . . . 10,437 10,932

Other accrued expenses . . . . . . . . . . . . . . . 11,542 24,648
------- -------
Total current liabilities . . . . . . . . . . . . 132,017 140,238
------- -------51,561 49,599

Deferred income taxes. . . . . . . . . . . . . . . . . 7,290 9,586

5,062

Long-term debt, net of current maturities. . . . . . . 440,219 447,822

Other long-term liabilities.Stockholders' equity:
Preferred stock. . . . . . . . . . . . . . 49,599 47,112

Stockholders' equity:

Preferred stock, $.01 par value, 15,000,000 shares
authorized, none issued . . . . . . . . . . . . . - --- --
Common stock, $.01 par value, voting
shares, 75,000,000 authorized,
40,214,84940,253,179 and 40,080,85440,214,849 issued, respectively . . . . . . .403 402 401
Capital in excess of par value . . . . . . . . . . . 281,075 280,996 280,837
Accumulated deficit. . . . . . . . . . . . . . . . . (215,631) (235,682) (166,724)
Treasury stock, at cost, 1,412,654 shares. . . . . . (14,463) (14,463)
------- --------------- --------
Total stockholders' equity.equity . . . . . . . . . . . . 51,384 31,253
100,051
------- --------------- --------
$653,638 $662,674
$740,285
======= =============== ========

See accompanying notes to consolidated financial statements.
F-4F-3

FOODMAKER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

Fifty-two Fifty-two Fifty-three
weeks ended weeks ended weeks endedSeptember 29, October 1, October 2,
October 3,1996 1995 1994 1993
--------- --------- ---------

Revenues:
Restaurant sales . . . . . . . . . . . . $ 892,029 $ 804,084 $ 843,038 $1,088,269
Distribution sales . . . . . . . . . . . 132,421 179,689 171,711 108,546
Franchise rents and royalties. . . . . . 34,048 32,530 33,740 35,232
Other. . . . . . . . . . . . . . . . . . 4,324 2,413 4,837 8,680
--------- --------- ---------
1,062,822 1,018,716 1,053,326 1,240,727
--------- --------- ---------
Costs and expenses:
Costs of revenues:
Restaurant costs of salessales. . . . . . . 226,139 244,560 307,940290,955 258,627 267,001
Restaurant operating costs.costs . . . . . 447,656. 477,976 447,235 495,340 644,434
Costs of distribution salessales. . . . . . 175,611130,241 175,688 165,789 104,817
Franchised restaurants costs.costs . . . . . 20,039 21,929 22,822 67,727
Selling, general and administrative. . . 110,188 100,764 124,42272,134 78,044 78,323
Equity in loss of FRI. . . . . . . . . . -- 57,188 2,108 -
Interest expense . . . . . . . . . . . . 46,126 48,463 55,201 57,586
--------- --------- ---------
1,037,471 1,087,174 1,086,584 1,306,926
--------- --------- ---------
LossEarnings (loss) before income taxes and
extraordinary item
and cumulative effect of changes
in accounting principles . . . . . . . . (68,458) (33,258) (66,199)

Income taxes (benefit) . . . . . . . . . . 500 3,010 (22,071)
--------- --------- ---------
Loss before extraordinary item and
cumulative effect of changes
in accounting principles . . . . . . . . (68,958) (36,268) (44,128)
Extraordinary item - loss on early
extinguishment of debt, net of25,351 (68,458) (33,258)
Income taxes . . - (3,302) -
Cumulative effect on prior years of
adopting SFAS 106 and SFAS 109 . . . . . - - (53,980)
--------- --------- ---------
Net loss . . . . . . . . . . . . . . . 5,300 500 3,010
--------- --------- ---------
Earnings (loss) before extraordinary item. 20,051 (68,958) (36,268)
Extraordinary item - loss on early
extinguishment of debt, net of taxes . . $ (68,958) $ (39,570) $ (98,108)
========= ========= =========
Loss per share - primary and fully diluted:
Loss before extraordinary item and
cumulative effect of changes
in accounting principles-- -- (3,302)
--------- --------- ---------
Net earnings (loss). . . . . . . . . . . . $ 20,051 $ (68,958) $ (39,570)
========= ========= =========

Earnings (loss) per share - primary
and fully diluted:
Earnings (loss) before
extraordinary item . . . . . . . . . . $ .51 $ (1.77) $ (.94) $ (1.15)
Extraordinary item . . . . . . . . . . . --- -- (.09) -
Cumulative effect on prior years of
adopting SFAS 106 and SFAS 109 . . . . - - (1.40)
--------- --------- ---------
Net lossearnings (loss) per share . . . . . .share. . . . . . $ .51 $ (1.77) $ (1.03) $ (2.55)
========= ========= =========

Weighted average shares outstanding. . . . 39,301 38,915 38,531 38,486

See accompanying notes to consolidated financial statements.
F-5F-4

FOODMAKER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands, except per share data)

Fifty-two Fifty-two Fifty-three
weeks ended weeks ended weeks endedSeptember 29, October 1, October 2,
October 3,1996 1995 1994 1993
--------- --------- ---------
Cash flows from operations:operating activities:
Net lossearnings (loss) excluding
extraordinary item. . $ (68,958) $ (36,268) $ (98,108)

Non-cash items included in operations:
Depreciation and amortization . . . . 35,837 39,925 53,499
Deferred finance cost amortization. . 2,467 2,685 3,200
Deferred income taxesitem . . . . . . . . 4,524 4,535 (23,905)
Equity. . $ 20,051 $ (68,958) $ (36,268)
Non-cash items included in loss of FRIoperations:
Depreciation and amortization. . . . . 36,491 35,837 39,925
Deferred finance cost amortization . . 2,499 2,467 2,685
Deferred income taxes. . . . . . . . . (2,296) 4,524 4,535
Equity in loss of FRI. . . . . . . . . -- 57,188 2,108
-
Cumulative effect of accounting
changes.Decrease (increase) in receivables . . . 12,790 5,895 (3,373)
Decrease in inventories. . . . . . . . . 1,535 2,934 194
Increase in prepaid expenses . . . . . . (7,421) (985) (196)
Increase (decrease) in accounts payable. (2,722) (4,900) 16,375
Increase (decrease) in other
accrued liabilities. . . . . . . . . . 23,206 (458) 3,417
--------- --------- ---------
Cash flows provided by operating
activities . . . . . . . . . . . . . . - - 53,980
Decrease (increase) in receivables . . . 5,895 (3,373) 6,442
Decrease (increase) in inventories . . . 2,934 194 (5,646)
Increase in prepaid expenses . . . . . . (985) (196) (2,200)
Increase (decrease) in accounts payable. (4,900) 16,375 (1,659)
Increase (decrease) in other accrued
liabilities . . . . . . . . . . . . . . (458) 3,417 40,067
--------- --------- ---------
Cash flows from operations. . . . .84,133 33,544 29,402 25,670
--------- --------- ---------

Cash flows from investing activities:
Additions to property and equipment. . . (33,232) (27,033) (92,037) (46,269)
Disposition of property and equipment. . 4,597 4,416 3,374 6,162
Increase in trading area rights. . . . . (1,086) (9,745) (9,915 (1,289)(9,915)
Investment in FRI, net . . . . . . . . . --- -- (59,296) -
Disposition of Chi-Chi's . . . . . . . . --- -- 214,551 -
Acquisition of Consul. . . . . . . . . . - - (8,700)
Other. . . . . . . . . . . . . . . . . . (1,012) 6,538 (2,641) (8,830)
--------- --------- ---------
Cash flows provided (used) by
investing activities . . . . . . . . (30,733) (25,824) 54,036 (58,926)
--------- --------- ---------

Cash flows from financing activities:
Proceeds from issuance of long-term debt 400 900 82,519 2,283
Principal payments on long-term debt,
including current maturities.maturities . . . . . (44,677) (8,385) (113,033) (25,015)
Borrowings under revolving bank loans. . -- 29,000 5,000 30,000
Principal repayments under revolving
bank loans.loans . . . . . . . . . . . . . . -- (29,000) (35,000) -
Extraordinary loss on retirement of
debt, net of taxes.taxes . . . . . . . . . . --- -- (3,302) -
Increase (decrease) in accrued interest. (3,085) (495) 1,678 (1,875)
Proceeds from issuance of common stock . 80 160 489 1,171
Repurchase of common stock . . . . . . . - - (10,929)
Payments on stockholder notes. . . . . . - - 65
Proceeds from sale and leaseback
transactions.transactions . . . . . . . . . . . . . --- -- 9,695
22,035--------- --------- ---------
Cash flows provided (used) byused in financing
activities . . . . . . . . . . . . . (47,282) (7,820) (51,954) 17,735
--------- --------- ---------

Net increase (decrease) in cash and cash
equivalents .equivalents. . . . . . . . . . . . . . . $ 6,118 $ (100) $ 31,484 $ (15,521)
========= ========= =========

Supplemental disclosure of cash flow
information:
Cash paid during the year for:
Interest, net of amounts capitalized. $ 46,712 $ 46,491 $ 51,242 $ 56,070
Income tax payments (refunds), net. . 5,973 (6,403) (275) 4,837

Noncash investing and financing activities:
Increase in property and intangible
assets due to change in accounting
for income taxes. . . . . . . . . . . . $ - $ - $ 16,401

See accompanying notes to consolidated financial statements.
F-6F-5

FOODMAKER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands, except per share data)

Capital
Common stock in excess
Notes
Common stockNumber of of par Accumulated Treasury receivable-
Shares Amount value deficit stock stockholders Total
---------- ------ -------- --------- -------- ------- ------------ --------------

Balance at September 27, 1992 38,505,500October 3, 1993 . . . 39,646,904 $ 385 $279,193 $ (29,046) $ (3,534) $ (65) $246,933396 $280,353 $(127,154) $(14,463) $139,132

Exercise of stock options
and warrants 1,141,404 11 1,160 - - - 1,171

Payments on stockholder notes - - - - - 65 65

Purchases of treasury stock - - - - (10,929) - (10,929)

Net loss of the Company - - - (98,108) - - (98,108)
---------- ---- ------- -------- ------- ----- -------
Balance at October 3, 1993 39,646,904 396 280,353 (127,154) (14,463) - 139,132

Exercise of stock options
and warrants. . . . . . . . . 433,950 5 484 - - --- -- 489

Net loss of the Company - - -Company. . . . . -- -- -- (39,570) - --- (39,570)
---------- ---- ------------ -------- ------- ----- ---------------- -------- --------

Balance at October 2, 1994 . . . 40,080,854 401 280,837 (166,724) (14,463) - 100,051

Exercise of stock options
and warrants . . . . . . . . . 133,995 1 159 - - --- -- 160

Net loss of the Company - - -Company. . . . . -- -- -- (68,958) - --- (68,958)
---------- ---- ------------ -------- ------- ----- ---------------- -------- --------

Balance at October 1, 1995 . . . 40,214,849 402 280,996 (235,682) (14,463) 31,253

Exercise of stock options
and warrants . . . . . . . . . 38,330 1 79 -- -- 80

Net earnings of the Company. . . -- -- -- 20,051 -- 20,051
---------- ----- -------- --------- -------- --------

Balance at September 29, 1996. . 40,253,179 $ 402 $280,996 $(235,682)403 $281,075 $(215,631) $(14,463) $ - $ 31,25351,384
========== ==== ============ ======== ======= ===== ================ ======== ========

See accompanying notes to consolidated financial statements.
F-7F-6

FOODMAKER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)

1. ORGANIZATION Foodmaker, Inc. (the "Company") operates and franchises Jack in the Box
restaurants and formerly operated Chi-Chi's Mexican restaurants ("Chi-
Chi's") (see Note 3). The number of restaurants in operation at the end
of each fiscal year follows:

Jack in the Box Chi-Chi's
--------------------- ---------
1995 1994 1993 1993
---- ---- ---- ----
Operated by the Company. . . . 863 810 725 207
Operated by franchisees. . . . 389 414 447 28
----- ----- ----- ---
System restaurants . . . . . . 1,252 1,224 1,172 235
===== ===== ===== ===

2.AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of operations - Foodmaker, Inc. (the "Company" or "Foodmaker")
operates and franchises JACK IN THE BOX quick-serve restaurants with
operations principally in the western and southwestern United States.
Until January 27, 1994, the Company also owned Chi-Chi's, Inc. ("Chi-
Chi's"), a chain of full-service, casual Mexican restaurants located
primarily in the midwestern and midatlantic United States.

Basis of presentation and fiscal year - The consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. All significant intercompany transactions are eliminated.
Certain prior year amounts in the consolidated financial statement reclassificationsstatements have
been made in prior
yearsreclassified to conform towith the 19951996 presentation. The Company's
fiscal year is 52-5352 or 53 weeks ending the Sunday closest to September 30.

Cash equivalents, for purposesFair value of the statementsfinancial instruments - The Company invests cash in excess
of cash flows, are
considered to be alloperating requirements in short term, highly liquid investments with
a maturityoriginal maturities of three months or less, when purchased.which are considered as cash
equivalents. The fair value of these financial instruments approximate
the carrying amounts due to their short duration. The fair values of each
of the Company's long-term debt instruments are based on quoted market
values, where available, or on the amount of future cash flows associated
with each instrument discounted using the Company's current borrowing rate
for similar debt instruments of comparable maturity. The fair values of
the Company's long-term debt approximate carrying values.

Inventories are valued at the lower of cost which approximates FIFO,(first-in, first-out method)
or market.

Investments - The Company accounts for its 39% investment in Family
Restaurants, Inc. ("FRI") usingPreopening costs are those typically associated with the equity methodopening of accounting. In 1995
the Company completely wrote off its investment in FRI (see Note 3).

Trading area rights represent the amount allocated under purchase
accounting to reflect the value of operating existing restaurants within
their specific trading areaa new
restaurant and are amortized on a straight-line basis
over the period of control of the property, not exceeding 40 years, and
are retired when a restaurant is franchised or sold.

Lease acquisition costs represent the acquired values of existing lease
contracts having lower contractual rents than fair market rents and are
amortized over the remaining lease term.

Other assets are inclusive of deferred franchise contract costs
representing the acquired value of franchise contracts, amortized over the
term of the franchise agreement, usually 20 years; deferred finance costs
amortized on the interest method over the terms of the respective loan
agreements, from 7 to 14 years; and pre-opening costs, consistingconsist primarily of employee training and food costs
incurred before a restaurant opens,
whichopens. Preopening costs, included in prepaid
expenses, are capitalized and amortized over a one-year period commencing on the date a
restaurant opens.

Cost of business in excess of net assets at acquisition is amortized on a
straight-line basis over 40 years. The Company assesses the
recoverability of cost of business in excess of net assets at acquisition
by determining whether the amortization of the balance over its remaining
life can be recovered through projected undiscounted future cash flows.
Based on these calculations, the Company has determined that this
intangible asset was not impaired at October 1, 1995, October 2, 1994 and
October 3, 1993.

F-8

FOODMAKER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Property at cost - Facilities leased under capital leases are stated at
the present value of minimum lease payments at the beginning of the lease
term, not to exceed fair value.

Depreciation is provided on a straight-line basis over the estimated
useful lives of the buildings and equipment or over the lease term for
certain capital leases (buildings 3% to 6 2/3% per year and restaurant and
other equipment 3% to 33 1/3% per year). Expenditures for new facilities and those whichthat
substantially increase the useful lives of the property are capitalized.
Maintenance, repairs, and minor renewals are expensed as incurred. When
properties are retired or otherwise disposed of, the related cost and
accumulated depreciation are removed from the accounts and gains or losses
on the dispositions are reflected in results of operations.

Facilities leased under capital leases are stated at the present value of
minimum lease payments at the beginning of the lease term, not to exceed
fair value.

Buildings, equipment and leasehold improvements are depreciated using the
straight-line method based on the estimated useful lives of the assets or
over the lease term for certain capital leases (buildings 15 to 33 years
and equipment 3 to 30 years).

Investments - The Company accounted for its 39% investment in Family
Restaurants, Inc. ("FRI") using the equity method of accounting. In 1995
the Company completely wrote off its investment in FRI as described in
Note 2.

Trading area rights represent the amount allocated under purchase
accounting to reflect the value of operating existing restaurants within
their specific trading area. These rights are amortized on a straight-
line basis over the period of control of the property, not exceeding 40
years, and are retired when a restaurant is franchised or sold.
F-7

FOODMAKER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Lease acquisition costs represent the acquired values of existing lease
contracts having lower contractual rents than fair market rents and are
amortized over the remaining lease term.

Other assets primarily include deferred franchise contract costs, deferred
finance costs and goodwill. Deferred franchise contract costs represent
the acquired value of franchise contracts and are amortized over the term
of the franchise agreement, usually 20 years. Deferred finance costs are
amortized on the interest method over the terms of the respective loan
agreements, from 4 to 10 years. Goodwill represents the cost of business
in excess of net assets at acquisition and is amortized on a straight-line
basis over 40 years. The Company assesses the recoverability of goodwill
by determining whether the amortization of the balance over its remaining
life can be recovered through projected undiscounted future cash flows.
Based on these calculations, the Company has determined that this
intangible asset was not impaired and no reduction in the related
estimated useful life is warranted.

Franchise operations - Franchise fee revenuesarrangements generally provide for
initial license fees of approximately $50 (formerly $25) per restaurant
and continuing payments to the Company based on a percentage of sales.
Among other things, the franchisee may be provided the use of land and
building, generally for a period of 20 years, and is required to pay
negotiated rent, property taxes, insurance and maintenance. Franchise
fees are recognizedrecorded as revenue when the Company has substantially performed
all material services have been performed by the Company.of its contractual obligations. Expenses associated with the issuance
of the franchise are charged to expenseexpensed as incurred. Continuing fees from franchised restaurants, for which the Company is
obligated to maintain its restaurant concepts,Franchise rents and royalties
are recorded as income on an accrual basis. Gains on sales of restaurant
businesses to franchisees, including trading area rights and equipment,which have not been material, are recorded as
other revenues when the sales are consummated and certain other criteria
are met.

Income taxes - In February 1992, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. ("SFAS") 109,
"Accounting for Income Taxes". SFAS 109 requires a change from the
deferred method of accounting for income taxes of APB Opinion 11 to the
asset and liability method of accounting for income taxes. Under the
asset and liability method of SFAS 109, deferredDeferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.

Under SFAS 109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. Effective September 28, 1992,
the Company adopted SFAS 109 and has reported the cumulative effect of
this change in the 1993 consolidated statement of operations.

Net earnings (loss) per share for each year is computed based on the
weighted average number of common and common equivalent shares
outstanding. When dilutive, stock options and warrants are included as
share equivalents using the treasury stock method. PrimaryFor all years
presented, primary and fully diluted earnings (loss) per share are not
materially different.

Stock Optionsoptions - The Company accounts for stock options under the intrinsic
value based method whereby compensation expense is recognized onfor the
difference betweenexcess, if any, of the quoted market price of the Company stock at the
date of grant andover the option price. F-9The Company's policy is to grant
stock options at fair value at the date of grant.

Advertising costs - The Company maintains a marketing fund consisting of
funds contributed by the Company equal to at least 5% of gross sales of
all Company-operated JACK IN THE BOX restaurants and contractual marketing
fees paid monthly by franchisees for restaurants operated in the United
States. Production costs of commercials, programming and other marketing
activities are expensed to the marketing fund.

Estimations - Management is required to make certain assumptions and
estimates in conformity with generally accepted accounting principles that
affect reported amounts of assets, liabilities, disclosure of
contingencies, revenues and expenses. Actual amounts could differ from
these estimates.
F-8

FOODMAKER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
3.(continued)

2. FAMILY RESTAURANTS, INC.

On January 27, 1994, Foodmaker, Apollo FRI Partners, L.P. ("Apollo") and
Green Equity Investors, L.P. ("GEI"), whose general partner is Leonard
Green & Partners, acquired Restaurant Enterprises Group, Inc. ("REGI"), a
company that owns, operatesowned, operated and franchisesfranchised various restaurant chains
including El Torito, Carrows and Coco's. Contemporaneously, REGI changed
its name to Family Restaurants, Inc. ("FRI"). Concurrently, Foodmaker
contributed its entire Chi-Chi's Mexican restaurant chain to FRI in
exchange for a 39% equity interest in FRI, valued at $62 million, a five-yearfive-
year warrant to acquire 111,111 additional shares at $240 per share, which
would increase its equity interest to 45% and approximately $173 million
in cash ($208 million less the face amount of Chi-Chi's debt assumed, aggregatingof
approximately $35 million). Apollo and GEI, respectively, contributed $62
million and $29 million in cash and holdheld approximate 39% and 18% equity
positions in FRI. Management of FRI invested $2.5 million in cash and
notes and holdsheld an approximate 4% equity position. The net cash received
was used by Foodmaker to repay all of the debt outstanding under its then
existing bank credit facility, which has been terminated, and to reduce
other debt, to the extent permitted by the Company's financing agreements,
and to provide funds for capital expenditures and general corporate
purposes.

As a result of negative publicity regarding the nutritional value of
Mexican food, and resultingsubstantial sales declines, FRI wrote off the goodwill
attributable to Chi-Chi's in their fourthits quarter ended December 25, 1994. The
Company recordedthen wrote off its 39% investment in FRI in its first quarter of
1995 the complete write-down
of its 39% investment in FRI as a result of the goodwill write-off.

Summarized financial information through FRI's third quarter ended
September 24, 1995, follows:

Statement of operations data: Balance sheet data:
Sales . . . . . $852,040 Current assets. . . . . $ 38,499
Gross profit. . 42,205 Current liabilities . . 295,106
Net loss. . . . (98,545) Total assets. . . . . . 674,096
Stockholders' deficit . (106,421)fiscal year 1995.

Because of FRI's continuing substantial losses and resulting increased
borrowing requirements, the major FRI stockholders were required to
purchase a participation with respect toin any additional advances by the banks to FRI.
Rather than become liable for these advances, the Company, by an agreement
dated November 20, 1995, transferred all of its stock and warrants to
Apollo. Since the Company's investment in FRI was previously written off
in fiscal 1995, the consummation of this agreement subsequent to the date of the financial statements will havehad no effect on the
consolidated financial condition or results of operations of the Company.
F-10Company
in fiscal 1996.
F-9

FOODMAKER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
4.(continued)

3. LONG-TERM DEBT

September 29, October 1,
October 2,1996 1995
1994
------- ------------------- ---------

The detail of long-term debt follows:

Senior notes, 9 1/4% interest, due March 1, 1999,
redeemable beginning March 1, 1997. . . . . . . . . . . . . . . . $175,000 $175,000
Senior subordinated notes, 9 3/4% interest, due June 1, 2002,
redeemable beginning June 1, 1997 . . . . . . . . . . . . . . . . 125,000 125,000
Senior notes, 12 3/4% interest, repaid in full November 3, 1994. . - 7,043
Senior subordinated notes, 14 1/4% interest,
due May 15, 1998, redeemable beginning May 15, 1993,
repaid in full on May 15, 1996. . . . . . . . 42,843. . . . . . . . . . -- 42,843
Financing lease obligations, net of discounts of
$2,923$2,548 reflecting a 10.3% effective interest rate,
semi-annual payments of $3,413 and $747 to cover
interest and sinking fund requirements, respectively,
due in equal installments January 1, 2003 and
November 1, 2003. . . . . . . . . . . . . . . . . . . . . . . . . 67,452 67,077 66,705
Secured notes, 11 1/2% interest, due in monthly
installments through May 1, 2005. . . . . . . . . . . . . . . . . 9,356 9,954 10,489
Secured notes, 9 1/2% interest, due in monthly
installments through August 1, 2017 . . . . . . . . . . . . . . . 8,456 8,580 8,692
Capitalized lease obligations, 11% average interest rate . . . . . 11,043 11,127 11,213
Other notes, principally unsecured, 10% average interest raterate. . . . . . . . . . . . . . . . . . . . .1,845 2,474
2,183
------- --------------- --------
398,152 442,055 449,168
Less current portion . . . . . . . . . . . . . . . . . . . . . . . (1,836) (1,346)
------- -------1,812 1,836
-------- --------
$396,340 $440,219
$447,822
======= =============== ========

The secured notesCompany's revolving bank credit agreement which was restated March 15,
1996, expires December 31, 1998, and bank loans are secured by substantially allprovides for a credit facility of up
to $60 million, including letters of credit of up to $25 million. The
credit agreement requires the payment of an annual commitment fee of
either 1/2% or 3/8% of the unused credit line depending on the Company's
real and personal property.leverage ratio. The Company had no borrowings under the agreement at the
end of fiscal years 1996 or 1995.

The Company is subject to a number of covenants under its various credit
agreements including limitations on additional borrowing,borrowings, capital
expenditures, lease commitments and dividend payments, and requirements to
maintain certain financial ratios, cash flows and net worth. On July 26, 1994, the Company entered into a revolving bank credit
agreement, expiring July 26, 1997, which provides for a credit facility of
up to $52.5 million, including letters of credit for the account of the
Company in an aggregate amount of up to $25 million. The revolvingsecured
notes and bank loans requireare secured by substantially all the payment of a commitment fee of 1/2% per year of the
unused credit line.

F-11Company's real
and personal property.

F-10

FOODMAKER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
4.(continued)

3. LONG-TERM DEBT (continued)

In early January 1994, the Company entered into financing lease
arrangements with two limited partnerships (the "Partnerships"), in which
estates for years relating to 76 restaurants were sold. The acquisition
of the properties, including costs and expenses, was funded through the
issuance by a special purpose corporation acting as agent for the
Partnerships of $70 million senior secured notes, interest payable semi-
annually and due in two equal annual installments of principal onnotes. On January 1, 2003 and
November 1, 2003. The Company is required semi-
annually through 2002 to make payments to a trustee of approximately $3.4
million and special payments of approximately $.7 million, which
effectively cover interest and sinking fund requirements, respectively, on
the notes. Immediately prior to the principal payment dates,2003, the Company must make rejectable offers to reacquire 50% of the
properties at each date at a price which is sufficient, in conjunction
with previous sinking fund deposits, to retire the notes. If the
Partnerships reject the offers, the Company may purchase the properties at
less than fair market value or cause the Partnerships to fund the
remaining principal payments on the notes and, at the Company's option,
cause the Partnerships to acquire the Company's residual interest in the
properties. If the Partnerships are allowed to retain the estates for
years, the Company has available options to extend the leases for total
terms of up to 35 years, at which time the ownership of the property will
revert to the Company. The transactions are reflected as financings with
the properties remaining in the Company's consolidated financial
statements.

Aggregate maturities and sinking fund requirements on all long-term debt
are $1,805, $44,289, $176,566$2,948, $178,069, $3,229 and $1,725$3,410 for the years 19971998 through 2000,2001,
respectively.

Interest capitalized during the construction period of restaurants was
$200, $161 and $727 in 1996, 1995 and $255 in 1995, 1994, and 1993, respectively.

5. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of cash and cash equivalents, trade receivables, trade
accounts payable, accrued expenses and notes payable to banks approximate
fair values.

The fair values of each of the Company's long-term debt instruments are
based on quoted market values, where available, or on the amount of future
cash flows associated with each instrument discounted using the Company's
current borrowing rate for similar debt instruments of comparable
maturity. The carrying value and the estimated fair value of the
Company's long-term debt at October 1, 1995 are $430,928 and $412,028,
respectively.

Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. These estimates are subjective in nature and involve
uncertainties and matters of significant judgement and therefore cannot be
determined with precision. Changes in assumptions could significantly
affect the estimates.

The Company does not maintain investments or commitments for which the
application of SFAS 119, "Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instruments," would cause a
material effect.

F-12

FOODMAKER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)

6.4. LEASES

As Lessee - The Company leases restaurant and other facilities under
leases having terms expiring at various dates through 2046. The leases
generally have renewal clauses of 5 to 20 years exercisable at the option
of the Company and in some instances have provisions for contingent
rentals based upon a percentage of defined revenues. Total rent expense
for all operating leases was $81,006, $75,680 $77,296 and $87,845,$77,296, including
contingent rentals of $3,903, $2,843 and $3,486 in 1996, 1995 and $3,875 in 1995, 1994, and 1993,
respectively.

Future minimum lease payments under capital and operating leases are as
follows:

Fiscal Capital Operating
year leases leases
------ ------- --------
1996.1997. . . . . . . . . . . . . . . . . . . . . . . $ 1,7291,689 $ 64,340
1997. . . . . . . . . . . . . . . . . . . . . . . 1,658 61,65668,803
1998. . . . . . . . . . . . . . . . . . . . . . . 1,580 58,0471,611 65,494
1999. . . . . . . . . . . . . . . . . . . . . . . 1,538 54,9561,568 62,814
2000. . . . . . . . . . . . . . . . . . . . . . . 1,518 49,5531,549 56,667
2001. . . . . . . . . . . . . . . . . . . . . . . 1,531 52,422
Thereafter. . . . . . . . . . . . . . . . . . . . 16,203 352,726
------15,426 348,427
------- --------
Total minimum lease payments . . . . . . . . . . . 24,226 $641,27823,374 $654,627
========
Less amount representing interest. . . . . . . . . 13,099 =======
------12,331
-------
Present value of obligations under capital leases. 11,12711,043
Less current portion . . . . . . . . . . . . . . . 484
------468
-------
Long-term capital lease obligationobligations. . . . . . . . . $10,643
======$10,575
=======
F-11

FOODMAKER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)

4. LEASES (continued)

Building assets recorded under capital leases were $10,248$13,281 and $10,464,$10,248,
net of accumulated depreciation of $3,033$3,639 and $2,420,$3,033, as of September 29,
1996 and October 1, 1995, and October 2, 1994, respectively.

As Lessor - The Company leases or subleases restaurants to certain
franchisees and others under agreements which generally provide for the
payment of percentage rentals in excess of stipulated minimum rentals,
usually for a period of 20 years. Total rental revenue was $21,497,
$21,309 $21,911 and $26,318,$21,911, including contingent rentals of $5,469, $4,763 and
$4,979 in 1996, 1995 and $8,880 in 1995, 1994, and 1993, respectively.

The minimum rents receivable under these non-cancelable leases are as
follows:

Fiscal Sales-type Operating
year leases leases
------ ------- --------
1996.1997. . . . . . . . . . . . . . . . . . . . . . . $ 44 $ 16,815
1997. . . . . . . . . . . . . . . . . . . . . . . 44 16,12816,542
1998. . . . . . . . . . . . . . . . . . . . . . . 44 15,96316,193
1999. . . . . . . . . . . . . . . . . . . . . . . 44 15,79915,968
2000. . . . . . . . . . . . . . . . . . . . . . . 44 15,531
2001. . . . . . . . . . . . . . . . . . . . . . . 45 15,43415,262
Thereafter. . . . . . . . . . . . . . . . . . . . 255 104,694
---- -------211 90,081
----- --------
Total minimum future rentals . . . . . . . . . . . 476 $184,833432 $169,577
========
Less amount representing interest. . . . . . . . . 198 =======
----168
-----
Net investment (included in other assets). . . . . $ 278
====264
=====

Land and building assets held for lease were $67,972$65,156 and $76,051,$67,972, net of
accumulated depreciation of $14,862$17,038 and $14,664,$14,862, as of September 29, 1996
and October 1, 1995, and
October 2, 1994, respectively.

F-13

FOODMAKER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)

7.5. INCOME TAXES

The Company adopted SFAS 109 as of September 28, 1992. The $43,804
cumulative effect at that date of this change in accounting for income
taxes is reported separately in the 1993 consolidated statement of
operations.

The fiscal year income taxes consist of the following:

1996 1995 1994 1993
--------- --------- ---------
Federal - current . . . . . . . . . . . . $ 7,179 $ (388) $ (624) $ -
- deferred. . . . . . . . . . . . (2,680) 345 3,236 (21,252)
State - current . . . . . . . . . . . . 737 256 478 1,834
- deferred. . . . . . . . . . . . 64 287 (1,858)
(2,653)
-------------- ------ -------
Subtotal. . . . . . . . . . . . . . . . . 5,300 500 1,232 (22,071)
Income tax benefit of extraordinary item. - (1,778) -
-------- -- 1,778
-------- ------ -------
Income taxes (benefit)taxes. . . . . . . . . . . . . . . $ 5,300 $ 500 $ 3,010
$(22,071)======== ====== ====== =======
F-12

FOODMAKER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)

5. INCOME TAXES (continued)

A reconciliation of fiscal year income taxes with the amounts computed at
the statutory federal rate of 35% follows:
1996 1995 1994 1993
--------- --------- ---------
Computed at federal statutory rate. . . . $ 8,874 $(23,960) $(11,640) $(23,170)
State income taxes (benefits), net of
federal effect . . . . . . . . . . . . . 521 353 (897) (410)
Amortization of intangibles . . . . . . . 53 27 327 1,088
Targeted jobs credit wages. . . . . . . . -- (733) (742)
(585)
Addition (reduction) to valuation
allowanceallowance. . . . . . . . . . . . . . . . (4,295) 26,280 18,520 537
Gain on sale of subsidiary. . . . . . . . --- -- (1,988) -
Benefit of reattributed net operating
loss carryback . . . . . . . . . . . . . -- (1,420) - ---
Other, net. . . . . . . . . . . . . . . . 147 (47) (570)
469
------ ------ ------- -------- --------
$ 5,300 $ 500 $ 3,010
$(22,071)
====== ====== ======= F-14

FOODMAKER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)

7. INCOME TAXES (continued)======== ========

The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities are presented
below:
September 29, October 1,
October 2,1996 1995
1994
-------- -----------------
Deferred tax assets:
Tax loss, andcaptial loss, contribution carryforwards
and tax credits. . . . . . .credit carryforwards . . . . . . . . . . $ 33,38757,698 $ 29,45533,387
Investment in subsidiary. . . . . . . . . . . . . -- 26,130 3,140
Insurance reserves. . . . . . . . . . . . . . . . 16,569 14,393 14,242
Accrued pension and postretirement benefits . . . 8,775 9,552 9,649
Accrued vacation pay expense. . . . . . . . . . . 6,257 6,029 5,767
Other reserves and allowances . . . . . . . . . . 5,049 5,871 7,308
Deferred income . . . . . . . . . . . . . . . . . 3,840 3,598 4,190
Other, net. . . . . . . . . . . . . . . . . . . . $ 3,352 $ 2,383
1,511
------- --------------- --------
Total gross deferred tax assets . . . . . . . . . 101,540 101,343 75,262
Less valuation allowance. . . . . . . . . . . . . (49,507) (23,227)
------- -------45,212 49,507
-------- --------
Net deferred tax assets . . . . . . . . . . . . . 56,328 51,836
52,035
------- --------------- --------

Deferred tax liabilities:
Property and equipment, principally due to
differences in depreciation. . . . . . . . . . . 47,707 43,889 40,960
Intangible assets . . . . . . . . . . . . . . . . 15,592 17,059 15,539
Other, net. . . . . . . . . . . . . . . . . . . . 319 474
598
------- --------------- --------
Total gross deferred liabilitiestax liabilities. . . . . . . . .63,618 61,422
57,097
------- --------------- --------
Net deferred tax liabilityliability. . . . . . . . . . . . $ 7,290 $ 9,586
$ 5,062
======= =============== ========
F-13

FOODMAKER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)

5. INCOME TAXES (continued)

The valuation allowance of $49,507$45,212 as of October 1, 1995September 29, 1996 represents
deferred tax assets that may not be realized by the reversal of future
taxable temporary differences. In fiscal 1995,1996, the Company recognized an
increasea
decrease in the valuation allowance of $26,280$4,295 related to the write-offexpected use
of the investment in Family Restaurants, Inc., the SFAS 106 accrual and an
adjustment to contributionstax credit carryforwards.

At October 1, 1995,September 29, 1996, the Company had federal tax net operating loss
carryforwards of approximately $41,294$16,101 which expire in 2008 andthrough 2010, and
general business credit carryforwards of approximately $10,249,$10,777 which
expire in 2000 through 2010.2010 and captial loss carryforwards of approximately
$65,000 which expire in 2001. The Company has alternative minimum tax
credit carryforwards of approximately $6,692.$13,856. The alternative minimum
tax credit carryforwards have no expiration date; however, they may only
be utilized to reduce any regular tax liability the Company may have in the
future.

8. CONTINGENT LIABILITIES

Various claims and legal proceedings are pending against the Company in
various state and federal courts. Many of those proceedings are in the
states of California, Washington, Nevada, Idaho and Oregon, seeking
monetary damages for personal injuries relating to the outbreak of food-
borne illness (the "Outbreak") attributed to hamburgers served at
Jack in the Box restaurants. The Company, in consultation with its
insurance carriers and attorneys, does not anticipate that the total
liability on all such lawsuits and claims will exceed the coverage
available under its applicable insurance policies.

F-15

FOODMAKER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)

8. CONTINGENT LIABILITIES (continued)

Actions were filed on July 2, 1993, in the Superior Court of California,
County of San Diego, by certain of the Company's franchisees against the
Company, The Vons Companies, Inc., ("Vons") and other suppliers (Syed
Ahmad, et al, versus Foodmaker, Inc., et al), claiming damages from
reduced sales and profits due to the Outbreak. After extensive
negotiations, settlements were reached with the plaintiff franchisees, and
all but one of the domestic franchisees who did not join in suing the
Company in this lawsuit. During 1993, the Company provided approximately
$44.5 million to cover the settlements and associated costs, including the
settlement with the remaining franchisee. On January 14, 1994, the non-
settling franchisee filed suit against the Company and The Vons Companies
in Superior Court of California, County of San Diego and in Federal Court,
Southern District of California (Ira Fischbein, et al versus Foodmaker,
Inc., et al) claiming damages from reduced sales, lost profits and reduced
value of the franchise due to the Outbreak. After extensive negotiations,
the Company reached an agreement under the terms of which on February 3,
1995, the Company settled all claims of the franchisee against the Company
and acquired 27 operating restaurants and the development rights to the
Las Vegas and Denver markets.

The Company on July 19, 1993, filed a cross-complaint against Vons and
other suppliers seeking reimbursement for all damages, costs and expenses
incurred in connection with the Outbreak. On or about January 18, 1994,
Vons filed a cross-complaint against Foodmaker and others in this action
alleging certain contractual and tort liabilities and seeking damages in
unspecified amounts and a declaration of the rights and obligations of the
parties. Substantially the same claims were made by the parties in a
separate lawsuit in Superior Court of California, County of Los Angeles.
On May 17, 1995 it was determined the litigation between the Company,
Vons, and other defendants would be heard in Los Angeles. The cases have
been consolidated and are set for trial in November 1996.

In April 1993, a class action, In re Foodmaker, Inc./Jack in the Box
Securities Litigation, was filed in Federal Court, Western District of
Washington at Seattle against the Company, its Chairman, and the President
of the Jack in the Box Division on behalf of all persons who acquired the
Company's common stock between March 4, 1992 and January 22, 1993 seeking
damages in an unspecified amount as well as punitive damages. In general
terms, the complaint alleges that there were false and misleading
statements in the Company's March 4, 1992 prospectus and in certain public
statements and filings in 1992 and 1993, including claims that the
defendants disseminated false information regarding the Company's food
quality standards and internal quality control procedures. After
extensive negotiations through a mediation process, a settlement was
reached and subsequently approved by the Court. Under the terms of the
settlement the Company paid $8 million into an escrow account,
disbursements from which are subject to Court approval. The $8 million
payment was reflected in the results of operations for the first quarter
of fiscal 1995.

The Federal Trade Commission ("FTC") is investigating whether the Company
violated the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the
"HSR Act") when the Company's former subsidiary, Chi-Chi's, Inc., acquired
Consul Restaurant Corporation in October 1992 without first complying with
the reporting and waiting requirements of the HSR Act. The Company later
made the filing as it was preparing for the sale of Chi-Chi's. The
Company has engaged counsel in connection with the investigation and on
August 17, 1994, counsel for the Company received a request, preliminary
in nature, for information and documents. A subpoena covering the
preliminary material supplied and additional information and documents was
issued on January 19, 1995. Sworn statements have been given to the FTC
by various people, including certain officers and former officers of the
Company and Chi-Chi's. The HSR Act provides for a penalty of up to
$10,000 per day for failure to comply with the above requirements.
Management believes that any potential penalty, if assessed, will not have
a material impact on the Company.

The amount of liability from the claims and actions described above cannot
be determined with certainty, but in the opinion of management, based in
part upon advice from legal counsel, the ultimate liability from all
pending legal proceedings, asserted legal claims and known potential legal
claims which are probable of assertion should not materially affect the
consolidated financial position of the Company.

F-16

FOODMAKER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)

8. CONTINGENT LIABILITIES (continued)

The U.S. Internal Revenue Service ("IRS") had proposed adjustments to tax
liabilities of $17 million (exclusive of interest) for the Company's
federal income tax returns for fiscal years 1986 through 1988. A final
report has not been issued but agreement has been reached to satisfy these
proposed adjustments at approximately $.6 million (exclusive of $.4
million interest). The IRS examinations of the Company's federal income
tax returns for fiscal years 1989 and 1990 resulted in the issuance of
proposed adjustments to tax liabilities aggregating $2.2 million
(exclusive of $.7 million interest). The Company has filed a protest with
the Regional Office of Appeals of the IRS contesting the proposed
assessments. Management believes that adequate provision for income taxes
has been made.

9.6. RETIREMENT, SAVINGS AND BONUS PLANS

The Company has non-contributory defined benefit pension plans covering
substantially all salaried and hourly employees meeting certain
eligibility requirements. These plans are subject to modification at any
time. The plans provide retirement benefits based on years of service and
compensation. It is the Company's practice to fund retirement costs as
necessary.

The components of the fiscal year net defined benefit pension expense isare
as follows:
1996 1995 1994
1993
--------- --------- ---------------- ------- -------
Present value of benefits earned
during the year. . . . . . . . . . . . . $ 2,634 $ 2,303 $ 2,456 $ 2,075
Interest cost on projected benefit
obligations. . . . . . . . . . . . . . . 3,659 3,355 2,961 2,530
Actual return on plan assets. . . . . . . (3,630) (3,300) (538) (300)
Net amortization. . . . . . . . . . . . . 978 1,431 (908)
(1,203)
------ ------ ------------- ------- -------
Net pension expense for the period. . . . $ 3,641 $ 3,789 $ 3,971
$ 3,102
====== ====== ============= ======= =======

The funded status of the plans is as follows:

September 29, 1996 October 1, 1995
October 2, 1994------------------------- -------------------------
Qualified Non-qualified Qualified Non-qualified
plans plan plans plan
------ ------ ------ -------------- ------- -------- -------
Actuarial present value of benefit obligations:

Vested benefits. . . . . . . . . . . . . . . . $(29,021) $(5,204) $(27,598) $(4,154) $(22,871) $(4,178)
Nonvested benefits . . . . . . . . . . . . . . (6,859) (715) (3,723) (1,033)
(3,166) (1,169)-------- ------- -------------- ------- ------
Accumulated benefit obligation . . . . . . . . (35,880) (5,919) (31,321) (5,187) (26,037) (5,347)
Effect of future salary increases. . . . . . . (8,374) (2,780) (7,527) (2,836)
(6,147) (3,773)-------- ------- -------- -------
Projected benefit obligation. . . . . . . . . . (44,254) (8,699) (38,848) (8,023) (32,184) (9,120)
Plan assets at fair value . . . . . . . . . . . 39,677 -- 32,843 - 26,583 ---
-------- ------- -------------- ------- ------
Projected benefit obligations in
excess of plan assets.assets . . . . . . . . . . . . . (4,577) (8,699) (6,005) (8,023) (5,601) (9,120)
Unrecognized prior service costcost. . . . . . . . . (243) 2,774 (278) 2,973 267 3,203
Unrecognized net transition obligation.obligation . . . . . 47 139 56 166 63 193
Unrecognized net (gain) loss.loss . . . . . . . . . . 4,046 (534) 3,981 (532)
2,158 1,534-------- ------- -------------- -------
------
Pension liabilityliability. . . . . . . . . . . . . . . . $ (727) $(6,320) $ (2,246) $(5,416)
$ (3,113) $(4,190)
======= ====== ======= ======-------- ------- -------- -------

F-17F-14

FOODMAKER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
9.(continued)

6. RETIREMENT, SAVINGS AND BONUS PLANS (continued)

In determining the above information forpresent values of benefit obligations at each period, the Company's
actuaries assumed the following:

October 1, 1995 October 2, 1994
Qualified Non-qualified Qualified Non-qualified
plans plan plans plan
------ ------ ------ ------

Discount rate . . . . . . . . . . . . . . . . . 7.75% 7.75% 8.25% 7.25%
Rate of increase in compensation levels . . . . 5.00% 5.00% 5.50% 5.00%
Long-term rate of return on assets. . . . . . . 8.50% N/A 8.00% N/A

year end,
a 7.75% discount rate and a 5% rate of increase in compensation levels
were assumed. The long-term rate of return on assets was 8.5% in both
years. Assets of the qualified plans consist primarily of listed stocks
and bonds.

The Company maintains a savings plans which are organized underplan pursuant to Section 401(k) of the
Internal Revenue Code, which allow non-executiveallows administrative and clerical employees
who have completed at least one year
ofsatisfied the service orrequirements and reached age 21 whichever is later, to defer
upfrom 2% to 12% of their pay on a pre-tax basis. The Company contributes
an amount equal to 50% of the first 4% of compensation that is deferred by
the participant. The Company's contributions under this plan were $1,067,
$498 and $1,081 in 1996, 1995 and 1994, respectively. The Company also
maintains an unfunded, non-qualified deferred compensation plan, which was
created in 1990 for key executives and other members of management.management who
were then excluded from participation in the qualified savings plan. This
plan allows participants to defer up to 15% of their salary on a pre-tax
basis. The Company contributes an amount equal to 100% of the first 3%
contributed by the employee. The Company's contributions under the non-
qualified deferred compensation plan were $233, $212 and $285 in 1996,
1995 and 1994, respectively. In each plan, a participant's right to
Company contributions vests at a rate of 25% per year of service.

The Company's savings plans contributions were $498,
$1,081 and $1,162 in 1995, 1994 and 1993, respectively. The Company's
non-qualified deferred compensation plan contributions were $212, $285 and
$376 in 1995, 1994 and 1993, respectively.

The Company maintains a bonus plan whichthat allows certain officers and
employees of the Company to earn annual cash bonuses based upon
achievement of certain financial and performance goals approved by the
compensation committee of the Company's boardBoard of directors.Directors. Under this
plan, $3,195 and $710 was expensed in 1995.1996 and 1995, respectively.

The Company adopted a deferred compensation plan for non-management
directors in the second quarter of 1995. Under the plan's equity option,
those who are eligible to receive directors' fees or retainers may choose
to defer receipt of their compensation. OnceThe amounts deferred are
converted into stock equivalents at the then current market price of the
Company's common stock. The Company provides a credit equal to 25% of the
compensation initially deferred. In 1995,Under this plan, a total of $186 and
$116 was expensed in 1996 and 1995, respectively, for both the deferment
credit and the stock appreciation on the deferred compensation.

10.7. POSTRETIREMENT BENEFIT PLAN

The Company sponsors a health care plan that provides postretirement
medical benefits for employees who meet minimum age and service
requirements. The plan is contributory, with retiree contributions
adjusted annually, and contains other cost-sharing features such as
deductibles and coinsurance. The Company's policy is to fund the cost of
medical benefits in amounts determined at the discretion of management.

The normal net periodic postretirement benefit cost forwas $1,201, $1,440 and
$1,533 in 1996, 1995 1994 and 1993 was $1,440, $1,533 and $1,532,1994, respectively. The plan was amended in
1995 to
eliminate retiree medical benefits coverage for those under age 45 at
September 30, 1995, resulting in a curtailment gain of $1,900.

The
Company adopted SFAS 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," as of September 28, 1992. The cumulative
effect on prior years of adopting SFAS 106 was $10,176 in 1993.

F-18F-15

FOODMAKER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
10.(continued)

7. POSTRETIREMENT BENEFIT PLAN (continued)

The components of the fiscal year net periodic postretirement benefit cost
are as follows:
1996 1995 1994
------ ------- ------
Service cost. . . . . . . . . . . . . . . $ 505 $ 675 $ 770
Interest cost . . . . . . . . . . . . . . 816 854 763
Net amortization and deferral . . . . . . (120) (89) --
Curtailment gain. . . . . . . . . . . . . -- (1,900) --
------ ------- ------
Net periodic postretirement benefit
cost (gain). . . . . . . . . . . . . . . $1,201 $ (460) $1,533
====== ======= ======

The plan's funded status reconciled with amounts recognized in the
Company's consolidated balance sheetsheets is as follows:

September 29, October 1,
October 2,1996 1995
1994
-------- -----------------
Accumulated postretirement benefit obligation:
Retirees.Retirees . . . . . . . . . . . . . . . . . . . . . $ (1,198)(1,343) $ (1,036)(1,198)
Fully eligible active plan participantsparticipants. . . . . . (2,777) (2,478) (2,171)
Other active plan participants.participants . . . . . . . . . . (7,684) (6,855)
(7,209)
------- --------------- --------
(11,804) (10,531) (10,416)
Plan assets at fair value.value . . . . . . . . . . . . - -
------- -------. -- --

Accumulated postretirement benefit obligation
in excess of plan assets . . . . . . . (10,531) (10,416)
Unrecognized prior service cost. . . . . . . . . . - -(11,804) (10,531)
Unrecognized net gain. . . . . . . . . . . . . . . (2,180) (2,825)
------- -------
Accrued postretirement benefit cost
included in other liabilities . . . . . . . . . . $(12,711) $(13,241)
======= =======

The components of the fiscal year net periodic postretirement benefit cost
is as follows:

1995 1994 1993
------ ----- ------
Service cost. . . . . . . . . . . . . . . $ 675 $ 770 $ 743
Interestprior service cost . . . . . . . . . . . . . . 854 763 789
Actual return on plan assets. . . . . . . - - -
Net amortization and deferral . . . . . . (89) - -
Recognition of transition obligation. . . - - 10,176
Curtailment gain. . . . . . . . . . . . . (1,900) - -
------ ----- ------
Net periodic postretirement benefit
cost (gain)-- --
Unrecognized net gain . . . . . . . . . . . . . . . $ (460) $ 1,533 $ 11,708
====== ===== ======(2,062) (2,180)
-------- --------
Accrued postretirement benefit cost
included in other long-term liabilities. . . . . . $(13,866) $(12,711)
======== ========

In determining the above information, the Company's actuaries assumed a
discount ratesrate of 7.75% and 8.25% as of September 29, 1996 and October 1, 1995 and October 2,
1994, respectively.1995.

For measurement purposes, a 10%9.5% annual rate of increase in the per capita
cost of covered benefits (i.e., health care cost trend rate) was assumed
for 19951996 for plan participants under age 65; the rate was assumed to
decrease 1/2% per year to 5% by the year 2005 and remain at that level
thereafter. For plan participants age 65 years or older, an 8%a 7.5% annual
health care cost trend rate was assumed for 1995;1996; the rate was assumed to
decrease 1/2% per year to 4% by the year 2003. The health care cost trend
rate assumption has a significant effect on the amounts reported. For
example, increasing the assumed health care cost trend rates by one
percentage point in each year would increase the accumulated
postretirement benefit obligation as of October 1, 1995September 29, 1996 by $2,200,$2,466, or
21%, and the aggregate of the service and interest cost components of net
periodic postretirement benefit cost for the year ended October 1, 1995September 29, 1996
by $300$336 or 20%25%.

11. FRANCHISE ARRANGEMENTS

Franchise arrangements generally provide for initial license fees of
approximately $25 per restaurant and continuing payments to the Company
based on a percentage of sales. Among other things, the franchisee is
provided the use of land and building, generally for a period of 20 years,
and is required to pay negotiated rent, property taxes, insurance and
maintenance. Gains on sales of restaurant businesses to franchisees,
included in other revenues, were $358 and $2,231 in 1994 and 1993,
respectively.

F-19

FOODMAKER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)

12. RELATED PARTY TRANSACTIONS

The Company provides distribution services to a portion of FRI's Mexican
restaurants, principally those operated under the Chi-Chi's name.
Distribution sales to those restaurants aggregated $78,195 and $63,702 in
1995 and 1994, respectively, subsequent to January 27, 1994, the date the
Company sold Chi-Chi's and acquired its 39% interest in FRI. In relation
to the distribution sales, the Company had accounts receivable of $3,839
and $3,166 due from Chi-Chi's at October 1, 1995 and October 2, 1994,
respectively.

Gibbons, Goodwin, van Amerongen ("GGvA"), successor to Gibbons, Green, van
Amerongen, general partners in the limited partnerships which owned
approximately 45% of the Company's outstanding common stock at October 1,
1995, were paid fees of $150, $900 and $827 in 1995, 1994 and 1993,
respectively, under an agreement which expired December 1994, whereby GGvA
provided certain management services to the Company.

13. STOCKHOLDERS' EQUITY

In conjunction with the December 1988 acquisition of the Company, warrants
for the purchase of 1,584,573 shares of common stock were issued and are
exercisable at $.93 per share, as adjusted. As of October 1, 1995,
warrants for 1,450,626 shares had been exercised.

At October 1, 1995, the Company had 4,904,527 shares of common stock
reserved for issuance upon the exercise of stock options and 133,947
shares reserved for issuance upon exercise of warrants.

14.8. STOCK OPTIONS

The Company offers stock option plans to attract, retain and motivate key
officers, non-employee directors and employees by providing for or
increasing the proprietary interests of such persons to work toward the
future financial success of the Company.
F-16

FOODMAKER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)

8. STOCK OPTIONS (continued)

In January 1992, the Company adopted the 1992 Employee Stock Incentive
Plan (the "1992 Plan") and, as part of a merger, assumed outstanding
options to employees under its predecessor's 1990 Stock Option Plan and
assumed contractually the options to purchase 42,750 shares of common
stock granted to two non-employee directors of the Company. Under the
1992 Plan, employees are eligible to receive stock options, restricted
stock and other various stock-based awards. Subject to certain
adjustments, up to a maximum of 1,875,000 shares of common stock may be
sold or issued under the 1992 Plan. No awards shall be granted after
January 16, 2002, although stock may be issued thereafter, pursuant to
awards granted prior to such date.

In August 1993, the Company adopted the 1993 Stock Option Plan (the "1993
Plan"). Under the 1993 Plan, employees who do not participate in the 1992
Plan are eligible to receive annually stock options with an aggregate
exercise price equivalent to a maximum of 10 percent10% of their eligible
earnings. Subject to certain adjustments, up to a maximum of 3,000,000
shares of common stock may be sold or issued under the 1993 Plan. No
awards shall be granted after December 11, 2003, although common stock may
be issued thereafter, pursuant to awards granted prior to such date.

In February 1995, the Company adopted the Non-Employee Director Stock
Option Plan (the "Director Plan"). Under the Director Plan, any eligible
director of the Company who is not an employee of the Company or a
subsidiary of the Company is granted annually an option to purchase 10,000
shares of common stock at fair market value. Subject to certain
adjustments, up to a maximum of 250,000 shares of common stock may be sold
or issued under the Director Plan. Unless sooner terminated, no awards
shall be granted after February 17, 2005, although common stock may be
issued thereafter, pursuant to awards granted prior to such date.

F-20

FOODMAKER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)

14. STOCK OPTIONS (continued)

The terms and conditions of the stock-based awards under the plans are
determined by a committee of the boardBoard of directorsDirectors on each award date and
may include provisions for the exercise price, expirations, vesting,
restriction on sales and forfeiture, as applicable. Options granted under
the plans have terms not exceeding 11 years and provide for an option
exercise price no less than 100% of the fair market value of the common
stock on the day the option was granted.stock.

The following is a summary of stock option activity for the three fiscal
years ended October 1, 1995:September 29, 1996:

Option price
Shares per share
----------------- ------------
Balance at September 27, 1992 . . . . . . . 1,419,890 $ .96-10.00
Granted . . . . . . . . . . . . . . . . . 547,334 10.13-13.38
Exercised . . . . . . . . . . . . . . . . (100,923) .96-10.00
Cancelled . . . . . . . . . . . . . . . . (10,690) 1.13-11.00
---------
Balance at October 3, 1993. . . . . . . . . 1,855,611 $ .96-13.38
GrantedGranted. . . . . . . . . . . . . . . . . . 323,000 5.88-10.13
ExercisedExercised. . . . . . . . . . . . . . . . . (115,050) .96-1.13
CancelledCancelled. . . . . . . . . . . . . . . . . (252,970) 5.88-13.38
-----------------
Balance at October 2, 1994. . . . . . . . . 1,810,591 .96-12.25
GrantedGranted. . . . . . . . . . . . . . . . . . 812,098 4.18-6.50
ExercisedExercised. . . . . . . . . . . . . . . . . (42,900) .96-1.13
CancelledCancelled. . . . . . . . . . . . . . . . . (267,818) 1.13-12.25
---------
Balance at October 1, 1995. . . . . . . . . 2,311,971 .96-12.25
Granted. . . . . . . . . . . . . . . . . . 540,891 6.75-9.125
Exercised. . . . . . . . . . . . . . . . . (10,880) 1.13-6.50
Cancelled. . . . . . . . . . . . . . . . . (129,395) 1.13-11.00
---------
Balance at September 29, 1996 . . . . . . . 2,712,587 .96-12.25
=========
Stock options for the purchase of 1,513,5751,732,685 shares of common stock were
exercisable at September 29, 1996.

F-17

FOODMAKER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)

9. STOCKHOLDERS' EQUITY

The Company has 15,000,000 shares of preferred stock authorized for
issuance at a par value of $.01 per share. No shares have been issued.

On July 26, 1996, the Board of Directors declared a dividend of one
preferred stock purchase right (a "Right") for each outstanding share of
the Company's common stock, which Rights expire on July 26, 2006. Each
Right entitles a stockholder to purchase for an exercise price of $40,
subject to adjustment, one one-hundredth of a share of Series A Junior
Participating Cumulative Preferred Stock of the Company, or, under certain
circumstances, shares of common stock of the Company or a successor
company with a market value equal to two times the exercise price. The
Rights would only become exercisable for all other persons when any person
has acquired or commences to acquire a beneficial interest of at least 20%
of the Company's outstanding common stock. The Rights have no voting
privileges and may be redeemed by the Board of Directors at a price of
$.001 per Right at any time prior to the acquisition of a beneficial
ownership of 20% of the outstanding common shares. There are 388,405
shares of Series A Junior Participating Cumulative Preferred Stock
reserved for issuance upon exercise of the Rights.

In conjunction with the December 1988 acquisition of the Company, warrants
for the purchase of 1,584,573 shares of common stock were issued and are
exercisable at October 1, 1995.

15.$.93 per share, as adjusted. As of September 29, 1996,
warrants for 1,478,076 shares had been exercised.

At September 29, 1996, the Company had 4,893,647 shares of common stock
reserved for issuance upon the exercise of stock options and 106,497
shares reserved for issuance upon exercise of warrants.

10. AVERAGE SHARES OUTSTANDING

Fiscal year net earnings (loss) per share is based on the weighted average
number of shares outstanding during the year, determined as follows:

1996 1995 1994 1993
---------- ---------- ----------

Shares outstanding, beginning of fiscal year. . . . . . 38,802,195 38,668,200 38,234,250 38,148,946
Effect of common stock issued . . . . . . . . . . . . . 16,071 29,566 296,797 913,570
Effect of common stock reacquired . . . . . . . . . . . - - (1,027,008)
Assumed additional shares issued upon
exercise of stock options and warrants,
net of shares reacquired at the average
market price . . . . . . . . . . . . . . . . . . . . . 482,510 216,874 - 450,819--
---------- ---------- ----------
Weighted average shares outstanding . . . . . . . . . . 39,300,776 38,914,640 38,531,047 38,486,327
========== ========== ==========

F-21F-18

FOODMAKER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
16.(continued)

11. RELATED PARTY TRANSACTIONS

The Company provides distribution services to a portion of FRI's Mexican
restaurants, principally those operated under the Chi-Chi's name.
Distribution sales to those restaurants subsequent to FRI's acquisition of
Chi-Chi's aggregated $65,106, $78,195 and $63,702 in 1996, 1995 and 1994,
respectively. In relation to the distribution sales, the Company had
accounts receivable of $2,924 and $3,839 due from Chi-Chi's at
September 29, 1996 and October 1, 1995, respectively. Distribution
services continue to be provided by the Company even though FRI is no
longer a related party.

Gibbons, Goodwin, van Amerongen ("GGvA"), successor to Gibbons, Green, van
Amerongen, general partners in the limited partnerships which owned
approximately 45% of the Company's outstanding common stock until such
stock was distributed to the limited partners in November 1995, were paid
fees of $150 and $900 in 1995 and 1994, respectively, under an agreement
which expired December 1994, whereby GGvA provided certain management
services to the Company.

12. CONTINGENT LIABILITIES

Various claims and legal proceedings are pending against the Company in a
federal court and in state courts in the state of Washington, seeking
monetary damages for personal injuries relating to the outbreak of
food-borne illness (the "Outbreak") attributed to hamburgers served at
JACK IN THE BOX restaurants. The Company, in consultation with its
insurance carriers and attorneys, does not anticipate that the total
liability on all such lawsuits and claims will exceed the coverage
available under its applicable insurance policies.

The Company is engaged in litigation with the Vons Companies, Inc.
("Vons") and other suppliers seeking reimbursement for all damages, costs
and expenses incurred in connection with the Outbreak. The initial
litigation was filed by the Company on February 4, 1993. Vons has filed
cross-complaints against the Company and others alleging certain
contractual, indemnification and tort liabilities; seeking damages in
unspecified amounts and a declaration of the rights and obligations of the
parties. The claims of the parties arise out of two separate lawsuits
which have been consolidated and are now set for trial in the Los Angeles
Superior Court, Los Angeles, California in July 1997.

On April 6, 1996 an action was filed by one of the Company's international
franchisees, Wolsey, Ltd., in the United States District Court in San
Diego, California against the Company and its directors, its international
franchising subsidiary, and certain officers of the Company and others.
The complaint alleges certain contractual, tort and law violations related
to the franchisees' development rights in the Far East and seeks damages
in excess of $25 million, injunctive relief, attorney fees and costs.
The Company has successfully dismissed portions of the complaint,
including the single claim alleging wrongdoing by the Company's outside
directors. Management believes the remaining allegations are without
foundation and intends to vigorously defend the action.

F-19

FOODMAKER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)

12. CONTINGENT LIABILITIES (Continued)

On November 5, 1996 an action was filed by the "National JIB Franchisee
Association, Inc." (the "Association") and several of the Company's
franchisees in the Superior Court of California, County of San Diego in
San Diego, California, against the Company and others. The lawsuit
alleges that certain Company policies are unfair business practices and
violate sections of the California Corporations Code regarding material
modifications of franchise agreements and interfere with franchisees'
right of association. It seeks injunctive relief, a declaration of the
rights and duties of the parties, unspecified damages and recission of
alleged material modifications of plaintiffs' franchise agreements. The
complaint also alleges fraud, breach of a fiduciary duty and breach of a
third party beneficiary contract in connection with certain payments that
the Company received from suppliers and seeks unspecified damages,
interest, punitive damages and an accounting. Management believes that
its policies are lawful and that it has satisfied any obligation to its
franchisees in regard to such supplier payments.

On December 10, 1996, a suit was filed by the Company's Mexican licensee,
Foodmex, Inc., in the United States District Court in San Diego, California
against the Company and its international franchising subsidiary. Foodmex
formerly operated several JACK IN THE BOX franchise restaurants in Mexico,
but its licenses were terminated by the Company for, among other reasons,
chronic insolvency and failure to meet operational standards. Foodmex's
suit alleges wrongful termination of its master license, breach of contract
and unfair competition and seeks an injunction to prohibit termination of
its license as well as unspecified monetary damages. The Company believes
its termination of the Foodmex license was proper, and that there is no
merit to the Foodmex claims. The Company intends to vigorously defend the
action.

F-20

FOODMAKER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)

13. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION
September 29, October 1,
1996 1995
-------- --------
Accounts receivable:
Trade. . . . . . . . . . . . . . . . . . . . . $ 7,489 $ 16,521
Notes. . . . . . . . . . . . . . . . . . . . . 2,010 5,698
Other. . . . . . . . . . . . . . . . . . . . . 6,476 7,584
Allowance for doubtful accounts. . . . . . . . (3,493) (4,531)
-------- --------
$ 12,482 $ 25,272
======== ========

Other Assets:
Trading area rights, net of amortization of
$18,669 and $15,618, respectively. . . . . . . $ 67,663 $ 69,761
Lease acquisition costs, net of amortization of
$20,896 and $18,580, respectively. . . . . . . 22,299 25,003
Other assets, net of amortization of
$18,259 and $16,316, respectively. . . . . . . 34,261 36,310
-------- --------
$124,223 $131,074
======== ========

Accrued liabilities:
Payroll and related taxes. . . . . . . . . . . . $ 29,889 $ 26,372
Sales and property taxes . . . . . . . . . . . . 10,125 9,922
Advertising. . . . . . . . . . . . . . . . . . . 12,294 7,487
Insurance. . . . . . . . . . . . . . . . . . . . 41,494 32,406
Interest . . . . . . . . . . . . . . . . . . . . 7,352 10,437
Other. . . . . . . . . . . . . . . . . . . . . . 14,804 11,542
-------- --------
$115,958 $ 98,166
======== ========

14. QUARTERLY RESULTS OF OPERATIONS (Unaudited)

16 weeks ended 12 weeks ended
----------------------------------------------------
Jan. 23, 1994 Apr. 17, 1994 Jul. 10, 1994 Oct. 2, 1994
------------- ------------- ------------- ------------

Revenues . . . . . . . . . . . . $381,574 $218,706 $225,822 $227,224
Gross profit . . . . . . . . . . 43,602 24,574 27,988 28,651
Loss before extraordinary item . (4,399) (22,913) (3,434) (5,522)
Net loss . . . . . . . . . . . . (4,399) (25,651) (3,434) (6,086)
Loss per share before
extraordinary item. . . . . . . (.11) (.60) (.09) (.14)
Net loss per share . . . . . . . (.11) (.67) (.09) (.16)

16 weeks ended 12 weeks ended
----------------------------------------------------
Jan. 22, 1995 Apr. 16, 1995 Jul.July 9, 1995 Oct. 1, 1995
------------- ------------- ------------------------- ------------

Revenues . . . . . . . . . . . . $293,680 $229,661 $244,075 $251,300
Gross profit . . . . . . . . . . 37,662 32,233 37,897 39,58929,391 25,272 29,885 30,689
Net earnings (loss). . . . . . . (72,291) (3,146) 2,622 3,857
Net earnings (loss) per share. . (1.87) (.08) .07 .10

16 weeks ended 12 weeks ended
----------------------------------------------------
Jan. 21, 1996 Apr. 14, 1996 July 7, 1996 Sept. 29, 1996
------------- ------------- ------------ --------------

Revenues . . . . . . . (72,291) (3,146) 2,622 3,857. . . . . $330,630 $249,975 $243,147 $239,070
Gross profit . . . . . . . . . . 43,047 29,870 36,134 34,560
Net earnings (loss). . . . . . . . . . 4,690 4,013 5,515 5,833
Net earnings per share.share . (1.87) (.08) .07. . . . .12 .10 .14 .15

F-22

F-21