Good day, everyone. And welcome to the Jack in the Box Incorporated Second Quarter Fiscal 2015 Earnings Conference Call. Today's call is being broadcast live over the Internet. A replay of the call will be available on the Jack in the Box corporate website starting today. During the question-and-answer period, please use your handset when asking your questions. Please not ask over a speaker phone. At this time, for opening remarks and introductions, I would like to turn the call over to Carol DiRaimo, Vice President of Investor Relations and Corporate Communications for Jack in the Box. Please go ahead.

Thank you, Hursey, and good morning, everyone. Joining me on the call today are Chairman and CEO, Lenny Comma; and Executive Vice President and CFO, Jerry Rebel. During this morning's session, we will review the company's operating results for the second quarter of fiscal 2015, as well as some of the guidance we updated yesterday for the remainder of the year. In our comments this morning, per share amounts refer to diluted earnings per share and operating earnings per share is defined as diluted EPS from continuing operations on a GAAP basis, excluding restructuring charges and gains or losses from refranchising. Following today's presentation, we will take questions from the financial community. Please be advised that during the course of our presentation and our question-and-answer session today, we may make forward-looking statements that reflect management's expectations for the future, which are based on current information. Actual results may differ materially from these expectations based on risks to the business. The Safe Harbor statement in yesterday's news release and the cautionary statement in the company's most recent Form 10-K are considered a part of this conference call. Material risk factors, as well as information relating to company operations are detailed in our most recent 10-K, 10-Q and other public documents filed with the SEC. These documents are available on the Investors section of our website at www.jackinthebox.com. A few calendar items to note. Jack in the Box management will be presenting at the Oppenheimer Consumer Conference in Boston on June the 23rd, at the Jefferies Consumer Conference in Nantucket on June the 24th. Our third quarter ends on July the 5th and we tentatively plan to announce results on Wednesday, August the 5th after market close. Our conference call is tentatively scheduled to be held at 8:30 a.m. Pacific Time on Thursday, August the 6th. And with that, I will turn the call over to Lenny.

Thank you, Carol, and good morning. Jack in the Box reported another solid quarter yesterday, culminating in a 35% increase in operating EPS. We experienced continue sales momentum and margin expansion at both Jack in the Box and Qdoba, and essentially completed our refranchising strategy with the sale of our last Southeast market. Same-store sales at company Jack in the Box restaurants increased 7.4% for the second quarter, with transactions driving approximately one-third of that growth. System-wide, same-store sales increased 8.9%, which was our best performance since 1999. Once again, Jack in the Box outperformed the industry, with system-wide same-store sales growth 760 basis points higher than the QSR sandwich segment. More than doubling the gap we experienced last quarter. Second quarter sales increased in all our major markets and were strong across all dayparts led by breakfast and dinner. The biggest contributor was our new premium Buttery Jack burgers, which has been the most successful product launch in recent memory. These are permanent addition to the menu, not just an [LTL] [ph]. We believe they are great foreshadow of the type of creatable products and quality that we intend to introduce in coming quarters. Over the years we built a lot of equity in breakfast with great tasting items featuring freshly cracked egg and that momentum continued during the quarter with products like our Breakfast Burritos and Loaded Breakfast Sandwich. Jack in the Box have served our full menu, including Breakfast All Day for nearly 25 years and you can expect us to continued to focus on this core competency. We showcase these new products in our advertising, where we have been placing a greater emphasis on the taste and visual appeal of the food. Another way to demonstrate the quality improvements we're making to our menu is in…

Thank you Lenny and good morning everyone. With strong same-store sales growth at both brands and the benefit from refranchising at Jack in the Box, we were able to drive significant margin improvement and continue to return a substantial amount of cash to shareholders during the quarter. For Jack in the Box, the 7.4% increase in company same-store sales was comprised of transaction growth of 2.4%, mixed benefits of 2.9% and pricing of approximately 2.1%. For Qdoba, the 7% increase in company same-store sales was comprised of a 7.4% increase in the average check which was driven primarily by the new simplified pricing structure, catering growth of 0.9% and a decline in transactions of 1.3%. As Lenny mentioned, weather was a factor for Qdoba in the quarter. There were three weeks negatively impacted and one week alone where 90% of our company restaurants were affected, same-store sales were down nearly 8% and transactions were down nearly 15%. For the second quarter, consolidated restaurant operating margins topped the 20% level of 210 basis points to 20.6% of sales as same-store sales growth translated into nice margin expansion at both brands, despite headwinds from commodities and minimum wage increases. Jack in the Box company restaurant margins expanded 280 basis points to 21.4%, including the benefit of approximately 170 basis points resulting from our refranchising strategy. Average weekly sales for Jack in the Box company restaurants topped $36,000 in the quarter, up 11% resulting from both refranchising and strong same-store sales growth. Year-to-date our company AUVs are above $1.8 million. Qdoba company restaurant margins grew 50 basis points to 18.8% as leverage from the new pricing structure was partially offset by commodity inflations and increase in labor staffing and higher credit card fees. Franchise margins expanded by 220 basis points in the quarter…

Thank you, sir. [Operator Instructions] Our first question is from Mr. Joe Buckley from Buckley from Bank of America. Sir, your line is open.

Thank you. Had a question on sales, I guess for each brand, if I may. It is first time in a while that you’ve mentioned dinner for Jack in the Box, along with breakfast. Usually, we are hearing late-night and breakfast as the strongest dayparts. So can you talk a little bit about what’s driving the dinner daypart of Jack?

Sure. Joe, this is Lenny. When we were out in New York and Boston back in January I guess it was, we talked about the research that we have been conducting with the Jack in the Box brand and that we were disappointing in some of the results that we got, essentially with the consumer set was that they were not pleased with state of our hamburgers and several other core products. And so I mentioned that we are going to start investing in improving those products and using LTOs this year to sort of foreshadow what those improvements would be and we expected that and I think I talked about it during those conferences. We expected that that would start to drive the lunch and dinner dayparts, two dayparts that for the last couple of years haven’t been the drivers of our success. So, I think what you are seeing is with the launch of the new products, the consumer is responding right in line with what the research set they would do and essentially the success we’ve experienced with that product is starting to drive the dinner dayparts. So that’s really what it is and what we would anticipate as we move further into the initiative is that across the menu, we’d be able to make permanent improvements similar to what we've been able to foreshadow with these new additions to the menu. And we would expect that they would drive strong results as well.

Okay. And then question on Qdoba. How do you think about a sustained level of a same-store sales growth? You have a couple more quarters where you benefit from the simplified pricing structure and then I would suspect the comp will be a little bit more traffic dependent. And even though weather impacted it this quarter, the traffic component has been relatively small. So how do you think about that going forward? How can you elevate the traffic, the traffic portion? Or is that the overall game plan, when you lap the simplified pricing structure

Yeah. So first, let me answer the last part of your question. Yeah, we do think it will be traffic dependent. So you can expect a focus there. When you look at the building blocks to Qdoba’s success, you can go back to the prior strategy where you had a core menu that hasn’t changed essentially in over 10 years. You had introduced a whole wheat tortilla and brown rice within 10 years. So it was certainly not an innovation strategy. Coming out of the research, what we realized is that we would have to incorporate product innovation into our strategy going forward. And so the first thing we did was we capitalized on existing equities, which were eventually Queso and Mango. And when we get that, you saw significant growth not only in sales but in transactions. And on the heels of that, we changed the pricing structure, which essentially took some of the annoyance factor out of the transactions and it generated a new sort of value proposition for the consumer. And although we’ve realized that primarily in price, we also see favorable response from the guests from the standpoint of loyalty and their satisfaction with the experience. And so what you are going to expect to be the next phase will be additional product innovation going into next year, as well as reading the results of some of the investments we have in the interior and exteriors of the facilities and then starting to incorporate that into remodels and new builds. We believe that that product innovation and focusing on place will drive additional transactions, which will helps us to lap what we've done with price and transactions thus far.

Okay. Thank you.

Got it.

Thank you. Next question is from Mr. Alex Slagle from Jefferies. Sir, your line is open.

Thank you. A question on Jack in the Box, and if you could talk to what's driving the increase in the unit growth outlook for that brand this year?

Yeah, Alex. This is Jerry. I think what we are seeing is -- and I guess not too surprising when franchisees give a sense or the higher sales and believability that they are more sustainable than they are one-trick pony. They begin to get a little bit more excited about investing into brand. Also, we’ve changed a few things structurally, with the company investing in some real estate broker type services that we are looking for new units for that regard, if they are going to be company or franchised units. In fact, we have a bias to looking for units and then offering them up two franchisees. So, I think it’s a combination of the sales improvement. The excitement about where we are going long-term and then also some of the things that we are doing structurally with respect to new unit opportunities.

Great. Thank you. And then just one clarification on guidance and what the share repurchase now is assumed in the current earnings guidance. Is that just already what's been completed? Or does it exclude potential execution of the remaining -- a piece of the remaining $140 million authorization?

No, we would expect to be active in Q3 and Q4 as well. We remember that we've -- and assumed the guidance -- it hasn’t -- the share buyback piece though into guidance, Alex, it hasn’t really changed at all from what we described in the guidance back in November. So, we are not expecting buybacks to drive the increase in our EPS guide, it’s just operational. So we had said we expect to be regular and opportunistic. And if we’re looking at the way things are trending this morning, we may have an opportunity to be a bit more opportunistic this quarter as well.

Great. Thank you.

Thank you. Next question is from Mr. Chris O'Cull from KeyBanc. Sir, your line is open.

Thanks. Good morning, guys. Jerry, since your initial guidance for '15, the company has raised the Jack comp assumption by roughly 3 points and Qdoba by 1 to 2 points. Which based on the earnings sensitivity you have given us in the past would indicate roughly $0.35 of additional earnings. But your earnings guidance ex the impairment increases has only been increased by roughly $0.20, and you also lowered the commodity outlook. So I guess I am trying to understand, is this just conservatism, or has the flow through assumption or which you have been experiencing, has that changed?

I don’t think it’s a flow through assumptions, Chris. But if you look at our incentive compensation plans, they are driven almost exclusive on improvement in operating EPS and an improvement in restaurant level margins. And so what we’ve seen is as we have continued to perform better than our original expectations, we’ve also seen an increase in our incentive comp accruals so far for the first half of the year and then also we expect to see going forward for the balance of the year which is included now in the guidance. So I think that’s partially offsetting that. I would say the good news is as far as the G&A load on this, is this does not add any dollars through our structural G&A cost. This is all variable cost based upon improved performance. So I don’t think that you will see this be baked into the baseline G&A costs going forward. Although we would love to have a similar problem if you will next year with improved EPS growth and improved margin growth as well.

And then one last one, do you still expect Qdoba’s margin to be higher than Jack’s for the year?

That’s a good question. I would say it’s going to be a close call and maybe a photo finish year. But I would say that’s more due to the Jack in the Box improving margins [it is driven] [ph] by 21.4% margin that we saw in Q2. It won’t be because Qdoba margin is performing lower than what our expectations for them.

Okay. Great. Thanks.

Thank you. Next question is from Mr. Robert Derrington from Wunderlich Securities. Sir, your line is open.

Yes. Thank you. Two questions. One, first off, Lenny when you look at the competitive environment out there as you see it, obviously there is a lot of noise, the company Jack's been very successful with some of the innovation that you brought to bear there. Given the noise that some of the competition is doing to try and steal some of that specialness, do you anticipate any changing of your plan versus what you have been doing? Or should we consider you all to visit with the brand as opposed to one of your competitors doing something more similar to you? How should we think about that?

So, Bob, if you think about some of the conversations we’ve had in the past, we've said long ago that essentially Jack in the Box has to be a differentiated quality-driven brand, because we are not big enough to play in the space of the value driver in the industry. And I think that the good thing is that the consumer wants and believes that we are more of a quality-driven brand differentiation, our quirkiness of our advertising, the weirdness of our menu. I mean, keep in my tacos is still a huge seller and we're a burger company. So we’ve had a history of being able to put things out there that are just little different than everyone else. And the consumer has come to expect that. When you look at what some of our competitors are doing, they are trying to play in a space that is probably not an equity that they currently have and will take I believe a very long time for them to establish that equity. So I'm not saying whether it's right or wrong, those are things that competitors have to figure out for themselves. But what I can say is our strategy won't change because we know the space that we play in and essentially we've been finding success there and there's a reason for us to believe that that's going to change. One of the things we've also done as a brand historically is we're very responsive to what the competition does. So we'll stick to our strategy, but as folks try to encroach on our space we will certainly have a response and that's something that you can anticipate as well. So, no strategy change. And if we're going to throw some punches back in the other direction, it's going to be from the basis of what our strengths are and you will see us compete that way going forward.

Great. That's really helpful, Jerry. And if I could pursue or follow up on the Qdoba difference between the company comps and the franchise comps, I think it was about 260 basis points. Can you give us some color how much of that specifically have you broken out in basis points, what the weather's impact may have been or could have been based on store closures, or anything like that?

What we know is that the company restaurants were generally and perhaps more substantially impacted by weather than what the franchisees were. As an example, the Upper Midwest saw a very mild winter versus say Colorado and Nashville from where you are as an example. And our largest franchisee is in Milwaukee and they saw virtually no weather impact at all throughout the quarter. So I think part of this is without being able to quantify exactly how much, I think part of that 260 basis point differential is due to the company restaurant being more heavily impacted by weather, particularly in those three weeks and I described earlier.

Okay. Terrific. Thank you.

Thank you. Next question is from Mr. Jeff Farmer of Wells Fargo. Sir, your line is open.

Thank you. I know you are reluctant to focus too much on any one product, but can you put this success to the Buttery Jack burger launch into context relative to some of the other new products you’re seeing recently. I guess the best way to do that would be percent of sales or any other method or measure you think would be helpful for us

Jeff, we don't typically share those details but let me just try to give you some color in another way. I've been here for 14 years and in that timeframe, we've never had a product as successful as Buttery Jack. So it's by far the most successful thing that most of the folks working in the brand today have experienced. And when you look at the work that went into it what's nice about what we are experiencing is we expect similar quality cares in changes across the core menu coming into next year and we think that's going to be met with a very similar response from the consumer.

Okay.

And Jeff, just let me add to that, is the Buttery Jack in terms of the food and packaging costs, one of the things that contributed to the margin in the quarter was, the Buttery Jack actually had a lower food and packaging cost than what the LTO that we promoted in last year's second quarter was with the Bacon Insider burger. And then also it's replacing the number one and number two position on the menu board and it's replacing the Sirloin burger that also has a lower food and packaging cost than what the sterling burger has also. So it helps generate some nice mix benefit on our food and packaging costs in the quarter as well.

That is helpful. Thank you for that. And just one follow-up. It looks like last quarter or your first fiscal quarter, Jack’s franchise same-store sales at least modestly outperform the company number. That franchise outperformance looks like it jumped pretty nicely here in the fiscal second quarter and looks like 2 points. I'm just curious in terms of what's driving that, where the franchise are in terms of initiating some of these topline drivers that perhaps you introduced a couple of quarters ago but again, any color and understanding that accelerating relative performance versus the company stores from the franchise stores?

Jeff, couple things to think about there. First off, the company operations have historically been 24-hour operations and as we started focusing on late-night, our franchise locations many more of them went to 24/7 locations. In addition, on the franchise side, you have a bit more pricing than what you see us take on the company side in recent quarters and then also traffic for the franchise side was even better than traffic for the company outside. And keep in mind part of what you see there is just in the base case the benefit that the franchisees get from percentage standpoint on a lower AUV base compared to the company ops.

All right. Thanks.

And Jeff, this is Jerry. Just one other thing to add on to that, with now 80 plus percent franchise operated, we get -- we earn slightly more operating EPS on a 1% change in franchise same-store sales than we do with company same-store sales, so that adds nicely to our earnings growth.

Thanks again.

Thank you. Next one is from Mr. Nick Setyan, Wedbush Securities. Sir, your line is open.

Hey. Thanks. Lenny, I kind of want to focus a little bit more on the profitability of Jack in the Box. I mean, over 21% of margins here, that’s better than a lot of the fastest growth names out there. I mean, the cash and cash returns over the last two years have increased dramatically, Jack in the Box too. So why are we seeing above 1% unit growth, or why can’t we see the franchisees accelerate to above 1% unit growth going forward?

Nick, we’re hopeful that we will see that. I can tell you that I was just sharing, internally, I spent the last six weeks out in the marketplace visiting with Qdoba and Jack in the Box franchisees and corporate employees. And there is certainly a lot more conversation. In fact, the primary conversation has been about growth from our operators of those brands. And where we are with it today is that the Jack in the Box brand is working on these core improvements that we’re talking about. And I think the franchisees are starting to gear up for growth and they’re looking at it through the lens of, hey, if we can continue to make these improvements then I want more restaurants. So, our hope is and our anticipation is that that growth rate will go up and we’re going to prepare for that.

Then Nick, just with respect to timing, what we’re seeing -- to Lenny’s point is we’re seeing a significant increase in the interest from our franchise operators to building new Jack in the Box restaurants. But because there is a drive through and it’s a free standing ground up building, that process takes anywhere from call it, 18 months in Texas to two plus years in California. So activity today doesn’t create a new restaurant next month because it has a much longer timeline.

Got it. And I mean, basically your longer term guidance, I think, before you got into your longer term guidance in terms of the lever margin, any reason why we shouldn’t see that go up from here at both brands?

Well, that’s a great question. We will provide that information to you on our November call and but we’ll certainly have to read, look at that, given where the current trends are. One thing I want to just caution everybody for the Q3 and Q4 outlook for the Jack in the box margins. One thing to consider is Q3 and Q4 margins are generally more significantly impacted by high utility costs, as it cost more to heat, excuse me, it cost more to cool our restaurants, in hot weather than it cost to heat them in colder weather. So we usually see 50 plus basis point change just in utilities, seasonally.

Thank you.

Thank you. Next question is from Mr. Sam Beres of Robert W. Baird & Company. Sir, your line is open.

Hi. Thanks for taking the question. In terms of the Qdoba traffic, obviously, it appears that it was a fairly meaningfully impacted by some unfavorable weather during the quarter, but even excluding that weather, it seems like a traffic may have possibly decelerated modestly here, relative to a couple prior quarters? So if that is the case, maybe a little perspective from you on what possibly could driven that slightly softer traffic and if you think the new pricing architecture could have -- be having impacted anyway?

Sam, just one thing to think about is, as you said there was a weather impact and as you focus on the one year basis, you could be the transactions as flat to slightly negative. But when you look at two-year basis, even with weather, we don’t have that situation and that's why when Joe asked the question earlier, I was trying to help folks, think about the stack of sales generators over the last year and a half, because if you look at the innovation of last year it drove sales and transactions and then we stack on top of that the new value proposition this year, which early on drove both sales and transactions, and only recently with some weather impact do we see the transactions moderate a little bit. But when you look at stack over two-year basis, you actually have a very healthy mix of both sales and transaction growth driving the performance. So when you look all things in and you think about what we’ve been able to do with the value proposition that has raised the average check without reducing significant traffic, all-in-all its a big win for us and when you able to then stack on top of that the next set of product innovation which we anticipate happening into the beginning of next year we are feeling really good about the outlook.

Thanks. And maybe just one quick follow-up, if you could -- are you able to provide any perspective on kind of what the Q3 comps guidance for Qdoba assumes for check in traffic roughly speaking given that I believe that traffic was pretty strong in the year ago period?

Yeah. Nick, we never break out what our expectations are, sorry, Sam. I think I gave one name wrong, I apologize, Sam, and probably, won’t be the last one either. But we don’t typically, if we’ll provide breakout on our same-store sales numbers until the end of the quarter.

Great. Thank you.

Thank you. Next one is from Mr. Matthew DiFrisco of Guggenheim Securities. Sir, your line is open.

Thank you. One question one clarification, just you said the superior -- superior trend that you are outpacing your peers by roughly around 700 basis points I think it was? Is that on a national basis or is that on a regional basis, meaning your stores in California are beating their peers sitting across street from them also at a 7% pace?

Yeah. Matt, this is Carol. So we actually outpaced the NPD QSR sandwich segment by 760 basis points, that's the national numbers, that include 16 of the chains and you can see it’s the biggest ones, it’s all of the major peers. So we don’t get the regional data, but that's the national number. I would also say, keep in mind that weather really wasn’t a factor for Jack in either periods, so you would have to look at that more on a regional basis too.

So I guess one would conclude then that your one of the benefits could be deduced from that that you were also saying California -- your California and Texas exposure has benefited you versus those that are nationally skewed correct?

I guess that we don’t have the data to know what the peers are doing in those two markets.

Okay. Then my question also is just with the $0.06 charge for equipment, I just wanted to clarify also that that is 100% company owned stores replacing? Are you also replacing those stores of the franchisees that maybe you still own the building to and rent them back out? Are you going to be owing the machine and retiring the existing one and bringing in the new freestyle?

The $0.06 charge Matt is just related to the company units. Franchisees will replace their own equipment and do whatever they deem appropriate with their write-off, but it won’t impact the company at all.

And did you give any color on how many stores today have their freestyle? And what we should expect as far as the progression for company and then the complete system as well to adopt it?

It would have beginning to roll out, Matt. We expect to have that done by the end of the calendar year. So there is less than a 100 that are out there right now. And that's just recent.

Okay, calendar year franchise and company?

Correct.

Great. Thank you.

Thank you. Next question is from Mr. Joe Buckley of Bank of America. Sir, your line is open.

Thank you. I had a couple of follow-ups. Maybe first just on the $0.06 charge, Jerry would that be evenly split between the quarters? And is that -- is this the number like pre-tax and post-tax or is there a tax benefit to the expense?

No, it’s the same number pre-tax and post-tax. There is no additional tax benefit to that versus any other tax benefit for any other expense. But I’d say for now you can assume that's going to be pretty evenly split. The reality will be it would depend upon the actual implementation schedule and how close we are to keeping on that actual implementation schedule. But I’d model it pretty even.

Okay. And then kind of more for an industry background kind of question, what are you seeing in terms of egg prices with the avian flu news seems to spread to more markets?

Yes. We are seeing generally egg prices trending up and fortunately for us most of our supplies are coming from yet unaffected areas. By and large, it does mean that we are completely unaffected, but I think our major supplies are coming from those other yet not affected areas. Eggs are only about 3% of our overall spend and our assumption about increasing egg costs are included in our 2% commodity guidance for the full-year.

Okay. And then one more quick one if I can. Going back to my unit business question. So are the Buttery Jack burgers being viewed more as a dinner product or are you kind of merchandising them in some way to make it more of a dinner product to drive the dinner daypart?

A couple of things that are interesting Joe, so we experienced and I’m going to just compare and contrast a couple things from the past till today. In the past when we rolled out a breakfast platter, we sold a ton of them at dinner, at lunch and late night. And you’ve seen the same thing with Buttery Jack, although we do sell obviously the majority of them at lunch and dinner because we serve the whole menu 24/7. There is a ton of Buttery Jack’s being sold even at breakfast. So your assumption that it is primarily a lunch and dinner product is correct. I don't know that it’s more of a dinner versus the lunch. I think we just -- we need a little more time to learn that. But it’s certainly a lunch and dinner product. But like all of our other products that just -- that are a hit with the guests, we tend to see a more than you would imagine percentage of sales going to the other dayparts as well.

Is the Buttery Jack driving the mixup at Jack in the Box? Is that the primary factor, the check mix?

Yes, it is.

Okay. Thank you.

Thank you. Next question is from Mr. Jeffrey Bernstein at Barclays. Sir, your line is open.

Great. Thank you very much. Two questions. One maybe, Lenny, as we think about the Jack in the Box brand and throughput, I think you mentioned the [AUBs] [ph] at the company operated stores are now north of $1.8 million. Wondering whether you see any capacity constraints or better yet maybe what’s the biggest throughput opportunity? I know in the past you’ve often updated us on speed of service as the biggest kind of opportunities. Any color on where we stand on that or any other opportunity just to alleviate you pressure you might be seeing with such strong sales?

Yes. So couple things to think about, Jeff. First off, keep in mind some of our oldest facilities are in cities like Los Angeles and Houston. They happen to be our smallest footprint facilities with our small kitchen and they also happen to do well over $2 million in sales a year. So from the standpoint of any constraints, we don’t see those. Actually the newer restaurants can facilitate even higher sales than that. And those are what we are building today and we would expect that the $1.8 million is something we can grow on top of. And what’s really going to be driver of that, we believe it is the menu primarily and then supporting the menu would be operational efficiencies. But the big learning, I think that came out of the research was that from a prioritization standpoint, we were going to get more of a return and early return on investing in menu enhancement than we were on operational efficiencies. So it's not that we're forgetting operational efficiencies, it's just that from a prioritization standpoint, we’re going to drive the menu to be a better menu first followed by or at least parallel by operational efficiencies.

Got it. And then just the refranchising, Jerry, I think you mentioned you are now pretty much complete. Obviously it's been a long journey from 5, 10 years ago. Just couple of things, just wondering, what you say maybe the biggest noticeable operational difference, when we understand the financial impact, but what do you say is the big difference now versus then, and whether there are thoughts of pushing above the low 80s. What the positives and negatives might be to consider, kind of next tranche to take either 90% or more?

Let me start with the last question first here. I think we’re not married to a number. There’s nothing magic about 81 or 82 or 85 or 75 or 90 for that matter. The real issue for us is can it be accretive to operating earnings in a post refranchising world. And with the average unit volumes trending above $1.8 million right now, that makes that a very high hurdle to be able to refranchise and make it accretive to earnings. So, I think we're pretty happy with where we are on that. It doesn't mean that we never look at one-off type transactions. But again at 1.8 volume in 20-ish percent margin, it makes us very difficult to justify refranchising transactions.

Got it. If you look at this -- one last thing, in terms of the balance sheet, I think you guys you talked about the ongoing share repo and a very healthy dividend increase. I’m just wondering how the board thinks about, I guess, leverage in the context that we’re turning even more cash, what’s the right balance from that perspective?

So, I think the board is still comfortable with this two to three times leverage, I think in this quarter, with the share repurchase we actually did not above two. For the first time, we're working pretty hard to get there. The board is still obviously with another $100 million share repurchase authorization very, very bullish with respect to us continuing the return cash to shareholders. And the 30% increase in the dividend, I think also indicates their appetite to continue to do so. And I think the ability for us to get credit and the free cash flow that we’re generating bodes well for us to continue to be very active with respect to returning cash to shareholders.

Great. Thank you.

The next question please?

Next one is from Keith Siegner of UBS. Sir, your line is open.

Hi. Thanks. This is Dennis Geiger on for Keith. With competition announcing an aggressive shift to new digital engagement tools including mobile order pay and even delivery. Where are you in that process now? And I guess more specifically given I believe, you’ve indicated you likely initiate broader mobile digital efforts at Qdoba first, where's Qdoba in that process right now?

So, everything you said is accurate. We’re going to focus on Qdoba first and the infrastructure that we’re building for the Qdoba business actually bodes well for Jack in the Box as we are starting to moving into the same space. The Qdoba process is well underway and we would anticipate being able to into next year start to test and initiate the use of that new technology. And keep in mind, Qdoba has not been out of that space. We’ve actually been active in that space for quite some time and. And we have experienced quite a bit of success with it. We believe with the changes to the platform, we’ll be able to engage consumers even better and we believe that will drive even stronger result.

Great. Thank you.

Operator, you’re going to prompt for additional questions?

Yes. The last question is from Robert Derrington with Wunderlich Securities. Sir, your line is open.

Yes. Thank you. Most of my question have been answered. But I have one quick one Jerry, when does your window open on your repurchase program?

It generally opens the day after or two days after we filed the queue depending on how early we file the queue.

Got it.

So soon.

Okay. Very good. Thank you.

I think that is all the questions that we have for today. Thanks for joining us and we look forward to speaking with you soon.

Thank you. That concludes today’s conference. Thank you for participating. You may now disconnect.