Build-A-Bear Workshop 2009 Annual Report Download - page 26

BUILD-A-BEAR WORKSHOP, INC. 2009 FORM 10-K
• provide consumers with access to their personal
information and the ability to rectify inaccurate
information;
• obtain express parental consent prior to collecting and
using personal information from children; and
• comply with the Federal Children’s Online Privacy
Protection Act.
Such regulation may also include enforcement and
redress provisions. While we have implemented programs
and procedures designed to protect the privacy of people,
including children, from whom we collect information, and our
websites are designed to be fully compliant with the Federal
Children’s Online Privacy Protection Act, there can be no
assurance that such programs will conform to all applicable
laws or regulations. If we fail to fully comply, we may be
subjected to liability and damage to our reputation.
We have a stringent privacy policy covering the
information we collect from our guests and have established
security features to protect our guest database and website.
However, our security measures may not prevent security
breaches. We may need to expend significant resources to
protect against security breaches or to address problems
caused by breaches. If unauthorized third parties were able to
penetrate our network security and gain access to, or
otherwise misappropriate, our guests’ personal information, it
could harm our reputation and, therefore, our business and
we could be subject to liability. Such liability could include
claims for misuse of personal information or unauthorized use
of credit cards. These claims could result in litigation, our
involvement in which, regardless of the outcome, could
require us to expend significant financial resources. In
addition, because our guest database primarily includes
personal information of young children and young children
frequently interact with our website, we are potentially
vulnerable to charges from parents, children’s organizations,
governmental entities, and the media of engaging in
inappropriate collection, distribution or other use of data
collected from children. Such charges could adversely impact
guest relationships and ultimately cause a decrease in net
sales and also expose us to litigation and possible liability.
Our virtual world website, primarily for children,
buildabearville.com, allows social interaction between users.
While we have security features and chat monitoring, our
security measures may not protect users’ identities and our
online safety measures may be questioned which may result in
negative publicity or a decrease in visitors to our site. If site
users act inappropriately or seek unauthorized contact with
other users of the site, it could harm our reputation and,
therefore, our business and we could be subject to liability.
Internet privacy is a rapidly changing area and we may be
subject to future requirements and legislation that are costly to
implement and negatively impact our results.
We may suffer negative publicity or be sued if the
manufacturers of our merchandise violate labor laws or
engage in practices that our guests believe are unethical.
We rely on our sourcing personnel to select manufacturers
with legal and ethical labor practices, but we cannot control
the business and labor practices of our manufacturers. If one
of these manufacturers violates labor laws or other applicable
regulations or is accused of violating these laws and
regulations, or if such a manufacturer engages in labor or
other practices that diverge from those typically acceptable in
the United States, we could in turn experience negative
publicity or be sued.
We may suffer negative publicity or negative sales if the
non-proprietary toy products we sell in our stores do not meet
our quality standards or fails to achieve our sales
expectations.
We expect to expand our product assortment to include
interactive toy products manufactured by other toy companies.
For example, we recently added the line of Zhu Zhu pets, an
interactive line of toy hamsters, to our stores. If sales do not
meet our expectations or are impacted by competitors’
pricing, we may have to take markdowns or other liquidation
strategies to sell the product. If other toy companies do not
meet quality standards or violate any manufacturing or labor
laws, we suffer negative publicity and not realize our sales
plans.
We may suffer negative publicity or be sued if the
manufacturers of our merchandise ship any products that do
not meet current safety standards or production requirements
or if our products are recalled or cause injuries.
Although we require our manufacturers to meet specific
product safety standards and submit our products for testing,
we cannot control the materials used by our manufacturers. If
one of these manufacturers ships merchandise that does not
meet our required standards, we could in turn experience
negative publicity or be sued.
Many of our products are used by small children and
infants who may be injured from usage. We may decide or
be required to recall products or be subject to claims or
lawsuits resulting from injuries. For example, in 2009 we
voluntarily recalled a product due to a possible safety issue,
for which a vendor reimbursed us for certain related
expenses. Negative publicity in the event of any recall or if
any children are injured from our products could have a
material adverse effect on sales of our products and our
business, and related recalls or lawsuits with respect to such
injuries could have a material adverse effect on our financial
position. Although we currently have liability insurance, we
cannot assure you that it would cover product recalls, and we
face the risk that claims or liabilities will exceed our insurance
coverage. Furthermore, we may not be able to maintain
adequate liability insurance in the future.
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