Build-A-Bear Workshop 2012 Annual Report Download - page 24

BUILD-A-BEAR WORKSHOP, INC. 2012 FORM 10-K
operate their stores profitably. As a result, our franchising
strategy may not be profitable to us. Moreover, our brand
image and reputation may suffer. When franchisees perform
below expectations we may transfer those agreements to other
parties or discontinue the franchise agreement. Furthermore,
even if our international franchising strategy is successful, the
interests of franchisees might sometimes conflict with our
interests. For example, whereas franchisees are concerned
with their individual business strategies and objectives, we
are responsible for ensuring the success of the Build-A-Bear
Workshop brand and all of our stores.
The laws of the various foreign countries in which our
franchisees operate govern our relationships with our
franchisees. These laws, and any new laws that may be
enacted, may detrimentally affect the rights and obligations
between us and our franchisees and could expose us to
additional liability.
Portions of our business are subject to privacy and security
risks. If we improperly obtain, or are unable to protect,
information from our guests, in violation of privacy or security
laws or expectations, we could be subject to liability and
damage to our reputation.
Our Web site, bearville.com,features children’s games and in
world e-mail and chat system. In addition, our e-commerce
site, buildabear.com, features e-cards and printable party
invitations and thank-you notes and provides an opportunity
for children under the age of 13 to sign up, with the consent
of their parent or guardian, to receive our online newsletter.
We currently obtain and retain personal information about
our Web site users, store shoppers and Stuff Fur Stuff loyalty
program members. In addition, we obtain personal
information about our guests as part of their registration in our
Find-A-Bear identification system. Federal, state and foreign
governments have enacted or may enact laws or regulations
regarding the collection and use of personal information, with
particular emphasis on the collection of information regarding
minors. Such regulations include or may include requirements
that companies establish procedures to:
• give adequate notice regarding information collection
and disclosure practices;
• allow consumers to have personal information deleted
from a company’s database;
• 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, comprehensive 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 Web site, primarily for children,
bearville.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.
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