Burger King 2006 Annual Report Download - page 34

‚ merge, consolidate or dispose of our assets or the capital stock or assets of any subsidiary;
‚ pay dividends, make distributions or redeem capital stock in certain circumstances;
‚ enter into transactions with our affiliates;
‚ grant liens on our assets or the assets of our subsidiaries;
‚ enter into the sale and subsequent lease-back of real property; and
‚ make or repay intercompany loans.
Our senior secured credit facility requires us to maintain specified financial ratios. Our ability to meet
these financial ratios and tests can be affected by events beyond our control, and we may not meet those ratios.
A breach of any of those restrictive covenants or our inability to comply with the required financial ratios
would result in a default under our senior secured credit facility or require us to dedicate a substantial portion
of our cash flow from operations to payment on our indebtedness. If the banks accelerate amounts owing
under our senior secured credit facility because of a default and we are unable to pay such amounts, the banks
have a right to foreclose on the stock of BKC and certain of its subsidiaries.
We face risks of litigation and pressure tactics, such as strikes, boycotts and negative publicity from customers,
franchisees, suppliers, employees and others, which could divert our financial and management resources and
which may negatively impact our financial condition and results of operations.
Class action lawsuits have been filed, and may continue to be filed, against various quick service
restaurants alleging, among other things, that quick service restaurants have failed to disclose the health risks
associated with high-fat foods and that quick service restaurant marketing practices have targeted children and
encouraged obesity. We have also been sued in California under Proposition 65 to force disclosure of warnings
that certain of our products, such as french fries and flame-broiled hamburgers, may expose customers to
potentially cancer-causing chemicals. In addition, we face the risk of lawsuits and negative publicity resulting
from injuries, including injuries to infants and children, allegedly caused by our products, toys and other
promotional items available in our restaurants or our playground equipment.
In addition to decreasing our sales and profitability and diverting our management resources, adverse
publicity or a substantial judgment against us could negatively impact our business, results of operations,
financial condition and brand reputation, hindering our ability to attract and retain franchisees and grow our
business in the United States and internationally.
In addition, activist groups, including animal rights activists and groups acting on behalf of franchisees,
the workers who work for our suppliers and others, have in the past, and may in the future, use pressure tactics
to generate adverse publicity about us by alleging, for example, inhumane treatment of animals by our
suppliers, poor working conditions or unfair purchasing policies. These groups may be able to coordinate their
actions with other groups, threaten strikes or boycotts or enlist the support of well-known persons or
organizations in order to increase the pressure on us to achieve their stated aims. In the future, these actions or
the threat of these actions may force us to change our business practices or pricing policies, which may have a
material adverse effect on our business, results of operations and financial condition.
Further, we may be subject to employee, franchisee and other claims in the future based on, among other
things, mismanagement of the system, unfair or unequal treatment, discrimination, harassment, wrongful
termination and wage, rest break and meal break issues, including those relating to overtime compensation.
We have been subject to these types of claims in the past, and if one or more of these claims were to be
successful or if there is a significant increase in the number of these claims, our business, results of operations
and financial condition could be harmed.
Our failure to comply with existing or increased government regulations or becoming subject to future
regulation relating to the products that we sell could adversely affect our business and operating results.
We are currently subject to numerous federal, state, local and foreign laws and regulations, including
those relating to: the preparation and sale of food; building and zoning requirements; environmental protection
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