Burger King 2010 Annual Report Download - page 29

Table of Contents
drought and hurricanes, increased demand, problems in production or distribution, the inability of our vendors to obtain credit, food
safety warnings or advisories or the prospect of such pronouncements, or other conditions beyond our control. A shortage or
interruption in the availability of certain food products or supplies could increase costs and limit the availability of products critical to
restaurant operations.
Four distributors service approximately 85% of our U.S. system restaurants and in many of our international markets, including
the U.K., we have a sole distributor that delivers products to all of our restaurants. Our distributors operate in a competitive and
low−margin business environment. If one of our principal distributors is in financial distress and therefore unable to continue to supply
us and our franchisees with needed products, we may need to take steps to ensure the continued supply of products to restaurants in the
affected markets, which could result in increased costs to distribute needed products. If a principal distributor for our Company
restaurants and/or our franchisees fails to meet its service requirements for any reason, it could lead to a disruption of service or supply
until a new distributor is engaged, which could have an adverse effect on our business.
The loss of key management personnel or our inability to attract and retain new qualified personnel could hurt our business and
inhibit our ability to operate and grow successfully.
The success of our business to date has been, and our continuing success will be, dependent to a large degree on the continued
services of our executive officers, including John Chidsey, our Chairman and Chief Executive Officer; Natalia Franco, our new Global
Chief Marketing Officer; Ben Wells, our Chief Financial Officer; Charles M. Fallon, Jr., our President, North America; and other key
personnel who have extensive experience in the franchising and food industries. If we lose the services of any of these key personnel
and fail to manage a smooth transition to new personnel, our business could suffer.
Changes in tax laws and unanticipated tax liabilities could adversely affect the taxes we pay and our profitability.
We are subject to income and other taxes in the United States and numerous foreign jurisdictions. Our effective income tax rate in
the future could be adversely affected by a number of factors, including: changes in the mix of earnings in countries with different
statutory tax rates; changes in the valuation of deferred tax assets and liabilities; continued losses in certain international Company
restaurant markets that could trigger a valuation allowance or negatively impact our ability to utilize foreign tax credits to offset our
U.S. income taxes; changes in tax laws; the outcome of income tax audits in various jurisdictions around the world; sales of Company
restaurants to franchisees; and any repatriation of non−U.S. earnings for which we have not previously provided for U.S. taxes. In
Mexico, we may at some point be required to apply the IETU or “flat tax” to our Mexico operations, which would result in a material
write−down of our deferred tax assets related to Mexico, an increase in our deferred tax liabilities and an increased consolidated
effective tax rate. We regularly review our deferred tax assets for recoverability based on our history of earnings, expectations for future
earnings and expected timing of reversals of temporary differences, and we regularly assess all of these matters to determine the
adequacy of our tax provision, which is subject to significant discretion. In 2009, the Obama administration proposed legislation that
would change how U.S. multinational corporations are taxed on their foreign income. If such legislation is enacted, it may have a
material adverse impact to our tax rate and, in turn, our profitability.
Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be
materially different from our historical income tax provisions and accruals. The results of a tax audit or related litigation could have a
material effect on our income tax provision, net income or cash flows in the period or periods for which that determination is made.
Leasing and ownership of a significant portfolio of real estate exposes us and our franchisees to possible liabilities and losses.
Many of our Company and franchise restaurants are presently located on leased premises. As leases underlying our Company and
franchisee restaurants expire, we or our franchisees may be unable to negotiate a new lease or lease extension, either on commercially
acceptable terms or at all, which could cause us or our franchisees to close
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