Burger King 2013 Annual Report Download - page 18

Table of Contents
While we believe that our joint venture and master franchise arrangements provide us with experienced local business partners in foreign countries,
events or issues, including disagreements with our partners, may occur that require attention of our senior executives and may result in expenses or losses that
erode the profitability of our international operations.
In addition, the U.S. Foreign Corrupt Practices Act, or “FCPA,” and similar worldwide anti-bribery laws generally prohibit companies and their
intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business. Our policies mandate compliance
with these laws. Despite our compliance programs, we cannot assure you that our internal control policies and procedures always will protect us from reckless
or negligent acts committed by our employees, agents, joint venture partners or franchisees. Violations of these laws, or allegations of such violations, may
have a negative effect on our results of operations, financial condition and reputation.

In certain of our international markets, we enter into agreements with master franchisees that permit the master franchisee to develop and operate
restaurants in defined geographic areas. As permitted by our master franchise agreements, certain master franchisees may elect to sub-franchise rights to
develop and operate restaurants in the geographic area covered by the master franchise agreement. Our master franchise agreements contractually obligate our
master franchisees to operate their restaurants in accordance with specified operations, safety and health standards and also require that any sub-franchise
agreement contain similar requirements. However, we are not party to the agreements with the sub-franchisees and, as a result, are dependent upon our master
franchisees to enforce these standards with respect to sub-franchised restaurants. As a result, the ultimate success and quality of any sub-franchised
restaurant rests with the master franchisee and the sub-franchisee. If sub-franchisees do not successfully operate their restaurants in a manner consistent with
required standards, franchise fees and royalty income paid to the applicable master franchisee and ultimately to us could be adversely affected, and our brand
image and reputation may be harmed, which could materially and adversely affect our business and operating results.

We plan to significantly increase worldwide restaurant count. A significant component of our future growth strategy involves increasing our restaurant
count in our international markets. We and our franchisees face many challenges in opening new restaurants, including, among others:
• the selection and availability of suitable restaurant locations;
• the impact of local tax, zoning, land use and environmental rules and regulations on our ability and the ability of our franchisees to develop
restaurants, and the impact of any material difficulties or failures that we and our franchisees experience in obtaining the necessary licenses and
approvals for new restaurants;
• the negotiation of acceptable lease terms;
• the availability of bank credit and, for franchise restaurants, the ability of franchisees to obtain acceptable financing terms;
• securing acceptable suppliers;
• employing and training qualified personnel; and
• consumer preferences and local market conditions.
In the past, we have approved franchisees that were unsuccessful in implementing their expansion plans, particularly in new markets. There can be no
assurance that we will be able to identify franchisees who meet our criteria, or if we identify such franchisees, that they will successfully implement their
expansion plans.
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Source: Burger King Worldwide, Inc., 10-K, February 21, 2014 Powered by Morningstar® Document Research℠
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