Burger King 2013 Annual Report Download - page 22

Table of Contents


Many of our Company and franchise restaurants are presently located on leased premises. As leases underlying our Company and franchise 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 restaurants in desirable locations. As a result, our sales and our brand building initiatives could be adversely affected. We generally
cannot cancel these leases; therefore, if an existing or future restaurant is not profitable, and we decide to close it, we may nonetheless be committed to perform
our obligations under the applicable lease including, among other things, paying the base rent for the balance of the lease term.


We depend in large part on our brand, which represents 39% of the total assets on our balance sheet as of December 31, 2013, and we believe that our
brand is very important to our success and our competitive position. We rely on a combination of trademarks, copyrights, service marks, trade secrets,
patents and other intellectual property rights to protect our brand and branded products. The success of our business depends on our continued ability to use
our existing trademarks and service marks in order to increase brand awareness and further develop our branded products in both domestic and international
markets. We have registered certain trademarks and have other trademark registrations pending in the United States and foreign jurisdictions. Not all of the
trademarks that we currently use have been registered in all of the countries in which we do business, and they may never be registered in all of these
countries. We may not be able to adequately protect our trademarks, and our use of these trademarks may result in liability for trademark infringement,
trademark dilution or unfair competition. The steps we have taken to protect our intellectual property in the United States and in foreign countries may not be
adequate and our proprietary rights could be challenged, circumvented, infringed or invalidated. In addition, the laws of some foreign countries do not protect
intellectual property rights to the same extent as the laws of the United States.
We may not be able to prevent third parties from infringing our intellectual property rights, and we may, from time to time, be required to institute
litigation to enforce our trademarks or other intellectual property rights or to protect our trade secrets. Further, third parties may assert or prosecute
infringement claims against us and we may or may not be able to successfully defend these claims. Any such litigation could result in substantial costs and
diversion of resources and could negatively affect our revenue, profitability and prospects regardless of whether we are able to successfully enforce our rights.

We may from time to time, in the ordinary course of business, be subject to litigation relating to matters including, but not limited to, disputes with
franchisees, suppliers, employees and customers, as well as disputes over our intellectual property.
Whether or not any claims against us are valid, or whether we are ultimately held liable, such litigation may be expensive to defend, harm our reputation
and divert resources away from our operations and negatively impact our reported earnings. Furthermore, legal proceedings against a franchisee or its affiliates
by third parties, whether in the ordinary course of business or otherwise, may include claims against us by virtue of our relationship with the franchisee.

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 or high-sodium foods and that quick service restaurant marketing practices
have targeted children and encouraged obesity. Adverse publicity about these allegations may negatively affect us and our franchisees, regardless of whether the
allegations are true, by discouraging customers from buying our products. In addition, we face the risk of lawsuits and negative publicity resulting from
illnesses and 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 revenue 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.
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Source: Burger King Worldwide, Inc., 10-K, February 21, 2014 Powered by Morningstar® Document Research℠
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