Chili's 2012 Annual Report Download - page 18

centers in which we or our franchisees are located or have executed leases may fail to open or may cease
operations. If our landlords fail to satisfy required co-tenancies, such failures may result in us or our franchisees
terminating leases or delaying openings in these locations. Also, decreases in total tenant occupancy in retail
centers in which we are located may affect guest traffic at our restaurants. All of these factors could have a
material adverse impact on our operations.
Inflation may increase our operating expenses.
We have experienced impact from inflation. Inflation has caused increased food, labor and benefits costs
and has increased our operating expenses. As operating expenses increase, we, to the extent permitted by
competition, recover increased costs by increasing menu prices, or by reviewing, then implementing, alternative
products or processes, or by implementing other cost reduction procedures. We cannot ensure, however, that we
will be able to continue to recover increases in operating expenses due to inflation in this manner.
Changes in governmental regulation may adversely affect our ability to maintain our existing and future
operations and to open new restaurants.
We are subject to the Fair Labor Standards Act (which governs such matters as minimum wages, overtime
and other working conditions), along with the Americans with Disabilities Act, the Immigration Reform and
Control Act of 1986, various family leave mandates and a variety of other laws enacted, or rules and regulations
promulgated by federal, state and local governmental authorities that govern these and other employment
matters, including, tip credits, working conditions, safety standards and immigration status. We expect increases
in payroll expenses as a result of federal and state mandated increases in the minimum wage, and although such
increases are not expected to be material, we cannot assure you that there will not be material increases in the
future. Enactment and enforcement of various federal, state and local laws, rules and regulations on immigration
and labor organizations may adversely impact the availability and costs of labor for our restaurants in a particular
area or across the United States. Other labor shortages or increased team member turnover could also increase
labor costs. In addition, our vendors may be affected by higher minimum wage standards or availability of labor,
which may increase the price of goods and services they supply to us. We continue to review the health care
reform law enacted by Congress in March of 2010 and regulations issued related to the law to evaluate the
potential impact of this new law on our business, and to accommodate various parts of the law as they take effect.
There are no assurances that a combination of cost management and price increases can accommodate all of the
costs associated with compliance.
We are subject to laws and regulations, which vary from jurisdiction to jurisdiction, relating to nutritional
content and menu labeling. Compliance with these laws and regulations may lead to increased costs and
operational complexity, changes in sales mix and profitability, and increased exposure to governmental
investigations or litigation. We do not expect to incur material costs from compliance with the provision of the
new health care law requiring disclosure of calories on the menus, but cannot reliably anticipate any changes in
guest behavior resulting from implementation of this portion of the law, which could have adverse effects on our
sales or results of operations.
Each of our and our franchisees’ restaurants is also subject to licensing and regulation by alcoholic beverage
control, health, sanitation, safety and fire agencies in the state, county and/or municipality where the restaurant is
located. We generally have not encountered any material difficulties or failures in obtaining and maintaining the
required licenses and approvals that could impact the continuing operations of an existing restaurant, or delay or
prevent the opening of a new restaurant. Although we do not, at this time, anticipate any occurring in the future,
we cannot assure you that we or our franchisees will not experience material difficulties or failures that could
impact the continuing operations of an existing restaurant, or delay the opening of restaurants in the future.
We are also subject to federal and state environmental regulations, and although these have not had a
material negative effect on our operations, we cannot ensure that there will not be a material negative effect in
the future. In particular, the U.S. and other foreign governments have increased focus on environmental matters
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