Dunkin' Donuts 2015 Annual Report Download - page 25

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where we intend to conduct operations, including in foreign jurisdictions. Such claims could harm our image, our brands, our
competitive position or our ability to expand our operations into other jurisdictions and cause us to incur significant costs related
to defense or settlement. If such claims were decided against us, or a third party indemnified by us pursuant to license terms, we
could be required to pay damages, develop or adopt non-infringing products or services or acquire a license to the intellectual
property that is the subject of the asserted claim, which license may not be available on acceptable terms or at all. The attendant
expenses could require the expenditure of additional capital, and there would be expenses associated with the defense of any
infringement, misappropriation, or other third-party claims, and there could be attendant negative publicity, even if ultimately
decided in our favor.
Growth into new territories may be hindered or blocked by pre-existing third-party rights.
We act to obtain and protect our intellectual property rights we need to operate successfully in those territories where we
operate. Certain intellectual property rights including rights in trademarks are national in character, and are obtained on a
country-by-country basis by the first person to obtain protection through use or registration in that country in connection with
specified products and services. As our business grows, we continuously evaluate the potential for expansion into new
territories and new products and services. There is a risk with each expansion that growth will be limited or unavailable due to
blocking pre-existing third-party intellectual property rights.
The restaurant industry is affected by consumer preferences and perceptions. Changes in these preferences and perceptions
may lessen the demand for our products, which could reduce sales by our franchisees and reduce our royalty revenues.
The restaurant industry is affected by changes in consumer tastes, national, regional, and local economic conditions, and
demographic trends. For instance, if prevailing health or dietary preferences cause consumers to avoid donuts and other
products we offer in favor of foods that are perceived as healthier, our franchisees’ sales would suffer, resulting in lower royalty
payments to us, and our business and operating results would be harmed.
If we fail to successfully implement our growth strategy, which includes opening new domestic and international
restaurants, our ability to increase our revenues and operating profits could be adversely affected.
Our growth strategy relies in part upon new restaurant development by existing and new franchisees. We and our franchisees
face many challenges in opening new restaurants, including:
• availability of financing;
• selection and availability of suitable restaurant locations;
• competition for restaurant sites;
• negotiation of acceptable lease and financing terms;
• securing required domestic or foreign governmental permits and approvals;
• consumer tastes in new geographic regions and acceptance of our products;
• employment and training of qualified personnel;
• impact of inclement weather, natural disasters, and other acts of nature; and
• general economic and business conditions.
In particular, because the majority of our new restaurant development is funded by franchisee investment, our growth strategy
is dependent on our franchisees’ (or prospective franchisees’) ability to access funds to finance such development. We do not
provide our franchisees with direct financing and therefore their ability to access borrowed funds generally depends on their
independent relationships with various financial institutions. If our franchisees (or prospective franchisees) are not able to
obtain financing at commercially reasonable rates, or at all, they may be unwilling or unable to invest in the development of
new restaurants, and our future growth could be adversely affected.
To the extent our franchisees are unable to open new restaurants as we anticipate, our revenue growth would come primarily
from growth in comparable store sales. Our failure to add a significant number of new restaurants or grow comparable store
sales would adversely affect our ability to increase our revenues and operating income and could materially and adversely harm
our business and operating results.
Increases in commodity prices may negatively affect payments from our franchisees and licensees.
Coffee and other commodity prices are subject to substantial price fluctuations, stemming from variations in weather patterns,