Dunkin' Donuts 2015 Annual Report Download - page 29

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breaches of contract or wrongful termination under the franchise arrangements. In addition, we are, from time to time, the
subject of complaints or litigation from customers alleging illness, injury, or other food-quality, health, or operational concerns
and from suppliers alleging breach of contract. We may also be subject to employee claims based on, among other things,
discrimination, harassment, or wrongful termination. Finally, litigation 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
defendant-franchisee. In addition to decreasing the ability of a defendant-franchisee to make royalty payments and diverting
management resources, adverse publicity resulting from such allegations may materially and adversely affect us and our
brands, regardless of whether such allegations are valid or whether we are liable. Our international operations may be subject to
additional risks related to litigation, including difficulties in enforcement of contractual obligations governed by foreign law
due to differing interpretations of rights and obligations, compliance with multiple and potentially conflicting laws, new and
potentially untested laws and judicial systems, and reduced or diminished protection of intellectual property. A substantial
unsatisfied judgment against us or one of our subsidiaries could result in bankruptcy, which would materially and adversely
affect our business and operating results.
Our business is subject to various laws and regulations and changes in such laws and regulations, and/or failure to comply
with existing or future laws and regulations, could adversely affect us.
We are subject to state franchise registration requirements, the rules and regulations of the Federal Trade Commission (the
“FTC”), various state laws regulating the offer and sale of franchises in the United States through the provision of franchise
disclosure documents containing certain mandatory disclosures, and certain rules and requirements regulating franchising
arrangements in foreign countries. Although we believe that the Franchisors’ Franchise Disclosure Documents, together with
any applicable state-specific versions or supplements, and franchising procedures that we use comply in all material respects
with both the FTC guidelines and all applicable state laws regulating franchising in those states in which we offer new
franchise arrangements, noncompliance could reduce anticipated royalty income, which in turn may materially and adversely
affect our business and operating results.
Our franchisees are subject to various existing U.S. federal, state, local, and foreign laws affecting the operation of the
restaurants including various health, sanitation, fire, and safety standards. Franchisees may in the future become subject to
regulation (or further regulation) seeking to tax or regulate high-fat foods, to limit the serving size of beverages containing
sugar, to ban the use of certain packaging materials (including polystyrene used in the iconic Dunkin’ Donuts cup), or requiring
the display of detailed nutrition information. Each of these regulations would be costly to comply with and/or could result in
reduced demand for our products.
In connection with the continued operation or remodeling of certain restaurants, franchisees may be required to expend funds to
meet U.S. federal, state, and local and foreign regulations. Difficulties in obtaining, or the failure to obtain, required licenses or
approvals could delay or prevent the opening of a new restaurant in a particular area or cause an existing restaurant to cease
operations. All of these situations would decrease sales of an affected restaurant and reduce royalty payments to us with respect
to such restaurant.
The franchisees are also subject to the Fair Labor Standards Act of 1938, as amended, and various other laws in the United
States and in foreign countries governing such matters as minimum-wage requirements, overtime and other working conditions,
and citizenship requirements. A significant number of our franchisees’ food-service employees are paid at rates related to the
U.S. federal minimum wage and applicable minimum wages in foreign jurisdictions and past increases in the U.S. federal
minimum wage and foreign jurisdiction minimum wage have increased labor costs, as would future such increases. Any
increases in labor costs might result in franchisees inadequately staffing restaurants. Understaffed restaurants could reduce sales
at such restaurants, decrease royalty payments, and adversely affect our brands. Evolving labor and employment laws, rules and
regulations could also result in increased exposure on the part of Dunkin’ Brands’ for labor and employment related liabilities
that have historically been borne by franchisees.
Our and our franchisees’ operations and properties are subject to extensive U.S. federal, state, and local laws and regulations,
including those relating to environmental, building, and zoning requirements. Our development of properties for leasing or
subleasing to franchisees depends to a significant extent on the selection and acquisition of suitable sites, which are subject to
zoning, land use, environmental, traffic, and other regulations and requirements. Failure to comply with legal requirements
could result in, among other things, revocation of required licenses, administrative enforcement actions, fines, and civil and
criminal liability. We may incur investigation, remediation, or other costs related to releases of hazardous materials or other
environmental conditions at our properties, regardless of whether such environmental conditions were created by us or a third
party, such as a prior owner or tenant. We have incurred costs to address soil and groundwater contamination at some sites, and
continue to incur nominal remediation costs at some of our other locations. If such issues become more expensive to address, or
if new issues arise, they could increase our expenses, generate negative publicity, or otherwise adversely affect us.