IHOP 2012 Annual Report Download - page 37

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In addition, there can be no assurance that third parties will not assert infringement or misappropriation claims against us, or
assert claims that our rights in our trademarks, service marks and other intellectual property assets are invalid or unenforceable.
Any such claims could have a material adverse effect on us or our franchisees if such claims were to be decided against us. If our
rights in any intellectual property were invalidated or deemed unenforceable, it could permit competing uses of intellectual property
which, in turn, could lead to a decline in restaurant revenues and sales of other branded products and services (if any). If the
intellectual property became subject to third-party infringement, misappropriation or other claims, and such claims were decided
against us, we may be forced to pay damages, be required to develop or adopt non-infringing intellectual property or be obligated
to acquire a license to the intellectual property that is the subject of the asserted claim. There could be significant expenses associated
with the defense of any infringement, misappropriation, or other third-party claims.
Ownership of real property exposes us to potential environmental liabilities. The ownership of real property exposes us
to potential environmental liabilities from United States federal, state and local governmental authorities and private lawsuits by
individuals or businesses. The potential environmental liabilities in connection with the ownership of real estate are highly uncertain.
We currently do not have actual knowledge of any environmental liabilities that would have a material adverse effect on the
Company. From time to time, we have experienced some non-material environmental liabilities resulting from environmental
issues at our properties. While we are unaware of any material environmental liabilities, it is possible that material environmental
liabilities relating to our properties may arise in the future.
Matters involving employees at certain company-operated restaurants expose us to potential liability. We are subject to
United States federal, state and local employment laws that expose us to potential liability if we are determined to have violated
such employment laws. Failure to comply with federal and state labor laws pertaining to minimum wage, overtime pay, meal and
rest breaks, unemployment tax rates, workers' compensation rates, citizenship or residency requirements, child labor requirements,
sales taxes and other employment-related matters may have a material adverse effect on our business or operations. In addition,
employee claims based on, among other things, discrimination, harassment or wrongful termination may divert financial and
management resources and adversely affect operations. The losses that may be incurred as a result of any violation of such
employment laws are difficult to quantify.
Our failure or the failure of our franchisees to comply with federal, state and local governmental regulations may subject
us to losses and harm our brands. 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 extensive federal, state and local governmental regulations, including those relating to the food safety and
inspection and the preparation and sale of food and alcoholic beverages. Disruptions within any government agencies could impact
the U.S. food industry which may have an adverse affect on our business. We are also subject to laws and regulations relating to
building and zoning requirements. 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.
In addition, 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 and may
increase our exposure to governmental investigations or litigation. In connection with the continued operation or remodeling of
certain restaurants, we or our franchisees may be required to expend funds to meet federal, state and local and foreign regulations.
The inability to obtain or maintain such licenses or publicity resulting from actual or alleged violations of such laws could have
an adverse effect on our results of operations.