IHOP 2014 Annual Report Download - page 29

10
Government Regulation
We are subject to Federal Trade Commission (“FTC”) regulation and a number of state laws which regulate the offer and
sale of franchises. We also are subject to a number of state laws which regulate substantive aspects of the franchisor-franchisee
relationship. The FTC's Trade Regulation Rule on Franchising, as amended (the “FTC Rule”), requires us to furnish to
prospective domestic franchisees a Franchise Disclosure Document containing information prescribed by the FTC Rule.
State laws that regulate the offer and sale of franchises and the franchisor-franchisee relationship presently exist in a
number of states and some of these laws require registration of the franchise offering with the state authorities. Those states that
regulate the franchise relationship generally require that the franchisor deal with its franchisees in good faith, prohibit
interference with the right of free association among franchisees, limit the imposition of unreasonable standards of performance
on a franchisee and regulate discrimination against franchisees with respect to charges, royalty fees or other fees. Although
such laws may restrict a franchisor in the termination and/or non-renewal of a franchise agreement by, for example, requiring
"good cause" to exist as a basis for the termination and/or non-renewal, advance notice to the franchisee of the termination or
non-renewal, an opportunity to cure a default and a repurchase of inventory or other compensation upon termination, these
provisions have not historically had a significant effect on our franchise operations.
Each restaurant is subject to licensing and regulation by a number of governmental authorities, which may include liquor
license authorities (primarily in the case of Applebee's restaurants), health, sanitation, safety, fire, building and other agencies
in the state or municipality in which the restaurant is located. We are also subject to new laws and regulations, which vary from
jurisdiction to jurisdiction, relating to nutritional content and menu labeling.
More stringent and varied requirements of local governmental bodies with respect to zoning, land use and environmental
factors could delay or prevent the development of new restaurants in particular areas.
Various federal and state labor laws govern both our own and our franchisees' relationships with our respective employees.
These include such matters as minimum wage requirements, overtime and other working conditions. Significant additional
government-imposed increases in minimum wages, paid leaves of absence, mandated health benefits or increased tax reporting
and tax payment requirements with respect to employees who receive gratuities could be detrimental to the economic viability
of our restaurants.
We are subject to a number of privacy and data protection laws and regulations globally. The legislative and regulatory
landscape for privacy and data protection continues to evolve, and there has been an increase in attention given to privacy and
data protection issues with the potential to affect directly our business, including recently enacted laws and regulations in the
United States and internationally requiring notification to individuals and government authorities of security breaches involving
certain categories of personal information.
In March 2010, President Obama signed the Patient Protection and Affordable Care Act and the Health Care and Education
Affordability Reconciliation Act of 2010. The legislation is far-reaching and is intended to expand access to health insurance
coverage over time by adjusting the eligibility thresholds for most state Medicaid programs and providing certain other
individuals and small businesses with tax credits to subsidize a portion of the cost of health insurance coverage. The legislation
includes a requirement that most individuals obtain health insurance coverage beginning in 2014 and a requirement that certain
large employers offer coverage to their employees or pay a financial penalty. We expect that our health insurance coverage
expenses, and the health insurance coverage expenses of our franchisees, will increase over the long term as a result of this
legislation, and any such increases could adversely affect our business, cash flows, financial condition and results of operations.
In recent years, there has been an increased legislative, regulatory and consumer focus at the federal, state and municipal
levels on the food industry including nutrition and advertising practices. Restaurants operating in the quick-service and fast-
casual segments have been a particular focus. In addition to the United States Food and Drug Administration’s recently adopted
menu labeling requirements for restaurants, a number of other jurisdictions around the United States have adopted regulations
requiring that chain restaurants include calorie information on their menus or make other nutritional information available.
Initiatives in the area of nutrition disclosure or advertising, such as requirements to provide information about the nutritional
content of our food, may result in increased costs of compliance with the requirements and may also change customer buying
habits in a way that adversely impacts our sales. For further information regarding governmental regulation, see Item 1A, Risk
Factors.