IHOP 2015 Annual Report Download - page 36

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may not be able to adequately adapt Applebee's or IHOP restaurants' menu offerings to keep pace with developments in
consumer preferences, which may result in reductions to the franchise payments we receive from franchisees and the revenues
generated by our company-operated restaurants.
We face a variety of risks associated with doing business with franchisees and vendors in international markets. Our
expansion into international markets could create risks to our brands and reputation. We believe that we have selected high-
caliber international franchisees with significant experience in restaurant operations. However, the ultimate success and quality
of any franchise restaurant rests with the franchisee.
There is no assurance that our international operations will be profitable or that international growth will continue. Our
international operations are subject to all of the same risks associated with our domestic operations, as well as a number of
additional risks. These include, among other things, international economic and political conditions, international currency
fluctuations, terrorism, and differing cultures and consumer preferences.
We also are subject to governmental regulations throughout the world that impact the way we do business with our
international franchisees and vendors. These include antitrust and tax requirements, import/export/customs regulations, anti-
boycott regulations, and other international trade regulations, the USA Patriot Act and the Foreign Corrupt Practices Act.
Failure to comply with any such legal requirements could subject us to monetary liabilities and other sanctions, which could
harm our business, results of operations and financial condition.
We may be subject to litigation and other legal proceedings that could be time consuming, require significant amounts
of management time and result in the diversion of significant operational resources. We are involved in lawsuits, claims and
proceedings incident to the ordinary course of our business. Litigation is inherently unpredictable. Any claims against us,
whether meritorious or not, could be time consuming, result in costly litigation, require significant amounts of management
time and result in the diversion of significant operational resources. There have been a growing number of lawsuits in recent
years. There has also been a rise in employment-related lawsuits. From time to time, we have been subject to these types of
lawsuits. The cost of defending claims against us or the ultimate resolution of such claims may harm our business and operating
results. In addition, the increasingly regulated business environment may result in a greater number of enforcement actions and
private litigation. This could subject us to increased exposure to stockholder lawsuits.
We and our franchisees are subject to complaints or litigation from guests alleging illness, injury or other food quality,
food safety, health or operational concerns. We and our franchisees are also subject to "dram shop" laws in some states pursuant
to which we and our franchisees may be subject to liability in connection with personal injuries or property damages incurred
in connection with wrongfully serving alcoholic beverages to an intoxicated person. Although our franchise agreements require
our franchisees to defend and indemnify us, we may be named as a defendant and sustain liability in legal proceedings against
franchisees under the doctrines of vicarious liability, agency, negligence or otherwise. We may also initiate legal proceedings
against franchisees for breach of the terms of their franchise agreements, including underreporting of sales, failure to operate
restaurants according to standard operating procedures and payment defaults. Such claims may reduce the ability of our
franchisees to make payments to us and the profits generated by our company-operated restaurants. These claims may also
reduce the ability of franchisees to enter into new franchise agreements with us.
Third-party claims with respect to intellectual property assets, if decided against us, may result in competing uses or
require adoption of new, non-infringing intellectual property, which may in turn adversely affect sales and revenues. We
regard our service marks and trademarks related to our restaurant businesses as having significant value and being important to
our marketing efforts. To protect our restaurants and services from infringement, we rely on contracts, copyrights, patents,
trademarks, service marks and other common law rights, such as trade secret and unfair competition laws. We have registered
certain trademarks and service marks in the United States and international jurisdictions; however, effective intellectual
property protection may not be available in every country in which we have or intend to open or franchise a restaurant.
Although we believe we have taken appropriate measures to protect our intellectual property, there can be no assurance that
these protections will be adequate.
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