Panera Bread 2010 Annual Report Download - page 21

vigorously defending the lawsuit, the outcome of litigation is difficult to assess and quantify and the defense against
such claims or actions can be costly. In addition to decreasing sales and profitability and diverting financial and
management resources, we may suffer from adverse publicity that could harm our brand, regardless of whether the
allegations are valid or whether we are liable. Moreover, we are subject to the same risks of adverse publicity
resulting from allegations even if the claim involves one of our franchisees. A judgment significantly in excess of
our insurance coverage for any claims could materially and adversely affect our consolidated financial condition or
results of operations. Additionally, publicity about these claims may harm our reputation or prospects and adversely
affect our results.
If we are unable to protect our customers’ credit card data, we could be exposed to data loss, litigation,
and liability, and our reputation could be significantly harmed.
In connection with credit card sales, we transmit confidential credit card information by way of secure private
retail networks. Although we use private networks, third parties may have the technology or know-how to breach
the security of the customer information transmitted in connection with credit card sales, and our security measures
and those of our technology vendors may not effectively prohibit others from obtaining improper access to this
information. If a person is able to circumvent these security measures, he or she could destroy or steal valuable
information or disrupt our operations. Any security breach could expose us to risks of data loss, litigation, and
liability, and could seriously disrupt our operations and any resulting negative publicity could significantly harm our
reputation.
We periodically acquire existing bakery-cafes from our franchisees or ownership interests in other res-
taurant or bakery-cafe concepts, which could adversely affect our consolidated results of operations.
We have historically acquired existing bakery-cafes and development rights from our franchisees either by
negotiated agreement or exercise of our rights of first refusal under the franchise and area development agreements.
Any acquisition that we undertake involves risk, including:
• our ability to successfully achieve anticipated synergies, accurately assess contingent and other liabilities as
well as potential profitability;
• failure to successfully integrate the acquired entity’s operational and support activities;
• unanticipated changes in business and economic conditions;
• limited or no operational experience in the acquired bakery-cafe market;
• future impairment charges related to goodwill and other acquired intangible assets; and
• risks of dispute and litigation with the seller, the seller’s landlords, and vendors and other parties.
Any of these factors could strain our financial and management resources as well as negatively impact our
consolidated results of operations.
Our operating results fluctuate due to a number of factors, some of which may be beyond our control,
and any of which may adversely affect our financial condition.
Our operating results may fluctuate significantly from our forecasts, targets, or projections because of a
number of factors, including the following:
• changes in average weekly net sales and comparable net bakery-cafe sales due to:
•lower customer traffic or average check per transaction, including as a result of the introduction or
removal of new menu items;
•changes in demographics, consumer preferences, and discretionary spending;
•negative publicity about the ingredients we use or the occurrence of food-borne illnesses or other
problems at our bakery-cafes;
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