Panera Bread 2013 Annual Report Download - page 21

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to pay for all hours worked. The outcome of litigation, particularly class actions and regulatory actions, is inherently difficult to
assess or 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.
Our failure or inability to protect our trademarks or other proprietary rights could adversely affect our business and
competitive position.
We believe that our intellectual property and confidential and proprietary information are essential to our business and competitive
position. Our trademarks, copyrights, service marks, trade secrets, confidential and proprietary information, and other intellectual
property rights, are key components of our operating and marketing strategies. Although we have taken steps to protect our brand,
intellectual property, and confidential and proprietary information, these steps may not be adequate. Unauthorized usage or imitation
by others could harm our image, brand, or competitive position and, if we commence litigation to enforce our rights, cause us to
incur significant legal fees.
We do not believe that our trademarks, menu offerings or newly developed technology platforms related to our initiatives designed
to improve bakery-cafe throughput, customer experience and greater access for our customers, infringe upon the proprietary rights
of third parties. An infringement claim, whether or not it has merit, could be time-consuming to defend against, result in costly
litigation, cause delays or suspensions in marketing or introducing new menu items in the future or the rollout of initiatives such
as those noted above, or require us to enter into royalty or licensing agreements. As a result, any such claim could have a material
adverse effect on our business, consolidated financial condition and results of operations.
We try to ensure that our franchisees maintain and protect our brand and our confidential and proprietary information. However,
since our franchisees are independent third parties that we do not control, if they do not operate their bakery-cafes in a manner
consistent with their agreements with us, our brand and reputation or the value of our confidential and proprietary information
could be harmed. If this occurs, our business and operating results could be adversely affected.
We rely heavily on information technology and any material failure, interruption, or security breach in our systems could
adversely affect our business.
We rely heavily on information technology systems across our operations, including for the order and delivery of fresh dough
from our fresh dough facilities, point-of-sale processing in our bakery-cafes, gift and loyalty cards, online business, and various
other processes and transactions, including the storage of employee and customer information. Our ability to effectively manage
our business and coordinate the production, distribution, and sale of our products depends significantly on the reliability and
capacity of these systems. The failure of these systems to operate effectively, problems with transitioning to upgraded or replacement
systems, or a breach in security of these systems could cause delays in product sales and reduced efficiency of our operations, and
significant capital investments could be required to remediate the problem.
We periodically acquire existing bakery-cafes from our franchisees or ownership interests in other restaurant or bakery-
cafe concepts, which could adversely affect our consolidated results of operations.
Periodically, we have acquired existing bakery-cafes 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.