Panera Bread 2014 Annual Report Download - page 25

13
Regulatory changes in and customer focus on nutrition and advertising practices could adversely affect our business.
There continues to be increased consumer emphasis on and regulatory scrutiny of restaurants operating in the quick-service and
fast-casual segments with respect to nutrition and advertising practices. While we have responded to these developments by
updating our menu boards and printed menus in all of our Company-owned bakery-cafes to include caloric information, we may
become subject to other regulations in the area of nutrition disclosure or advertising which would require us to make certain
additional nutritional information available to our customers or restrict the sales of certain types of ingredients. We may experience
higher costs associated with the implementation and oversight of such changes that could have an adverse impact on our business.
Rising insurance costs could negatively impact our profitability.
We self-insure a significant portion of potential losses under our workers’ compensation, medical, general, auto, and property
liability programs. The liabilities associated with the risks that are retained by us are estimated, in part, by considering our historical
claims experience and data from industry and other actuarial sources. The estimated accruals for these liabilities could be affected
if claims differ from these assumptions and historical trends. Unanticipated changes in the actuarial assumptions and management
estimates underlying our reserves of these losses could result in materially different amounts of expense under these programs,
which could have a material adverse effect on our consolidated financial condition and results of operations.
The recent changes to healthcare laws in the United States will likely significantly increase our healthcare costs and
negatively impact our financial results.
We offer eligible U.S. employees the opportunity to enroll in healthcare coverage subsidized by us. For various reasons, many
of our eligible employees currently choose not to participate in our healthcare plans. The changes to the U.S. healthcare laws may
lead some eligible employees who currently do not participate in our healthcare plans to enroll for coverage and may result in
some currently ineligible employees becoming eligible and enrolling for coverage. Such changes in the law include the imposition
of a penalty on an individual who does not obtain healthcare coverage, penalties for employers who do not offer affordable coverage
to certain employees and provisions making certain individuals who can obtain employer coverage ineligible for healthcare
premium tax subsidies that would otherwise be available in connection with the purchase of coverage through an exchange. If a
significant number of employees who do not currently participate in our subsidized healthcare plans enroll as a result of the changes
in law, our healthcare costs may increase significantly and negatively impact our financial results.
We are subject to complaints and litigation that could have an adverse effect on our business.
In the ordinary course of our business, we have been, and we expect that in the future we will be, subject to complaints and litigation
alleging that we are responsible for customer illness or injury suffered during or after a visit to one of our Company-owned bakery-
cafes or franchise-operated bakery-cafes, including allegations of poor food quality, food-borne illness, adverse health effects,
nutritional content or allergens, advertising claims or personal injury claims. In addition, from time to time, we are subject to
litigation by employees, investors, franchisees, and others through private actions, class actions or other forums, including those
alleging violations of various federal and state wage and hour laws regarding, among other things, overtime eligibility and failure
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