Papa Johns 2014 Annual Report Download - page 24

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Item 1A. Risk Factors
We are subject to various risks that could have a negative effect on our business, financial condition and
results of operations. These risks could cause actual operating results to differ from those expressed in
certain “forward looking statements” contained in this Form 10-K as well as in other Company
communications. Before you invest in our securities you should carefully consider these risk factors
together with all other information included in this Form 10-K and our other publicly filed documents.
We face competition from other food industry competitors, and our results of operations can be
negatively impacted by the actions of one or more of our competitors.
The QSR Pizza category and the restaurant industry in general are intensely competitive, and there are
many well-established competitors with substantially greater financial and other resources than the Papa
John’s system. Some of these competitors have been in existence for a substantially longer period than
Papa John’s and may be better established in the markets where restaurants operated by us or our
franchisees are, or may be, located. Demographic trends, traffic patterns, the type, number and location of
competing restaurants, and changes in pricing or other marketing initiatives or promotional strategies,
including new product and concept developments, by one or more of our major competitors, can have a
rapid and adverse impact on our sales and earnings and our system-wide restaurant operations. Such an
adverse impact could also be caused or exacerbated if our marketing incentives or new product offerings
are not effective.
In addition to more established competitors, we also face competition from new competitors and concepts
such as fast casual pizza concepts. The emergence or growth of new competitors may negatively impact
our sales and our system-wide restaurant operations.
Changes in consumer preferences or discretionary consumer spending could adversely impact our
results.
Changes in consumer preferences and trends (for example, changes in dietary preferences that could
cause consumers to avoid pizza in favor of foods that are perceived as more healthful, lower-calorie or
otherwise based on their nutritional content) or preferences for a dining experience such as fast casual
pizza concepts, could adversely affect our restaurant business. Also, our success depends to a significant
extent on numerous factors affecting consumer confidence and discretionary consumer income and
spending and adverse economic conditions such as high levels of unemployment, high fuel and energy
costs and reduced access to credit. Such factors could cause consumers to spend less on food or shift to
lower-priced products, and adverse changes in these factors could reduce sales or inhibit our ability to
increase pricing, either of which could materially adversely affect our results of operations.
Food safety and quality concerns may negatively impact our business and profitability.
Incidents or reports of food- or water-borne illness, or other food safety issues, food contamination or
tampering, employee hygiene and cleanliness failures, improper employee conduct, or presence of
communicable disease at our restaurants, QC Centers, or suppliers could lead to product liability or other
claims. Such incidents or reports could negatively affect our brand and reputation and a decrease in
customer traffic resulting from these reports could negatively impact our revenues and profits. Similar
incidents or reports occurring at quick service restaurants unrelated to us could likewise create negative
publicity, which could negatively impact consumer behavior towards us.
We rely on our domestic and international suppliers, as do our franchisees, to provide quality ingredients
and to comply with applicable laws and industry standards. A failure of one of our domestic or
international suppliers to meet our quality standards, or meet domestic or international food industry