Pizza Hut 2011 Annual Report Download - page 115

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Our success depends substantially on the value and perception of our brands.
Our success is dependent in large part upon our ability to maintain and enhance the value of our brands and our customers’
connection to our brands. Brand value is based in part on consumer perceptions on a variety of subjective qualities, and even
isolated business incidents can erode brand value and consumer trust, particularly if the incidents receive considerable publicity
or result in litigation. For example, our brands could be damaged by claims or perceptions about the quality of our products
regardless of whether such claims or perceptions are accurate. Consumer demand for our products and our brand value could
diminish significantly if any such incidents or other matters erode consumer confidence in us or our products, which would likely
result in lower sales and, ultimately, profits.
Our business may be adversely impacted by general economic conditions.
Our results of operations are dependent upon discretionary spending by consumers, which may be affected by general economic
conditions globally or in one or more of the markets we serve. Some of the factors that impact discretionary consumer spending
include unemployment, disposable income and consumer confidence. These and other macroeconomic factors could have an
adverse effect on our sales mix, profitability or development plans, which could harm our financial condition and operating results.
The impact of potentially limited credit availability on third-party vendors such as our suppliers cannot be predicted. The inability
of our suppliers to access financing, or the insolvency of suppliers, could lead to disruptions in our supply chain which could
adversely impact our sales, cost of sales and financial condition.
Changes in governmental regulations may adversely affect our business operations.
Our Concepts and their franchisees are subject to numerous laws and regulations around the world. Our restaurants are subject
to state and local licensing and regulation by health, sanitation, food, workplace safety, fire and other agencies. In addition, we
face risks arising from compliance with and enforcement of increasingly complex federal and state immigration laws and regulations
in the U.S.
We are also subject to the Americans with Disabilities Act in the U.S. and similar state laws that give civil rights protections to
individuals with disabilities in the context of employment, public accommodations and other areas. The expenses associated with
any facilities modifications required by these laws could be material. Our operations in the U.S. are also subject to the U.S. Fair
Labor Standards Act, which governs such matters as minimum wages, overtime and other working conditions, family leave
mandates and a variety of similar state laws that govern these and other employment law matters. The compliance costs associated
with these laws and evolving regulations could be substantial, and any failure or alleged failure to comply with these laws could
lead to litigation, which could increase our expenses and adversely affect our financial condition.
We also face risks from new or changing laws and regulations relating to nutritional content, nutritional labeling, product safety
and menu labeling. Compliance with these laws and regulations can be costly and can increase our exposure to litigation or
governmental investigations or proceedings. New or changing laws and regulations relating to union organizing rights and activities
may impact our operations at the restaurant level and increase our cost of labor. In addition, we are subject to laws relating to
information security, privacy, cashless payments and consumer credit, protection and fraud, and any failure or perceived failure
to comply with those laws could harm our reputation or lead to litigation, which could adversely affect our financial condition.
We are also subject to increasing environmental regulations, which could result in increased taxation or future restrictions on or
increases in costs associated with food and other restaurant supplies, transportation and utilities, any of which could decrease our
operating profits and/or necessitate future investments in our restaurant facilities and equipment to achieve compliance.
The impact of current laws and regulations, the effect of future changes in laws or regulations that impose additional requirements
and the consequences of litigation relating to current or future laws and regulations, or our inability to respond effectively to
significant regulatory or public policy issues, could increase our compliance and other costs of doing business and therefore have
an adverse effect on our results of operations. Failure to comply with the laws and regulatory requirements of federal, state and
local authorities could result in, among other things, revocation of required licenses, administrative enforcement actions, fines
and civil and criminal liability. Compliance with these laws and regulations could be costly and could increase our exposure to
litigation or governmental investigations or proceedings.
Form 10-K