Pizza Hut 2014 Annual Report Download - page 100

13MAR201517272138
PART I
Risk Factors
You should carefully review the risks described below as they identify property or contract rights in China, our business would be adversely
important factors that could cause our actual results to differ materially impacted.
from our forward-looking statements and historical trends.
Health concerns arising from outbreaks
Food safety and food-borne illness of viruses or other diseases may have an
concerns may have an adverse effect on adverse effect on our business.
our business. Outbreaks of avian flu occur from time to time around the world,
Food-borne illnesses, such as E. coli, hepatitis A, trichinosis or including in China where a significant portion of our profits and
salmonella, and food safety issues, such as food tampering, revenues originate. It is possible that outbreaks in China and
contamination or adulteration, have occurred in the past and could elsewhere could reach pandemic levels. Public concern over avian flu
occur in the future. Any report or publicity linking us or one of our generally may cause fear about the consumption of chicken, eggs and
Concept restaurants, including restaurants operated by our Concepts’ other products derived from poultry, which could cause customers to
franchisees, to instances of food-borne illness or food safety issues consume less poultry and related products. This would likely result in
could adversely affect our Concepts’ brands and reputations as well lower revenues and profits. Avian flu outbreaks could also adversely
as our revenues and profits and possibly lead to litigation. If a affect the price and availability of poultry, which could negatively
customer of our Concepts becomes ill from food-borne illnesses or as impact our profit margins and revenues. Widespread outbreaks could
a result of food safety issues, restaurants in our system may be also affect our ability to attract and retain employees.
temporarily closed, which would decrease our revenues. In addition, Furthermore, other viruses such as H1N1 or ‘‘swine flu’’ may be
instances or allegations of food-borne illness or food safety issues, transmitted through human contact, and the risk of contracting viruses
real or perceived, involving our restaurants, restaurants of could cause employees or guests to avoid gathering in public places,
competitors, suppliers or distributors (regardless of whether we use or which could adversely affect restaurant guest traffic or the ability to
have used those suppliers or distributors), or otherwise involving the adequately staff restaurants. We could also be adversely affected if
types of food served at our restaurants, could result in negative jurisdictions in which we have restaurants impose mandatory
publicity that could adversely affect our sales. The occurrence of closures, seek voluntary closures or impose restrictions on operations
food-borne illnesses or food safety issues could also adversely affect of restaurants. Even if such measures are not implemented and a
the price and availability of affected ingredients, which could result in virus or other disease does not spread significantly, the perceived risk
disruptions in our supply chain and/or lower margins for us and our of infection or health risk may affect our business.
Concepts’ franchisees.
Our foreign operations subject us to
Our significant China operations subject risks that could negatively affect our
us to risks that could negatively affect business.
our business.
A significant portion of our Concepts’ restaurants are operated in
A significant and growing portion of our restaurants are located, and countries and territories outside of the U.S., and we intend to continue
our revenues and profits originate, in China. As a consequence, our expansion of our international operations. As a result, our business is
financial results are increasingly dependent on our results in China, increasingly exposed to risks inherent in foreign operations. These
and our business is increasingly exposed to risks there. These risks risks, which can vary substantially by country, include political
include changes in economic conditions (including consumer instability, corruption, social and ethnic unrest, changes in economic
spending, unemployment levels and wage and commodity inflation), conditions (including consumer spending, unemployment levels and
consumer preferences, taxation (including income and non-income wage and commodity inflation), the regulatory environment, income
based tax rates and laws) and the regulatory environment, as well as and non-income based tax rates and laws and consumer preferences
increased media scrutiny of our business and industry and increased as well as changes in the laws and policies that govern foreign
competition. In addition, our results of operations in China and the investment in countries where our restaurants are operated.
value of our Chinese assets are affected by fluctuations in currency
exchange rates, which may adversely affect reported earnings. There In addition, our results of operations and the value of our foreign
can be no assurance as to the future effect of any such changes on assets are affected by fluctuations in currency exchange rates, which
our results of operations, financial condition or cash flows. may adversely affect reported earnings. More specifically, an increase
in the value of the U.S. Dollar relative to other currencies, such as the
In addition, any significant or prolonged deterioration in U.S.-China Australian Dollar, the British Pound, the Canadian Dollar and the
relations could adversely affect our China business. Certain risks and Euro, as well as currencies in certain emerging markets, such as the
uncertainties of doing business in China are solely within the control of Russian Ruble, could have an adverse effect on our reported
the Chinese government, and Chinese law regulates the scope of our earnings. There can be no assurance as to the future effect of any
foreign investments and business conducted within China. There are such changes on our results of operations, financial condition or cash
also uncertainties regarding the interpretation and application of laws flows.
and regulations and the enforceability of intellectual property and
contract rights in China. If we were unable to enforce our intellectual
6YUM! BRANDS, INC. - 2014 Form 10-K
ITEM 1A
Form 10-K