Red Lobster 2011 Annual Report Download - page 41

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Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Darden
›
2011 Annual Report 39
฀ •฀฀฀Unfavorable฀publicity,฀or฀a฀failure฀to฀respond฀effectively฀to฀adverse฀
publicity, relating to food safety or other concerns that could harm
our฀reputation;
฀ •฀฀฀Federal,฀state฀and฀local฀regulation฀of฀our฀business,฀including฀laws฀and฀
regulations relating to food safety, minimum wage and other labor issues
including unionization, health care reform, taxes, menu labeling, building
and zoning requirements, land use and environmental laws including
climate฀change฀regulations,฀and฀liquor฀laws;฀
฀ •฀฀฀Labor฀and฀insurance฀costs,฀including฀increased฀labor฀costs฀as฀a฀result฀
of federal and state-mandated increases in minimum wage rates and
increased insurance costs as a result of increases in our current
insurance฀premiums;
฀ •฀฀฀A฀material฀information฀technology฀failure,฀inadequacy,฀interruption฀or฀
breach฀of฀security;
฀ •฀฀฀Our฀inability฀or฀failure฀to฀execute฀a฀comprehensive฀business฀continuity฀
plan following a major natural disaster such as a hurricane or manmade
disaster,฀including฀terrorism;
฀ •฀฀฀The฀health฀concerns฀arising฀from฀food-related฀pandemics,฀outbreaks฀of฀
flu฀viruses฀or฀other฀diseases;
฀ •฀฀฀The฀intensely฀competitive฀nature฀of฀the฀restaurant฀industry,฀especially฀
pricing,฀service,฀location,฀personnel฀and฀type฀and฀quality฀of฀food;฀
฀ •฀฀฀Factors฀impacting฀our฀ability฀to฀drive฀sufficient฀profitable฀sales฀growth฀
through brand relevance, operating excellence, opening new restaurants
and developing or acquiring new dining brands, including lower-than-
expected฀sales฀of฀newly-opened฀restaurants฀and฀acquisition฀risks;฀
฀ •฀฀฀The฀impact฀of฀the฀substantial฀indebtedness฀we฀incurred฀in฀connection฀
with฀the฀acquisition฀of฀RARE;
฀ •฀฀฀Our฀plans฀to฀expand฀smaller฀brands฀like฀Bahama฀Breeze฀and฀Seasons฀52฀
that have not yet proven their long-term viability may not be successful
and could require us to make substantial further investments in these
brands฀and฀result฀in฀losses฀and฀impairments;
฀ •฀฀฀A฀lack฀of฀suitable฀new฀restaurant฀locations฀or฀a฀decline฀in฀the฀quality฀of฀
the฀locations฀of฀our฀current฀restaurants;฀
฀ •฀฀฀Higher-than-anticipated฀costs฀to฀open,฀close,฀relocate฀or฀remodel฀
restaurants;
฀ •฀฀฀Increased฀advertising฀and฀marketing฀costs;
฀ •฀฀฀A฀failure฀to฀develop฀and฀recruit฀effective฀leaders฀or฀the฀loss฀of฀
key฀personnel;
฀ •฀฀฀The฀price฀and฀availability฀of฀key฀food฀products,฀ingredients฀and฀utilities฀
used by our restaurants and a failure to achieve economies of scale
in฀purchasing;฀
฀ •฀฀฀The฀impact฀of฀shortages฀or฀interruptions฀in฀the฀delivery฀of฀food฀and฀other฀
products฀from฀third฀party฀vendors฀and฀suppliers;
฀ •฀฀฀The฀impact฀of฀volatility฀in฀the฀market฀value฀of฀derivatives฀we฀use฀to฀hedge฀
commodity฀prices;
฀ •฀฀฀Economic฀and฀business฀factors฀specific฀to฀the฀restaurant฀industry฀and฀
other general macroeconomic factors including unemployment, energy
prices and interest rates, severe weather conditions including hurricanes,
and public safety conditions, including actual or threatened armed
conflicts฀or฀terrorist฀attacks;
฀ •฀฀฀The฀impact฀of฀disruptions฀in฀the฀financial฀markets,฀including฀the฀availability฀
and฀cost฀of฀credit฀and฀an฀increase฀in฀pension฀plan฀expenses;฀
฀ •฀฀฀Risks฀associated฀with฀doing฀business฀with฀franchisees,฀business฀partners฀
and฀vendors฀in฀foreign฀markets;
฀ •฀฀฀Failure฀to฀protect฀our฀service฀marks฀or฀other฀intellectual฀property;
฀ •฀฀฀The฀negative฀effect฀of฀a฀possible฀impairment฀in฀the฀carrying฀value฀of฀our฀
goodwill฀or฀other฀intangible฀assets;฀and
฀ •฀฀฀A฀failure฀of฀our฀internal฀control฀over฀financial฀reporting฀and฀future฀
changes in accounting standards.
Any of the risks described above or elsewhere in this report or our other
filings with the SEC could have a material impact on our business, financial
condition or results of operations. It is not possible to predict or identify all risk
factors. Additional risks and uncertainties not presently known to us or that we
currently believe to be immaterial may also impair our business operations.
Therefore, the above is not intended to be a complete discussion of all potential
risks or uncertainties.