Baskin Robbins 2011 Annual Report Download - page 32

reduce the overall goodwill of our brands, whether through the failure to meet health and safety standards,
engage in quality control or maintain product consistency, or through the participation in improper or
objectionable business practices. Moreover, unauthorized third parties may use our intellectual property to trade
on the goodwill of our brands, resulting in consumer confusion or dilution. Any reduction of our brands’
goodwill, consumer confusion, or dilution is likely to impact sales, and could materially and adversely impact
our business and operating results.
Under certain license agreements, our subsidiaries have licensed to Dunkin’ Brands the right to use certain
trademarks, and in connection with those licenses, Dunkin’ Brands monitors the use of trademarks and the
quality of the licensed products. While courts have generally approved the delegation of quality-control
obligations by a trademark licensor to a licensee under appropriate circumstances, there can be no guarantee that
these arrangements will not be deemed invalid on the ground that the trademark owner is not controlling the
nature and quality of goods and services sold under the licensed trademarks.
The restaurant industry is affected by consumer preferences and perceptions. Changes in these preferences
and perceptions may lessen the demand for our products, which could reduce sales by our franchisees and
reduce our royalty revenues.
The restaurant industry is affected by changes in consumer tastes, national, regional and local economic
conditions and demographic trends. For instance, if prevailing health or dietary preferences cause consumers to
avoid donuts and other products we offer in favor of foods that are perceived as more healthy, our franchisees’
sales would suffer, resulting in lower royalty payments to us, and our business and operating results would be
harmed.
If we fail to successfully implement our growth strategy, which includes opening new domestic and
international restaurants, our ability to increase our revenues and operating profits could be adversely
affected.
Our growth strategy relies in part upon new restaurant development by existing and new franchisees. We and our
franchisees face many challenges in opening new restaurants, including:
• availability of financing;
• selection and availability of suitable restaurant locations;
• competition for restaurant sites;
• negotiation of acceptable lease and financing terms;
• securing required domestic or foreign governmental permits and approvals;
• consumer tastes in new geographic regions and acceptance of our products;
• employment and training of qualified personnel;
• impact of inclement weather, natural disasters and other acts of nature; and
• general economic and business conditions.
In particular, because the majority of our new restaurant development is funded by franchisee investment, our
growth strategy is dependent on our franchisees’ (or prospective franchisees’) ability to access funds to finance
such development. We do not provide our franchisees with direct financing, and therefore, their ability to access
borrowed funds generally depends on their independent relationships with various financial institutions. If our
franchisees (or prospective franchisees) are not able to obtain financing at commercially reasonable rates, or at
all, they may be unwilling or unable to invest in the development of new restaurants, and our future growth could
be adversely affected.
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