Baskin Robbins 2013 Annual Report Download - page 21

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including our customers, franchisees, and employees. We rely on commercially available systems, software, tools, and
monitoring to provide security for processing, transmitting, and storing confidential information. Further, the systems currently
used for transmission and approval of electronic payment transactions, and the technology utilized in electronic payment
themselves, all of which can put electronic payment at risk, are determined and controlled by the payment card industry, not by
us. In addition, our franchisees, contractors, or third parties with whom we do business or to whom we outsource business
operations may attempt to circumvent our security measures in order to misappropriate such information, and may purposefully
or inadvertently cause a breach involving such information. Third parties may have the technology or know-how to breach the
security of the personal information collected, stored, or transmitted by us or our franchisees, and our franchisees' and our
security measures, as well as those of our technology vendors, may not effectively prohibit others from obtaining improper
access to this information. Advances in computer and software capabilities and encryption technology, new tools, and other
developments may increase the risk of such a breach. If a person is able to circumvent our data security measures or that of
third parties with whom we do business, he or she could destroy or steal valuable information or disrupt our operations. Any
security breach could expose us to risks of data loss, litigation, liability, and could seriously disrupt our operations. Any
resulting negative publicity could significantly harm our reputation and could materially and adversely affect our business and
operating results.
We cannot predict the impact that the following may have on our business: (i) new or improved technologies, (ii) alternative
methods of delivery, or (iii) changes in consumer behavior facilitated by these technologies and alternative methods of
delivery.
Advances in technologies or alternative methods of delivery, including advances in vending machine technology and home
coffee makers, or certain changes in consumer behavior driven by these or other technologies and methods of delivery could
have a negative effect on our business. Moreover, technology and consumer offerings continue to develop, and we expect that
new or enhanced technologies and consumer offerings will be available in the future. We may pursue certain of those
technologies and consumer offerings if we believe they offer a sustainable customer proposition and can be successfully
integrated into our business model. However, we cannot predict consumer acceptance of these delivery channels or their impact
on our business. In addition, our competitors, some of whom have greater resources than us, may be able to benefit from
changes in technologies or consumer acceptance of alternative methods of delivery, which could harm our competitive position.
There can be no assurance that we will be able to successfully respond to changing consumer preferences, including with
respect to new technologies and alternative methods of delivery, or to effectively adjust our product mix, service offerings, and
marketing and merchandising initiatives for products and services that address, and anticipate advances in, technology and
market trends. If we are not able to successfully respond to these challenges, our business, financial condition, and operating
results could be harmed.
Economic conditions adversely affecting consumer discretionary spending may negatively impact our business and
operating results.
We believe that our franchisees' sales, customer traffic, and profitability are strongly correlated to consumer discretionary
spending, which is influenced by general economic conditions, unemployment levels, and the availability of discretionary
income. Negative consumer sentiment in the wake of the economic downturn has been widely reported over the past five years
and may continue in 2014. Our franchisees' sales are dependent upon discretionary spending by consumers; any reduction in
sales at franchised restaurants will result in lower royalty payments from franchisees to us and adversely impact our
profitability. If the economic downturn continues for a prolonged period of time or becomes more pervasive, our business and
results of operations could be materially and adversely affected. In addition, the pace of new restaurant openings may be
slowed and restaurants may be forced to close, reducing the restaurant base from which we derive royalty income. As long as
the weak economic environment continues, our franchisees' sales and profitability and our overall business and operating
results could be adversely affected.
Our substantial indebtedness could adversely affect our financial condition.
We have a significant amount of indebtedness. As of December 28, 2013, we had total indebtedness of approximately $1.8
billion, excluding $3.0 million of undrawn letters of credit and $97.0 million of unused commitments under our senior credit
facility.
Subject to the limits contained in the credit agreement governing our senior credit facility and our other debt instruments, we
may be able to incur substantial additional debt from time to time to finance working capital, capital expenditures, investments,
or acquisitions, or for other purposes. If we do so, the risks related to our high level of debt could intensify. Specifically, our
high level of debt could have important consequences, including:
• limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions, or
other general corporate requirements;