Baskin Robbins 2013 Annual Report Download - page 23

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not be able to obtain a waiver from the required lenders. If this occurs we would be in default under our senior credit facility,
the lenders could exercise their rights, as described above, and we could be forced into bankruptcy or liquidation. See
“Management's discussion and analysis of financial condition and results of operations—Liquidity and capital resources,” and
“Description of indebtedness.”
Infringement, misappropriation, or dilution of our intellectual property could harm our business.
We regard our Dunkin' Donuts® and Baskin-Robbins® trademarks as having significant value and as being important factors in
the marketing of our brands. We have also obtained trademark protection for several of our product offerings and advertising
slogans, including “America Runs on Dunkin' ® ” and “What are you Drinkin'? ® ”. We believe that these and other intellectual
property are valuable assets that are critical to our success. We rely on a combination of protections provided by contracts, as
well as copyright, patent, trademark, and other laws, such as trade secret and unfair competition laws, to protect our intellectual
property from infringement, misappropriation, or dilution. We have registered certain trademarks and service marks and have
other trademark and service mark registration applications pending in the U.S. and foreign jurisdictions. However, not all of the
trademarks or service marks that we currently use have been registered in all of the countries in which we do business, and they
may never be registered in all of those countries. Although we monitor trademark portfolios both internally and through
external search agents and impose an obligation on franchisees to notify us upon learning of potential infringement, there can
be no assurance that we will be able to adequately maintain, enforce, and protect our trademarks or other intellectual property
rights. We are aware of names and marks similar to our service marks being used by other persons in certain geographic areas
in which we have restaurants. Although we believe such uses will not adversely affect us, further or currently unknown
unauthorized uses or other infringement of our trademarks or service marks could diminish the value of our brands and may
adversely affect our business. Effective intellectual property protection may not be available in every country in which we have
or intend to open or franchise a restaurant. Failure to adequately protect our intellectual property rights could damage our
brands and impair our ability to compete effectively. Even where we have effectively secured statutory protection for our trade
secrets and other intellectual property, our competitors may misappropriate our intellectual property and our employees,
consultants, and suppliers may breach their contractual obligations not to reveal our confidential information, including trade
secrets. Although we have taken measures to protect our intellectual property, there can be no assurance that these protections
will be adequate or that third parties will not independently develop products or concepts that are substantially similar to ours.
Despite our efforts, it may be possible for third-parties to reverse-engineer, otherwise obtain, copy, and use information that we
regard as proprietary. Furthermore, defending or enforcing our trademark rights, branding practices, and other intellectual
property, and seeking an injunction and/or compensation for misappropriation of confidential information, could result in the
expenditure of significant resources and divert the attention of management, which in turn may materially and adversely affect
our business and operating results.
Although we monitor and restrict franchisee activities through our franchise and license agreements, franchisees may refer to
our brands improperly in writings or conversation, resulting in the dilution of our intellectual property. Franchisee
noncompliance with the terms and conditions of our franchise or license agreements may 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