Einstein Bros 2002 Annual Report Download - page 9

http://www.sec.gov/Archives/edgar/data/949373/000104746903027186/a2116520z10-ka.htm[9/11/2014 10:14:22 AM]
We are vulnerable to changes in consumer preferences and economic conditions that could harm our financial results.
Food service businesses are often affected by changes in consumer tastes, national, regional and local economic conditions and demographic
trends. Factors such as traffic patterns, local demographics and the type, number and location of competing restaurants may adversely affect the
performance of individual locations. In addition, inflation and increased food and energy costs may harm the restaurant industry in general and our
locations in particular. Adverse changes in any of these factors could reduce consumer traffic or impose practical limits on pricing, which could
harm our business prospects, financial condition, operating results or cash flow. Our continued success will depend in part on our ability to
anticipate, identify and respond to changing consumer preferences and economic conditions.
There is intense competition in the restaurant industry.
Our industry is intensely competitive and there are many well-established competitors with substantially greater financial and other resources.
In addition to current competitors, one or more new major competitors with substantially greater financial, marketing and operating resources could
enter the market at any time and compete directly against us. In addition, in virtually every major metropolitan area in which we operate or expect
to enter, local or regional competitors already exist.
We face the risk of adverse publicity and litigation in connection with our operations.
We are from time to time the subject of complaints or litigation from our consumers alleging illness, injury or other food quality, health or
operational concerns. Adverse publicity resulting from these allegations may materially adversely affect us, regardless of whether the allegations
are valid or whether we are liable. In addition, employee claims against us based on, among other things, discrimination, harassment or wrongful
termination may divert our financial and management resources that would otherwise be used to benefit the future performance of our operations.
We have been subject to claims from time to time, and although these claims have not historically had a material impact on our operations, a
significant increase in the number of these claims or an increase in the number of successful claims could materially adversely affect our business,
prospects, financial condition, operating results or cash flows.
We rely in part on our franchisees.
We rely in part on our franchisees and the manner in which they operate their locations to develop and promote our business. Although we
have developed criteria to evaluate and screen prospective franchisees, there can be no assurance that franchisees will have the business acumen or
financial resources necessary to operate successful franchises in their franchise areas. The failure of franchisees to operate franchises successfully
could have a material adverse effect on us, our reputation, our brands and our ability to attract prospective franchisees.
We face risks associated with government regulation.
Each of our locations is subject to licensing and regulation by the health, sanitation, safety, building and fire agencies of the respective states
and municipalities in which it is located. A failure to comply with one or more regulations could result in the imposition of sanctions, including the
closing of facilities for an indeterminate period of time, or third-party litigation, any of which could have a material adverse effect on us and the
results of our operations.
In addition, our franchise operations are subject to regulation by the Federal Trade Commission. Our franchisees and we must also comply
with state franchising laws and a wide range of other state and local rules and regulations applicable to our business. The failure to comply with
federal, state and local rules and regulations would have an adverse effect on our franchisees and us.
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Under various federal, state and local laws, an owner or operator of real estate may be liable for the costs of removal or remediation of certain
hazardous or toxic substances on or in such property. Such liability may be imposed without regard to whether the owner or operator knew of, or
was responsible for, the presence of such hazardous or toxic substances. Although we are not aware of any environmental conditions that require
remediation by us under federal, state or local law at our properties, we have not conducted a comprehensive environmental review of our
properties or operations and no assurance can be given that we have identified all of the potential environmental liabilities at our properties or that
such liabilities would not have a material adverse effect on our financial condition.
We may not be able to protect our trademarks and other proprietary rights.
We believe that our trademarks and other proprietary rights are important to our success and our competitive position. Accordingly, we devote
substantial resources to the establishment and protection of our trademarks and proprietary rights. However, the actions taken by us may be