Einstein Bros 2011 Annual Report Download - page 14

Form 10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312512092597/d260635d10k.htm[9/11/2014 10:08:30 AM]
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 our results of operations.
Recently, many government bodies have begun to legislate or regulate high-fat and high sodium foods and require disclosure of nutritional
information as a way of combating concerns about obesity and health. In addition to the phase-out of artificial trans-fats, public interest groups
have focused attention on the marketing of high-fat and high-sodium foods to children in a stated effort to combat childhood obesity. Some cities
and states have recently adopted or are considering regulations requiring disclosure of nutritional facts, including calorie
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information, on menus and/or menu boards. Additional cities or states may propose or adopt similar regulations. The cost of complying with these
regulations could increase our expenses and the possible negative publicity arising from such legislative initiatives could reduce our future sales.
Our franchising operations are subject to regulation by the Federal Trade Commission. We must also comply with state franchising laws and
a wide range of other state and local rules and regulations applicable to our business. In addition, the Dodd-Frank Act and the rules promulgated
thereunder may impose new business or disclosure obligations on us. The failure to comply with or substantial changes in federal, state and local
rules and regulations would have an adverse effect on us.
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. We may not have identified all of the potential environmental liabilities at our properties, and any such liabilities that are
identified in the future may have a material adverse effect on our financial condition. Moreover, the adoption of new or more stringent
environmental laws or regulations could result in a material liability to us and the current environmental condition of our leased properties could be
harmed by third parties or by the condition of land or operations in the vicinity of our leased properties.
We may not be able to protect our brands, trademarks, service marks and other proprietary rights.
Our brands, which include our trademarks, service marks 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 brands. However, the actions we take may be
inadequate to prevent imitation of our products and concepts by others, to prevent various challenges to our registrations or applications or denials
of applications for the registration of trademarks, service marks and proprietary rights in the U.S. or other countries, or to prevent others from
claiming violations of their trademarks and proprietary marks. In addition, others may assert rights in our trademarks, service marks and other
proprietary rights.
The loss of key personnel or difficulties recruiting and retaining qualified personnel could adversely affect our business and financial results.
Our success depends substantially on the contributions and abilities of key executives and other employees, and on our ability to recruit and
retain high quality employees to work in and manage our restaurants. We must continue to recruit, retain and motivate management and other
employees sufficient to maintain our current business and support our projected growth. A loss of key employees or a significant shortage of high
quality restaurant employees to maintain our current business and support our projected growth could adversely affect our business and financial
results.
Our ability to use net operating loss carryforwards to offset future taxable income for U.S. federal income tax purposes is subject to limitation.
In general, under Section 382 of the Internal Revenue Code, a corporation that undergoes an “ownership change” is subject to limitations on
its ability to utilize its pre-change net operating loss (“NOL”) carryforwards to offset future taxable income. A corporation generally undergoes an
“ownership change” when the stock ownership percentage (by value) of its “5 percent stockholders” increases by more than 50 percentage points
over any three-year testing period.
Due to transactions involving the sale or other transfer of our stock from the date of our last ownership change through the date of the
secondary public offering of our common stock, and changes in the value of our stock during that period, any new offerings may result in an
additional ownership change for purposes of
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