El Pollo Loco 2016 Annual Report Download - page 24

ThePatientProtectionandAffordableCareActof2010(the“PPACA”)requiresemployerssuchasustoprovideadequateandaffordablehealthinsuranceforall
qualifyingemployeesortopayamonthlyper-employeefeeorpenaltyfornon-compliance.Changesingovernment-mandatedhealthcarebenefitsunderthePPAC
Aareanticipatedtomodestlyincreaseourcostsandthecostsofourfranchisees.OurcompliancewiththePPACAmayresultinmodestmodificationstoour
employmentandbenefitspoliciesandpractices.In2015,weexperiencedamarginalenrollmentincreaseinourhealthplanswithnewlyeligibleemployees.
Becauseparticipationinthehealthplansbynew,full-timeemployeeswasmarginal,thecostincreasesdidnotresultinmodificationstoourbusinesspractices.
However,futurecostincreasesmaybematerialandanyfuturemodificationstoourbusinesspracticesmaybedisruptivetoouroperationsandimpactourabilityto
attractandretainpersonnel.
WearealsosubjecttoregulationbytheFederalTradeCommissionandsubjecttostatelawsthatgoverntheoffer,sale,renewal,andterminationoffranchisesand
ourrelationshipswithourfranchisees.Failuretocomplywiththeselawsandregulationsinanyjurisdictionortoobtainrequiredapprovalscouldresultinabanon
ortemporarysuspensionoffranchisesales,fines,ortherequirementthatwemakearescissionoffertoourfranchisees,anyofwhichcouldaffectourabilityto
opennewrestaurantsinthefutureandthuscouldmateriallyandadverselyaffectourbusinessandoperatingresults.Anysuchfailurecouldalsosubjectusto
liabilitytoourfranchisees.
Weareincreasinglysubjecttoenvironmentalregulations,whichmayincreaseourcostofdoingbusinessandaffectthemannerinwhichweoperate.Environmental
regulationscouldincreasethelevelofourtaxationandfutureregulationscouldimposerestrictionsorincreasethecostsassociatedwithfood,foodpackaging,and
othersupplies,transportationcosts,andutilitycosts.Complyingwithenvironmentalregulationsmaycauseourresultsofoperationstosuffer.Wecannotpredict
whatenvironmentalregulationsorlegislationwillbeenactedinthefuture,howexistingorfutureenvironmentallawswillbeadministeredorapplied,orthelevel
ofcoststhatwemayincurtocomplywith,orsatisfyclaimsrelatingto,suchlawsandregulations.
Legislation and regulations requiring the display and provision of nutritional information for our menu offerings, new information or attitudes regarding diet
and health, or adverse opinions about the health effects of consuming our menu offerings, could affect consumer preferences and negatively impact our results
of operations.
Governmentregulationandconsumereatinghabitsmayimpactourbusinessasaresultofchangesinattitudesregardingdietandhealthornewinformation
regardingthehealtheffectsofconsumingourmenuofferings.Thesechangeshaveresultedin,andmaycontinuetoresultin,theenactmentoflawsandregulations
thatimpacttheingredientsandnutritionalcontentofourmenuofferings,orlawsandregulationsrequiringustodisclosethenutritionalcontentofourfood
offerings.
ThePPACAestablishesauniform,federalrequirementforcertainrestaurantstopostcertainnutritionalinformationontheirmenus.Specifically,thePPACA
amendedtheFederalFood,Drug,andCosmeticActtorequirethatchainrestaurantswith20ormorelocations,operatingunderthesamenameandoffering
substantiallythesamemenus,publishthetotalnumberofcaloriesofstandardmenuitemsonmenusandmenuboards,alongwithastatementthatputsthiscalorie
informationinthecontextofatotaldailycalorieintake.ThePPACAalsorequirescoveredrestaurantstoprovidetoconsumers,uponrequest,awrittensummaryof
detailednutritionalinformationforeachstandardmenuitem,andtoprovideastatementonmenusandmenuboardsabouttheavailabilityofthisinformation.The
PPACAfurtherpermitstheU.S.FoodandDrugAdministrationtorequirecoveredrestaurantstomakeadditionalnutrientdisclosures,suchasdisclosureoftrans-
fatcontent.Anunfavorablereporton,orreactionto,ourmenuingredients,thesizeofourportions,orthenutritionalcontentofourmenuitemscouldnegatively
influencethedemandforourofferings.
Furthermore,anumberofstates,counties,andcitieshaveenactedmenulabelinglawsrequiringmulti-unitrestaurantoperatorstodisclosecertainnutritional
informationtocustomers,orhaveenactedlegislationrestrictingtheuseofcertaintypesofingredientsinrestaurants.California,ourlargestmarket,isoneofthese,
althoughitsmenulabelinglawhasbeensupersededbythePPACA.
Whilewebelievethatourfoodisgenerallyhealthierthanthatofourpeers,customersmaydisagreeorchangetheirdininghabitstoavoidQSR-likerestaurants
altogether.
Compliancewithcurrentandfuturelawsandregulationsregardingtheingredientsandnutritionalcontentofourmenuitemsmaybecostlyandtime-consuming.
Additionally,ifconsumerhealthregulationsorconsumereatinghabitschangesignificantly,wemayberequiredtomodifyordiscontinuecertainmenuitems,and
wemayexperiencehighercostsassociatedwiththeimplementationofthosechanges.Additionally,somegovernmentauthoritiesareincreasingregulations
regardingtrans-fatsandsodium,whichmayrequireustolimitoreliminatetrans-fatsandsodiuminourmenuofferings,orswitchtohigher-costingredients,or
whichmayhinderourabilitytooperateincertainmarkets.Somejurisdictionshavebannedcertaincookingingredients,suchastrans-fats,whichasmallnumberof
ouringredientscontainintraceamounts,orhavediscussedbanningcertainproducts,suchaslargesodas.Removaloftheseproductsandingredientsfromour
menuscouldaffectproducttastes,customersatisfactionlevels,andsalesvolumes,whereasifweweretofailtocomplywiththeselawsorregulations,ourbusiness
couldexperienceamaterialadverseeffect.
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