Jamba Juice 2014 Annual Report Download - page 21

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We may not be able to adequately protect our intellectual property, which could harm the value of our brand and adversely affect our business.
Our intellectual property is material to the conduct of our business. Our ability to implement our business plan successfully depends in part on our ability
to build further brand recognition using our trademarks, service marks, trade dress and other proprietary intellectual property, including our name and logos
and the unique ambiance of our stores, both domestically and overseas. We have secured the ownership and rights to our marks in the United States and have
filed or obtained registrations in select classes including restaurant services in most other significant foreign jurisdictions. We undertake similar efforts to
protect our brands in other relevant consumer product categories in relevant jurisdictions. If our efforts to protect our intellectual property are inadequate, or
if any third party misappropriates or infringes on our intellectual property, the value of our store brand and our consumer products brands may be harmed,
which could have a material adverse effect on our business. While we have not encountered material claims from prior users of intellectual property relating
to restaurant services in areas where we operate or intend to conduct material operations in the near future, there can be no assurances that we will not
encounter any material claims in the future. If so, this could harm our image, brands or competitive position and cause us to incur significant penalties and
costs.
Our business could be adversely affected by increased labor or healthcare costs. Self-insurance plan claims could materially impact our results.
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Labor is a primary component in the cost of operating our business. We compete with other employers in our markets for hourly workers and may become
subject to higher labor costs as a result of such competition. We devote significant resources to recruiting and training our team members. A considerable
number of the team members employed by us are paid at rates related to the federal minimum wage. In 2009, the federal minimum wage increased to $7.25 per
hour. Additionally, many of our Company Store team members work in stores located in states where the minimum wage is greater than the federal minimum
wage and receive compensation equal to the state’s minimum wage. The current California minimum wage is $9.00 per hour, and it will increase to $10.00
per hour effective January 1, 2016.
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Moreover, municipalities may set minimum wages above the applicable state standards, such as in San Francisco, which raised the minimum wage to
$11.05 per hour as of January 1, 2015. Any further increases in the federal minimum wage or the enactment of additional state or local minimum wage
increases where our employees may be located will increase our labor costs. Competition for employees in various markets could also result in higher
required wage rates. Furthermore, the Company is self-insured for employee healthcare and dental benefits. The Company pays a substantial part of the
healthcare benefits for team members at the general manager level and above and for those working at the Company’s corporate office. The Company has a
retrospective policy for its Worker’s Compensation risks. Liabilities associated with the risks that the Company retains are estimated in part, by considering
historical claims experience, reserves and other actuarial assumptions. The estimated accruals for these liabilities are based on statistical analyses of historical
industry data as well as the Company’s actual historical trends. If actual claims experience differs from the Company’s assumptions, historical trends, and
estimates, changes in the Company’s insurance reserves could materially impact our results of operations.
The Patient Protection and Affordable Care Act enacted in 2010, as well as other healthcare reform legislation being considered by Congress and state
legislatures may have a material adverse impact on our business. We are currently evaluating the future impact of the Patient Protection and Affordable Care
Act on our business. Due to provisions requiring phasing-in over time, changes to our healthcare costs structure could have a significant, negative impact on
our future business.
We are reliant on our outsourcing partner to provide effective administrative functions.
During the latter part of 2014, we engaged a third party service provider to provide outsourced accounting, IT, human resources, and contract
management services. This allowed us to achieve efficiencies and cost savings, in part, through a reduction in our workforce. If our outsourcing partner fails
to perform at a sufficient level to ensure our efficient operation, we may not have the resources to timely and efficiently take over those functions, and our
financial performance might be adversely impacted as a result.
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