Jamba Juice 2014 Annual Report Download - page 26

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Our franchisees could take actions that harm our reputation and reduce our royalty revenue.
While we have franchise agreements in place with our franchisees that provide certain operational requirements, we do not exercise control over the day-
to-day operations of our Franchise Stores. Any operational or developmental shortcomings of our Franchise Stores, including their failure to comply with
applicable laws, are likely to be attributed to our system-wide operations in the eyes of consumers and could adversely affect our reputation and have a direct
negative impact on the royalty revenue we receive from those and other stores.
We could face liability from our franchisees and from government agencies.
A franchisee or government agency may bring legal action against us based on the franchisor/franchisee relationship. Various state and federal laws
govern our relationship with our franchisees and our potential sale of a franchise. If we fail to comply with these laws, we could be liable for damages to
franchisees, fines or other penalties. Expensive litigation with our franchisees or government agencies may adversely affect both our profits and our important
relations with our franchisees.
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Litigation and publicity concerning food quality, health claims, and other issues can result in liabilities, increased expenses, distraction of management,
and can also cause customers to avoid our products, which could adversely affect our results of operations, business and financial condition.
Food service businesses can be adversely affected by litigation and complaints from customers or government authorities resulting from food quality,
health claims, allergens, illness, injury or other health concerns or operating issues stemming from one retail location or a number of retail locations. Adverse
publicity about these allegations may negatively affect us, regardless of whether the allegations are true, by discouraging customers from buying our
products.
Our customers occasionally file complaints or lawsuits against us alleging that we are responsible for some illness or injury they suffered at or after a
visit to our stores, or that we have problems with food quality or operations. We are also subject to a variety of other claims arising in the ordinary course of
our business, including false advertising claims, personal injury claims, contract claims and claims alleging violations of federal and state law regarding
workplace and employment matters, discrimination and similar matters, and we could become subject to class action or other lawsuits related to these or
different matters in the future. Regardless of whether any claims against us are valid, or whether we are ultimately held liable, claims may be expensive to
defend and may divert time and money away from our operations and hurt our performance. A judgment significantly in excess of our insurance coverage, or
for which we are not covered by insurance, could materially and adversely affect our financial condition or results of operations. Any adverse publicity
resulting from these allegations may also materially and adversely affect our reputation or prospects, which in turn, could adversely affect our results.
In addition, the food services industry has been subject to a growing number of claims based on the nutritional content of food products they sell, and
disclosure and advertising practices. We may also be subject to this type of proceeding in the future and, even if not, publicity about these matters
(particularly directed at the quick-service and fast-casual segments of the industry) may harm our reputation or prospects and adversely affect our results.
We are also impacted by trends in litigation, including class-action allegations brought under various consumer protection laws, securities
and derivative lawsuits claiming violations of state and federal securities law, and employee lawsuits, including wage and hour claims. We may also be
impacted by litigation involving our relationship with franchisees and the legal distinction between our franchisees and us for employee claims based on,
among other things, wage and hour violations, discrimination, harassment, or wrongful termination, as these types of claims are increasingly asserted against
franchisors on a co-employer theory by employees of franchisees.
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