Nutrisystem 2015 Annual Report Download - page 18

Freight and Fulfillment. In 2015, more than 96% of our orders were shipped by one third-party provider and
100% of our order fulfillment was handled by one third-party provider. Should these providers be unable to
service our needs for even a short duration, our revenue and business could be harmed. Additionally, the cost and
time associated with replacing these providers on short notice would add to our costs. Any replacement
fulfillment provider would also require startup time, which could cause us to lose sales and market share.
Internet and Networking. Our business also depends on a number of third parties for Internet access and
networking, and we have limited control over these third parties. Should our network connections go down, our
ability to fulfill orders would be delayed. Further, if our website or call center become unavailable for a
noticeable period of time due to Internet or communication failures, our business could be adversely affected,
including harm to our brand and loss of sales.
Therefore, we are dependent on maintaining good relationships with these third parties. The services we require
from these parties may be disrupted by a number of factors associated with their businesses, including the
following:
• labor disruptions;
• delivery problems;
• financial condition or results of operations;
• internal inefficiencies;
• equipment failure;
• severe weather;
• fire;
• natural or man-made disasters; and
• with respect to our food suppliers, shortages of ingredients or United States Department of Agriculture
(“USDA”) or United States Food and Drug Administration (“FDA”) compliance issues.
We may be subject to claims that our personnel are unqualified to provide proper weight loss advice.
We offer comprehensive individualized counseling options from registered dietitians, certified diabetes educators
and weight loss counselors with varying levels of training. We may be subject to claims from our customers
alleging that our personnel lack the qualifications necessary to provide proper advice regarding weight loss and
related topics. We may also be subject to claims that our personnel have provided inappropriate advice or have
inappropriately referred or failed to refer customers to health care providers for matters other than weight loss.
Such claims could result in lawsuits, damage to our reputation and divert management’s attention from our
business, which would adversely affect our business.
We may be subject to health or advertising related claims from our customers.
Our weight loss program does not include medical treatment or medical advice, and we do not engage physicians
or nurses to monitor the progress of our customers. Many people who are overweight suffer from other physical
conditions, and our target consumers could be considered a high-risk population. A customer who experiences
health problems could allege or bring a lawsuit against us on the basis that those problems were caused or
worsened by participating in our weight management program. For example, our predecessor businesses suffered
substantial losses due to health-related claims and related publicity. Further, customers who allege that they were
deceived by any statements that we made in advertising or labeling could bring a lawsuit against us under
consumer protection laws. Currently, we are neither subject to any such allegations nor have we been named in
any such litigation. If we were subject to any such claims, while we would defend ourselves against such claims,
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