Papa Johns 2011 Annual Report Download - page 17

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Item 1A. Risk Factors
We are subject to various risks that could have a negative effect on our business, financial condition and
results of operations. These risks could cause actual operating results to differ from those expressed in
certain “forward looking statements” contained in this Form 10-K as well as in other Company
communications. Although we believe that our expectations are based on reasonable assumptions, actual
results may differ materially from those in the forward-looking statements as a result of various factors:
We face substantial competition from other food industry competitors, and our results of operations can
be negatively impacted by the actions of one or more of our competitors.
The QSR Pizza category and the restaurant industry in general are intensely competitive with respect to
price, service, location and food quality, and there are many well-established competitors with
substantially greater financial and other resources than the Papa John’s system. Some of these competitors
have been in existence for a substantially longer period than Papa John’s and may be better established in
the markets where restaurants operated by us or our franchisees are, or may be, located. Experience has
shown that a change in pricing or other marketing initiatives or promotional strategies, including new
product and concept developments, by one or more of our major competitors can have a rapid and adverse
impact on our sales and earnings and our system-wide restaurant operations.
Changes in consumer preferences or discretionary consumer spending could adversely impact our
results.
Changes in consumer taste (for example, changes in dietary preferences that could cause consumers to
avoid pizza in favor of foods that are perceived as more healthful, and continuing focus on weight
management), demographic trends, traffic patterns and the type, number and location of competing
restaurants could adversely affect our restaurant business. Also, our success depends to a significant
extent on numerous factors affecting discretionary consumer spending, including disposable consumer
income, consumer confidence and economic conditions, such as continued higher levels of
unemployment. Further adverse changes in these factors could reduce sales or inhibit our ability to
increase pricing, either of which could materially adversely affect our results of operations.
Our brand could be impacted by negative publicity concerning food quality and other health issues.
Like other food industry competitors, we could be materially adversely affected by food safety issues and
negative publicity concerning food quality, product recalls, customer service, illness, injury, publication
of government or industry findings concerning food products served by us or competitors, or other health
concerns or operating issues stemming from one or more restaurants. Reports of food safety issues,
perceived health impact of ingredients in the products we serve and customer service issues could reduce
our sales and transactions. This risk is heightened by the impact of social media.
Our success depends on the differentiation of our brand.
Our results depend upon our ability to differentiate our brand and our reputation for quality. If we fail in
either of these areas, demand for our products could fall or we could otherwise be unable to operate our
restaurants profitably.
We may not be able to execute our growth strategy or achieve our planned growth targets.
Our growth strategy depends on the Company and our franchisees’ ability to open new restaurants and to
operate them on a profitable basis. Planned growth targets and the ability to operate new and existing
restaurants profitably are affected by economic and competitive conditions and the resulting impact on