Papa Johns 2012 Annual Report Download - page 21

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Our systems could be damaged or interrupted by power loss through various technological failures or acts
of God. In particular, we may experience occasional interruptions of our digital ordering solutions, which
make online ordering unavailable or slow to respond, negatively impacting sales and the experience of
our customers. If our digital ordering solutions do not perform with adequate speed, our customers may
be less inclined to return to our digital ordering solutions, as frequently or at all. If our systems do not
operate properly, we may need to upgrade or replace these systems, which could require material capital
investment from us and our franchisees. Part of our technology infrastructure is specifically designed for
us and our operational systems, which could cause unexpected costs, delays or inefficiencies when
infrastructure upgrades are needed. Significant portions of our technology infrastructure are provided by
third parties, and the performance of these systems is largely beyond our control. Failure of our third
party systems, and backup systems, to adequately perform, particularly as our online sales grow, could
harm our business and the satisfaction of our customers. In addition, we may not have or be able to obtain
adequate protection or insurance to mitigate the risks of these events or compensate for losses related to
these events, which could damage our business and reputation and be expensive and difficult to remedy or
repair.
We may incur significant costs resulting from a security breach, including a breach of confidential
customer information from our digital ordering business.
We are subject to a number of privacy and data protection laws and regulations. Our business requires the
collection and retention of large volumes of internal and customer data, including credit card data and
other personally identifiable information of our employees and customers housed in the various
information systems we use. The integrity and protection of that customer, employee and Company data
is critical to us. Although we take significant steps to prevent security breaches, such as theft of customer
and Company information, failure to prevent fraud or security breaches could result in significant costs to
us and have a material adverse effect on our business.
We have been and will continue to be subject to various types of litigation, including class and collective
action litigation, which could subject us to significant damages or other remedies.
We and our restaurant industry competitors are subject to the risk of litigation from various parties,
including vendors, customers, franchisees and employees. We are involved in a number of lawsuits,
claims, investigations, and proceedings consisting of intellectual property, employment, consumer,
commercial and other matters arising in the ordinary course of business. We are currently a defendant in
cases containing class action allegations. Plaintiffs in these types of class action lawsuits often seek
recovery of very large or indeterminate amounts, and the magnitude of the potential loss relating to such
lawsuits may not be accurately estimated. We evaluate all of the claims and proceedings involving us to
assess the expected outcome and where necessary we estimate the amount of potential losses to us. In
many cases, particularly the class action cases, we may not be able to estimate the amount of potential
losses and/or our estimates may prove to be insufficient. These assessments are made by management
based on the information available at the time made and require the use of a significant amount of
judgment, and actual outcomes or losses may materially differ. Regardless of whether any claims against
us are valid, or whether we are ultimately held liable, such litigation may be expensive to defend and may
divert resources away from our operations and negatively impact earnings.
We may be subject to impairment charges.
Impairment charges are possible if our subsidiaries located in the United Kingdom (“PJUK”) and China
or previously acquired domestic restaurants perform below our expectations. This would result in a
decrease in our reported asset value and reduction in our net income.