Papa Johns 2013 Annual Report Download - page 23

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15฀
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.฀If฀we฀experience฀prolonged฀and฀widespread฀technological฀difficulties฀
with฀the฀planned฀rollout฀of฀our฀upgraded฀POS฀system,฀“FOCUS,”฀our฀domestic฀corporate฀and฀franchise฀
operations฀ could฀ be฀ disrupted,฀ adversely฀ impacting฀ sales.฀ 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฀ harm฀ our฀ business฀ and฀
revenues฀ due฀ to฀ the฀ reputational฀ damage฀ to฀ our฀ brand.฀ Such฀ a฀ breach฀ could฀ also฀ result฀ in฀ litigation,฀
penalties,฀and฀other฀significant฀costs฀to฀us฀and฀have฀a฀material฀adverse฀effect฀on฀our฀financial฀results.฀
฀
We฀have฀been฀and฀will฀continue฀to฀be฀subject฀to฀various฀types฀of฀litigation,฀including฀collective฀and฀class฀
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฀a฀
case฀ containing฀ collective฀ and฀ class฀ action฀ allegations.฀ Plaintiffs฀ in฀ these฀ types฀ of฀ 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฀possible฀we฀estimate฀the฀amount฀of฀potential฀losses฀to฀us.฀In฀many฀
cases,฀ particularly฀ collective฀ and฀ 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.฀Further,฀we฀
may฀ not฀ be฀ able฀ to฀ obtain฀ adequate฀ insurance฀ to฀ protect฀ us฀ from฀ these฀ types฀ of฀ litigation฀ matters฀ or฀
extraordinary฀business฀losses.฀฀฀฀฀
฀
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฀ could฀ result฀ in฀ a฀
decrease฀in฀our฀reported฀asset฀value฀and฀reduction฀in฀our฀net฀income.฀฀
฀
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