Popeye's 2014 Annual Report Download - page 24

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Item 1A. RISK FACTORS
Certain statements we make in this filing, and other written or oral statements made by or on our behalf, may constitute
“forward-looking statements” within the meaning of the federal securities laws. Words or phrases such as “should result,” “are
expected to,” “we anticipate,” “we estimate,” “we project,” “we believe,” or similar expressions are intended to identify forward-
looking statements. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially
from our historical experience and our present expectations or projections. We believe that these forward-looking statements are
reasonable; however, you should not place undue reliance on such statements. Such statements speak only as of the date they are
made, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of future
events, new information or otherwise. The following risk factors and others that we may add from time to time, are some of the
factors that could cause our actual results to differ materially from the expected results described in our forward-looking statements.
If we are unable to compete successfully against other companies in the QSR industry or develop new products that appeal
to consumer preferences, we could lose customers and our revenues may decline.
The QSR industry is intensely competitive with respect to price, quality, brand recognition, menu offerings, service and location.
If we are unable to compete successfully against other foodservice providers, we could lose customers and our revenues may
decline. We compete against other QSRs, including chicken, hamburger, pizza, Mexican and sandwich restaurants, other purveyors
of carry out food, convenience dining establishments and other home meal replacement alternatives, including national restaurant
and grocery store chains. Many of our competitors possess substantially greater financial, marketing, personnel and other resources
than we do. There can be no assurance that consumers will continue to regard our products favorably, that we will be able to
develop new products that appeal to consumer preferences, or that we will be able to continue to compete successfully in the QSR
industry.
Adverse publicity related to food safety and quality could result in a loss of customers and reduce our revenues.
We and our franchisees are, from time to time, the subject of complaints or litigation from guests alleging illness, injury or
other food quality, health or operational concerns. Adverse publicity resulting from these allegations may harm our reputation or
our franchisees’ reputation, regardless of whether the allegations are valid or not, whether we are found liable or not, or whether
those concerns relate only to a single restaurant or a limited number of restaurants or many restaurants. We are also subject to
potentially negative publicity from various sources, including television, social media sites, which are beyond the control of the
Company. Additionally, some animal rights organizations have engaged in confrontational demonstrations at certain restaurant
companies across the country. As a multi-unit restaurant company, we can be adversely affected by the publicity surrounding
allegations involving illness, injury, or other food quality, health or operational concerns. Complaints, litigation or adverse publicity
experienced by one or more of our franchisees could also adversely affect our business as a whole. If we have adverse publicity
due to any of these concerns, we may lose customers and our revenues may decline.
If our franchisees are unable or unwilling to open a sufficient number of restaurants, our growth strategy could be at risk.
As of December 28, 2014, we franchised 1,805 restaurants domestically and 509 restaurants in Puerto Rico, Guam, the Cayman
Islands and 26 foreign countries. Our growth strategy is significantly dependent on increasing the number of our franchised
restaurants. If our franchisees are unable to open a sufficient number of restaurants, our growth strategy could be significantly
impaired.
Our ability to successfully open additional franchised restaurants will depend on various factors, including the availability of
suitable sites, the negotiation of acceptable leases or purchase terms for new locations, permitting and regulatory compliance, the
ability to meet construction schedules, the financial and other capabilities of our franchisees, and general economic and business
conditions. Many of the foregoing factors are beyond the control of our franchisees. Further, there can be no assurance that our
franchisees will successfully develop or operate their restaurants in a manner consistent with our concepts and standards, or will
have the business abilities or access to financial resources necessary to open the restaurants required by their agreements.
Historically, there have been many instances in which Popeyes franchisees have not fulfilled their obligations under their
development agreements to open new restaurants.
If the cost of chicken increases, our cost of sales will increase and our operating results could be adversely affected.
The principal raw material for Popeyes is fresh chicken. Any material increase in the costs of fresh chicken could adversely
affect our operating results. Our company-operated and franchised restaurants purchase fresh chicken from various suppliers who
service us from various plant locations. These costs are significantly affected by increases in the cost of chicken, which can result
from a number of factors, including increases in the cost of grain, disease, declining market supply of fast-food sized chickens
and other factors that affect availability. Because our purchasing agreements for fresh chicken allow the prices that we pay for