Popeye's 2015 Annual Report Download - page 24

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• compliance with the Americans with Disabilities Act; and
• working and safety conditions.
If we fail to comply with existing or future regulations, we may be subject to governmental or judicial fines or sanctions, or
we could suffer business interruption or loss. In addition, our capital expenses could increase due to remediation measures that
may be required if we are found to be noncompliant with any of these laws or regulations.
We are also subject to regulation by the Federal Trade Commission and to state and foreign laws that govern the offer, sale
and termination of franchises and the refusal to renew franchises. The failure to comply with these regulations in any jurisdiction
or to obtain required approvals could result in a ban or temporary suspension on future franchise sales or fines or require us to
make a rescission offer to franchisees, any of which could adversely affect our business and operating results.
Failure to protect our information systems against cyber attacks or information security breaches, including failure to
protect the integrity and security of individually identifiable data of our customers, franchisees and employees, could expose
us to litigation, damage our reputation and have a material adverse effect on our business.
We and our franchisees rely on computer systems and information technology to conduct our business. These systems are
inherently vulnerable to disruption or failure, as well as internal and external security breaches, or other disruptive problems
caused by hackers. A failure of these systems could cause an interruption in our business which could have a material adverse
effect on our results of operations and financial condition.
In addition, we receive and maintain certain personal information about our customers, franchisees and employees. The use
of this information by us is regulated by applicable law. If our or our franchisees' security and information systems are
compromised or our business associates fail to comply with these laws and regulations and this information is obtained by
unauthorized persons or used inappropriately, it could adversely affect our reputation, as well as our restaurant operations and
results of operations and financial condition. Additionally, we could be subject to litigation or the imposition of penalties. As
privacy and information security laws and regulations change, we may incur additional costs to ensure we remain in compliance.
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 and our franchisees 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 chicken to fluctuate, a rise in the prices of chicken products could expose us to cost increases. If we
fail to anticipate and react to increasing food costs by adjusting our purchasing practices or increasing our sales prices, our cost
of sales may increase and our operating results could be adversely affected.
Currency, economic, political and other risks associated with our international operations could adversely affect our
operating results.
We face currency, economic, political, and other risks associated with our international operations. As of December 27, 2015,
we had 569 franchised restaurants in Puerto Rico, Guam, the Cayman Islands and 27 foreign countries. Business at these
operations is conducted in the respective local currency. The amount owed to us is based on a conversion of the royalties and
other fees to U.S. dollars using the prevailing exchange rate. In particular, the royalties are based on a percentage of net sales
generated by our foreign franchisees’ operations. Consequently, our revenues from international franchisees are exposed to the
potentially adverse effects of our franchisees’ operations, currency exchange rates, local economic conditions, political instability
and other risks associated with doing business in foreign countries. We expect that our franchise revenues generated from
international operations will increase in the future, thus increasing our exposure to changes in foreign economic conditions and
currency fluctuations.
Disruptions in the financial markets may adversely affect the availability and cost of credit and changes in economic
conditions may impact consumer spending patterns.
The ability of our franchisees and prospective franchisees to obtain financing for development of new restaurants or
reinvestment in existing restaurants depends in part upon financial and economic conditions which are beyond their control. If
our franchisees are unable to obtain financing on acceptable terms to develop new restaurants or reinvest in existing restaurants,
our business and financial results could be adversely affected.
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