Shake Shack 2016 Annual Report Download - page 32

Table of Contents
us to claims from guests and employees, any of which could have a material adverse effect on our financial condition and results of operations.
Because a component of our strategy is to continue to grow our licensed business internationally, the risks of doing business internationally could lower our
revenues, increase our costs, reduce our profits or disrupt our business.
Thirty-five of our 40 licensed Shacks as of December 30, 2015 are located outside the United States and we expect to continue to expand our licensed Shacks
internationally. As a result, we are and will be, on an increasing basis, subject to the risks of doing business outside the United States, including:
▪changes in foreign currency exchange rates or currency restructurings and hyperinflation or deflation in the countries in which we operate;
▪the imposition of restrictions on currency conversion or the transfer of funds or limitations on our ability to repatriate non-U.S. earnings in a tax effective
manner;
▪ the presence and acceptance of varying levels of business corruption in international markets;
▪ the ability to comply with, or impact of complying with, complex and changing laws, regulations and policies of foreign governments that may affect
investments or operations, including foreign ownership restrictions, import and export controls, tariffs, embargoes, intellectual property, licensing
requirements and regulations, increase in taxes paid and other changes in applicable tax laws;
▪ the difficulties involved in managing an organization doing business in many different countries;
▪the ability to comply with, or impact of complying with, complex and changing laws, regulations and economic political policies of the U.S. government,
including U.S. laws and regulations relating to economic sanctions, export controls and anti-boycott requirements;
▪increase in an anti-American sentiment and the identification of the licensed brand as an American brand;
▪ the effect of disruptions caused by severe weather, natural disasters, outbreak of disease or other events that make travel to a particular region less
attractive or more difficult; and
▪ political and economic stability.
Any or all of these factors may adversely affect the performance of and licensing revenues we receive from our licensed Shacks located in international markets.
Our international licensed Shacks operate in several volatile regions that are subject to geopolitical and socio-political factors that pose risk to our business
operations. In particular, our licensee has been negatively impacted by currency devaluation in Russia and we have seen a reduction in licensing revenue from our
Russian Shacks. In addition, the economy of any region in which our Shacks are located may be adversely affected to a greater degree than that of other areas of
the country or the world by certain developments affecting industries concentrated in that region or country. For example, our Shacks located in the Middle East
have suffered from depressed oil prices in recent months with declines in sales in traffic experienced throughout the region. If conditions persist or worsen in any
of these regions, it is possible that our licensee may choose to close one or more of these Shacks. While these factors and the impact of these factors are difficult to
predict, any one or more of them could lower our revenues, increase our costs, reduce our profits or disrupt our business, and, as our international licensed
operations increase, these risks will become more pronounced.
We depend on key members of our executive management team.
We depend on the leadership and experience of key members of our executive management team. The loss of the services of any of our executive management
team members could have a material adverse effect on our business and prospects, as we may not be able to find suitable individuals to replace such personnel on a
timely basis or without incurring increased costs, or at all. We do not maintain key person life insurance policies on any of our executive officers. We believe that
our future success will depend on our continued ability to attract and retain highly skilled and qualified personnel. There is a high level of competition for
experienced, successful personnel in our industry. Our inability to meet our executive staffing requirements in the future could impair our growth and harm our
business.
Shake Shack Inc. Form 10-K | 30