Shake Shack 2016 Annual Report Download - page 35

Table of Contents
of a total daily calorie intake. These new labeling laws may also change consumer buying habits in a way that adverse impacts our sales. Additionally, an
unfavorable report on, or reaction to, our menu ingredients, the size of our portions or the nutritional content of our menu items could negatively influence the
demand for our offerings.
Food Safety Regulations
There is also a potential for increased regulation of certain food establishments in the United States, where compliance with a Hazard Analysis and Critical Control
Points ("HACCP") approach may now be required. HACCP refers to a management system in which food safety is addressed through the analysis and control of
potential hazards from production, procurement and handling, to manufacturing, distribution and consumption of the finished product. Many states have required
restaurants to develop and implement HACCP Systems, and the United States government continues to expand the sectors of the food industry that must adopt and
implement HACCP programs. For example, FSMA granted the FDA new authority regarding the safety of the entire food system, including through increased
inspections and mandatory food recalls. Although restaurants are specifically exempted from or not directly implicated by some of these new requirements, we
anticipate that the new requirements may impact our industry. Additionally, our suppliers may initiate or otherwise be subject to food recalls that may impact the
availability of certain products, result in adverse publicity or require us to take actions that could be costly for us or otherwise impact our business.
Local Licensure, Building and Zoning Regulations
The development and operation of Shacks depend, to a significant extent, on the selection of suitable sites, which are subject to zoning, land use, environmental,
traffic and other regulations and requirements. We are also subject to licensing and regulation by state and local authorities relating to health, sanitation, safety and
fire standards. Typically, licenses, permits and approvals under such laws and regulations must be renewed annually and may be revoked, suspended or denied
renewal for cause at any time if governmental authorities determine that our conduct violates applicable regulations. Difficulties or failure to maintain or obtain the
required licenses, permits and approvals could adversely affect our existing Shacks and delay or result in our decision to cancel the opening of new Shacks, which
would adversely affect our business.
Employment Regulations
We are subject to various federal and state laws governing our employment practices, including laws relating to minimum wage requirements, employee
classifications as exempt or non-exempt, payroll and unemployment tax laws, requirements to provide meal and rest periods or other benefits, family leave
mandates, requirements regarding working conditions and accommodations to certain employees, citizenship and work authorization requirements, insurance and
workers' compensation rules and anti-discrimination laws. Compliance with these regulations is costly and requires significant resources. Additionally, we may
suffer losses from or incur significant costs to defend claims alleging non-compliance.
Although none of our employees are currently covered under collective bargaining agreements, our employees may elect to be represented by labor unions in the
future. If a significant number of our employees were to become unionized and collective bargaining agreement terms were significantly different from our current
compensation arrangements, it could adversely affect our business, financial condition or results of operations. In addition, a labor dispute involving some or all of
our employees may harm our reputation, disrupt our operations and reduce our revenues, and resolution of disputes may increase our costs. Further, if we enter into
a new market with unionized construction companies, or the construction companies in our current markets become unionized, construction and build out costs for
new Shacks in such markets could materially increase.
The Affordable Care Act
With the passage in 2010 of the U.S. Patient Protection and Affordable Care Act (the "ACA"), we are required to provide affordable coverage, as defined in the
ACA, to substantially all full-time employees, or otherwise be subject to potential excise tax penalties based on the affordability criteria in the ACA. Additionally,
some states and localities have passed state and local laws mandating the provision of certain levels of health benefits by some employers. Increased health care
and insurance costs, as well as the potential increase in participation by our employees who previously had not participated in our medical plan coverage, could
have a material adverse effect on our business, financial condition and results of operations.
33 | Shake Shack Inc. Form 10-K