Shake Shack 2016 Annual Report Download - page 36

Table of Contents
Americans with Disabilities Act and Similar State Laws
We are subject to the U.S. American with Disabilities Act ("ADA") and similar state laws, which, among other things, prohibits discrimination in employment and
public accommodations on the basis of disability. Under the ADA, our Shacks are required to meet federally mandated requirements for the disabled and we could
be required to incur expenses to modify our Shacks to provide service to, or make reasonable accommodations for the employment of, disabled persons. The
expenses associated with these modifications, or any damages, legal fees and costs associated with resolving ADA-related complaints could be material.
Laws and Regulations Relating to Our Licensed Operations
Our licensing operations are subject to laws enacted by a number of states, rules and regulations promulgated by the U.S. Federal Trade Commission and certain
rules and requirements regulating licensing activities in foreign countries. Failure to comply with new or existing licensing laws, rules and regulations in any
jurisdiction or to obtain required government approvals could negatively affect our licensing sales and our relationships with our licensees.
U.S. Foreign Corrupt Practices Act and Similar Anti-Bribery and Anti-Kickback Laws
A significant portion of our licensed operations are located outside the United States. The U.S. Foreign Corrupt Practices Act, and other similar anti-bribery and
anti-kickback laws and regulations, generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of
obtaining or retaining business. While our license agreements mandate compliance with applicable law, we cannot assure you that we will be successful in
preventing our employees or other agents from taking actions in violation of these laws or regulations. Such violations, or allegations of such violations, could
disrupt our business and result in a material adverse effect on our financial condition, results of operations and cash flows.
Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our
results of operations and financial condition.
We are subject to taxes by the U.S. federal, state, local and foreign tax authorities, and our tax liabilities will be affected by the allocation of expenses to differing
jurisdictions. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:
▪ changes in the valuation of our deferred tax assets and liabilities;
▪ expected timing and amount of the release of any tax valuation allowance;
▪ tax effects of stock-based compensation;
▪ changes in tax laws, regulations or interpretations thereof; or
▪ future earnings being lower than anticipated in jurisdictions where we have lower statutory tax rates and higher than anticipated earnings in jurisdictions
where we have higher statutory tax rates.
We may also be subject to audits of our income, sales and other transaction taxes by U.S. federal, state, local and foreign taxing authorities. Outcomes from these
audits could have an adverse effect on our operating results and financial condition.
Additionally, SSE Holdings is treated as a partnership for U.S. federal income tax purposes, and the SSE Holdings LLC Agreement restricts transfers of LLC
Interests that would cause SSE Holdings to be treated as a "publicly traded partnership" for U.S. federal income tax purposes. If the Internal Revenue Service
("IRS") were to contend successfully that SSE Holdings LLC should be treated as a “publicly traded partnership” for U.S. federal income tax purposes, SSE
Holdings LLC would be treated as a corporation for U.S. federal income tax purposes and thus would be subject to entity-level tax on its taxable income, which
could have a material adverse effect on our results of operations, financial position and cash flows.
Shake Shack Inc. Form 10-K | 34