Home
Jump to Risk Factors
Jump to Industries
Jump to Exposures
Jump to Event Codes
Jump to Wiki Summary

Industries
Restaurants
Asset Management and Custody Banks
Construction and Engineering
Construction Materials
Construction and Farm Machinery and Heavy Trucks
Technology Hardware Storage and Peripherals
Information Technology
Technology Hardware and Equipment
Exposures
Provide
Rights
Military
Express intent
Regime
Judicial
Event Codes
Force
Acknowledge responsibility
Sports contest
Warn
Solicit support
Accident
Threaten
Agree
Empathize
Negotiation
Release or return
Yield to order
Yield
Promise
Vote
Ask for protection
Accuse
Demand
Pessimistic comment
Endorse
Host meeting
Wiki Wiki Summary
Restaurant A restaurant is a business that prepares and serves food and drinks to customers. Meals are generally served and eaten on the premises, but many restaurants also offer take-out and food delivery services.
Darden Restaurants Darden Restaurants, Inc. is an American multi-brand restaurant operator headquartered in Orlando.
Types of restaurants Restaurants fall into several industry classifications, based upon menu style, preparation methods and pricing, as well as the means by which the food is served to the customer.\n\n\n== Origin of categories ==\nHistorically, restaurant referred only to places that provided tables where one ate while seated, typically served by a waiter.
McDonald's McDonald's Corporation is an American-based multinational fast food chain, founded in 1940 as a restaurant operated by Richard and Maurice McDonald, in San Bernardino, California, United States. They rechristened their business as a hamburger stand, and later turned the company into a franchise, with the Golden Arches logo being introduced in 1953 at a location in Phoenix, Arizona.
The World's 50 Best Restaurants The World's Best 50 Restaurants is a list produced by UK media company William Reed Business Media, which originally appeared in the British magazine Restaurant, based on a poll of international chefs, restaurateurs, gourmands and restaurant critics. In addition to the main ranking, the organisation awards a series of special prizes for individuals and restaurants, including the One To Watch award, the Lifetime Achievement Award and the Chefs' Choice Award, the latter based on votes from the fifty head chefs from the restaurants on the previous year's list.
BJ's Restaurants BJ's Restaurants, Inc. is an American restaurant chain, headquartered in Huntington Beach, California.
Successful (song) "Successful" is a song by Canadian rapper Drake and R&B singer Trey Songz . The song features guest appearances from Drake's mentor and labelmate Lil Wayne.
Secrets of a Successful Marriage "Secrets of a Successful Marriage" is the twenty-second and final episode of the fifth season of the American animated television series The Simpsons. It originally aired on the Fox network in the United States on May 19, 1994.
Ageing Ageing (BE) or aging (AE) is the process of becoming older. The term refers mainly to humans, many other animals, and fungi, whereas for example, bacteria, perennial plants and some simple animals are potentially biologically immortal.
Putt's Law and the Successful Technocrat Putt's Law and the Successful Technocrat is a book, credited to the pseudonym Archibald Putt, published in 1981. An updated edition, subtitled How to Win in the Information Age, was published by Wiley-IEEE Press in 2006.
Media franchise A media franchise, also known as a multimedia franchise, is a collection of related media in which several derivative works have been produced from an original creative work of fiction, such as a film, a work of literature, a television program or a video game.\n\n\n== Transmedia franchise ==\n \nA media franchise often consists of cross-marketing across more than one medium.
Oldest McDonald's restaurant The oldest McDonald's restaurant is a drive-up hamburger stand at 10207 Lakewood Boulevard at Florence Avenue in Downey, California. It was the third McDonald's restaurant and opened on August 18, 1953.
Franchise agreement A franchise agreement is a legal, binding contract between a franchisor and franchisee. In the United States franchise agreements are enforced at the State level.
Indian Premier League The Indian Premier League (IPL), also officially known as TATA IPL for sponsorship reasons is a professional men's Twenty20 cricket league, contested by ten teams based out of seven Indian cities and three Indian states. The league was founded by the Board of Control for Cricket in India (BCCI) in 2007.
Ansoff matrix The Ansoff matrix is a strategic planning tool that provides a framework to help executives, senior managers, and marketers devise strategies for future growth. It is named after Russian American Igor Ansoff, an applied mathematician and business manager, who created the concept.
Market penetration Market penetration refers to the successful selling of a good or service in a specific market. It is measured by the amount of sales volume of an existing good or service compared to the total target market for that product or service.
Tops Friendly Markets Tops Friendly Markets is an American supermarket chain based in Amherst, New York, that operates stores in Upstate New York, Vermont, and Northern Pennsylvania. The chain operates full-scale supermarkets.
Risk management Risk management is the identification, evaluation, and prioritization of risks (defined in ISO 31000 as the effect of uncertainty on objectives) followed by coordinated and economical application of resources to minimize, monitor, and control the probability or impact of unfortunate events or to maximize the realization of opportunities.\nRisks can come from various sources including uncertainty in international markets, threats from project failures (at any phase in design, development, production, or sustaining of life-cycles), legal liabilities, credit risk, accidents, natural causes and disasters, deliberate attack from an adversary, or events of uncertain or unpredictable root-cause.
Competition Competition is a rivalry where two or more parties strive for a common goal which cannot be shared: where one's gain is the other's loss (an example of which is a zero-sum game). Competition can arise between entities such as organisms, individuals, economic and social groups, etc.
Financial ratio A financial ratio or accounting ratio is a relative magnitude of two selected numerical values taken from an enterprise's financial statements. Often used in accounting, there are many standard ratios used to try to evaluate the overall financial condition of a corporation or other organization.
Social franchising Social franchising is the application of commercial franchising concepts to achieve socially beneficial ends, rather than profit.\n\n\n== Overview ==\nSocial franchising is the application of the principles of commercial franchising to promote social benefit rather than private profit.
Culver's Culver Franchising System, LLC, doing business as Culver's, is a privately owned and operated American casual fast food restaurant chain that operates primarily in the Midwestern United States. The chain is mostly known for its "butter burgers" and frozen custard, but also offers cheese curds, chicken, fish, and salads.
Master franchise A master franchise is a franchise relationship in which the owner of the franchise brand (the master franchisor) grants to another party the right to recruit new franchisees in a specific area. In exchange, the other party typically pays some price as well as agreeing to take on some or all of the responsibility to train and support new franchisees in their area.
Passenger rail franchising in Great Britain Passenger rail franchising in Great Britain is the system of contracting the operation of the passenger services on the railways of Great Britain to private companies, which has been in effect since 1996 and was greatly altered in 2020, with rail franchising being effectively abolished in May 2021.\nThe system was created as part of the privatisation of British Rail, the former state-owned railway operator, and involved franchises being awarded by the government to train operating companies (TOCs) through a process of competitive tendering.
Operation Mincemeat Operation Mincemeat was a successful British deception operation of the Second World War to disguise the 1943 Allied invasion of Sicily. Two members of British intelligence obtained the body of Glyndwr Michael, a tramp who died from eating rat poison, dressed him as an officer of the Royal Marines and placed personal items on him identifying him as the fictitious Captain (Acting Major) William Martin.
Arithmetic Arithmetic (from Ancient Greek ἀριθμός (arithmós) 'number', and τική [τέχνη] (tikḗ [tékhnē]) 'art, craft') is an elementary part of mathematics that consists of the study of the properties of the traditional operations on numbers—addition, subtraction, multiplication, division, exponentiation, and extraction of roots. In the 19th century, Italian mathematician Giuseppe Peano formalized arithmetic with his Peano axioms, which are highly important to the field of mathematical logic today.
Operations management Operations management is an area of management concerned with designing and controlling the process of production and redesigning business operations in the production of goods or services. It involves the responsibility of ensuring that business operations are efficient in terms of using as few resources as needed and effective in meeting customer requirements.
Emergency operations center An emergency operations center (EOC) is a central command and control facility responsible for carrying out the principles of emergency preparedness and emergency management, or disaster management functions at a strategic level during an emergency, and ensuring the continuity of operation of a company, political subdivision or other organization.\nAn EOC is responsible for strategic direction and operational decisions and does not normally directly control field assets, instead leaving tactical decisions to lower commands.
Operations research Operations research (British English: operational research), often shortened to the initialism OR, is a discipline that deals with the development and application of advanced analytical methods to improve decision-making. It is sometimes considered to be a subfield of mathematical sciences.
Elementary operations In mathematics, an elementary matrix is a matrix which differs from the identity matrix by one single elementary row operation. The elementary matrices generate the general linear group GLn(F) when F is a field.
2011 military intervention in Libya On 19 March 2011, a multi-state NATO-led coalition began a military intervention in Libya, to implement United Nations Security Council Resolution 1973, in response to events during the First Libyan Civil War. With ten votes in favour and five abstentions, the UN Security Council's intent was to have "an immediate ceasefire in Libya, including an end to the current attacks against civilians, which it said might constitute "crimes against humanity" ...
Medical license A medical license is an occupational license that permits a person to legally practice medicine. In most countries, a person must have a medical license bestowed either by a specified government-approved professional association or a government agency before he or she can practice medicine.
Financial law Financial law is the law and regulation of the insurance, derivatives, commercial banking, capital markets and investment management sectors. Understanding Financial law is crucial to appreciating the creation and formation of banking and financial regulation, as well as the legal framework for finance generally.
Risk Factors
If we are unable to successfully open new restaurants, our revenue growth rate and profits may be reduced
To successfully expand our business, we must open new restaurants on schedule and in a profitable manner
In the past, we have experienced delays in restaurant openings and we and our franchisees may experience similar delays in the future
Delays or failures in opening new restaurants could hurt our ability to meet our growth objectives, which may affect the expectations of securities analysts and others and thus our stock price
We cannot guarantee that we or our franchisees will be able to achieve our expansion goals or that new restaurants will be operated profitably
Further, any restaurants that we or our franchisees open may not obtain operating results similar to those of our existing restaurants
Our ability to expand successfully will depend on a number of factors, many of which are beyond our control
These factors include, but are not limited to: • locating suitable restaurant sites in new and existing markets; • negotiating acceptable lease terms; • generating positive cash flow from existing and new restaurants; • successful operation and execution in new and existing markets; • recruiting, training and retaining qualified corporate and restaurant personnel and management; • attracting and retaining qualified franchisees; • cost effective and timely planning, design and build-out of restaurants; • the reliability of our customer and market studies; • consumer trends; • obtaining and maintaining required local, state and federal governmental approvals and permits related to the construction of the sites and the sale of food and alcoholic beverages; • creating customer awareness of our restaurants in new markets; • competition in our markets, both in our business and in locating suitable restaurant sites; • the cost of our principal food products and supply and delivery shortages or interruptions; • weather conditions; and • general economic conditions
6 _________________________________________________________________ [57]Table of Contents We must identify and obtain a sufficient number of suitable new restaurant sites for us to sustain our revenue growth rate
We and our franchisees may not be able to find sufficient new restaurant sites to support our planned expansion in future periods
We face significant competition from other restaurant companies and retailers for sites that meet our criteria and the supply of sites may be limited in some markets
Our inability to obtain suitable restaurant sites at reasonable costs may reduce our growth rate, which may affect the expectations of securities analysts and others and thus our stock price
Our expansion in existing markets can cause sales in some of our existing restaurants to decline, which could result in restaurant closures
As part of our expansion strategy, we and our franchisees intend to open new restaurants in our existing markets
Since we typically draw customers from a relatively small radius around each of our restaurants, the sales performance and customer counts for restaurants near the area in which a new restaurant opens may decline due to cannibalization, which could result in restaurant closures
In addition, new restaurants added in existing markets may not achieve the same operating performance as our existing restaurants
Our expansion into new markets may present increased risks due to our unfamiliarity with the area
The restaurants we open in new geographic regions may not achieve market acceptance
Some of our future franchised restaurants and company-owned restaurants will be located in areas where we have little or no meaningful experience
Those markets may have different demographic characteristics, competitive conditions, consumer tastes and discretionary spending patterns than our existing markets that may cause our new restaurants to be less successful than restaurants in our existing markets
An additional risk in expansion into new markets is the lack of market awareness of the Cosi brand
Restaurants opened in new markets may open at lower average weekly sales volumes than restaurants opened in existing markets and may have higher restaurant-level operating expense ratios than in existing markets
Sales at restaurants opened in new markets may take longer to reach average annual company-owned restaurant sales, if at all, thereby affecting the profitability of these restaurants
We may not be able to successfully incorporate a franchising and area developer model into our strategy
We are incorporating a franchising and area developer model into our business strategy in certain selected markets
We have not used a franchising or area developer model prior to fiscal 2004 and may not be as successful as predicted in attracting franchisees and developers to the Cosi concept or identifying franchisees and developers that have the business abilities or access to financial resources necessary to open our restaurants or to successfully develop or operate our restaurants in a manner consistent with our standards
Incorporating a franchising and area developer model into our strategy also requires us to devote significant management and financial resources to support the franchise of our restaurants
Our future performance will depend on our franchisees’ ability to execute our concept and capitalize upon our brand recognition and marketing
We may not be able to recruit franchisees who have the business abilities or financial resources necessary to open restaurants on schedule, or who will conduct operations in a manner consistent with our concept and standards
Our franchisees may not be able to operate restaurants in a profitable manner
If we are not successful in incorporating a franchising or area developer model into our strategy, we may experience delays in our growth or may not be able to expand and grow our business
If our franchisees cannot develop or finance new restaurants, build them on suitable sites or open them on schedule, our growth and success may be impeded
Our growth depends in part upon our ability to establish a successful and effective franchise program and to attract qualified franchisees
If our franchisees are unable to locate suitable sites for new restaurants, negotiate acceptable lease or purchase terms, obtain the necessary financial or management resources, meet construction 7 _________________________________________________________________ [58]Table of Contents schedules or obtain the necessary permits and government approvals, our growth plans may be negatively affected
We cannot assure you that any of the restaurants our franchisees open will be profitable
Additional foodservice strategic alliances may not be successful and may materially adversely affect our business and results of operations
We may decide to enter into additional alliances with third parties to develop foodservice strategic alliances in select markets or through select channels
Identifying strategic partners, negotiating agreements and building such alliances may divert management’s attention away from our existing businesses and growth plans
If we are not successful in forming additional foodservice strategic alliances, we may experience delays in our growth and may not be able to expand and grow our business
If we do form additional strategic alliances, we cannot assure you that the restaurants opened pursuant to these strategic alliances will be profitable
Any inability to manage our growth effectively could materially adversely affect our operating results
Failure to manage our growth effectively could harm our business
We have grown significantly since our inception and intend to grow substantially in the future both through a franchising strategy and opening new company-owned restaurants
Our existing restaurant management systems, financial and management controls and information systems may not be adequate to support our planned expansion
Our ability to manage our growth effectively will require us to continue to enhance these systems, procedures and controls
We must attract and retain talented operating personnel to maintain the quality and service levels at our existing and future restaurants
We may not be able to effectively manage these or other aspects of our expansion
We cannot assure you that we will be able to respond on a timely basis to all of the changing demands that our planned expansion will impose on management and on our existing infrastructure
If we are unable to manage our growth effectively, our business, results of operations and financial condition could be materially adversely impacted
If we are unable to successfully integrate future acquisitions, our business could be negatively impacted
Any acquisitions may also be costly
We may consider future strategic acquisitions
Acquisitions involve numerous risks, including difficulties assimilating new operations and products
In addition, acquisitions may require significant management time and capital resources
We cannot assure you that we will have access to the capital required to finance potential acquisitions on satisfactory terms, that any acquisition would result in long-term benefits to us, or that management would be able to manage effectively the resulting business
Future acquisitions are likely to result in the incurrence of additional indebtedness, which could contain restrictive covenants, or the issuance of additional equity securities, which could dilute our existing stockholders
We may also pay too much for a concept that we acquire relative to the actual economic return obtained
If our integration efforts are unsuccessful, our business and results of operations could suffer
Risks Related to Our Business If we are unable to execute our business strategy, we could be materially adversely affected
Our ability to successfully execute our business strategy will depend on a number of factors, some of which are beyond our control, including, but not limited to: • our ability to generate positive cash flow from operations; • identification and availability of suitable restaurant sites; • competition for restaurant sites and customers; • negotiation of favorable leases; • management of construction and development costs of new and renovated restaurants; • securing required governmental approvals and permits; • recruitment and retention of qualified operating personnel; 8 _________________________________________________________________ [59]Table of Contents successful operation and execution in new and existing markets; • recruiting, training and retaining qualified corporate and restaurant personnel and management; • identification of under-performing restaurants and our ability to improve or efficiently close under-performing restaurants, including securing favorable lease termination terms; • the rate of our internal growth, and our ability to generate increased revenue from existing restaurants; • our ability to incorporate a franchising and area developer model into our strategy; • competition in new and existing markets; • the reliability of our customer and market studies; • consumer trends; • the cost of our principal food products and supply and delivery shortages or interruptions; • weather conditions; and • general regional and national economic conditions
Each of these factors could delay or prevent us from successfully executing our business strategy, which could adversely affect our growth, revenues and our results of operations
We have a limited operating history and we may be unable to achieve profitability
There are currently 94 company-owned restaurants, five of which were opened during the last quarter of fiscal 2004, one of which opened in each of the second and third quarters of 2005, six of which opened in the fourth quarter of 2005 and two of which opened in the first quarter of 2006
Accordingly, limited historical information is available with which to evaluate our business and prospects
As a result, forecasts of our future revenues, expenses and operating results may not be as accurate as they would be if we had a longer history of operations and of combined operations
In fiscal 2005, we incurred net losses of dlra13dtta1 million, and, since we were formed, we have incurred net losses of approximately dlra207dtta4 million through the end of fiscal 2005 primarily due to funding operating losses, impairment charges, the cost of our merger in 1999, new restaurant opening expenses and lease termination costs
We intend to continue to expend significant financial and management resources on the development of additional restaurants, both company-owned and franchised
We cannot predict whether we will be able to achieve or sustain revenue growth, profitability or positive cash flow in the future
See “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” and the financial statements included in this Annual Report on Form 10-K for information on the history of our losses
If internally generated cash flow from our restaurants does not meet our expectations, our business, results of operations and financial condition could be materially adversely affected
Our cash resources, and therefore our liquidity, are highly dependent upon the level of internally generated cash from operations and upon future financing transactions
Although we believe that we have sufficient liquidity to fund our working capital requirements for the next twelve months, if cash flows from our existing restaurants or cash flows from new restaurants that we open do not meet our expectations or are otherwise insufficient to satisfy our cash needs or expansion plans, we may have to seek additional financing from external sources to continue funding our operations or reduce or cease our plans to open or franchise new restaurants
We cannot predict whether such financing will be available on terms acceptable to us, or at all
We may need additional capital in the future and it may not be available on acceptable terms
Our business may require significant additional capital in the future to, among other things, fund our operations, increase the number of company-owned or franchised restaurants, expand the range of services we offer and finance future acquisitions and investments
There is no assurance that financing will be available on terms acceptable to us, or at all
Our ability to obtain additional financing will be subject to a number of factors, including market conditions, our operating performance and investor sentiment
These factors may make the timing, amount, 9 _________________________________________________________________ [60]Table of Contents terms and conditions of additional financings unattractive to us
If we are unable to raise additional capital, our business, results of operations and financial condition could be materially adversely affected
Our franchisees could take actions that could harm our business
Franchisees are independent contractors and are not our employees
Although we have developed criteria to evaluate and screen prospective franchisees, we are limited in the amount of control we can exercise over our licensed franchisees, and the quality of franchised restaurant operations may be diminished by any number of factors beyond our control
Franchisees may not have the business acumen or financial resources necessary to successfully operate restaurants in a manner consistent with our standards and requirements and may not hire and train qualified managers and other restaurant personnel
Poor restaurant operations may affect each restaurant’s sales
Our image and reputation, and the image and reputation of other franchisees, may suffer materially and system-wide sales could significantly decline if our franchisees do not operate successfully
We could face liability from our franchisees
Various state and federal laws govern our relationship with our franchisees and potential sales of our franchised restaurants
If we fail to comply with these laws, we could be liable for damages to franchisees and fines or other penalties
Expensive litigation with our franchisees or government agencies may adversely affect both our profits and our important relations with our franchisees
Our financial results are affected by the financial results of our franchisees
We receive royalties from our franchisees
Our financial results are therefore somewhat contingent upon the operational and financial success of our franchisees, including implementation of our strategic plans, as well as their ability to secure adequate financing
If sales trends or economic conditions worsen for our franchisees, their financial health may worsen and our collection rates may decline
Additionally, refusal on the part of franchisees to renew their franchise agreements may result in decreased royalties
Entering into restructured franchise agreements may result in reduced franchise royalty rates in the future
Our restaurants are currently concentrated in the Northeastern and Mid-Atlantic regions of the United States, particularly in the New York City area
Accordingly, we are highly vulnerable to negative occurrences in these regions
We currently operate 59 company-owned restaurants in Northeastern and Mid-Atlantic states, of which 16 are located in the New York City area, the majority of which are located in New York central business districts
As a result, we are particularly susceptible to adverse trends and economic conditions in these areas
In addition, given our geographic concentration, negative publicity regarding any of our restaurants could have a material adverse effect on our business and operations, as could other regional occurrences impacting the local economies in these markets
You should not rely on past increases in our average unit volumes as an indication of our future results of operations because they may fluctuate significantly
A number of factors have historically affected, and will continue to affect, our average unit sales, including, among other factors: • our ability to execute our business and growth strategy effectively; • introduction of new menu items; • sales performance by our new and existing restaurants; • competition; • general regional and national economic conditions; 10 _________________________________________________________________ [61]Table of Contents weather conditions; and • consumer trends
It is not reasonable to expect our average unit volumes to increase at rates achieved over the past several years
Changes in our average unit volumes could cause the price of our common stock to fluctuate substantially
Seasonality, inclement weather and other variable factors may adversely affect our sales and results of operations and could cause our quarterly results to fluctuate and fall below expectations of securities analysts and investors, resulting in a decline in our stock price
Our business is subject to significant seasonal fluctuations and weather influences on consumer spending and dining out patterns
Inclement weather may result in reduced frequency of dining at our restaurants
Customer counts (and consequently revenues) are generally highest in spring and summer months and lowest during the winter months because of the high proportion of our restaurants located in the Northeast where inclement weather affects customer visits
Other factors such as unanticipated increases in labor, commodity, energy, insurance or other operating costs may also cause our quarterly results to fluctuate
For this reason, you should not rely upon our quarterly operating results as indications of future performance
Our operations depend on governmental licenses and we may face liability under “dram shop” statutes
We are subject to extensive federal, state and local government regulations, including regulations relating to alcoholic beverage control, the preparation and sale of food, public health and safety, sanitation, building, zoning and fire codes
Our business depends on obtaining and maintaining required food service and/or liquor licenses for each of our restaurants
If we fail to obtain or maintain all necessary licenses, we may be forced to delay or cancel new restaurant openings and close or reduce operations at existing locations
In addition, our sale of alcoholic beverages subjects us to “dram shop” statutes in some states
These statutes allow an injured person to recover damages from an establishment that served alcoholic beverages to an intoxicated person
Although we take significant precautions to ensure that all employees are trained in the responsible service of alcohol and maintain insurance policies in accordance with all state regulations regarding the sale of alcoholic beverages, the misuse of alcoholic beverages by customers may create considerable risks for us
If we are the subject of a judgment substantially in excess of our insurance coverage, or if we fail to maintain our insurance coverage, our business, financial condition, operating results or cash flows could be materially and adversely affected
See “Business — Government Regulation” in this Annual Report on Form 10-K for a discussion of the regulations with which we must comply
Our failure or inability to enforce our trademarks or other proprietary rights could adversely affect our competitive position or the value of our brand
We own certain common law trademark rights and a number of federal and international trademark and service mark registrations, and proprietary rights to certain of our core menu offerings
We believe that our trademarks and other proprietary rights are important to our success and our competitive position
We, therefore, devote appropriate resources to the protection of our trademarks and proprietary rights
The protective actions that we take, however, may not be enough to prevent unauthorized usage or imitation by others, which might cause us to incur significant litigation costs and could harm our image or our brand or competitive position
We also cannot assure you that third parties will not claim that our trademarks or offerings infringe the proprietary rights of third parties
Any such claim, whether or not it has merit, could be time-consuming, result in costly litigation, cause product delays or require us to enter into royalty or licensing agreements
As a result, any such claim could have a material adverse effect on our business, results of operations and financial condition
11 _________________________________________________________________ [62]Table of Contents We hold significant amounts of illiquid assets and may have to dispose of them on unfavorable terms
A certain portion of our assets, such as leasehold improvements and equipment, are illiquid
These assets cannot be converted into cash quickly and easily
We may be compelled to dispose of these illiquid assets on unfavorable terms, which could have an adverse effect on our business
We may face litigation that could have a material adverse effect on our business, financial condition and results of operations
From time to time, we are a defendant in litigation arising in the ordinary course of our business
Our customers may file complaints or lawsuits against us alleging that we are responsible for an illness or injury they suffered at or after a visit to a Cosi restaurant, or alleging that there was a problem with food quality or operations at a Cosi restaurant
We may also be subject to a variety of other claims arising in the ordinary course of our business, including personal injury claims, contract claims, claims from franchisees and claims alleging violations of federal and state law regarding workplace and employment matters, discrimination and similar matters
We could also become subject to class action lawsuits related to these matters in the future
To date, none of such litigation, some of which is covered by insurance, has had a material adverse effect on our consolidated financial position, results of operations or cash flows
Regardless of whether any future claims against us are valid or whether we are found to be liable, claims may be expensive to defend and may divert our management’s attention away from our operations and hurt our performance
The outcome of litigation, particularly class action lawsuits and regulatory actions, is difficult to assess or quantify
Plaintiffs in these types of lawsuits may seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time
A judgment significantly in excess of our insurance coverage for any claims could materially adversely affect our financial condition or results of operations
There may also be adverse publicity associated with litigation that could decrease customer acceptance of our services or those of our franchisees, regardless of whether the allegations are valid or whether we are ultimately found liable
As a result, litigation may adversely affect our business, financial condition and results of operations
Moreover, complaints, litigation or adverse publicity experienced by one or more of our franchisees could also hurt our business as a whole
We have a new management team that does not have proven success with the Company
Some members of our management team have been in place for only a relatively short period of time
They do not have previous experience with us, and we cannot assure you that they will fully integrate themselves into our business or that they will effectively manage our business affairs
Our failure to assimilate the new members of management, the failure of the new members of management to perform effectively, or the loss of any of the new members of management could have a material adverse effect on our business, financial condition and results of operations
If we are unable to protect our customers’ credit card data, we could be exposed to data loss, litigation and liability, and our reputation could be significantly harmed
In connection with credit card sales, we transmit confidential credit card information securely over public networks and store it in our data warehouse
Third parties may have the technology or know-how to breach the security of this customer information, and our security measures may not effectively prohibit others from obtaining improper access to this information
If a person is able to circumvent our security measures, he or she could destroy or steal valuable information or disrupt our operations
Any security breach could expose us to risks of data loss, litigation and liability and could seriously disrupt our operations and any resulting negative publicity could significantly harm our reputation
12 _________________________________________________________________ [63]Table of Contents Risks Relating to the Food Service Industry Our business is affected by changes in consumer preferences
Our success depends, in part, upon the popularity of our food products, our ability to develop new menu items that appeal to consumers and what we believe is an emerging trend in consumer preferences toward premium convenience restaurants
We depend on consumers who prefer made-to-order food in a sophisticated environment and are willing to pay a premium price for our products
Shifts in consumer preferences away from our restaurants or cuisine, our inability to develop new menu items that appeal to consumers or changes in our menu that eliminate items popular with some consumers could harm our business and future profitability
General economic conditions and the effects of the war on terrorism may cause a decline in discretionary consumer spending, which would negatively affect our business
Our success depends to a significant extent on discretionary consumer spending, which is influenced by general economic and political conditions and the availability of discretionary income
Accordingly, we may experience declines in sales during economic downturns or during periods of uncertainty like that which followed the September 11, 2001 terrorist attacks on the United States
In addition, economic uncertainty due to military action overseas, such as in Iraq and post-war military, diplomatic or financial responses, may lead to further declines in sales
Any decline in consumer spending or economic conditions could reduce customer traffic or impose practical limits on pricing, either of which could have a material adverse effect on our sales, results of operations, business and financial condition
Our success depends on our ability to compete with many food service businesses
The restaurant industry is intensely competitive and we compete with many well-established food service companies on the basis of taste, quality and price of product offered, customer service, atmosphere, location and overall guest experience
We compete with other sandwich retailers, specialty coffee retailers, bagel shops, fast-food restaurants, delicatessens, cafes, bars, take-out food service companies, supermarkets and convenience stores
Our competitors change with each daypart (breakfast, lunch and dinner), ranging from coffee bars and bakery cafes to casual dining chains
Aggressive pricing by our competitors or the entrance of new competitors into our markets could reduce our sales and profit margins
Many of our competitors or potential competitors have substantially greater financial and other resources than we do, which may allow them to react to changes in pricing, marketing and the quick service restaurant industry better than we can
As competitors expand their operations, we expect competition to intensify
We also compete with other employers in our markets for hourly workers and may be subject to higher labor costs
Fluctuations in coffee prices could adversely affect our operating results
The price of coffee, one of our main products, can be highly volatile
Although most coffee trades on the commodity markets, coffee of the quality we seek tends to trade on a negotiated basis at a substantial premium above commodity coffee pricing, depending on supply and demand at the time of the purchase
An increase in pricing of specialty coffees could have a significant adverse effect on our profitability
To mitigate the risks of increasing coffee prices and to allow greater predictability in coffee pricing, we typically enter into short-term purchasing arrangements for a portion of our green coffee requirements
We cannot assure you that these activities will be successful or that they will not result in our paying substantially more for our coffee supply than we would have been required to pay absent such activities
We purchase coffee through a single supplier under an agreement that expires in June 2010
Changes in food and supply costs could adversely affect our results of operations
Our profitability depends in part on our ability to anticipate and react to changes in food and supply costs
We rely on a single primary distributor of our food and paper goods
Although we believe that alternative distribution 13 _________________________________________________________________ [64]Table of Contents sources are available, any increase in distribution prices or failure by our distributor to perform could adversely affect our operating results
In addition, we are susceptible to increases in food costs as a result of factors beyond our control, such as weather conditions and government regulations
Failure to anticipate and adjust our purchasing practices to these changes could negatively impact our business
The food service industry is affected by litigation and publicity concerning food quality, health and other issues, which can cause customers to avoid our products and result in liabilities
Food service businesses can be adversely affected by litigation and complaints from customers or government authorities resulting from food quality, illness, injury or other health concerns or operating issues stemming from one restaurant or a limited number of restaurants
Adverse publicity about these allegations may negatively affect us, regardless of whether the allegations are true, by discouraging customers from buying our products
We could also incur significant liabilities if a lawsuit or claim results in a decision against us or if we incur litigation costs, regardless of the result
Our business could be adversely affected by increased labor costs or labor shortages
We devote significant resources to recruiting and training our managers and employees
Increased labor costs, due to competition, increased minimum wage or employee benefits costs or otherwise, would adversely impact our operating expenses
In addition, our success depends on our ability to attract, motivate and retain qualified employees, including restaurant managers and staff, to keep pace with our needs
If we are unable to do so, our results of operations may be adversely affected