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Krispy Kreme (DNUT)
NASDAQ:DNUT
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Risk Overview Q3, 2024
Risk Distribution
22% Finance & Corporate
22% Production
19% Legal & Regulatory
16% Ability to Sell
11% Tech & Innovation
11% Macro & Political
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.
Risk Change Over Time
S&P500 Average
Sector Average
Risks removed
Risks added
Risks changed
Krispy Kreme Risk Factors
New Risk (0)
Risk Changed (0)
Risk Removed (0)
No changes from previous report
The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
Risk Highlights Q3, 2024
Main Risk Category
Finance & Corporate
With 8 Risks
Finance & Corporate
With 8 Risks
Number of Disclosed Risks
37
No changes from last report
S&P 500 Average: 31
37
No changes from last report
S&P 500 Average: 31
Recent Changes
0Risks added
0Risks removed
0Risks changed
Since Sep 2024
0Risks added
0Risks removed
0Risks changed
Since Sep 2024
Number of Risk Changed
0
No changes from last report
S&P 500 Average: 3
0
No changes from last report
S&P 500 Average: 3
See the risk highlights of Krispy Kreme in the last period.
Risk Word Cloud
The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.
Risk Factors Full Breakdown - Total Risks 37
Finance & Corporate
Total Risks: 8/37 (22%)Below Sector Average
Share Price & Shareholder Rights3 | 8.1%
Share Price & Shareholder Rights - Risk 1
The market price of our common stock could be negatively affected by sales of substantial amounts of our common stock in the public markets.Share Price & Shareholder Rights - Risk 2
If the ownership of our common stock continues to be highly concentrated, it may prevent shareholders from influencing significant corporate decisions and may result in conflicts of interest.As of December 31, 2023, JAB held approximately 45% of our common stock through its affiliate, conferring upon it significant influence over crucial matters requiring shareholder approval. This influence extends to decisions such as electing directors, facilitating mergers, consolidations, and acquisitions, disposing of substantial assets, and shaping our capital structure. Additionally, JAB possesses the authority to amend our certificate of incorporation and bylaws, and influence our winding up and dissolution procedures.
This level of concentrated ownership could potentially lead to delays, deterrents, or the prevention of actions that may be favored by our other shareholders. It is important to note that JAB's interests may not always align with those of our broader shareholder base. Furthermore, this concentration of ownership has the potential to hinder or discourage any attempts at a change in control of our Company.
The concentration of voting power could also impact shareholders by limiting the opportunity to receive a premium for their common stock shares in the event of a sale of the Company, which, in turn, may affect the market price of our common stock. JAB might also seek to push us in directions that it deems beneficial for its own investment but could carry risks for other shareholders or negatively impact our Company and its stakeholders.
As a result, there is a possibility that the market price of our common stock could decline, or shareholders may not receive a premium above the prevailing market price in the event of a change in control. Furthermore, this concentration of share ownership might be viewed negatively by investors, potentially affecting the trading price of our common stock, as some may perceive drawbacks in owning shares in a company heavily influenced by a few significant shareholders.
Share Price & Shareholder Rights - Risk 3
Certain provisions of Delaware Law, the Investors' Rights Agreement, our certificate of incorporation, and our bylaws could hinder, delay, or prevent a change in control of us, which could adversely affect the price of our common stock.Several provisions within Delaware Law, our certificate of incorporation, and our bylaws are designed to create obstacles for third-party acquisition attempts without the consent of our Board of Directors or JAB Holdings B.V. ("JAB"), our largest beneficial shareholder.
As a Delaware corporation, we are subject to Delaware General Corporation Law, particularly Section 203, which restricts certain shareholders owning over 15% of our outstanding common stock (referred to as "interested shareholders") from engaging in specific business combinations without approval from at least two-thirds of our outstanding common stock not held by the interested shareholder.
Moreover, JAB wields substantial voting power over shares of our common stock eligible to vote in director elections and other shareholder votes through its affiliate, potentially influencing outcomes significantly.
Additionally, our certificate of incorporation grants our Board of Directors the authority to issue preferred stock at their discretion, without the need for shareholder approval. This flexibility extends to the issuance of authorized but unissued shares of our common stock. These provisions can complicate and protract the process of replacing incumbent directors.
These measures collectively serve as deterrents, potentially making it costly and challenging for a third party to initiate a tender offer, execute a change in control, or attempt a takeover that faces opposition from JAB, our management, or our Board of Directors. Public shareholders interested in participating in such transactions may find it difficult to do so, even if the deal would be beneficial for shareholders. Ultimately, these anti-takeover provisions could significantly hinder public shareholders' ability to realize benefits from a change in control or alterations in our management and Board of Directors, potentially impacting the market price of our common stock and the opportunity to secure any potential change of control premium.
Under the Investors' Rights Agreement with JAB, they have specific rights to access certain Company information, which JAB is obligated to treat as confidential. This information includes management's monthly financial review reports, consolidated financial results for each fiscal quarter, and other information reasonably requested by JAB. Given these rights and JAB's representation on our Board of Directors, JAB enjoys privileged access to our management and early insights into our financial results compared to our other investors. Although JAB must adhere to relevant U.S. securities laws governing the trading of our securities while in possession of material non-public information, it will still have a more comprehensive understanding of our business and financial condition than individual shareholders for as long as its information rights persist under the Investors' Rights Agreement.
Accounting & Financial Operations2 | 5.4%
Accounting & Financial Operations - Risk 1
We may be unable to pay dividends on our common stock.Accounting & Financial Operations - Risk 2
The full realization of our deferred tax assets may be affected by a number of factors, including future earnings and the feasibility of ongoing planning strategies.We hold deferred tax assets, encompassing federal, state, and foreign net operating loss carryforwards, accruals not yet deductible for tax purposes, tax credits, and other items. We have established valuation allowances, reducing the deferred tax assets associated with U.S. federal tax credits, as well as foreign and state and local net operating loss carryforwards, to an amount deemed more likely than not to be realized. The realization of these deferred tax assets hinges on our ability to generate future taxable income within each respective jurisdiction during the periods when these temporary differences reverse, or our capability to carry back any losses resulting from the deduction of these temporary differences.
It is essential to acknowledge that our existing deferred tax assets and tax credits could potentially expire or become unavailable to offset future income tax liabilities due to legal or regulatory changes. Such changes may include suspension on the use of deferred tax assets and tax credits imposed by certain jurisdictions, possibly with retroactive effects. For instance, during the COVID-19 pandemic, Illinois temporarily suspended the use of specific net operating losses and tax credits to offset revenue losses. Similar limitations on certain deferred tax assets and tax credits could be enforced by other jurisdictions.
We anticipate realizing these deferred tax assets over an extended period. However, if we encounter challenges in generating sufficient future taxable income in the U.S. and/or certain foreign jurisdictions, or if there is a significant alteration in the timeframe within which the underlying temporary differences become taxable or deductible, we may be compelled to augment our valuation allowances against our deferred tax assets. Such an adjustment could lead to an increase in our effective tax rate. We remain diligent in managing these considerations to optimize our financial position.
Debt & Financing1 | 2.7%
Debt & Financing - Risk 1
We have incurred significant indebtedness, which could adversely affect us, including decreasing our business flexibility and increasing our interest expense.Corporate Activity and Growth2 | 5.4%
Corporate Activity and Growth - Risk 1
We will face risks as we continue to focus on expansion of our omni-channel business model.Corporate Activity and Growth - Risk 2
We may not realize the anticipated benefits from past or potential future acquisitions, investments, or other strategic transactions.We periodically assess and may engage in mergers, acquisitions, divestitures, joint ventures, strategic partnerships, minority investments, or other strategic initiatives to broaden our Global Points of Access. These efforts may involve opportunities to acquire or collaborate with both domestic and international franchisees. In some cases, our former or current franchisees might retain a minority interest in the shops we acquire and continue to be involved in their operations. We make these decisions based on individual circumstances.
Such strategic endeavors come with inherent risks, including but not limited to:
- The challenges, delays, and costs associated with integrating acquired Krispy Kreme franchised shops, Points of Access, and strategic partnerships into our existing structure, including potential failure to achieve anticipated synergies or retain key staff;- Diverting management focus from everyday operations or other important initiatives to effectively implement our growth strategy;- The risk of not achieving expected revenue, profit, or cash flow from newly acquired Krispy Kreme franchised shops, Points of Access, companies, partnerships, or investments;- The potential to inherit significant contingent or unforeseen liabilities through acquisitions or other strategic dealings; and - The risk of significant value depreciation in our investments, possibly leading to goodwill impairment charges for acquired entities.
Our past and future strategic transactions may not yield the anticipated benefits, and could negatively impact our reputation and have a material adverse effect on our business, financial health, and operational outcomes.
Production
Total Risks: 8/37 (22%)Above Sector Average
Manufacturing1 | 2.7%
Manufacturing - Risk 1
Our business may be adversely affected by food safety issues, including food-borne illnesses, tampering, or contamination.Employment / Personnel2 | 5.4%
Employment / Personnel - Risk 1
Changes in the availability or cost of labor could adversely affect our business.Employment / Personnel - Risk 2
An inability to recruit and retain personnel could have materially adverse effects on our operations.Our Krispy Kremers play a pivotal role in delivering exceptional service and creating memorable experiences for our consumers. They are indispensable for the smooth operation of our retail outlets, manufacturing facilities, and delivery logistics. Our ability to maintain the highest product quality, whether in our Hot Light Theater Shops or at one of our DFD access points, heavily relies on their dedication.
Furthermore, our continued success hinges on the ongoing contributions of our senior management and key personnel, and our ability to retain and motivate them. However, certain economic and social trends beyond our control, such as labor shortages, may pose challenges in recruiting and retaining talented Krispy Kremers, including our senior management and other key personnel.
As our business continues to grow, it becomes increasingly challenging to identify and hire a sufficient number of employees, establish effective internal controls for a globally dispersed enterprise, and provide comprehensive training to ensure consistent product quality and outstanding consumer experiences worldwide.
If we encounter difficulties in recruiting, retaining, and motivating Krispy Kremers to support our projected growth and strategic initiatives, it could have significant adverse effects on our overall operations.
Supply Chain4 | 10.8%
Supply Chain - Risk 1
Our reliance on a single vendor for distribution of materials and supplies in the U.S. and a portion of Canada poses risks to our and our franchisees' ability to make doughnuts if the vendor fails to provide these materials and supplies per the agreement.Supply Chain - Risk 2
We have limited suppliers for many of the product components and services that we rely on and any interruption in supply could impair our ability to make and deliver our signature products, adversely affecting our business, financial condition, and results of operations.While we possess exclusive ownership of the recipes for our glaze flavoring and glaze base, we currently rely on a single supplier for these essential ingredients. Additionally, for our Insomnia Cookies brand, all cookie dough is sourced from a sole supplier. Our dependence on these suppliers exposes us to potential risks, including shortages, supply interruptions, and price fluctuations.
Any disruption in the supply chain of glaze flavoring could have adverse consequences on our ability to produce and deliver our signature products, including the beloved hot Original Glazed doughnut, to our consumers in a timely and competitive manner. Such interruptions could also impact our operational performance. In the event that suitable replacement products cannot be secured promptly, we face the potential loss of revenue resulting from the inability to offer our products and the associated increase in administrative and shipping expenses.
Furthermore, our reliance on a limited number of providers exposes us to heightened risks associated with the distribution networks of these suppliers. Factors such as fuel price increases, labor strikes, organized labor activities, adverse weather conditions, and various unforeseen variables may hinder our providers' capacity to meet our logistical requirements. If we encounter difficulties in sourcing alternative logistical providers, our costs may experience significant escalation. If we are unable to pass on these increased distribution costs to our consumers through higher product prices, it could adversely impact our business, financial health, and operational results.
Supply Chain - Risk 3
We are the only manufacturer of substantially all our doughnut-making equipment. If we have any problems producing this equipment, our shops' ability to make doughnuts could be negatively affected.Our custom doughnut-making equipment is exclusively manufactured at a single facility located in Winston-Salem, North Carolina. While we maintain limited backup sources for equipment production, the process of manufacturing new equipment swiftly in the event of a disruption at our Winston-Salem facility would present significant challenges.
In the unfortunate event of such a disruption, we would be compelled to explore alternative options, such as partnering with third-party manufacturers or relocating production to another facility. This transition may entail substantial delays in the manufacturing process and result in increased costs. Consequently, our ability to provide equipment to newly established shops or essential replacement parts for maintenance in existing shops could be compromised in terms of timeliness.
This situation underscores the importance of safeguarding our manufacturing operations to ensure the consistent supply of equipment to support our expanding network of shops and the maintenance requirements of our existing locations.
Supply Chain - Risk 4
We are the exclusive or primary supplier of doughnut mixes and key ingredients to shops worldwide and any problems supplying these ingredients could negatively affect our and our franchisees' ability to make doughnuts.We serve as the exclusive supplier of doughnut mixes to numerous domestic and international Krispy Kreme shops. Additionally, we hold the exclusive role of providing doughnut mix concentrate, which is blended with various ingredients to create doughnut mixes, to all Krispy Kreme shops worldwide. Furthermore, we are the sole supplier of specific critical ingredients to all domestic Company-owned shops, the majority of domestic franchise shops, and select international franchise shops.
Our concentrate manufacturing primarily takes place at our facility located in Winston-Salem, North Carolina, and to a limited extent, through a manufacturing agreement with BakeMark USA LLC ("BakeMark"). Domestic doughnut mix production occurs at our Winston-Salem plant and a third-party facility in Pico Rivera, California. The distribution of doughnut mixes, essential ingredients, and flavors to Krispy Kreme shops, both domestically and internationally, is facilitated by independent contract distributors. It is important to note that any disruption in the production of our mixes and concentrates would have a cascading effect on our global supply chain, with no adequate alternative source available.
The Pico Rivera facility is responsible for producing mixes for distribution to most Krispy Kreme shops west of the Mississippi River. In the event of a shutdown or capacity loss at our Winston-Salem facility, Pico Rivera has the capability to manufacture our doughnut mixes for other regions. Nevertheless, a production interruption at any manufacturing facility could hinder our, and our franchisees', ability to produce doughnuts domestically. Internationally, we operate several plants for doughnut mix production, and any disruption at these facilities could impact doughnut production capabilities regionally, affecting our locations and those of our franchisees.
Our international shipments of mixes and concentrates primarily depart from a single port in Florida. Any delays in shipping or disruptions in logistics chains could adversely affect our international operations as well as those of our franchisees. Such delays may result from known or unforeseen events, including those related to adverse weather conditions, customs and border closures, trade conflicts, and general trade route delays.
Furthermore, unexpected termination of our relationships with raw material suppliers, even when multiple suppliers exist for the same ingredient, may hinder our ability to secure adequate quantities of high-quality ingredients at competitive prices. As we continue our global expansion, these risks may intensify, leading to supply shortages, logistical challenges, and increased operational costs associated with managing and supplying a global network of Krispy Kreme shops.
Costs1 | 2.7%
Costs - Risk 1
Our profitability is sensitive to changes in the cost of raw materials and other commodities.Legal & Regulatory
Total Risks: 7/37 (19%)Above Sector Average
Regulation3 | 8.1%
Regulation - Risk 1
Healthcare legislation and other potential employment legislation could adversely affect our business, financial condition, and results of operations.Regulation - Risk 2
We are subject to franchise laws and regulations that govern our status as a franchisor and regulate some aspects of our franchise relationships. Our ability to develop new franchised shops and to enforce contractual rights against franchisees may be adversely affected by these laws and regulations, which could cause our franchise revenues to decline.As a franchisor, we operate within the regulatory framework established by the Federal Trade Commission and domestic and foreign laws governing the offer and sale of franchises. The importance of adhering to these regulations cannot be overstated, as any failure to obtain or maintain approvals for offering franchises could result in the loss of potential franchise revenues and revenues generated through our Market Development segment.
Furthermore, it is essential to recognize that both domestic and foreign laws not only oversee the procedural aspects of offering franchises but also regulate substantive aspects of our relationships with franchisees. These laws may impose limitations on our ability to terminate or effectively resolve conflicts with our franchisees. Compliance with these regulations is integral to the successful operation of our franchising business model and the maintenance of harmonious relationships with our franchisees.
Regulation - Risk 3
Our business may be adversely affected by litigation, regulation and publicity concerning food quality, health, and other issues, which can negatively affect public policy and consumer preferences toward our products.As a food service business, we acknowledge the potential adverse impacts stemming from litigation, regulatory actions, and consumer or government complaints related to food quality, illness, injuries, health concerns, or operational issues. These concerns may arise from individual shops or a limited number of shops, including those operated by our franchisees. Additionally, they may emerge as we introduce new products or expand distribution channels, such as our DFD business channels.
It is important to note that class action lawsuits have been filed against various food service businesses, including quick-service restaurants. These lawsuits may allege, among other things, the failure to disclose health risks associated with high-fat foods and marketing practices that encourage obesity. Given that one of our core competitive advantages lies in the taste and quality of our doughnuts and indulgent products, adverse publicity or regulations related to food quality or similar concerns have a more pronounced impact on our business compared to food service businesses that primarily compete on other factors.
Furthermore, in the event that such lawsuits or claims result in unfavorable judgments or due to litigation costs, regardless of the final outcome, we may face significant liabilities. We remain committed to upholding our reputation for taste and quality while diligently addressing these potential challenges and complying with regulations to ensure the satisfaction and safety of our consumers.
Litigation & Legal Liabilities1 | 2.7%
Litigation & Legal Liabilities - Risk 1
We may be subject to litigation that could adversely affect us by increasing our expenses, diverting management attention, or subjecting us to significant monetary damages and other remedies.Taxation & Government Incentives1 | 2.7%
Taxation & Government Incentives - Risk 1
Our annual effective income tax rate can change materially as a result of changes in our geographic mix of U.S. and foreign earnings and other factors, including changes in tax laws and changes made by regulatory authorities.Environmental / Social2 | 5.4%
Environmental / Social - Risk 1
If we or our franchisees or licensees are unable to protect our consumer and employee data and other regulated, protected, or personally identifiable information, we or our franchisees could be exposed to data loss, litigation, regulatory fines, and other liability, and our reputation could be significantly harmed.Environmental / Social - Risk 2
We may be affected by matters related to environmental, social, and governance ("Responsibility") trends and events, including governmental regulation and supply chain disruptions, that may adversely impact our business.Furthermore, the growing emphasis on Responsibility considerations by consumers, investors, governmental authorities, and various stakeholders may impact our operations and compliance obligations. Responsibility encompasses a broad spectrum of factors, including climate change, greenhouse gas emissions, packaging and waste management, human rights, sustainable supply chain practices, animal welfare, deforestation, and responsible use of land, energy, and water resources. Recent years have seen the introduction of disclosure requirements by entities such as the U.S. Congress, the U.S. Securities and Exchange Commission, the European Union, and the Nasdaq stock exchange, which either have already prompted or may in the future encourage or mandate us to adopt new practices for managing and reporting on Responsibility-related risks. The evolving nature and complexity of these rules and regulations render compliance more challenging and uncertain. Consequently, these changing regulatory frameworks, together with evolving stakeholder expectations, have led to increased general and administrative expenses and have necessitated greater management time and attention dedicated to achieving compliance and meeting these standards.
Moreover, as part of our commitment to making a positive global impact, we have established specific commitments, targets, and goals related to Responsibility concerns. We are also evaluating opportunities to expand these commitments further. It is important to note that our competitors may not share a similar level of ambition in setting environmental or sustainability objectives, potentially leading to lower supply chain and operational costs for them. We may choose to communicate these commitments, targets, and goals through public disclosures. Nevertheless, our ability to meet these commitments and navigate the associated risks is subject to various external factors and uncertainties, many of which are beyond our control. If we are not successful, or if we are perceived as ineffective, in achieving our Responsibility strategy or in mitigating Responsibility-related risks to our business, we could be exposed to market, operational, reputational, and execution challenges and costs.
Ability to Sell
Total Risks: 6/37 (16%)Below Sector Average
Competition1 | 2.7%
Competition - Risk 1
Our success depends on our ability to compete with many food service businesses.Demand2 | 5.4%
Demand - Risk 1
Changes in consumer preferences and demographic trends could negatively impact our business.Demand - Risk 2
Our DFD business channels depend on key customers and are subject to risks if such key customers reduce their purchases or terminate their relationships with us.A considerable portion of our revenue comes from sales to retail customers via our DFD channels, which necessitate a substantial infrastructure with notable fixed and semi-fixed costs. In our global operations, we serve a number of large retail customers, yet no single customer contributed to more than 10% of our total revenue in the fiscal years ending December 31, 2023, January 1, 2023, or January 2, 2022. These relationships are not bound by long-term contracts; rather, purchases are influenced by factors like pricing, product quality, consumer demand, and service excellence. Looking ahead, there is a possibility that these customers might reallocate their shelf space, currently occupied by our products, to other items, possibly including private label goods. Consequently, a loss or significant decrease in sales to one of these key retail customers, or if they encounter substantial financial issues, could have a negative impact on our business's health, financial stability, and operational results.
Sales & Marketing2 | 5.4%
Sales & Marketing - Risk 1
Our franchisees may affect our operating results and reputation.Sales & Marketing - Risk 2
A key portion of our growth strategy depends on opening new Krispy Kreme shops and Points of Access both domestically and internationally.Our strategic focus includes expanding our Global Points of Access, encompassing the establishment of new shops, DFD Doors, and Ecommerce platforms, both in our current markets and new regions. However, the effective implementation of this expansion strategy may be impacted by external factors outside the control of both us and our franchisees, potentially hindering shop development and impeding our overall growth objectives. Operational challenges, such as difficulties in sourcing product components or logistical services, may also impose limitations.
Additionally, our presence in certain international markets heavily depends on our franchisees. There is no guarantee that these franchisees will successfully develop or manage their shops in alignment with our brand standards. Moreover, their ability to effectively open, operate, and sustain these shops as per their agreements and our brand requirements may be constrained by their business capabilities or financial resources.
Brand / Reputation1 | 2.7%
Brand / Reputation - Risk 1
Our reputation and brand image are essential to our business success.Tech & Innovation
Total Risks: 4/37 (11%)Below Sector Average
Trade Secrets2 | 5.4%
Trade Secrets - Risk 1
Loss of our trade secret recipes could adversely affect our sales.Trade Secrets - Risk 2
Our failure or inability to obtain, maintain, protect, and enforce our trademarks or other intellectual property could adversely affect our business and the value of our brands.We possess common-law trademark rights in the U.S., complemented by numerous trademark and service mark registrations both domestically and internationally. Our intellectual property portfolio encompasses ingredient formulas, trademarks, copyrights, patents, business processes, and other valuable trade secrets. We view our trademarks and other intellectual property rights as integral to our success and competitive positioning. To safeguard these assets, we rely on a comprehensive strategy encompassing legal protections offered by trademark registrations, contracts, copyrights, patents, and common law rights, such as protections against unfair competition, passing off, and trade secret violations.
Despite our proactive efforts to secure, maintain, safeguard, and enforce our trademarks, service marks, and other intellectual property rights, there can be no absolute guarantee that these protections will be universally applicable. Challenges such as potential infringements, challenges to validity, declarations of generic status, circumvention, or violations may arise. Furthermore, the effectiveness of intellectual property protection may vary across countries where our brands have existing or potential shops or facilities. The intellectual property laws of certain foreign countries may not provide the same level of protection as those in the U.S.
We acknowledge the possibility that the measures we have implemented to safeguard our intellectual property, along with the available legal protections, may not always prove sufficient. Additionally, it is not assured that our franchisees will consistently uphold the quality of goods and services under our brand trademarks or consistently adhere to the guidelines we establish for preserving our brand's intellectual property rights. The defense and enforcement of our trademarks and other intellectual property could entail substantial resource allocation and potentially impact our business, reputation, financial standing, and operational results.
Furthermore, our brands may become targets of infringement claims, potentially impacting the use of specific names, trademarks, or proprietary knowledge, recipes, and trade secrets integral to our business. The defense against such claims can be costly, and in some cases, it may lead to restrictions on our use of proprietary information in the future or require the payment of damages, royalties, or other fees for the continued use of such proprietary information. Any of these outcomes has the potential to exert a negative influence on our business, reputation, financial condition, and operational results. We remain vigilant in protecting and managing our intellectual property assets.
Cyber Security1 | 2.7%
Cyber Security - Risk 1
Breaches or failures of our information technology systems or other cybersecurity or data security-related incidents may have an adverse impact on our business, financial condition, and results of operations.Technology1 | 2.7%
Technology - Risk 1
We rely on information technology in our operations. Any material failure, inadequacy, or interruption of that technology could adversely affect our ability to effectively operate our business and result in financial or other loss.Macro & Political
Total Risks: 4/37 (11%)Below Sector Average
Economy & Political Environment1 | 2.7%
Economy & Political Environment - Risk 1
Adverse economic conditions or disruptions in the markets where we operate could adversely impact our business, results of operations, and financial condition.International Operations1 | 2.7%
International Operations - Risk 1
Political, economic, currency, and other risks associated with our international operations could adversely affect our and our international franchisees' operating results.Natural and Human Disruptions2 | 5.4%
Natural and Human Disruptions - Risk 1
Adverse weather conditions could adversely affect our business.Natural and Human Disruptions - Risk 2
Public health outbreaks, epidemics, or pandemics, including the global COVID-19 outbreak, have disrupted and may continue to disrupt, our business, and could materially affect our business, financial condition, and results of operations.Health epidemics or pandemics can have detrimental effects on consumer spending, confidence levels, supply chain availability, and associated costs within the markets where we and our franchisees operate. These factors can collectively influence our business, financial standing, and operational results. A notable instance of this was the global spread of the COVID-19 epidemic in recent years, which disrupted global health, economic conditions, consumer behaviors, and food service operations.
While we have implemented measures to address significant public health risks on a large scale, we acknowledge the potential for future outbreaks to impact our shops and other facilities. Such outbreaks may result in a substantial portion of our workforce or the workforce of our business partners being unable to work.
Furthermore, our business is influenced by shifting consumer preferences and perceptions. Concerns regarding virus transmission have prompted employees and guests to avoid congregating in public places, leading to adverse effects on guest traffic at our locations and the ability to adequately staff our shops. The COVID-19 pandemic has triggered changes in consumer behaviors, some of which may endure or continue evolving even after the pandemic subsides. These shifts have already had and may continue to exert negative impacts on consumer traffic and the sales of both our Company-owned and franchisee-operated shops. We remain attentive to evolving consumer trends and their potential implications for our business and operational performance.
See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.
FAQ
What are “Risk Factors”?
Risk factors are any situations or occurrences that could make investing in a company risky.
The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment.
They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result.
It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.
How do companies disclose their risk factors?
Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process.
Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”.
Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report.
According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.
How can I use TipRanks risk factors in my stock research?
Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing.
You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector.
Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements.
A simplified analysis of risk factors is unique to TipRanks.
What are all the risk factor categories?
TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below.
1. Financial & Corporate
- Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results.
- Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing.
- Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments.
- Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances.
2. Legal & Regulatory
- Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company.
- Regulation – risks related to compliance, GDPR, and new legislation.
- Environmental / Social – risks related to environmental regulation and to data privacy.
- Taxation & Government Incentives – risks related to taxation and changes in government incentives.
3. Production
- Costs – risks related to costs of production including commodity prices, future contracts, inventory.
- Supply Chain – risks related to the company’s suppliers.
- Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls.
- Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation.
4. Technology & Innovation
- Innovation / R&D – risks related to innovation and new product development.
- Technology – risks related to the company’s reliance on technology.
- Cyber Security – risks related to securing the company’s digital assets and from cyber attacks.
- Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying.
5. Ability to Sell
- Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers.
- Competition – risks related to the company’s competition including substitutes.
- Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration.
- Brand & Reputation – risks related to the company’s brand and reputation.
6. Macro & Political
- Economy & Political Environment – risks related to changes in economic and political conditions.
- Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19.
- International Operations – risks related to the global nature of the company.
- Capital Markets – risks related to exchange rates and trade, cryptocurrency.