DARDEN RESTAURANTS, INC. The discussion and analysis below for the Company, which contains forward-looking statements, should be read in conjunction with the unaudited financial statements, the notes to such financial statements and the "Forward-Looking Statements" included elsewhere in this Form 10-Q.
To facilitate review of our discussion and analysis, the following table sets forth our financial results for the periods indicated. All information is derived from the unaudited consolidated statements of earnings for the quarters and six months endedNovember 27, 2022 andNovember 28, 2021 . Three Months Ended Six Months Ended November 27, November 28, November 27, November 28, (in millions) 2022 2021 % Chg 2022 2021 % Chg Sales$ 2,486.5 $ 2,272.2 9.4%$ 4,932.6 $ 4,578.2 7.7% Costs and expenses: Food and beverage 818.3 694.1 17.9 1,613.6 1,379.5 17.0 Restaurant labor 808.5 744.8 8.6 1,602.3 1,480.8 8.2 Restaurant expenses 417.0 385.0 8.3 820.5 763.1 7.5 Marketing expenses 31.1 21.9 42.0 61.4 45.8 34.1 General and administrative expenses 90.4 91.7 (1.4) 178.7 204.7
(12.7)
Depreciation and amortization 96.8 92.1 5.1 192.4 181.1 6.2 Impairments and disposal of assets, net (8.8) - NM (13.7) - NM Total costs and expenses$ 2,253.3 $ 2,029.6 11.0$ 4,455.2 $ 4,055.0 9.9 Operating income 233.2 242.6 (3.9) 477.4 523.2 (8.8) Interest, net 19.8 16.7 18.6 39.6 32.3 22.6 Earnings before income taxes 213.4 225.9 (5.5)$ 437.8 $ 490.9 (10.8) Income tax expense (1) 25.9 32.5 (20.3) 56.7 65.8 (13.8)
Earnings from continuing operations
(3.1)$ 381.1 $ 425.1
(10.4)
Losses from discontinued operations, net of tax (0.3) (0.2) 50.0 (0.9) (1.0) (10.0) Net earnings$ 187.2 $ 193.2 (3.1)$ 380.2 $ 424.1 (10.4)% Diluted net earnings per share: Earnings from continuing operations$ 1.52 $ 1.48 2.7$ 3.09 $ 3.24
(4.6)%
Losses from discontinued operations - - NM (0.01) (0.01) - Net earnings$ 1.52 $ 1.48 2.7$ 3.08 $ 3.23 (4.6)% (1) Effective tax rate 12.1 % 14.4 % 13.0 % 13.4 %
NM- Percentage not considered meaningful.
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The following table details the number of company-owned restaurants currently
reported in continuing operations that were open at the end of the second
quarter of fiscal 2023, compared with the number open at the end of fiscal 2022
and the end of the second quarter of fiscal 2022.
November 27, May 29, November 28,
2022 2022 2021
Olive Garden 890 884 879
LongHorn Steakhouse 553 546 539
Cheddar's Scratch Kitchen 179 172 172
Yard House 85 85 85
The Capital Grille 61 62 61
Seasons 52 45 45 44
Bahama Breeze 42 42 42
Eddie V's 29 28 27
The Capital Burger 3 3 3
Total 1,887 1,867 1,852
OVERVIEW OF OPERATIONS
COVID-19 Pandemic
During fiscal 2022, increasing numbers of COVID-19 cases throughout the United
States including the Omicron variant which significantly impacted our
restaurants in the third quarter, mostly in January 2022 , subjected some of our
restaurants to COVID-19-related restrictions such as mask and/or vaccine
requirements for team members, guests or both. Exclusions and quarantines of
restaurant team members or groups thereof disrupt an individual restaurant's
operations and often come with little or no notice to the local restaurant
management. During fiscal 2022, along with COVID-19, our operating results were
impacted by geopolitical and other macroeconomic events, leading to higher than
usual inflation on wages and other cost of goods sold. These events further
impacted the availability of team members needed to staff our restaurants and
caused additional disruptions in our product supply chain. During fiscal 2023,
these events have continued to impact our operating results as wage and cost
inflation continue to exceed recent norms.
The ongoing effects of COVID-19 and its variants, along with other geopolitical
and macroeconomic events could lead to further capacity restrictions, mask and
vaccination mandates, wage inflation, staffing challenges, product cost
inflation and disruptions in the supply chain that impact our restaurants'
ability to obtain the products needed to support their operations.
Financial Highlights - Consolidated
•Total sales increased 9.4% and 7.7% to$2.49 billion and$4.93 billion for the second quarter and six months of fiscal 2023 compared to$2.27 billion and$4.58 billion for the second quarter and six months of fiscal 2022 driven by blended same-restaurant sales increases of 7.3% and 5.7% and sales from 35 net new restaurants. •Our net earnings from continuing operations were$187.5 million and$381.1 million for the second quarter and six months of fiscal 2023 compared to$193.4 million and$425.1 million for the second quarter and six months of fiscal 2022. •Reported diluted net earnings per share from continuing operations were$1.52 and$3.09 for the second quarter and six months of fiscal 2023 compared to$1.48 and$3.24 for the second quarter and six months of fiscal 2022.
Outlook
We expect sales for fiscal 2023 to be between$10.3 and$10.45 billion , driven by same-restaurant sales growth of 5.0 to 6.5 percent and 55 to 60 new restaurant openings. Additionally, we expect capital expenditures incurred to build new restaurants, remodel and maintain existing restaurants and for technology initiatives to be$525 to$575 million . 24
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SALES
The following table presents our sales by segment for the periods indicated.
Three Months Ended Six Months Ended
November 27, November 28, November 27, November 28,
(in millions) 2022 2021 % Chg SRS (1) 2022 2021 % Chg SRS (1)
Olive Garden $ 1,176.7 $ 1,077.2 9.2 % 7.6 % $ 2,307.4 $ 2,167.6 6.4 % 5.0 %
LongHorn Steakhouse $ 600.5 $ 547.2 9.7 % 7.3 % $ 1,205.1 $ 1,114.3 8.1 % 5.7 %
Fine Dining $ 202.0 $ 188.7 7.0 % 5.9 % $ 385.4 $ 357.5 7.8 % 6.7 %
Other Business $ 507.3 $ 459.1 10.5 % 7.1 % $ 1,034.7 $ 938.8 10.2 % 7.4 %
(1)Same-restaurant sales is a year-over-year comparison of each period's sales
volumes for a 52-week year and is limited to restaurants open, or operated by
Darden, at least 16 months.
Olive Garden's sales increase for the second quarter and six months of fiscal
2023 was primarily driven by U.S. same-restaurant sales increases combined with
revenue from new restaurants. The increase in U.S. same-restaurant sales for the
second quarter of fiscal 2023 resulted from a 8.0 percent increase in average
check offset by a 0.3 percent decrease in same-restaurant guest counts. The
increase in U.S. same-restaurant sales for the six months of fiscal 2023
resulted from a 8.5 percent increase in average check offset by a 3.3 percent
decrease in same-restaurant guest counts.
LongHorn Steakhouse's sales increase for the second quarter and six months of
fiscal 2023 was primarily driven by same-restaurant sales increases combined
with revenue from new restaurants. The increase in same-restaurant sales for the
second quarter of fiscal 2023 resulted from a 7.2 percent increase in average
check combined with a 0.1 percent increase in same-restaurant guest counts. The
increase in same-restaurant sales for the six months of fiscal 2023 resulted
from a 6.8 percent increase in average check offset by a 1.0 percent decrease in
same-restaurant guest counts.
Fine Dining's sales increase for the second quarter and six months of fiscal
2023 was primarily driven by same-restaurant sales increases combined with
revenue from new restaurants. The increase in same-restaurant sales for the
second quarter of fiscal 2023 resulted from a 7.1 percent increase in average
check offset by a 1.1 percent decrease in same-restaurant guest counts. The
increase in same-restaurant sales for the six months of fiscal 2023 resulted
from a 6.6 percent increase in average check combined with a 0.1 percent
increase in same-restaurant guest counts.
Other Business' sales increase for the second quarter and six months of fiscal
2023 was primarily driven by same-restaurant sales increases combined with
revenue from new restaurants. The increase in same-restaurant sales for the
second quarter months of fiscal 2023 resulted from a 7.4 percent increase in
average check offset by a 0.3 percent decrease in same-restaurant guest counts.
The increase in same-restaurant sales for the six months of fiscal 2023 resulted
from a 7.1 percent increase in average check combined with a 0.3 percent
increase in same-restaurant guest counts.
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COSTS AND EXPENSES
The following table sets forth selected operating data as a percent of sales for
the periods indicated. All information is derived from the unaudited
consolidated statements of earnings for the quarters and six months ended
Three Months Ended Six Months Ended
November 27, 2022 November 28, 2021 November 27, 2022 November 28, 2021
Sales 100.0 % 100.0 % 100.0 % 100.0 %
Costs and expenses:
Food and beverage 32.9 30.5 32.7 30.1
Restaurant labor 32.5 32.8 32.5 32.3
Restaurant expenses 16.8 16.9 16.6 16.7
Marketing expenses 1.3 1.0 1.2 1.0
General and administrative expenses 3.6 4.0 3.6 4.5
Depreciation and amortization 3.9 4.1 3.9 4.0
Impairments and disposal of assets, net (0.4) - (0.3) -
Total operating costs and expenses 90.6 % 89.3 % 90.3 % 88.6 %
Operating income 9.4 10.7 9.7 11.4
Interest, net 0.8 0.7 0.8 0.7
Earnings before income taxes 8.6 9.9 8.9 10.7
Income tax expense 1.0 1.4 1.1 1.4
Earnings from continuing operations 7.5 % 8.5 % 7.7 % 9.3 %
Quarter Ended
•Food and beverage costs increased as a percent of sales primarily due to a 3.7% impact from inflation and a 0.8% impact from menu mix, partially offset by a 2.1% impact from pricing. •Restaurant labor costs decreased as a percent of sales primarily due to a 2.3% impact from pricing and sales leverage, partially offset by a 1.3% impact from inflation and a 0.7% impact from decreased productivity. •Restaurant expenses decreased as a percent of sales primarily due to a 1.5% impact from pricing and sales leverage, partially offset by a 0.3% impact from higher utility costs, a 0.3% impact from higher repairs and maintenance expenses, a 0.2% impact from credit card expense, and a 0.6% impact from all other costs. •Marketing expenses increased as a percent of sales primarily due to increased marketing media. •General and administrative expenses decreased as a percent of sales primarily due to a 0.4% impact related to lower incentive pay accrual and a 0.4% impact due to sales leverage, partially offset by a 0.3% impact on mark to market on deferred compensation plans. •Depreciation and amortization expenses decreased as a percent of sales primarily due to sales leverage. •Impairment and disposal of assets, net decreased as a percent of sales due to gains recognized on the sale of properties.
Six Months Ended
•Food and beverage costs increased as a percent of sales primarily due to a 4.0%
impact from inflation and a 0.9% impact from menu mix, partially offset by a
2.1% impact from pricing.
•Restaurant labor costs increased as a percent of sales primarily due to a 1.4%
impact from inflation and a 0.8% impact from decreased productivity, partially
offset by a 2.1% impact from pricing and sales leverage.
•Restaurant expenses decreased as a percent of sales primarily due to a 1.1%
impact from pricing and sales leverage, partially offset by a 0.4% impact from
higher utility costs, a 0.4% impact from higher repairs and maintenance
expenses, and a 0.2% impact from credit card expense.
•Marketing expenses increased as a percent of sales primarily due to increased
marketing media.
•General and administrative expenses decreased as a percent of sales primarily
due to a 0.6% impact from lower incentive pay accrual and a 0.3% impact related
to sales leverage.
•Depreciation and amortization expenses decreased as a percent of sales
primarily due to sales leverage.
•Impairment and disposal of assets, net decreased as a percent of sales due to
gains recognized on the sale of properties.
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INCOME TAXES
The effective income tax rate for continuing operations for the quarter endedNovember 27, 2022 was 12.1 percent compared to an effective income tax rate for the quarter endedNovember 28, 2021 of 14.4 percent. This change was primarily driven by the impact of federal tax credits and hedge mark-to-market impacts. The effective income tax rate for continuing operations for the six months endedNovember 27, 2022 was 13.0 percent compared to an effective income tax rate for the quarter endedNovember 28, 2021 of 13.4 percent. This change was primarily driven by the impact of federal tax credits and lower net earnings from continuing operations. The Inflation Reduction Act ("IRA") was enacted onAugust 16, 2022 . The IRA includes provisions imposing a 1% excise tax on share repurchases that occur afterDecember 31, 2022 and introduces a 15% corporate alternative minimum tax ("CAMT") on adjusted financial statement income. The CAMT will be effective for us beginning in fiscal 2024. We currently are not expecting the IRA to have a material adverse impact to our financial statements.
LOSSES FROM DISCONTINUED OPERATIONS
On an after-tax basis, losses from discontinued operations for the second quarter and six months ended of fiscal 2023 were$0.3 million ($0.00 per diluted share) and 0.9 million ($(0.01) per diluted share) compared with losses from discontinued operations for the second quarter and six months of fiscal 2022 of$0.2 million ($0.00 per diluted share) and 1.0 million ($(0.01) per diluted share).
SEGMENT RESULTS
We manage our restaurant brands, Olive Garden,LongHorn Steakhouse ,Cheddar's Scratch Kitchen , Yard House,The Capital Grille , Seasons 52,Bahama Breeze , Eddie V's and The Capital Burger inNorth America as operating segments. We aggregate our operating segments into reportable segments based on a combination of the size, economic characteristics and sub-segment of full-service dining within which each brand operates. Our four reportable segments are: (1) Olive Garden, (2)LongHorn Steakhouse , (3) Fine Dining and (4) Other Business (see Note 6 to our unaudited consolidated financial statements in Part I, Item 1 of this report). Our management uses segment profit as the measure for assessing performance of our segments. The following table presents segment profit margin for the periods indicated. Three Months Ended Six Months Ended Segment November 27, 2022 November 28, 2021 Change November 27, 2022 November 28, 2021 Change Olive Garden 18.6% 21.8% (320) BPS 18.9% 22.5% (360) BPS LongHorn Steakhouse 14.3% 15.3% (100) BPS 14.7% 17.1% (240) BPS Fine Dining 19.3% 21.0% (170) BPS 17.9% 20.5% (260) BPS Other Business 11.6% 13.6% (200) BPS 12.7% 15.7% (300) BPS The decrease in Olive Garden and LongHorn's segment profit margin for the second quarter and six months of fiscal 2023 was driven primarily by food and beverage costs partially offset by positive same-restaurant sales. The decrease in Fine Dining and Other Business' segment profit margin for the second quarter and six months of fiscal 2023 was driven primarily by food and beverage and restaurant labor costs partially offset by positive same-restaurant sales.
SEASONALITY
Our sales volumes fluctuate seasonally. Typically, our average sales per restaurant are highest in the winter and spring, followed by the summer, and lowest in the fall. Holidays, changes in the economy, severe weather, effects of the COVID-19 pandemic and similar conditions may impact sales volumes seasonally in some operating regions. Because of the seasonality of our business, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
Typically, cash flows generated from operating activities are our principal
source of liquidity, which we use to finance capital expenditures for new
restaurants and to remodel and maintain existing restaurants, to pay dividends
to our shareholders and to repurchase shares of our common stock. Since
substantially all of our sales are for cash and cash equivalents, and accounts
payable are generally paid in 5 to 90 days, we are typically able to carry
current liabilities in excess of current assets.
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We currently manage our business and financial ratios to target an
investment-grade bond rating, which has historically allowed flexible access to
financing at reasonable costs. Our publicly issued long-term debt currently
carries the following ratings:
•Moody's Investors Service "Baa2";
•Standard & Poor's "BBB"; and
•Fitch "BBB".
Our commercial paper has ratings of:
•Moody's Investors Service "P-2";
•Standard & Poor's "A-2"; and
•Fitch "F-2".
These ratings are as of the date of the filing of this Form 10-Q and have been
obtained with the understanding that Moody's Investors Service, Standard &
Poor's and Fitch will continue to monitor our credit and make future adjustments
to these ratings to the extent warranted. The ratings are not a recommendation
to buy, sell or hold our securities, may be changed, superseded or withdrawn at
any time and should be evaluated independently of any other rating.
On September 10, 2021 , we entered into a $1 billion Revolving Credit Agreement
(Revolving Credit Agreement) with Bank of America, N.A . (BOA), as administrative
agent, and the lenders and other agents party thereto. The Revolving Credit
Agreement is a senior unsecured credit commitment to the Company and contains
customary representations and affirmative and negative covenants (including
limitations on liens and subsidiary debt and a maximum consolidated lease
adjusted total debt to total capitalization ratio of 0.75 to 1.00) and events of
default usual for credit facilities of this type. As of November 27, 2022 , we
had no outstanding balances and were in compliance with all covenants under the
Revolving Credit Agreement. As of November 27, 2022 , $58.0 million of commercial
paper was outstanding, which was backed by this facility. After consideration of
commercial paper backed by the Revolving Credit Agreement, as of November 27,
2022 , we had $942.0 million of credit available under the Revolving Credit
Agreement.
The Revolving Credit Agreement matures on September 10, 2026 , and the proceeds
may be used for working capital and capital expenditures, the refinancing of
certain indebtedness, certain acquisitions and general corporate purposes. Loans
under the Revolving Credit Agreement bear interest at a rate of LIBOR plus a
margin determined by reference to a ratings-based pricing grid (Applicable
Margin), or the base rate (which is defined as the highest of the BOA prime
rate, the Federal Funds rate plus 0.500 percent, and the Eurodollar Rate plus
1.00 percent) plus the Applicable Margin. Assuming a "BBB" equivalent credit
rating level, the Applicable Margin under the Revolving Credit Agreement will be
1.000 percent for LIBOR loans and 0.000 percent for base rate loans.
As of
•$500.0 million of unsecured 3.850 percent senior notes due in
•$96.3 million of unsecured 6.000 percent senior notes due in
•$42.8 million of unsecured 6.800 percent senior notes due in
•$300.0 million of unsecured 4.550 percent senior notes due in
The interest rate on our$42.8 million senior notes due inOctober 2037 is subject to adjustment from time to time if the debt rating assigned to such series of notes is downgraded below a certain rating level (or subsequently upgraded). The maximum adjustment is 2.000 percent above the initial interest rate and the interest rate cannot be reduced below the initial interest rate. As ofNovember 27, 2022 , no such adjustments are made to this rate. We may from time to time repurchase our remaining outstanding debt in privately negotiated transactions. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements and other factors. From time to time we enter into interest rate derivative instruments. See Note 10 to our unaudited consolidated financial statements in Part I, Item 1 of this report, which is incorporated by reference. Net cash flows provided by operating activities of continuing operations increased to$635.6 million for the six months of fiscal 2023, from$481.5 million for the six months of fiscal 2022. Net cash flows provided by operating activities include net earnings from continuing operations of$381.1 million and$425.1 million in the six months of fiscal 2023 and 2022, respectively. Net cash flows provided by operating activities increased in fiscal 2023 primarily due to the change in working capital compared to fiscal 2022 offset by lower net earnings from continuing operations. Net cash flows used in investing activities of continuing operations were$273.4 million for the six months of fiscal 2023, compared to$177.8 million for the six months of fiscal 2022. Capital expenditures increased to$280.3 million for the six 28 --------------------------------------------------------------------------------
months of fiscal 2023 from
Net cash flows used in financing activities of continuing operations were$534.9 million for the six months of fiscal 2023, compared to$721.0 million for the six months of fiscal 2022. Net cash flows used in financing activities for the six months of fiscal 2023 included dividends paid of$296.5 million , share repurchases of$299.2 million , and repayments of short-term debt of$253.5 million partially offset by proceeds from the issuance of short-term debt. Net cash flows used in financing activities for the six months of fiscal 2022 included dividends paid of$286.1 million and share repurchases of$452.3 million partially offset by proceeds from the exercise of employee stock options. Dividends declared by our Board of Directors totaled$2.42 and$2.20 per share for the six months of fiscal 2023 and 2022, respectively. OnJune 22, 2022 , our Board of Directors authorized a new share repurchase program under which we may repurchase up to$1 billion of our outstanding common stock. This repurchase program does not have an expiration and replaces the existing share repurchase authorization. During the quarter and six months endedNovember 27, 2022 , we repurchased 0.76 million and 2.4 million shares of our common stock, respectively, compared to 1.8 million and 3.1 million shares of our common stock, respectively, during the quarter and six months endedNovember 28, 2021 . We are not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, changes in financial condition, sales, costs or expenses, results of operations, liquidity, capital expenditures or capital resources. Impairment of our assets, including goodwill or trademarks, adversely affects our financial position and results of operations, and our leverage ratio for purposes of our Revolving Credit Agreement. A leverage ratio exceeding the maximum permitted under our Revolving Credit Agreement would be a default under our Revolving Credit Agreement. AtNovember 27, 2022 , write-downs of goodwill, other indefinite-lived intangible assets, or any other assets in excess of approximately$824.7 million would have been required to cause our leverage ratio to exceed the permitted maximum. As our leverage ratio is determined on a quarterly basis, and due to the seasonal nature of our business, a lesser amount of impairment in future quarters could cause our leverage ratio to exceed the permitted maximum. FINANCIAL CONDITION Our current assets totaled$892.1 million as ofNovember 27, 2022 , compared to$1.18 billion as ofMay 29, 2022 . The decrease was primarily due to a decrease in prepaid income taxes as well as cash and cash equivalents. Our current liabilities totaled$1.91 billion as ofNovember 27, 2022 , compared to$1.85 billion as ofMay 29, 2022 . The increase was primarily driven by an increase in accounts payable and short-term debt, offset by a decrease in accrued payroll.
CRITICAL ACCOUNTING ESTIMATES
We prepare our consolidated financial statements in conformity withU.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales, costs and expenses during the reporting period. Actual results could differ from those estimates. We have discussed the development, selection and disclosure of those estimates with the Audit Committee. Our critical accounting estimates have not changed materially from those previously reported in our Annual Report on Form 10-K for the fiscal year endedMay 29, 2022 .
APPLICATION OF NEW ACCOUNTING STANDARDS
Information regarding application of new accounting standards is incorporated by
reference from Note 1 to our unaudited consolidated financial statements in Part
I, Item 1 of this report.
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FORWARD-LOOKING STATEMENTS
Statements set forth in or incorporated into this report regarding the expected increase in the number of our restaurants and capital expenditures in fiscal 2023, projections for sales and all other statements that are not historical facts, including without limitation statements with respect to the financial condition, results of operations, plans, objectives, future performance and business ofDarden Restaurants, Inc. and its subsidiaries that are preceded by, followed by or that include words such as "may," "will," "expect," "intend," "anticipate," "continue," "estimate," "project," "believe," "plan," "outlook" or similar expressions, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are included, along with this statement, for purposes of complying with the safe harbor provisions of that Act. Any forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update such statements for any reason to reflect events or circumstances arising after such date. By their nature, forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by such forward-looking statements. In addition to the risks and uncertainties of ordinary business obligations, and those described in information incorporated into this report, the forward-looking statements contained in this report are subject to the risks and uncertainties described in Part I, Item 1A "Risk Factors" in our Annual Report on Form 10-K for the year endedMay 29, 2022 and in our Forms 10-Q (including this report), which are summarized as follows: •The disruption of our business and the global economy caused by the novel coronavirus (COVID-19) pandemic; •A failure to address cost pressures, including rising costs for commodities, labor, health care and utilities used by our restaurants, and a failure to effectively deliver cost management activities and achieve economies of scale in purchasing; •Economic and business factors and their impacts on the restaurant industry and general macroeconomic factors including unemployment, energy prices and interest rates;
•The inability to hire, train, reward and retain restaurant team members and determine and maintain adequate staffing;
•A failure to recruit, develop and retain effective leaders or the loss or shortage of personnel with key capacities and skills;
•Increases in labor and insurance costs;
•Health concerns arising from food-related pandemics, outbreaks of flu, viruses or other diseases;
•Failures to maintain food safety throughout the supply chain and food-borne illness concerns; •Insufficient guest or employee facing technology or a failure to maintain a continuous or secure cyber network •Increased costs related to compliance with privacy and data protection laws and government enforcement, litigation or adverse publicity relating to potential failures thereof; •Insufficient or ineffective response to legislation or government regulation may impact our cost structure, operational efficiencies and talent availability;
•Intense competition, or an insufficient focus on competition and the consumer landscape;
•Changes in consumer preferences that may adversely affect demand for food at our restaurants;
•An inability or failure to recognize, respond to and effectively manage the accelerated impact of social media;
•A failure to identify and execute innovative marketing and guest relationship tactics and ineffective or improper use of other marketing initiatives and increased advertising and marketing costs;
•Impacts of climate change, adverse weather conditions and natural disasters;
•The inability to cancel long-term, non-cancelable leases that we may want to cancel or the inability to renew the leases that we may want to extend at the end of their terms;
•Our inability or failure to execute a comprehensive business continuity plan following a major natural disaster such as a hurricane or manmade disaster, including terrorism;
•The impact of shortages, delay or interruptions in the delivery of food and other products from third-party vendors and suppliers;
•Our failure to drive both short-term and long-term profitable sales growth through brand relevance, operating excellence, opening new restaurants of existing brands and developing or acquiring new dining brands;
•A lack of suitable new restaurant locations or a decline in the quality of the locations of our current restaurants;
•Higher-than-anticipated costs or delays to open, close, relocate or remodel restaurants;
•Risks associated with doing business with franchisees and licensees;
•Risks associated with doing business with business partners and vendors in foreign markets;
•Volatility in the market value of derivatives we may use to hedge commodity and broader market prices;
•Volatility in
•Failure to protect our service marks or other intellectual property;
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•Litigation, including allegations of illegal, unfair or inconsistent employment practices;
•Unfavorable publicity, or a failure to respond effectively to adverse publicity;
•Disruptions in the financial markets that may impact consumer spending patterns, affect the availability and cost of credit;
•Impairment of the carrying value of our goodwill or other intangible assets;
•Changes in tax laws or treaties and unanticipated tax liabilities; and
•A failure of our internal controls over financial reporting and future changes in accounting standards.
Any of the risks described above or elsewhere in this report or our other filings with theSEC could have a material impact on our business, financial condition or results of operations. It is not possible to predict or identify all risk factors. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also impair our business operations. Therefore, the above is not intended to be a complete discussion of all potential risks or uncertainties.
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