- fluctuations in commodity prices;
- competitive actions; and
- the impact of inclement weather, natural disasters and other calamities.
Our business is also subject to minor seasonal fluctuations. Historically, sales in most of our restaurants have been
higher during the winter months of each year. Holidays, changes in weather, severe weather and similar conditions may
impact sales volumes seasonally in some operating regions. As a result, our quarterly operating results and comparable
restaurant sales may fluctuate as a result of seasonality. Accordingly, results for any one quarter are not necessarily
indicative of results to be expected for any other quarter or for any year and comparable restaurant sales for any
particular future period may decrease. In the future, operating results may fall below the expectations of securities
analysts and investors. In that event, the price of our common stock could decrease.
Risks Related to the Restaurant IndustryChanges 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. Any
increase in food prices, particularly proteins, 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 food supply constrictions, weather conditions,
food safety concerns, product recalls, global market and trade conditions, and government regulations. We cannot
predict whether we will be able to anticipate and react to changing food costs by adjusting our purchasing practices and
menu prices, and a failure to do so could adversely affect our operating results. Extreme and/or long term increases in
commodity prices could adversely affect our future results, especially if we are unable, primarily due to competitive
reasons, to increase menu prices. Additionally, if there is a time lag between the increasing commodity prices and our
ability to increase menu prices or if we believe the commodity price increase to be short in duration and we choose not
to pass on the cost increases, our short-term results could be negatively affected. Also, if we adjust pricing there is no
assurance that we will realize the full benefit of any adjustment due to changes in our guests’ menu item selections and
guest traffic.
We currently purchase the majority of our beef from three beef suppliers under annual contracts. While we maintain
relationships with additional suppliers, if any of these vendors were unable to fulfill its obligations under its contracts,
we could encounter supply shortages and incur higher costs to secure adequate supplies, either of which would harm our
business.
Our business could be adversely affected by increased labor costs or labor shortages.
Labor is a primary component in the cost of operating our business. We devote significant resources to recruiting
and training our restaurant managers and hourly employees. Increased labor costs due to competition, unionization,
increased minimum and tipped wages, changes in hour and overtime pay, state unemployment rates or employee benefits
costs (including workers’ compensation and health insurance), company staffing initiatives, or otherwise would
adversely impact our operating expenses.
Increased competition for qualified employees caused by a shortage in the labor pool exerts upward pressure on
wages paid to attract and retain such personnel, resulting in higher labor costs, together with greater recruitment and
training expense. We could suffer from significant indirect costs, including restaurant disruptions due to management or
hourly labor turnover and potential delays in new restaurant openings. A shortage in the labor pool could also cause our
restaurants to be required to operate with reduced staff which could negatively impact our ability to provide adequate
service levels to our guests resulting in adverse guest reactions and a possible reduction in guest traffic counts.
We have many restaurants located in states or municipalities where the minimum and/or tipped wage is greater than
the federal minimum and/or tipped wage. We anticipate that additional legislation increasing minimum and/or tipped
wage standards will be enacted in future periods and in other jurisdictions. In addition, regulatory actions which result in
changes to healthcare eligibility, design and cost structure could occur. Any increases in minimum or tipped wages or
increases in employee benefits costs will result in higher labor costs.
Our operating margin will be adversely affected to the extent that we are unable or are unwilling to offset any