What changed in this filing

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Item 1A. Risk Factors

2021-02-24 compared with 2020-03-12 · 231 added, 177 removed, 195 unchanged (68% of the section changed)

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It is not possible for us to predict all possible risk factors or the impact these factors could have on us or the extent to which any one factor, or combination of factors, may materially adversely affect our financial performance.

Risks Related to Our Financial Performance

Risks Related to the COVID-19 Pandemic

The outbreak of, and local, state and federal governmental responses to, the COVID-19 pandemic have significantly disrupted and will continue to disrupt our business, which has and could continue to materially adversely affect our financial condition and operating results for an extended period of time.

The COVID-19 pandemic has significantly disrupted and will continue to disrupt our business for the foreseeable future.

Following the imposition of social distancing regulations that curtailed our restaurant operations to an off-premise only model, in late April 2020 certain jurisdictions began allowing the reopening of restaurant dining rooms, and more recently certain jurisdictions have reinstituted off-premise only regulations.

We will continue to operate under capacity restrictions in those jurisdictions that permit on-premise dining for some time as social distancing protocols remain in place, and dining rooms that are currently open are subject to closure based on increases in COVID-19 case numbers and the changing rules of various jurisdictions.

Additionally, an outbreak or perceived outbreak of the COVID-19 pandemic connected to one or more of our restaurants could result in restaurant closures as well as negative publicity directed at any of our brands and cause customers to avoid our restaurants.

We cannot predict how long the COVID-19 pandemic will last or whether it will reoccur, what additional restrictions may be enacted, to what extent we can maintain off-premise sales volumes or if individuals will be comfortable returning to our dining rooms during or following social distancing protocols and what long-lasting effects the COVID-19 pandemic may have on consumer behavior and the restaurant industry as a whole.

The regulations applicable to the reopening process, along with the potential impact of the COVID-19 pandemic on consumer spending behavior, could materially adversely affect our financial performance.

Our restaurant operations could be further disrupted if any of our restaurant staff members are diagnosed with COVID-19, which has occurred at some of our restaurants, requiring the quarantine of some or all of a restaurant’s staff members and the temporary closure of the affected restaurant.

If a significant percentage of our workforce is unable to work due to COVID-19 illness, quarantine, limitations on travel or other government restrictions in connection with the COVID-19 pandemic, our operations may be negatively impacted, potentially materially adversely affecting our liquidity, financial condition or results of operations.

Certain of our suppliers were similarly adversely impacted by the COVID-19 pandemic and as a result, we experienced certain shortages of food items and other supplies at our restaurants, none of which had a material impact on our operations.

Our supplies may continue to be impacted by the COVID-19 pandemic, which could have an adverse effect on our operations.

In addition, we furloughed approximately 41,000 staff members, and although a significant number have returned to work, we may need to implement additional furloughs depending on future events.

Staff members who are furloughed might seek and find other employment, we may be unable to properly staff and reopen our restaurants with experienced staff members when the business interruptions caused by the COVID-19 pandemic abate or end.

In addition, while we have taken actions to manage our liquidity position in response to the COVID-19 pandemic, we may need to seek additional sources of liquidity.

The COVID-19 pandemic is adversely affecting the availability of liquidity generally in the credit markets, and there can be no guarantee that additional liquidity will be available on favorable terms, or at all, especially the longer the COVID-19 pandemic lasts or if it were to reoccur.

To this end, on May 1, 2020, we entered into an amendment (the "Amendment") to our Third Amended and Restated Loan Agreement, dated July 30, 2019 (as amended by the Amendment, the "Amended Facility"), that, among other changes, provides for net adjusted leverage ratio and EBITDAR to interest and rent expense coverage ratio covenant relief through the first quarter of fiscal 2021.

Following the end of the covenant relief period, a material increase in our level of debt could cause our net adjusted leverage ratio and EBITDAR to interest and rent expense coverage ratios to be outside of permitted levels under the covenants in the Amended Facility.

(See Item 1A - Risk Factors - Risks Related to our Business - "Any failure to satisfy financial covenants and/or repayment requirements under our credit facility could harm our financial condition.") To further increase our liquidity given the impact of COVID-19 on our operations, we issued 200,000 shares of Series A Convertible Preferred Stock on April 20, 2020 for an aggregate purchase price of $200 million.

(See Notes 12 and 17 of Notes to Consolidated Financial Statements in Part 1, Item 1 of this report for further discussion of these events.)

To further manage our liquidity position in response to the COVID-19 pandemic and considering governmental occupancy restrictions limiting our ability to access and use our leased restaurants, we engaged our landlords in discussions to obtain rent relief.

As a result, we entered into a number of lease amendments providing relief in the form of deferred and/or abated rent.

If occupancy restrictions related to the COVID-19 pandemic continue for longer than expected or become more prevalent or more restrictive in connection with a reemergence or worsening of the outbreak, we may again seek to engage our landlords in discussions seeking additional rent relief.

If these discussions are not successful, we may incur considerable rental expenses without sufficient offsetting operating income.

We also may choose to cease operations at certain restaurants where profitability is particularly impacted by challenges related to the COVID-19 pandemic or other factors.

Should we do so, we will incur significant costs associated with lease terminations and our winding down of operations at the affected restaurant(s).

The COVID-19 pandemic has also adversely affected our ability to open new restaurants.

We have delayed some new unit openings and will continue to evaluate the pace and quantity of new unit development until more clarity on the restaurant industry operating environment emerges.

Delays in new unit development may materially adversely affect our ability to grow our business, particularly if these delays extend for a significant amount of time.

Risks Related to the Restaurant Industry

The impact global and domestic economic conditions have on consumer discretionary spending could materially adversely affect our financial performance.

The COVID-19 pandemic has had a significant impact on global and domestic economies and will likely continue to negatively impact these economies for some time in the future.

Dining out is a discretionary expenditure that historically has been influenced by domestic and global economic conditions.

These conditions include, but may not be limited to:

In addition to the COVID-19 pandemic, these conditions include, but may not be limited to:

unemployment, general and industry-specific inflation, consumer confidence, consumer purchasing and saving habits, credit conditions, stock market performance, home values, population growth, household incomes and tax policy.

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Changes in customer traffic and average check amount may be impacted by a variety of factors, including, without limitation:

macroeconomic conditions that impact consumer discretionary spending;

macroeconomic conditions, including the COVID-19 pandemic, that impact consumer discretionary spending;

perception of our concepts’ offerings in terms of quality, price, value and service;

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changes in consumer eating habits;

the evolving retail landscape, which is becoming increasingly influenced by technology and a growing consumer preference for convenience, value and experience;

the evolving retail landscape, which, for reasons including the COVID-19 pandemic, is becoming increasingly influenced by technology and a growing consumer preference for convenience, value and experience;

adverse weather conditions;

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Unfavorable menu mix shifts could reduce average check amount, negatively impacting our ability to grow comparable restaurant sales.

We have generated a higher mix of sales from off-premise channels as a consumer preference for convenience has increased.

More competition in these channels and any reduction in our ability to differentiate our concepts in these channels could negatively impact our comparable restaurant sales performance.

In recent years we have generated a higher mix of sales from off-premise channels as a consumer preference for convenience has increased.

This shift of sales to off-premise channels has been significantly accelerated in recent months as a result of occupancy restrictions and dining room closures impacting our restaurants and other challenges related to the COVID-19 pandemic.

As challenges related to the COVID-19 pandemic subside we may be unable to sustain current off-premise sales volumes.

Growing competition in off-premise channels and any reduction in our ability to differentiate our concepts in these channels could negatively impact our comparable restaurant sales performance.

If our efforts to grow comparable restaurant sales are not successful, the effect, over time, would be to spread costs across a lower level of sales, which could materially adversely affect our financial performance.

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We must protect our reputation in order to continue to be successful and to grow the value of our brands domestically and internationally.

Negative publicity directed at any of our brands, regardless of factual basis, such as relating to the quality of our restaurant food or consumer packaged goods, restaurant facilities, customer complaints or litigation alleging injury or food-borne illnesses, food tampering or contamination or poor health inspection scores, sanitary or other issues with respect to food processing by us or our suppliers, the condition of our restaurants, labor relations, any failure to comply with applicable regulations or standards, allegations of harassment, politically motivated accusations or other negative publicity, could damage our reputation.

Any failure of our third-party delivery provider to represent our brands well could damage our reputation.

Negative publicity directed at any of our brands, regardless of factual basis, such as relating to the quality of our restaurant food or consumer packaged goods, the quality of our restaurant facilities, outbreaks of COVID-19 infections at our restaurants, customer complaints or litigation alleging injury or food-borne illnesses, food tampering or contamination or poor health inspection scores, sanitary or other issues with respect to food processing by us or our suppliers, the condition of our restaurants, labor relations, any failure to comply with applicable regulations or standards, allegations of harassment or disparate treatment based upon race, gender, national origin, religion or other class, allegations of sexual harassment, politically motivated accusations or other negative publicity, could damage our reputation.

Any failure of our third-party delivery provider to represent our brands in a favorable manner could damage our reputation.

These concerns are exacerbated by the speed with which negative information may now be disseminated through social media.

(See Item 1A — Risk Factors — “Any inability to effectively use and manage social media, could harm our marketing efforts as well as our reputation, which could materially adversely affect our financial performance”).

(See Item 1A — Risk Factors — Risks Related to Our Business — “Any inability to effectively use and manage social media could harm our marketing efforts as well as our reputation, which could materially adversely affect our financial performance”).

Negative publicity about us could harm our reputation and damage the value of our brands, which could materially adversely affect our financial performance.

We are experiencing significant labor cost inflation.

Over the past several years we have experienced and continue to experience significant labor cost inflation.

If we are unable to offset higher labor costs, our cost of doing business will significantly increase, which could materially adversely impact our financial performance.

Increases in minimum wages and minimum tip credit wages, extensions of personal and other leave policies, other governmental regulations affecting labor costs and a diminishing pool of potential staff members when the unemployment rate falls and legal immigration is restricted, especially in certain localities, could significantly increase our labor costs and make it more difficult to fully staff our restaurants, either of which could materially adversely affect our financial performance.

We operate in many jurisdictions where the minimum wage, other mandated benefits and labor, wage and hour laws, require significantly more from employers than what is required under United States federal requirements.

Some jurisdictions allow tipped staff members to be paid a lower tip credit wage that is supplemented by gratuities paid by customers.

Many jurisdictions, including the United States federal and state governments, either have or plan to significantly increase their minimum wage, tip credit wage and other benefits requirements.

Increases in minimum wages and minimum tip credit wages, extensions of personal and other leave policies, other governmental regulations affecting labor costs and a diminishing pool of potential staff members when the unemployment rate falls and legal immigration is restricted, especially in certain localities, could significantly increase our labor costs and make it more difficult to fully staff our restaurants, any of which could materially adversely affect our financial performance.

We believe it is becoming increasing likely that the United States federal government will significantly increase the federal minimum wage and tip credit wage (or eliminate the tip credit wage) and require significantly more mandated benefits than what is currently required under federal law.

Should this happen, other jurisdictions that have historically mandated higher wages and greater benefits than what is required under federal law may seek to further increase wages and mandated benefits.

In addition to increasing the overall wages paid to our minimum wage and tip credit wage earners, these increases create pressure to increase wages and other benefits paid to other staff members who, in recognition of their tenure, performance, job responsibilities and other similar considerations, historically received a rate of pay exceeding the applicable minimum wage or minimum tip credit wage.

Because we employ a large workforce, minimum wage and tip credit wage increases, as well as expanding benefits mandates, have a particularly significant impact on our labor costs.

Because we employ a large workforce, any wage increase and/or expansion of benefits mandates will have a particularly significant impact on our labor costs.

Our vendors, contractors and business partners are similarly impacted by wage and benefit cost inflation, and many have or will increase their price for goods, construction and services in order to offset their increasing labor costs.

We expect these trends will continue as minimum wages and minimum tip credit wages continue to rise and other benefits are mandated.

Our labor expenses include significant costs related to our self-insured health, pharmacy and dental benefit plans.

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However, given the unpredictable nature of actual health care claims trends, including the severity or frequency of claims, in any given year our health care costs could significantly exceed our estimates, which could materially adversely affect our financial performance.

A great deal of uncertainty exists with respect to the future of the Patient Protection and Affordable Care Act as amended by the Health Care and Education Affordability Reconciliation Act of 2010 (the “PPACA”) and such uncertainty makes planning difficult year over year.

Any significant changes to the healthcare insurance system, including a further dismantling of the PPACA in whole or in part and/or implementation of a supplementary and/or replacement healthcare insurance system, could impact our healthcare costs.

Any significant changes to the healthcare insurance system could impact our healthcare costs.

Material increases in healthcare costs could materially adversely affect our financial performance.

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If we are unable to effectively anticipate and respond to increased labor costs, our financial performance could be materially adversely affected.

If we are unable to successfully recruit and retain qualified restaurant management and operating personnel in an increasingly competitive market, we may be unable to effectively operate and grow our business and revenues, which could materially adversely affect our financial performance.

We must continue to attract, retain and motivate a sufficient number of qualified management and operating personnel to maintain consistency in the quality of our restaurants, both domestically and internationally.

Qualified management and operating personnel are currently in high demand.

If we are unable to attract and retain qualified people, our restaurants could be short staffed, we may be forced to incur overtime expenses, and our ability to operate and expand our concepts effectively could be limited, any of which could materially adversely affect our financial performance.

Concerns relating to pandemics and other diseases, food safety and food-borne illness could reduce customer traffic to our restaurants, disrupt our food supply chain or cause us to be the target of litigation, which could materially adversely affect our financial performance.

The COVID-19 pandemic has had a significant adverse impact on our customer traffic and ability to operate our restaurants and may continue to do so for the foreseeable future.

Future pandemics and other diseases may have a similar or more severe impact.

We also face food safety risks, including the risk of food-borne illness and food contamination (including allergen cross contamination), which are common both in the restaurant industry and the food supply chain.

While we dedicate substantial resources and provide training to ensure the safety and quality of the food we serve, these risks cannot be completely eliminated.

Additionally, we rely on our network of suppliers to properly handle, store and transport our ingredients for delivery to our restaurants.

Any failure by our suppliers, or their suppliers, could cause our ingredients to be contaminated, which could be difficult to detect and put the safety of our food in jeopardy.

We freshly prepare our menu items at our restaurants, which may put us at greater risk for food-borne illness and food contamination outbreaks than some of our competitors who use processed foods or commissaries to prepare their food.

The risk of food-borne illness also may increase whenever our menu items are served outside of our control, such as by third-party food delivery services, customer take-out or at catered events.

Adverse publicity or news reports, regardless of accuracy, regarding food quality or safety issues, illness, injury, recalls, health concerns, government or industry findings concerning food products served by us or our licensees or delivered by a third-party for off-premises consumption, or issues stemming from the operation of our restaurants or bakeries, restaurants operated by our licensees, third parties with whom we may co-brand products or who sell or distribute our products, or third parties we may use to procure materials used in our business or to deliver our products, or generally in the food supply chain, could be damaging to the restaurant industry overall and specifically harm our brand and reputation, which in turn could materially adversely affect our financial performance.

The demand for and availability and price of certain food items may be adversely impacted if a pathogen, such as coronavirus, Ebola, “mad cow disease,” “SARS,” “swine flu,” avian influenza, norovirus or other virus or bacteria, such as salmonella or E.coli, or if parasites or other toxins infect or are believed to have infected the food supply, including the food supply chain for our restaurants or bakery facilities.

Additionally, customers may avoid our restaurants and/or it may become difficult to adequately staff our restaurants if our customers or staff members become infected with a pathogen which was actually or claimed to be contracted at our restaurants.

Any adverse food safety occurrence may result in litigation against us.

Although we carry liability and other insurance coverage to mitigate costs we may incur as a result of these risks, not all risks of this nature are fully insurable and, even if insured, the negative publicity associated with such an event could damage our reputation and materially adversely affect our financial performance.

In addition to selling products throughout the world through various distribution channels, including, without limitation, supermarkets, mass market retailers, club stores and various other food service and retail channels, our two bakery facilities are the only sources of most of our baked desserts to our restaurants.

If any of our bakery products becomes subject to a product recall or market withdrawal, whether voluntary or involuntary, our costs to conduct such recall or market withdrawal could be significant, restaurant sales as well as third-party sales of bakery product could be negatively impacted and our reputation could be damaged, any of which could materially adversely affect our financial performance.

In addition, any adverse food safety event could result in mandatory or voluntary product withdrawals or recalls, regulatory and other investigations, and/or criminal fines and penalties, any of which could disrupt our operations, increase our costs, require us to respond to findings from regulatory agencies that may divert resources and assets, and result in potential civil fines and penalties as well as other legal action, any of which could materially adversely affect our financial performance.

Changes in, or any failure to comply with, applicable laws or regulations could materially adversely affect our ability to operate our restaurants and/or increase our cost to do so, which could materially adversely affect our financial performance.

We are required to comply with various federal, state and local and foreign laws and regulations, including, without limitation, those relating to alcoholic beverage control, public health and safety, access and use by the disabled, environmental hazards, labor and employment, such as, equal wage laws and exempt versus non-exempt employee classifications, data security and food safety and labeling.

Changes to these laws or regulations may create challenges for us.

While we subscribe to certain services and have established procedures to identify legal and regulatory changes, we cannot be certain to identify and comply with every change on a timely basis.

We may incur penalties and other costs, sanctions and adverse publicity by failing to comply with applicable laws, any of which could materially adversely affect our financial performance.

Our failure to obtain and/or retain licenses, permits or other regulatory approvals required to operate our business could delay or prevent the opening and/or continued operation of any of our restaurants or bakeries, materially adversely affecting that facility’s operations and profitability and our ability to obtain similar licenses, permits or approvals elsewhere, any of which could materially adversely affect our financial performance.

In certain jurisdictions, we may be subject to “dram shop” statutes that generally allow a person injured by an intoxicated person the right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person.

Dram shop litigation may result in significant judgments, including punitive damages.

A settlement or judgment against us under a dram shop statute in excess of our general liability insurance coverage could materially adversely affect our financial performance.

Significant increases in minimum wages, including the tip credit wage in certain states, paid or unpaid leaves of absence, equal wage legislation, mandatory sick pay and paid time off regulations in a growing number of jurisdictions, mandated health and/or COBRA benefits, or increased tax reporting, assessment or payment requirements related to our staff members who receive gratuities, or changes in interpretations of existing employment law, including with respect to classification of exempt versus non-exempt employees, could significantly increase our labor costs, which would materially adversely affect our financial performance.

We are subject to federal and state laws that prohibit discrimination in the workplace and that set standards for the design, accessibility and operation of public facilities, such as the Americans with Disabilities Act.

Compliance with these laws and regulations can be costly and failure to comply could create exposure to government proceedings and litigation.

Even a perceived failure to comply could result in negative publicity that could damage our reputation and materially adversely affect our financial performance.

In addition, various federal, state and local and foreign labor laws and regulations govern our operations and relationships with our staff members, including, but not limited to, minimum wages, meal and rest breaks, overtime, deductions, certain benefits (including health care benefits), safety, predictive scheduling, paid leave requirements, working conditions and citizenship and legal residency requirements.

These requirements also extend to independent third-party service providers we engage to perform certain services at our restaurants.

While we take precautions to ensure that our third-party service providers comply with applicable laws and to maintain an independent contractor relationship, we cannot be assured such efforts will be successful, and we may incur liability vicariously as a joint employer for failures by our independent third-party service providers to comply with applicable laws.

Changes in, or any failure to comply with, these laws and regulations could subject us to fines or other legal actions, which could materially adversely affect our financial performance.

Additionally, some jurisdictions have introduced (or may be planning to introduce) legislation seeking to mandate an employment relationship between companies that facilitate third-party delivery services and their service personnel.

If these measures are successful, delivery costs will significantly increase and/or these companies may choose to no longer operate within such jurisdictions, either of which result could significantly impede our ability to grow off-premise sales.

Despite our efforts to maintain compliance with legal requirements, including implementation of electronic verification of legal work status, some of our staff members may not meet legal citizenship or residency requirements.

In addition, immigration-related employment regulations may make it more difficult for us to identify and hire qualified staff members.

Our inability to maintain an experienced and qualified work force comprised of individuals who meet all legal citizenship or residency requirements could result in a disruption in our work force, sanctions against us and adverse publicity, any of which could materially adversely affect our financial performance.

Our inability to respond appropriately to changes in consumer health and disclosure regulations, and to adapt to evolving consumer dining preferences could negatively impact our operations and competitive position, which could materially adversely affect our financial performance.

Federal law requires restaurant operators with twenty or more locations to make certain nutritional information available to customers.

Additionally, some state, local and foreign governments also have enacted legislation regulating or prohibiting the sale of or mandating disclosures relating to certain types and/or levels of ingredients in food served in restaurants, such as trans fats, sodium, genetically modified organisms (GMOs) and gluten, and are taxing or considering taxing and/or otherwise regulating high fat, high sugar and high sodium foods.

While it remains unclear if and to what extent consumers may reconsider dining preferences in response to such requirements, it is clear that consumer dining preferences continue to evolve, and these preferences may evolve more rapidly in light of these new requirements.

We must be able to quickly and effectively adapt to any significant shift in consumer dining preference.

Our failure or inability to do so could cause our or our licensee’s restaurants to lose market share, which could materially adversely affect our financial performance.

Labor organizing could harm our operations and competitive position in the restaurant industry, which could materially adversely affect our financial performance.

Our staff members and others may attempt to unionize our workforce, establish boycotts or picket lines or interrupt our supply chains which could limit our ability to manage our workforce effectively and cause disruptions to our operations, which could materially adversely affect our financial performance.

These risks have been compounded by worker safety concerns during the ongoing COVID-19 pandemic.

Our labor costs may significantly increase if we become unable to effectively manage our workforce and the compensation and benefits we offer to our staff members, which also could materially adversely affect our financial performance.

Adverse weather conditions, natural disasters and health epidemics could unfavorably impact our restaurant sales, which could materially adversely affect our financial performance.

Adverse weather conditions, natural disasters and health epidemics can impact customer traffic, make it more difficult to fully staff our restaurants and, more severe cases, such as hurricanes, earthquakes, tornadoes, blizzards, other natural disasters or health epidemics, such as the COVID-19 pandemic, have resulted in and may in the future result in restaurant closures and curtailed operations, impediments to availability of staff and supplies and increased commodity costs, sometimes for prolonged periods of time, any of which could materially adversely affect our financial performance.

Climate change may cause adverse weather conditions and natural disasters to become more frequent and less predictable, which could make it more difficult to accurately project year-to-year comparisons in sales and other factors affecting financial performance.

Our cash flows may be negatively impacted by delay in the receipt of proceeds under any insurance policies or programs we maintain against certain of these risks or the proceeds may not fully offset any such losses.

Any or all these situations could materially adversely affect our financial performance.

Acts of violence at or threatened against our restaurants or the centers in which they are located, including civil unrest, customer intimidation, active shooter situations and terrorism, could unfavorably impact our restaurant sales, which could materially adversely affect our financial performance.

Any act of violence at or threatened against our restaurants or the centers in which they are located, including civil unrest, customer intimidation, active shooter situations and terrorist activities, may result in damage and restricted access to our restaurants and/or restaurant closures in the short-term and, in the long-term, may cause our customers and staff to avoid our restaurants.

Any such situation could adversely impact customer traffic and make it more difficult to fully staff our restaurants, which could materially adversely affect our financial performance.

Risks Related to Our Business

Our inability to anticipate and react effectively to changes in the costs of key operating resources may increase our cost of doing business, which could materially adversely affect our financial performance.

We negotiate short-term and long-term agreements for some of our principal commodity, supply and equipment requirements, such as certain dairy products and poultry, depending on market conditions and expected demand.

We continue to evaluate the possibility of entering into similar arrangements for other commodities and also periodically evaluate hedging vehicles, such as direct financial instruments, to assist us in managing risk and variability associated with such commodities.

Although these vehicles may be available to us, as of the end of fiscal 2019, we had chosen not to enter into any hedging contracts due to pricing volatility, excessive risk premiums, hedge inefficiencies or other factors.

We continue to evaluate the possibility of entering into similar arrangements for other commodities and periodically evaluate hedging vehicles, such as direct financial instruments, to assist us in managing risk and variability associated with such commodities.

Although these vehicles may be available to us, as of February 24, 2021, we had chosen not to enter into any hedging contracts due to pricing volatility, excessive risk premiums, hedge inefficiencies or other factors.

Commodities for which we have not entered into contracts can be subject to unforeseen supply and cost fluctuations, which at times may be significant.

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Certain products and ingredients commonly used in food preparation have recently come under scrutiny for possibly posing social and environmental risks, such as from an animal welfare and sustainability perspective.

We have identified some of these products and ingredients in our supply chain and have adopted a comprehensive Sustainable Sourcing Policy under which we commit to a buying preference in our supply chain by 2025, or sooner where required, for products and ingredients that are sustainably grown and harvested and which do not have negative social impact, and for products from animals that are humanely raised and processed (“sustainable products”).

While we are committed to implementing these changes in as timely and commercially feasible manner as possible, there is a risk that some of our products or ingredients may become the subject of adverse media attention before we are able to do so, regardless of factual basis.

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Commodity price fluctuations could impede our international licensees' profitability and hamper their ability to grow, which could negatively impact our ability to expand our brand internationally.

For all of these reasons, our financial performance could be materially adversely affected if we are unable to anticipate and effectively respond to increases in our operating costs.

If we are unable to anticipate and effectively respond to these and other increases in our operating costs, our financial performance could be materially adversely affected.

Our financial performance could be materially adversely affected if we fail to retain, or effectively respond to a loss of, key executives.

The success of our business continues to depend in critical respects on the contributions of David Overton, our founder, Chairman of the Board and Chief Executive Officer, and other senior executives of the Company.

The success of our business continues to depend in critical respects on the contributions of David Overton, our founder, Chairman of the Board and Chief Executive Officer, and our other senior executives.

The departure of Mr.

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However, there is a risk that we may not be able to implement the succession plan successfully or in a timely manner or that the succession plan will not result in the same financial performance we currently achieve under the guidance of our existing executive team.

Qualified management and operating personnel are currently in high demand.

Concerns relating to food safety, food-borne illness, pandemics and other diseases could reduce customer traffic to our restaurants, disrupt our food supply chain or cause us to be the target of litigation, which could materially adversely affect our financial performance.

We face food safety risks, including the risk of food-borne illness and food contamination (including allergen cross contamination), which are common both in the restaurant industry and the food supply chain.

While we dedicate substantial resources and provide training to ensure the safety and quality of the food we serve, these risks cannot be completely eliminated.

Additionally, we rely on our network of suppliers to properly handle, store and transport our ingredients for delivery to our restaurants.

Any failure by our suppliers, or their suppliers, could cause our ingredients to be contaminated, which could be difficult to detect and put the safety of our food in jeopardy.

The risk of food-borne illness also may increase whenever our menu items are served outside of our control, such as by third-party food delivery services, customer take-out or at catered events.

Any adverse food safety occurrence may result in litigation against us.

Information technology system failures or breaches of our network security could interrupt our operations and subject us to increased operating costs, as well as to litigation and other liabilities, any of which could materially adversely affect our financial performance.

We rely heavily on our in-restaurant and enterprise-wide computer systems and network infrastructure across our operations (“Cyber Environment”), which could be vulnerable to various risks.

The efficient management of our operations depends upon our ability to protect our Cyber Environment against damage from theft, casualties such as fire, power loss, telecommunications failure or other catastrophic events, as well as from internal and external security breaches, denial of service attacks, viruses, worms, malware, breaches of the algorithms we and our third-party service providers use to encrypt and protect data, including customer transaction and credit card data, and other malicious or disruptive events (collectively, “security incidents”).

We employ both internal resources and external consultants to conduct auditing and testing for weaknesses in our Cyber Environment to reduce the likelihood of any security incident.

In addition, we developed a multi-discipline security incident response plan to help ensure that our executives are fully and accurately informed and manage, with the help of content experts, the discovery, investigation and auditing of, and recovery from any security incidents.

However, we can provide no assurance that these measures will be successful in preventing a security incident or mitigating losses resulting from a security incident.

We have and will continue to have greater uncertainty with respect to these risks as they relate to our newly acquired concepts until we are able to complete a full review of their Cyber Environments and implement all identified corrective measures.

Our international licensees have access to certain elements of our intellectual property within their Cyber Environment and may not have developed adequate processes to secure their Cyber Environments against a security incident and may not maintain robust discovery, investigation, auditing or recovery protocols, or have the ability to promptly and effectively respond to a security incident.

Available cyber-risk insurance coverage and policy limits may not adequately cover or compensate us in the event of a security incident.

Our financial performance could be materially adversely affected if our operations are interrupted by a security incident from which we are not able to promptly and fully recover, if any cyber-risk insurance is unable to fully address our losses and/or if we become subjected to litigation or regulatory action because of such an incident.

Our inability to maintain a secure environment for customers’ and staff members’ personal data could harm our reputation and result in litigation against us, which could materially adversely affect our financial performance.

We receive and maintain certain personal information about our customers and staff members.

For example, we transmit confidential credit card information in connection with credit card transactions, and we are required to collect and maintain certain personal information in connection with our employment practices, including the administration of our benefit plans.

Our collection and use of this information may be regulated by U.S.

federal, state and local and foreign laws and regulations.

If a security incident were to occur involving loss of or inappropriate access to or dissemination of such personal information, we may become liable under applicable law for damages (including statutory damages) and incur penalties and other costs to remedy such an incident.

Depending on the facts and circumstances of such an incident, these damages, penalties and costs could be significant and may not be covered by insurance or could exceed our applicable insurance coverage limits.

Such an event also could harm our reputation and result in litigation against us.

Any of these results could materially adversely affect our financial performance.

Our ability to accept credit cards as a form of payment depends on us remaining compliant with standards set by the PCI Security Standards Council (PCI).

These standards require certain levels of Cyber Environment security and procedures to protect our customers’ credit card and other personal information.

We continue to evaluate additional security enhancements and have implemented end-to-end encryption and tokenization technology at our The Cheesecake Factory, Grand Lux Cafe, Rock Sugar Southeast Asian Kitchen and Social Monk Asian Kitchen concepts as well as public key infrastructure that only permits known computing assets access to our network and Intrusion Detection and Intrusion Prevention (IDS/IPS) that scans data in transit detecting and preventing the execution of harmful code.

However, we can provide no assurance that our security measures will be successful in the event of an attempted or actual security incident.

If these security measures are not successful, we may become subject to litigation or the imposition of regulatory penalties, which could result in negative publicity and significantly harm our reputation, either of which could materially adversely affect our financial performance.

We have and will continue to have greater uncertainty with respect to these risks as they relate to our recently acquired restaurant concepts until we are able to complete a full review of their Cyber Environments and implement all identified corrective measures.

If any of our third-party vendors experiences a failure that affects a significant aspect of our business, we may be subject to certain risks and may experience data loss, increased costs or other harm, any of which could materially adversely affect our financial performance.

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We derive substantial revenue from these aspects of our business, which could suffer in the event of any factor that adversely impacts our vendors' ability to provide such services.

Such factors may include, without limitation, loss of, or significant change in contractual terms of, key vendor contracts, vendor or processor failures, technology failures, damage to the reputation of any key vendor or other similar occurrences.

We continue to review options to expand the use of third-party providers in other areas.

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The failure of third-party vendors to provide adequate services, including protection of sensitive data, could significantly harm our operations and reputation, which could materially adversely affect our financial performance.

Any failure to realize the anticipated benefits of our acquisition of North Italia and the remaining business of Fox Restaurant Concepts LLC could materially adversely affect our financial performance.

On October 2, 2019, we completed the acquisition of North Italia and the remaining business of Fox Restaurant Concepts LLC ("FRC"), including Flower Child and all other FRC brands (the "Acquisition").

We have incurred and expect to continue to incur significant costs in connection with the Acquisition, including accounting, legal and other fees and expenses.

Further, the Acquisition requires us to pay contingent consideration and provide financing to FRC in an amount sufficient to support certain targets during the five years after closing, in each case, subject to the satisfaction of certain conditions.

In addition, we will incur substantial costs in connection with integrating FRC's businesses with ours, and there can be no assurance that we will not incur a material amount of unanticipated costs.

We acquired FRC's businesses with the expectation that the Acquisition will result in various benefits including, among others, business and growth opportunities and synergies in supply chain, real estate and other areas over time.

However, even if we are able to successfully integrate FRC's businesses with ours, there can be no assurances that we will realize some or all of the anticipated benefits of the Acquisitions, within the anticipated timeframes, if at all.

We may experience increased competition that limits our ability to expand our business, we may not be able to capitalize on expected business opportunities, and general industry and business conditions may deteriorate.

Any failure to realize the anticipated benefits of our acquisition ("Acquisition") of North Italia and the remaining business of Fox Restaurant Concepts LLC ("FRC") could materially adversely affect our financial performance.

In 2019, we acquired FRC's businesses with the expectation that the Acquisition will result in various benefits including, among others, business and growth opportunities and synergies in supply chain, real estate and other areas over time.

Combining independent companies with separate businesses, customers, employees, cultures and systems is a complex, costly and time-consuming process.

We may experience material unanticipated difficulties or expenses in connection with the integration of FRC's businesses with ours, and this process may disrupt the business of either or both companies.

Some of the difficulties could include:

consolidating and retaining management and other key employees;

integrating information, communications and other systems;

integrating purchasing, logistics, marketing and administration methods;

integrating corporate and administrative infrastructures;

minimizing the diversion of management's attention from ongoing business concerns;

and, successfully managing and coordinating the growth of the combined company.

Even if we are able to successfully integrate FRC's businesses with ours, there can be no assurances that we will realize some or all of the anticipated benefits of the Acquisitions, within the anticipated timeframes, if at all.

In addition, we may experience increased competition that limits our ability to expand our business, we may not be able to capitalize on expected business opportunities, and general industry and business conditions may deteriorate.

If any of these or other expected or unexpected factors limit our ability to achieve the anticipated benefits of the Acquisition, or if such business opportunities, growth prospects and synergies are not realized for any other reason, our financial performance could be materially adversely affected.

Any failure to satisfy financial covenants and/or repayment requirements under our credit facility could harm our financial condition.

In response to the COVID-19 pandemic, on May 1, 2020, we entered into the Amended Facility which provides for, among other things, (i) a covenant relief period (the "Covenant Relief Period") during which we are not required to comply with financial covenants requiring maintenance of the maximum Net Adjusted Leverage Ratio and minimum EBITDAR Ratio, (ii) a substitution of the Net Adjusted Leverage Ratio and EBITDAR to Interest and Rental Expense Ratio covenants with a liquidity covenant during the Covenant Relief Period and (iii) increased limitations on capital expenditures and on our ability to make restricted payments, incur debt and consummate acquisitions during the Covenant Relief Period.

Any failure to maintain debt covenants under the Amended Facility or to have sufficient liquidity to either repay or refinance the then outstanding balance at expiration of the Amended Facility, or upon any violation of the covenants, could materially adversely affect our financial performance.

(See Note 12 of Notes to Consolidated Financial Statements in Part IV, Item 15 for further discussion of our long-term debt.)

In addition, our increased indebtedness related to the Acquisition and our resulting higher debt-to-equity ratio, as compared to that which has existed on a historical basis, could limit our ability to obtain additional financing in the future and have other material consequences, including:

increasing our vulnerability to, and limiting our flexibility in planning for, changing business and market conditions, making us more vulnerable to adverse economic and industry conditions;

limiting our ability to use proceeds from any offering or divestiture transaction for purposes other than the repayment of debt;

and, creating competitive disadvantages compared to other companies with less indebtedness.

The Series A Convertible Preferred Stock has rights, preferences and privileges that are not held by, and are preferential to, the rights of our common stock.

Such preferential rights could adversely affect our liquidity and financial condition, and may result in the interests of the holders of the Series A Convertible Preferred Stock differing from those of the holders of our common stock.

On April 20, 2020, we issued 200,000 shares of the Series A Convertible Preferred Stock, par value $0.01 per share (the "Series A preferred stock"), for an aggregate purchase price of $200 million.

The Series A preferred stock ranks senior to our common stock with respect to dividends and distributions on liquidation, winding-up and dissolution upon which each share of Series A preferred stock will be entitled to receive an amount per share equal to the greater of (i) the purchase price (without giving effect to any commitment fee), plus all accrued and unpaid dividends (the “Liquidation Preference”) and (ii) the amount that the holder of the Series A preferred stock would have been entitled to receive at such time if the Series A preferred stock were converted into our common stock.

The holders of Series A preferred stock are entitled to dividends on the Liquidation Preference at the rate of 9.5% per annum, payable in cash or, at our option, paid-in-kind.

Such holders are also entitled to participate in dividends declared or paid on our common stock on an as-converted basis.

On and after October 20, 2027, holders of Series A preferred stock have the right to require redemption of all or any part of the Series A preferred stock for an amount equal to the Liquidation Preference.

Upon certain change of control events, we are required to redeem, subject to conversion rights of the holders of Series A preferred stock, all of the outstanding shares of Series A preferred stock for cash consideration equal to the greater of (i) the Liquidation Preference and (ii) the amount that such holder would have been entitled to receive at such time if the Series A preferred stock were converted into common stock.

If a redemption is required, we may not have sufficient funds to satisfy our obligation to pay the Liquidation Preference.

Each holder has the right, at its option, to convert its Series A preferred stock, in whole or in part, into fully paid and non-assessable shares of our common stock at a conversion price equal to $22.23 per share, subject to customary anti-dilution adjustments, including in the event of any stock split, stock dividend, recapitalization or similar events and certain antidilutive offerings if they occur on or prior to April 19, 2021.

Pursuant to the terms of the Certificate of Designations, unless and until approval of our stockholders is obtained as contemplated by Nasdaq listing rules (the “Stockholder Approval”), no holder may convert shares of Series A preferred stock through either an optional or a mandatory conversion into shares of common stock if and solely to the extent that such conversion would result in the holder beneficially owning in excess of 19.9% of then outstanding common stock.

We have the right to settle any conversion at the request of a holder in cash.

As of December 29, 2020, the Series A preferred stock was convertible into approximately 17.1% of our outstanding common stock, on an as-converted basis.

The dividend and redemption provisions of the Series A preferred stock could impact our liquidity and reduce the amount of cash flows available for working capital, capital expenditures, growth opportunities, acquisitions and other general corporate purposes.

Our obligations to the holders of Series A preferred stock could also limit our ability to obtain additional financing or increase our borrowing costs, which could have an adverse effect on our financial condition.

The preferential rights could also result in divergent interests between the holders of Series A preferred stock and those of the holders of our common stock.

The issuance of the Series A preferred stock has effectively reduced the relative voting power of holders of our common stock, may dilute the ownership of such holders, and may adversely affect the market price of our common stock.

As of December 29, 2020, the Series A preferred stock was convertible into approximately 17.1% of our outstanding common stock, on an as-converted basis.

As holders of the Series A preferred stock are entitled to vote, on an as-converted basis, together with holders of our common stock as a single class on generally all matters submitted to a vote of our common stockholders, the issuance of the Series A preferred stock has effectively reduced the relative voting power of the holders of our common stock.

In addition, the conversion of the Series A preferred stock to common stock would dilute the ownership interest of existing holders of our common stock, and any sales in the public market of the common stock issuable upon conversion of the Series A preferred stock could adversely affect prevailing market prices of our common stock.

We have granted the holders of the Series A preferred stock registration rights in respect of the shares of common stock issued upon conversion of the Series A preferred stock.

These registration rights would facilitate the resale of such common stock into the public market, and any such resale would increase the number of shares of our common stock available for public trading.

Sales by the holders of the Series A preferred stock of a substantial number of shares of our common stock in the public market, or the perception that such sales might occur, could have a material adverse effect on the price of our common stock.

We may incur additional costs if we are unable to renew our restaurant leases on similar terms and conditions, or at all, or to relocate our restaurants in certain trade areas, which could materially adversely affect our financial performance.

We currently lease all of our restaurant premises and, although we may consider other arrangements, we currently plan to continue to lease our restaurant locations in the future.

We currently lease all our restaurant premises and, although we may consider other arrangements, we currently plan to continue to lease our restaurant locations in the future.

Some of our leases have terms that will expire in the next few years and beyond.

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This aspect of social media is especially challenging because it allows any individual to reach a broad audience with an ability to respond or react, in near real time, with comments that are often not filtered or checked for accuracy.

If we are unable to quickly and effectively respond, any negative publicity could “go viral” causing nearly immediate and potentially significant harm to our brand and reputation, whether or not factually accurate.

If we are unable to quickly and effectively respond, any negative publicity could "go viral"

causing nearly immediate and potentially significant harm to our brand and reputation, whether or not factually accurate.

Our marketing strategy includes an emphasis on social media.

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Our failure to adequately protect our intellectual property could materially adversely affect our financial performance.

We own and have applied to register trade names, logos, service marks, trademarks, copyrights and other intellectual property (collectively, “Intellectual Property”), including The Cheesecake Factory®, North Italia®, a collection within the Fox Restaurant Concepts subsidiary and other trademarks related to our restaurant businesses in the United States and in additional countries throughout the world.

We own and have applied to register trade names, logos, service marks, trademarks, copyrights and other intellectual property (collectively, "Intellectual Property"), including The Cheesecake Factory ® , North Italia ® , a collection within the Fox Restaurant Concepts subsidiary and other trademarks related to our restaurant businesses in the United States and in additional countries throughout the world.

Our Intellectual Property is valuable to our business and requires continuous monitoring to protect.

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however, we cannot be assured of success in every case and cannot possibly find all infringing uses of our Intellectual Property.

Furthermore, we have not registered all of our Intellectual Property throughout the world, as doing so may not be feasible because of associated costs, various foreign trademark law prohibitions or registrations by others.

Furthermore, we have not registered all our Intellectual Property throughout the world, as doing so may not be feasible because of associated costs, various foreign trademark law prohibitions or registrations by others.

Our failure or inability to protect our Intellectual Property worldwide could limit our ability to globally expand our brand.

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International operations have a unique set of risks and challenges that differ from country to country, and can include, among other risks, political instability, governmental corruption, social, religious and ethnic unrest, anti-American sentiment, delayed and potentially less effective ability to respond to a crisis occurring internationally, changes in global economic conditions (such as currency valuation, disposable income, unemployment levels and increases in the prices of commodities and labor), the regulatory environment, immigration, labor and pension laws, income and other taxes, consumer preferences and practices, as well as changes in the laws and regulations governing foreign investment, joint ventures or licensing arrangements in countries where our restaurants or licensees are located and local import controls.

Operations at our international Company-owned (Canada) and licensed restaurants (Middle East, Mexico and Asia) may be negatively affected by factors outside of our control, including, but not limited to:

Operations at our international Company-owned and licensed restaurants may be negatively affected by factors outside of our control, including, but not limited to:

● difficulties in achieving the consistency of product quality and service as compared to restaurants we operate in the United States;

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businesses that operate internationally, including the Foreign Corrupt Practices Act and anti-boycott laws, and with foreign laws in the countries in which we expand our restaurants.

(See Item 1A — Risk Factors — “Changes in, or any failure to comply with, applicable laws or regulations could materially adversely affect our ability to operate our restaurants and/or increase our cost to do so, which could materially adversely affect our financial performance.”) We may incur considerable liability in the event we or our licensees fail to comply with foreign or domestic laws relating to our or their operation of any international restaurant and can provide no assurance that our insurance programs or contractual indemnification rights would be effective to protect against such liabilities.

We may not be able to successfully integrate FRC’s businesses or any future business we may acquire with ours.

Combining independent companies with separate businesses, customers, employees, cultures and systems is a complex, costly and time-consuming process.

We may experience material unanticipated difficulties or expenses in connection with the integration of FRC’s businesses with ours, and this process may disrupt the business of either or both companies.

In addition, we may pursue acquisitions of other businesses and assets.

Some of the difficulties related to past and any future acquisitions could include:

● consolidating and retaining management and other key employees;

● integrating information, communications and other systems;

● integrating purchasing, logistics, marketing and administration methods;

● integrating corporate and administrative infrastructures;

● minimizing the diversion of management’s attention from ongoing business concerns;

● successfully managing and coordinating the growth of the combined company.

In addition, we may incur impairment charges if an acquired business does not meet the performance expectations upon which the acquisition price was based.

Many of these factors are outside of our control and any one of them could result in increased costs, decreased revenues and diversion of management’s time and focus, which could materially adversely impact our business, financial condition and operating results.

(See Item 1A - Risk Factors - Risks Related to the Restaurant Industry - "Changes in, or any failure to comply with, applicable laws or regulations could materially adversely affect our ability to operate our restaurants and/or increase our cost to do so, which could materially adversely affect our financial performance.") We may incur considerable liability in the event we or our licensees fail to comply with foreign or domestic laws relating to our or their operation of any international restaurant and can provide no assurance that our insurance programs or contractual indemnification rights would be effective to protect against such liabilities.

We may engage in expansion opportunities or other initiatives which may create risks to our business that could materially adversely affect our financial performance.

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We continually evaluate the appropriate level of infrastructure necessary to support our operational and development plans, including our domestic and international expansion.

If market conditions improve and we are able to identify enough high-quality sites to significantly increase the planned number of new restaurant openings in the future, we may be unable to scale or manage the growth of our corporate and field supervision infrastructure in the short term to appropriately support our expansion.

Likewise, if sales decline, we may be unable to reduce our infrastructure quickly enough to prevent sales deleveraging.

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If, for any reason, we are unable to provide the appropriate level of infrastructure support to our international licensees, our licensee's operations could suffer, which could make it more difficult for us to grow our brand internationally and materially adversely affect our financial performance.

We may be required to record impairment charges, be unable to fully recoup landlord improvement allowances and/or decide to discontinue operations at certain restaurants, any of which could materially adversely affect our financial performance.

We have and may again be required to record impairment charges, be unable to fully recoup landlord improvement allowances and/or decide to discontinue operations at certain restaurants, any of which could materially adversely affect our financial performance.

In the first quarter of fiscal 2020, developments related to the COVID-19 pandemic triggered the need to perform impairment assessments of our long-lived assets, goodwill and other intangible assets and a revaluation of contingent consideration associated with the acquisition of FRC.

While no further interim assessments were required in fiscal 2020, future changes in estimates could further impact the carrying value of these items.

(See Notes 7 and 8 for further discussion of impairment of long-lived and intangible assets, respectively.

See Note 3 for further discussion of the revaluation of contingent consideration.)

We assess the potential impairment of our long-lived assets on an annual basis or whenever events or changes in circumstances indicate the carrying value of the assets or asset group may not be recoverable.

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In addition, we may incur impairment charges if an acquired business does not meet the performance expectations upon which the acquisition price was based.

At any given time, we may be monitoring certain locations, and future impairment charges and/or closures may occur if individual restaurant performance does not improve, which could materially adversely affect our financial performance.

We test our goodwill and other intangible assets for impairment annually or whenever events or changes in circumstances indicate the carrying value may not be recoverable.

At any given time, we may be monitoring a number of locations, and future impairment charges and/or closures may occur if individual restaurant performance does not improve, which could materially adversely affect our financial performance.

We test our goodwill and other indefinite-lived intangible assets for impairment annually or whenever events or changes in circumstances indicate a potential impairment.

Factors considered include, but are not limited to historical financial performance, a significant decline in expected future cash flows, unanticipated competition, changes in management or key personnel, macroeconomic and industry conditions and the legal and regulatory environment.

We cannot accurately predict the amount and timing of any impairment of assets.

Should the value of goodwill or other intangible assets become impaired, there could be a material adverse affect on our financial performance.

We cannot accurately predict the amount and timing of any impairment of these assets.

Should the value of goodwill or other intangible assets become impaired, there could be a material adverse effect on our financial performance.

A portion of our tenant allowances at certain premises may be subject to recoupment against percentage rent otherwise payable for such sites.

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● adverse weather or other delays during the construction period.

Changes to these laws or regulations may create challenges for us.

While we subscribe to certain services and have established procedures to identify legal and regulatory changes, we cannot be certain to identify and comply with every change on a timely basis.

We may incur penalties and other costs, sanctions and adverse publicity by failing to comply with applicable laws, any of which could materially adversely affect our financial performance.

Dram shop litigation may result in significant judgments, including punitive damages.

A settlement or judgment against us under a dram shop statute in excess of our general liability insurance coverage could materially adversely affect our financial performance.

Compliance with these laws and regulations can be costly and failure to comply could create exposure to government proceedings and litigation.

Even a perceived failure to comply could result in negative publicity that could damage our reputation and materially adversely affect our financial performance.

In addition, various federal, state and local and foreign labor laws and regulations govern our operations and relationships with our staff members, including, but not limited to, minimum wages, breaks, overtime, deductions, certain benefits (including health care benefits), safety, working conditions and citizenship and legal residency requirements.

These requirements also extend to independent third-party service providers we engage to perform certain services at our restaurants.

Changes in, or any failure to comply with, these laws and regulations could subject us to fines or other legal actions, which could materially adversely affect our financial performance.

Additionally, some jurisdiction including California have introduced (or may be planning to introduce) legislation seeking to mandate an employment relationship between companies that facilitate third-party delivery services and their service personnel.

In addition, immigration-related employment regulations may make it more difficult for us to identify and hire qualified staff members.

Changes in tax laws and resulting regulations could result in changes to our tax provisions and expose us to additional tax liabilities that could materially adversely affect our financial performance.

We are subject to income and other taxes in the U.S.

and foreign jurisdictions.

Changes in applicable U.S.

or foreign tax laws and regulations, such as the December 2017 enactment of Federal legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”), or their interpretation and application, including the possibility of retroactive effect and changes to state tax laws that may occur in response to the Tax Act, could affect our tax expense and profitability.

In addition, the final determination of any tax audits or related litigation could be materially different from our historical income tax provisions and accruals.

Changes in our tax provision or an increase in our tax liabilities, whether due to changes in applicable laws and regulations, the interpretation or application thereof, or a final determination of tax audits or litigation, could materially adversely affect our financial performance.

Federal law requires restaurant operators with twenty or more locations to make certain nutritional information available to customers.

While it remains unclear if and to what extent consumers may reconsider dining preferences in response to such requirements, it is clear that consumer dining preferences continue to evolve and these preferences may evolve more rapidly in light of these new requirements.

We must be able to quickly and effectively adapt to any significant shift in consumer dining preference.

Our failure or inability to do so could cause our or our licensee’s restaurants to lose market share, which could materially adversely affect our financial performance.

Labor organizing could harm our operations and competitive position in the restaurant industry, which could materially adversely affect our financial performance.

If we are unable to manage risks related to our business, costs associated with litigation and insurance could increase, which could materially adversely affect our financial performance.

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We retain financial responsibility for a significant portion of our risks and associated liabilities with respect to workers’ compensation, general liability, employment practices, staff health benefits and certain other insurable risks.

A number of factors may significantly increase our self-insurance costs, such as conditions of the insurance market, the availability of insurance, or changes in applicable regulations.

Several factors may significantly increase our self-insurance costs, such as conditions of the insurance market, the availability of insurance, or changes in applicable regulations.

The accrued liabilities associated with these programs are based on our annual estimate of the ultimate costs to settle known claims as well as claims incurred but not yet reported to us (“IBNR”).

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Our inability or failure to execute on comprehensive business continuity and disaster recovery plans following a major disaster could interfere with our business operations, which could materially adversely affect our financial performance.

All of our core and critical applications are housed in an external tier 3 data center, which is a location with redundant and dual-powered servers, storage, network links and other IT components.

All our core and critical applications are housed in an external tier 3 data center, which is a location with redundant and dual-powered servers, storage, network links and other IT components.

To mitigate business interruptions, we employ a disk-based data backup and replication infrastructure between our onsite and external data centers.

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Any of these events could materially adversely affect our financial performance.

Adverse weather conditions, natural disasters and health epidemics could unfavorably impact our restaurant sales, which could materially adversely affect our financial performance.

Adverse weather conditions, natural disasters and health epidemics can impact customer traffic at our restaurants, make it more difficult to fully staff our restaurants and, in more severe cases, such as hurricanes, earthquakes, tornadoes, blizzards, other natural disasters or health epidemics, such as the recent outbreak of coronavirus, cause a temporary inability to obtain supplies, increase commodity costs and cause closures of our affected restaurants, sometimes for prolonged periods of time, any of which could materially adversely affect our financial performance.

The recent outbreak of coronavirus in China has caused and may cause additional restaurant closures by our licensees in affected areas and may result in restaurant closures by our international licenesses in other countries if the number of cases in those countries rises, which decreases the amount of roylaties we receive from these licensees.

Any or all of these situations could materially adversely affect our financial performance.

Acts of violence at or threatened against our restaurants or the centers in which they are located, including active shooter situations and terrorism, could unfavorably impact our restaurant sales, which could materially adversely affect our financial performance.

Any act of violence at or threatened against our restaurants or the centers in which they are located, including active shooter situations and terrorist activities, may result in restricted access to our restaurants and/or restaurant closures in the short-term and, in the long-term, may cause our customers and staff to avoid our restaurants.

Any such situation could adversely impact customer traffic and make it more difficult to fully staff our restaurants, which could materially adversely affect our financial performance.

Our failure to establish, maintain and apply adequate internal control over our financial reporting and comply with changes in financial accounting standards or interpretations of existing standards could limit our ability to report our financial results accurately and timely or to detect and prevent fraud, any of which could materially adversely affect our financial performance.

We are subject to the ongoing internal control provisions of Section 404 of the Sarbanes-Oxley Act of 2002.

These provisions provide for the identification of material weaknesses in internal control over financial reporting — a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting principles generally accepted in the United States.

There can be no assurance that we will be able to timely remediate material weakness in internal controls (if any) or maintain all of the controls necessary to remain in compliance.

Any failure to maintain an effective system of internal control over financial reporting could limit our ability to report our financial results accurately and timely or to detect and prevent fraud, any of which could materially adversely affect our financial performance.

We have not fully evaluated any changes in internal control over financial reporting associated with the Acquisition and therefore any material changes that may result from the Acquisition have not been disclosed in this report.

We intend to disclose all material changes resulting from the Acquisition within or prior to the time of our first annual assessment of internal control over financial reporting that is required to include these entities.

Additionally, changes in accounting standards or new accounting pronouncements and interpretations could materially adversely affect our previously reported or future financial results, which could materially adversely affect our financial performance.

We incurred substantial indebtedness to fund the Acquisition, which could adversely affect our business, and any failure to satisfy financial covenants and/or repayment requirements under our credit facility could harm our financial condition.

On July 30, 2019, we entered into a Third Amended and Restated Loan Agreement (the “New Facility”), which amends and restates in its entirety our prior Second Amended and Restated Loan Agreement dated as of December 22, 2015.

The New Facility, which terminates on July 30, 2024, provides us with revolving loan commitments that total $400 million (of which $40 million may be used for issuances of letters of credit).

The New Facility contains a commitment increase feature that could provide for an additional $200 million in available credit upon our request and subject to the participating lenders electing to increase their commitments or new lenders being added to the New Facility.

We financed the Acquisition with the New Facility and cash on hand.

This increased indebtedness and our resulting higher debt-to-equity ratio, as compared to that which has existed on a historical basis, could limit our ability to obtain additional financing in the future and have other material consequences, including:

● increasing our vulnerability to, and limiting our flexibility in planning for, changing business and market conditions, making us more vulnerable to adverse economic and industry conditions;

● limiting our ability to use proceeds from any offering or divestiture transaction for purposes other than the repayment of debt;

● creating competitive disadvantages compared to other companies with less indebtedness.

Under the New Facility, we are subject to certain financial covenants, limitations on cash distributions and negative covenants that restrict indebtedness, liens, investments, sales of assets, fundamental changes and other matters.

Any failure to maintain these debt covenants or have sufficient liquidity to either repay or refinance the then outstanding balance at expiration of the New Facility, or upon violation of the covenants, could materially adversely affect our financial performance.

(See Note 12 of Notes to Consolidated Financial Statements in Part IV, Item 15 for further discussion of our long-term debt.)

Risks Related to Information Technology and Cyber Security

We rely heavily on our in-restaurant and enterprise-wide computer systems and network infrastructure across our operations ("Cyber Environment"), which could be vulnerable to various risks.

This reliance has grown since the onset of the COVID-19 pandemic as we have had to rely to a greater extent on systems such as online ordering, contactless payments, online reservations, systems supporting a remote workforce and the like.

On December 13, 2020, we were made aware that our Cyber Environment was penetrated by a cyberattack that penetrated thousands of organizations globally, including multiple parts of the United States government.

The culprits exploited a supply chain attack on one of our information technology services vendors, SolarWinds, which is widely used in government and industry.

We do not believe we were specifically targeted in the attack and after investigating we believe that no activation of the malware and no exfiltration of data occurred.

We worked with SolarWinds to remove the malware from our systems and do not believe there is any ongoing risk to our Cyber Environment as a result of this attack.

We employ both internal resources and external consultants to conduct auditing and testing for weaknesses in our Cyber Environment to reduce the likelihood of any security incident and have developed a multi-discipline security incident response plan to help ensure that our executives are fully and accurately informed and manage, with the help of content experts, the discovery, investigation and auditing of, and recovery from any security incidents.

Despite these measures, we were unable to prevent the SolarWinds penetration and can provide no assurance that these measures will be successful in preventing a future security incident or mitigating losses resulting from a security incident.

Available cyber-risk insurance coverage and policy limits may not adequately cover or compensate us in the event of a security incident.

Our inability to maintain a secure environment for customers' and staff members' personal data could result in liability and harm our reputation, which could materially adversely affect our financial performance.

We receive and maintain certain personal information about our customers and staff members.

Our collection and use of this information may be regulated by U.S.

federal, state and local and foreign laws and regulations.

Such an event also could harm our reputation and result in litigation against us.

Any of these results could materially adversely affect our financial performance.

Our ability to accept credit cards as a form of payment depends on us remaining compliant with standards set by the PCI Security Standards Council (PCI).

These standards require certain levels of Cyber Environment security and procedures to protect our customers’ credit card and other personal information.

At The Cheesecake Factory, North Italia, Grand Lux Cafe and Social Monk Asian Kitchen restaurants, we have implemented a robust end-to-end encryption and tokenization technology, a public key infrastructure, ensuring only trusted devices can access our network, and Intrusion Detection and Intrusion Prevention (IDS/IPS) that scans data in transit detecting and preventing the execution of harmful code.

In addition, we utilize a third-party security operations center (SOC) provider to monitor and analyze internal network traffic for potential malicious content.

However, we can provide no assurance that our security measures will be successful in the event of an attempted or actual security incident.

We are in the process of assessing the information technology systems and infrastructure for the FRC brands other than North Italia.

We will continue to have greater degree of risk with respect to the acquired systems and infrastructure until we are able to implement any recommended improvements.

Risks Related to Owning Our Stock

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Our stock price could be adversely affected if our performance falls short of our financial guidance and/or market expectations.

Our failure to achieve performance consistent with our financial guidance and/or market expectations could adversely affect the price of our stock.

Our failure to achieve performance consistent with any financial guidance we provide and/or market expectations could adversely affect the price of our stock.

Factors such as comparable restaurant sales that are below our target, slowing growth of our concepts domestically, our inability to successfully integrate and realize the anticipated benefits of the Acquisition, execute other growth opportunities, a decline in growth of our international business, any event that causes our operating costs to substantially increase, including, without limitation, any of the events described elsewhere in these Risk Factors, or our failure to repurchase stock as expected or pay or increase our dividend over time, could cause our performance to fall short of our financial guidance and/or market expectations.

Our stock price could be adversely affected if we are unable to continue to pay or if we are unable to increase dividends.

Our ability to pay and increase our dividends over time will depend on our ability to generate sufficient cash flows from operations and capacity to borrow funds, which may be subject to economic, financial, competitive and other factors that are beyond our control.

The New Facility limits cash distributions with respect to our equity interests, such as cash dividends and share repurchases, based on a defined ratio.

(See Note 12 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of our long-term debt.) Any failure to pay or increase our dividends over time may negatively impact investor confidence in us, and may negatively impact our stock price.

Our stock price could be adversely affected if we continue to be unable to pay dividends or, if paid, if we are unable to increase dividends.

To preserve liquidity during the COVID-19 pandemic and in conjunction with the terms of our Amended Facility, our Board suspended the quartely dividend on our common stock.

Any future dividends on our common stock will depend on our ability to do so under our Amended Facility or any future credit facility as well as our ability to generate sufficient cash flows from operations and capacity to borrow funds, which may be subject to economic, financial, competitive and other factors that are beyond our control.

(See Note 12 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of our long-term debt.) Continued failure to pay or increase our dividends over time may negatively impact investor confidence in us and may negatively impact our stock price.

Our stock price could be adversely affected by future sales or other dilution of our equity.

We are not restricted from issuing additional common stock or preferred stock, including any securities that are convertible into or exchangeable for, or that represent the right to receive, common stock or preferred stock or any substantially similar securities.

Subject to Nasdaq Listing Rules, we are not restricted from issuing additional common stock or preferred stock, including any securities that are convertible into or exchangeable for, or that represent the right to receive, common stock or preferred stock or any substantially similar securities.

Our Board of Directors is authorized to issue additional shares of common stock and additional classes or series of preferred stock without any action on the part of the stockholders.

The Board of Directors also has the discretion, without stockholder approval, to set the terms of any such classes or series of preferred stock that may be issued, including voting rights, dividend rights and preferences over the common stock with respect to dividends or upon the liquidation or winding up of our business and other terms.

If we issue preferred shares that have a preference over our common stock with respect to the payment of dividends or upon liquidation, dissolution or winding up, or if we issue preferred shares with voting rights that dilute the voting power of our common stock, the rights of our common stockholders or the market price of our common stock could be materially adversely affected.

If we issue preferred shares that have a preference over our common stock with respect to the payment of dividends or upon liquidation, dissolution or winding up, or if we issue preferred shares with voting rights that dilute the voting power of our common stock, including additional shares issued in connection with the paid-in-kind dividends on or anti-dilution adjustments to the conversion price of the Series A preferred stock, the rights of our common stockholders or the market price of our common stock could be materially adversely affected.

General Risk Factors

We are subject to income and other taxes in the U.S.

and foreign jurisdictions.

Changes in applicable U.S.

or foreign tax laws and regulations, such as the 2017 enactment of Federal legislation commonly referred to as the Tax Cuts and Jobs Act and the The Coronavirus Aid, Relief, and Economic Security Act of 2020 (collectively, the "Tax Acts"), or their interpretation and application, including the possibility of retroactive effect and changes to state tax laws that may occur in response to the Tax Acts, could affect our tax expense and profitability.

In addition, the final determination of any tax audits or related litigation could be materially different from our historical income tax provisions and accruals.

We are subject to the ongoing internal control provisions of Section 404 of the Sarbanes-Oxley Act of 2002.

These provisions provide for the identification of material weaknesses in internal control over financial reporting - a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting principles generally accepted in the United States.

There can be no assurance that we will be able to timely remediate material weakness in internal controls (if any) or maintain all of the controls necessary to remain in compliance.

Our business and stock price could be adversely affected by the actions of activist investors.

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Item 1A. Risk Factors