What changed in this filing

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Item 1A. Risk Factors

2024-08-21 compared with 2023-08-23 · 59 added, 35 removed, 233 unchanged (29% of the section changed)

Various risks and uncertainties could affect our business.

In addition to the information contained elsewhere in this report and other filings that we make with the SEC, the risk factors described below could have a material impact on

our business, financial condition, results of operation, cash flows or the trading price of our common stock.

In addition to the information contained elsewhere in this report and other filings that we make with the SEC, the risk factors described below could have a material impact on our business, financial condition, results of operation, cash flows or the trading price of our common stock.

It is not possible to identify all risk factors.

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• Increase gross sales and operating profits at existing restaurants with food and beverage options desired by our guests;

• Evolve our marketing and branding strategies in order to appeal to guests;

• Innovate and implement technology initiatives that provide a unique digital guest experience;

• Identify adequate sources of capital to fund and finance strategic initiatives, including reimaging existing restaurants, new restaurant development and new restaurant equipment;

• Evolve our marketing and branding strategies in order to appeal to guests and drive traffic and sales;

• Innovate and implement technology initiatives that provide an engaging digital guest experience;

• Identify adequate sources of capital to fund and finance strategic initiatives, including re-imaging existing restaurants, new restaurant development and new restaurant equipment;

• Grow and expand operations, including identifying available, suitable and economically viable locations for new restaurants, or making strategic acquisitions;

• Improve the speed and quality of our service.

• Improve the speed and quality of our service by simplifying operations.

Changes in consumer preferences may decrease demand for food at our restaurants.

Changing health or dietary preferences may cause consumers to avoid our products in favor of alternative foods.

Changing health or dietary preferences and current and new medical treatments may cause consumers to avoid our products in favor of alternative foods and/or to consume less of our products.

The food service industry as a whole depends on consumer preferences at the local, regional, national and international levels.

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Health concerns or outbreaks of disease in a food product could also reduce demand for particular menu offerings.

Even instances of food-borne illness, food tampering or food contamination occurring solely at restaurants of our competitors could result in negative publicity about the restaurant industry in general and adversely affect our sales or cause us to incur additional costs to implement food safety protocols beyond industry standards.

Even instances of food-borne illness, food tampering or food contamination occurring solely at restaurants of our competitors could result in negative publicity

about the restaurant industry in general and adversely affect our sales or cause us to incur additional costs to implement food safety protocols beyond industry standards.

The occurrence of food-borne illnesses or food safety issues could also adversely affect the price and availability of affected ingredients, resulting in higher costs and lower margins.

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Our sales may also be adversely impacted if there is a shortage of drivers that are willing and available to make deliveries from our restaurants.

If the third-party aggregators that we utilize for delivery cease or curtail their operations, fail to maintain sufficient labor force to satisfy demand, materially change fees, access or visibility to our products or give greater priority or promotions on their platforms to our competitors, our business may be negatively impacted.

If the third-party aggregators that we utilize for delivery cease or curtail their operations, fail to maintain sufficient a labor force to satisfy demand, materially change fees, access or visibility to our products or give greater priority or promotions on their platforms to our competitors, our business may be negatively impacted.

Loss of key management personnel could hurt our business and limit our ability to operate and grow successfully.

Our success depends, to a significant extent, on our leadership team and other key management personnel.

These personnel serve to maintain a corporate vision for our Company, execute our business strategy, and maintain consistency in the operating standards of our restaurants.

These personnel serve to maintain a corporate vision for our Company, execute our business strategy, and maintain

consistency in the operating standards of our restaurants.

If we are unable to attract and retain sufficiently experienced and capable key management personnel, our business and financial results may suffer.

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Our guests may be dissatisfied and our sales may decline if we fail to recruit, train and retain managers and team members that effectively implement our business strategy and provide high quality guest service.

There is active

competition for quality management personnel and hourly team members.

There is active competition for quality management personnel and hourly team members.

We are experiencing and may continue to experience challenges in recruiting and retaining team members in various locations as we are experiencing an increasingly tight and competitive labor market.

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As a result, we are particularly susceptible to adverse trends and economic conditions in those states.

Negative publicity, local economic conditions, health epidemics or pandemics (such as COVID-19), local strikes, energy shortages or extreme fluctuations in energy prices, droughts, earthquakes, fires or other natural disasters in regions where our restaurants are highly concentrated could have a material adverse effect on our business and operations.

Negative publicity, local economic conditions, health epidemics or pandemics, local strikes, energy shortages or extreme fluctuations in energy prices, droughts, earthquakes, fires or other natural disasters in regions where our restaurants are highly concentrated could have a material adverse effect on our business and operations.

The operational success of our franchise system is important to our business and future international growth.

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franchisee failures to meet obligations to pay employees;

and franchisees’ failure to comply with food quality and preparation requirements.

and franchisee failures to comply with food quality and preparation requirements.

Additionally, our international franchisees are subject to risks not encountered by our domestic franchisees, and royalties paid to us may decrease if their businesses are negatively impacted.

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Further, concern over climate change and other environmental sustainability matters has and may in the future result in new or increased legal and regulatory requirements to reduce or mitigate impacts to the environment, including greenhouse gas emissions regulations, alternative energy policies, and sustainability initiatives.

If we fail to achieve any goals, targets, or objectives we may set with respect to ESG matters, if we do not meet or comply with new regulations or evolving consumer, investor, industry, or stakeholder expectations and standards, including those related to reporting, or if we are perceived to have not responded appropriately to the growing concern for ESG matters, we may face legal or regulatory actions, the imposition of fines, penalties, or other sanctions, adverse publicity, and decreased demand from consumers, or the price of our common shares could decline, any of which could materially harm our reputation or have a material adverse effect on our business, financial condition, or operating results.

At the same time, stakeholders and regulators have increasingly expressed or pursued opposing views, legislation and investment expectations with respect to sustainability initiatives, including the enactment or proposal of "Anti-ESG" legislation or policies.

If we fail to achieve any goals, targets, or objectives we may set with respect to ESG matters, if we do not meet or comply with new regulations or evolving consumer, investor, industry, or stakeholder expectations and standards (which are not uniform), including those related to reporting, or if we are perceived to have not responded appropriately to the growing concern for ESG matters, we may face legal or regulatory actions, the imposition of fines, penalties, or other sanctions, adverse publicity, decreased demand from

consumers, or a decline in the price of our common shares, any of which could materially harm our reputation or have a material adverse effect on our business, financial condition, or operating results.

Macroeconomic and Industry Risks

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The restaurant business is highly competitive as to price, service, restaurant location, convenience, and type and quality of food.

We compete within each market with locally-owned restaurants as well as national and regional

restaurant chains.

We compete within each market with locally-owned restaurants as well as national and regional restaurant chains.

The casual dining segment of the restaurant industry has not seen significant growth in customer traffic in recent years.

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We compete primarily on the quality, variety and value perception of menu items, as well as the quality and efficiency of service, the attractiveness of facilities and the effectiveness of advertising and marketing programs.

Although we may implement a number of business strategies, the success of new products, initiatives and overall strategies is highly difficult to predict.

A key component of our corporate strategy involves our value platform as it relates to our competition;

failure to maintain the customer perception of brand value could negatively impact our sales.

If we are unable to compete effectively, our gross sales, guest traffic and profitability may decline.

A failure to identify and execute innovative marketing and guest engagement tactics, ineffective or improper use of other marketing initiatives, and increased advertising and marketing costs could adversely affect our results of operations.

Our ability to reach consumers and drive results is heavily influenced by brand marketing and advertising and our ability to adapt to evolving consumer preferences.

We rely on identifying trends and data analytics to create successful advertising programs, including customer relationship management, social media, television and other digital marketing efforts.

Increased costs in advertising may limit the amount of coverage we are able to achieve with any given campaign.

Our marketing and advertising programs may not be as successful as intended, and thus, may adversely affect our reputation, business, our growth prospects and the strength of our brand.

A failure to sufficiently innovate, develop guest relationship initiatives, or maintain adequate and effective advertising could inhibit our ability to maintain brand relevance or awareness and drive increased sales.

Our business could be adversely affected by our inability to respond to or effectively manage social media.

As part of our marketing strategy, we utilize social media platforms to promote our concepts and attract, engage and retain guests.

Our strategy may not be successful, resulting in expenses incurred without improvement in guest traffic or brand relevance.

In addition, a variety of risks are associated with the use of social media, including negative comments about us, exposure of personally identifiable information, fraud, dissemination of false information, and copyright and trademark risks.

The inappropriate use of social media vehicles by our guests or employees could increase our costs, lead to litigation or result in negative publicity that could damage our reputation and adversely affect our results of operations.

Given the marked increase in the use of social media platforms, individuals have access to a broad audience of consumers and other interested persons.

The availability of information on social media platforms is virtually immediate as is its impact.

Many social media platforms immediately publish the content their subscribers and participants post (which may include influencers with large audiences), often without filters or checks on the accuracy of the content posted.

Information concerning our Company may be posted on such platforms at any time.

If we are unable to quickly and effectively respond to such reports, we may suffer declines in guest traffic.

The impact may be immediate without affording us an opportunity for redress or correction.

These factors could have a material adverse impact on our business.

Global and domestic economic conditions negatively impact consumer discretionary spending and our business operations and could have a material negative effect on our financial performance.

The restaurant industry is dependent upon consumer discretionary spending, which is negatively affected by global and domestic economic conditions, such as:

fluctuations in disposable income and changes in consumer confidence, the price of gasoline, slow or negative growth, unemployment, credit conditions and availability, volatility in financial markets, inflationary pressures, weakness in the housing market, tariffs and trade barriers, wars or conflict in certain regions, pandemics or public health concerns, and changes in government and central bank monetary policies.

fluctuations in disposable income and changes in consumer confidence,

the price of gasoline, slow or negative growth, unemployment, credit conditions and availability, volatility in financial markets, inflationary pressures, weakness in the housing market, tariffs and trade barriers, wars or conflict in certain regions, pandemics or public health concerns, and changes in government and central bank monetary policies.

When economic conditions negatively affect consumer spending, discretionary spending for restaurant visits will be challenged, our guest traffic may deteriorate and the average amount guests spend in our restaurants may be reduced.

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General economic conditions, including inflation and fluctuations in energy costs, may continue to increase our operating expenses.

We have in the past, and are currently experiencing the impacts of economic conditions, including inflation and fluctuations in utility and energy costs.

We have in the past experienced, and are currently experiencing, the impacts of economic conditions, including inflation and fluctuations in utility and energy costs.

Inflation has caused added food, labor and benefits costs and increased our operating expenses.

Fluctuations and increases in utility and energy costs have also increased our operating expenses on regional and national levels, including through suppliers putting pressure on margins by passing on higher prices for petroleum-based fuels.

Fluctuations and increases in utility and energy costs have also increased our operating expenses at regional and national levels, including through suppliers increasing prices due to higher prices for petroleum-based fuels, and as a result, putting pressure on margins.

As operating expenses rise, we, to the extent permitted by competition, recover costs by raising menu prices, or by implementing alternative products, processes or cost reduction procedures.

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Information and Technology Related Risks

We are exposed to risks related to cyber security and protection of confidential information, and failure to protect the integrity and security of payment card or individually identifiable information of our guests and teammates or confidential and proprietary information of the Company could damage our reputation and expose us to loss of revenues, increased costs and litigation.

Our technology systems contain personal, financial and other information that is entrusted to us by our guests and team members, as well as financial, proprietary and other confidential information related to our business, and a significant portion of our restaurant sales are by credit or debit cards.

If our technology systems, or those of third-party services providers we rely upon, are compromised as a result of a cyber-attack (including whether from circumvention of security systems, denial-of-service attacks, hacking, “phishing” attacks, computer viruses, ransomware, malware, or social engineering) or other external or internal method, it could result in an adverse and material impact on our reputation, operations, and financial condition.

We are exposed to risks related to cybersecurity and protection of confidential information, and failure to protect the integrity and security of payment card or individually identifiable information of our guests and teammates or confidential and proprietary information of the Company could damage our reputation and expose us to loss of revenues, increased costs and litigation.

In addition, a significant portion of our restaurant sales are by credit or debit cards.

If our technology systems, or those of third-party services providers we rely upon, are compromised as a result of a cyber-attack (including whether from circumvention of security systems, denial-of-service attacks, hacking, use of artificial intelligence, “phishing” attacks, computer viruses, ransomware, malware, or social engineering) or other external or internal method, it could result in an adverse and material impact on our reputation, operations, and financial condition.

The cyber risks we face range from cyber-attacks common to most industries, to attacks that target us due to the confidential consumer information we obtain through our electronic processing of credit and debit card transactions.

The rapid evolution and increased adoption of artificial intelligence technologies may also heighten our cybersecurity risks by making cyber-attacks more difficult to detect, contain, and mitigate.

Such security breaches could also result in litigation or governmental investigation against us, as well as the imposition of penalties.

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As privacy and information security laws and regulations change, or cyber risks evolve pertaining to data, we may incur significant additional costs in technology, third-party services and personnel to maintain systems designed to anticipate and prevent cyber-attacks.

For example, the Company experienced a cyber security incident at some Chili’s locations in fiscal 2018.

For example, the Company experienced a cybersecurity incident at some Chili’s locations in fiscal 2018.

As with many public companies, our defenses are under attack regularly.

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Our ability to efficiently manage our business depends significantly on the reliability and capacity of these systems.

The failure of these systems to operate effectively, problems with maintenance, upgrading or transitioning to replacement systems or a breach in security of these systems could cause delays in customer service and reduce efficiency in our operations.

The failure of these systems to operate effectively, problems with maintenance, larger scale outages, upgrading or transitioning to replacement systems or a breach in security of these systems could cause delays in customer service and reduce efficiency in our operations.

Furthermore, as we continue to incorporate technology increasingly into our guests’ experiences, disruptions or performance issues with guest facing technology or systems could negatively impact the guest experience and counteract the intended benefits of such systems.

Additionally, our corporate systems and processes and corporate support for our restaurant operations are handled primarily at our restaurant support center.

We have disaster recovery procedures and business continuity plans in place to address most events of a crisis nature, including tornadoes and other natural disasters, and back up and off-site locations for recovery of electronic and other forms of data and information.

However, if we are unable to fully implement our disaster recovery plans, we may experience delays in recovery of data, inability to perform vital corporate functions, tardiness in required reporting and compliance, failures to adequately support field operations and other breakdowns in normal communication and operating procedures that could have a material adverse effect on our financial condition, results of operation and exposure to administrative and other legal claims.

However, if we are unable to fully implement our disaster recovery plans, we may experience delays in recovery of data, inability to perform vital corporate functions, loss of productivity, tardiness in required reporting and compliance, failures to adequately

support field operations and other breakdowns in normal communication and operating procedures that could have a material adverse effect on our financial condition, results of operation and exposure to administrative and other legal claims.

Financial Risks

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An impairment charge is required when the carrying value of the asset exceeds the estimated fair value.

For example, in fiscal 2023, we recognized

$12.0 million of long-lived asset and lease asset impairment charges as a result of decreased cash flows, and it is possible that we may incur similar charges in greater amounts in the future.

For example, in fiscal 2024, we recognized $12.2 million of long-lived asset and lease asset impairment charges as a result of decreased cash flows, and it is possible that we may incur similar charges in greater amounts in the future.

Refer to Note 1 - Nature of Operations and Summary of Significant Accounting Policies within Part II, Item 8 - Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements for more information.

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These measures may discourage investment in our common stock and may delay or discourage acquisitions that would result in our stockholders receiving a premium for their shares over the then-current market price.

Employment and labor laws and regulations may increase the cost of labor for our restaurants.

We are subject to various federal, state and local employment and labor laws and regulations that govern employment and labor matters, including, employment discrimination, minimum wages, work scheduling, overtime, tip credits, tax reporting, working conditions, safety standards, employment of minors, family leave and immigration status.

Employment and labor laws and regulations have increased, and in the future may further increase, the cost of labor for our restaurants.

tip credits, tax reporting, working conditions, safety standards, employment of minors, family leave and immigration status.

Compliance with these laws and regulations can be costly, and a failure or perceived failure to comply with these laws could result in negative publicity or litigation.

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Some states and localities have, and many others are contemplating, increases to their minimum wage and tip credit wage, and such increases can have a significant impact on our labor costs.

For example, in September 2023, California passed legislation setting the minimum wage for fast food restaurant employees at $20 per hour effective April 1, 2024 and establishing a council to set future wage increases and to make recommendations to state agencies for other sector-wide workplace standards.

In addition, new employment or labor laws may mandate additional benefits for employees or impose additional obligations that may adversely impact the costs of labor, the availability of labor and our business operations.

In addition, our suppliers may be affected by higher

minimum wage standards or availability of labor, which may increase the price of goods and services they supply to us.

There are no assurances that a combination of cost management and price increases can offset all of the costs associated with compliance.

In addition, our suppliers may be affected by higher minimum wage standards or availability of labor, which may increase the price of goods and services they supply to us.

There are no assurances that a combination of cost management and price increases can offset costs associated with compliance.

Governmental regulation may adversely affect our ability to maintain our existing and future operations and to open new restaurants.

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and limitations imposed by our credit agreements.

UNRESOLVED STAFF COMMENTS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors