Black Rock Coffee Bar (BRCB) risk factors, FY2025 10-K

Risks Related to Our Business and Industry

1. 01We have a history of losses and, especially if we continue to grow at an accelerated rate, we may not achieve or maintain profitability in the future
2. 02Food safety and quality concerns may negatively impact our brand, business and results of operations
3. 03Evolving consumer preferences and tastes, including public or medical opinions about caffeine and sugar consumption, or changes in consumer spending may adversely affect our business
4. 04We may not be able to compete successfully with other coffee stores, quick service restaurants and convenience stores, including the growing number of coffee delivery options
5. 05Our growth strategy depends in part on opening new stores in existing and new markets. We may be unsuccessful in opening new stores or establishing new markets, which could adversely affect our growth
6. 06New stores, once opened, may not be profitable or may close, and the increases in average per store sales and comparable sales that we have experienced in the past may not be indicative of future results
7. 07Our failure to manage our growth effectively could harm our business and operating results
8. 08Our marketing programs may not be successful, and our new menu items and advertising campaigns may not generate increased sales or profits, resulting in harm to our financial results
9. 09Our investments in technologies to enhance the guest experience may not generate the desired results and we may not be able to successfully expand our digital and delivery business
10. 10We contract with our suppliers and manufacturers to procure supplies, equipment, and other materials and products
11. 11unanticipated demand or other conditions may materially and adversely affect our results of operations even if we are able to establish alternative distribution channels
12. 12Tariffs on certain imports to the United States and other potential changes to U.S. trade policy could have a material adverse effect on our business, results of operations, prospects and financial condition
13. 13Increases or sustained inflation in the cost of high-quality arabica coffee beans, dairy or other commodities or decreases in the availability of high-quality arabica coffee beans, dairy or other commodities could have an adverse impact on our business and financial results
14. 14We may not successfully optimize, operate and manage our roasting facilities, which could have an adverse impact on our business and financial results
15. 15facilities and look to procure new roasting facilities, we may be unable to hire and retain skilled employees, which will severely hamper our expansion plans and roasting efforts
16. 16We are subject to the risks associated with leasing property
17. 17leases, the applicable landlords could draw under the letters of credit and/or seize the security deposit, which could adversely affect our financial condition and liquidity
18. 18Our stores are geographically concentrated in the Western United States and Texas, and we could be negatively affected by conditions specific to those regions
19. 19We face potential liability with our gift cards under the property laws of some states

Risks Related to Our Brand

1. 20Our brand is core to our success, and damage to our brand or reputation and negative publicity could negatively impact our business, financial condition and results of operations
2. 21If we fail to offer high-quality guest experience, our business and reputation will suffer
3. 22Our inability or failure to utilize, recognize, respond to, and effectively manage social media could have a material adverse effect on our business
4. 23We are subject to evolving rules and regulations with respect to ESG matters

Risks Related to People and Culture

1. 24We believe our culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose employee engagement, which could harm our business and reputation
2. 25Our inability to identify, recruit and retain qualified individuals for our stores could slow our growth and adversely impact our ability to operate
3. 26Changes in the cost of labor could harm our business
4. 27Unionization activities may disrupt our operations and affect our results of operations
5. 28We depend on Jeff Hernandez and Daniel Brand (two of our Co-Founders), executive officers and other key employees, and the loss of one or more of these employees or an inability to attract and retain other highly skilled employees could harm our business

Risks Related to Information Technology Systems, Cybersecurity, Data Privacy and Intellectual Property

1. 29If we or our third-party providers experience failures, outages, or sub-standard performance of our information technology systems, our operations could be disrupted and there may be damage to our business, reputation, results of operations, and financial condition
2. 30We are subject to cybersecurity risks and may incur increasing costs in an effort to minimize those risks, which efforts may or may not be effective. Security incidents may result in legal and financial exposure and reputational harm
3. 31laws, and we may fail to remain informed of and compliant with the varied requirements of such laws and of new data privacy laws. Similar laws have also been proposed at the federal level
4. 32We may not be able to adequately protect our intellectual property and we may become engaged in intellectual property-related disputes or litigation, any of which could harm the value of our brand and adversely affect our business, reputation, financial condition, and results of operations
5. 33Our use of AI may adversely impact our business, reputation, financial condition, and results of operations
6. 34If we or our vendors are unable to protect our guests’ credit and debit card data or other confidential information in connection with processing the same or our employees’ confidential information, we could be exposed to data loss, litigation, liability and reputational damage

Risks Related to Regulation and Litigation

1. 35We are subject to many federal, state and local laws with which compliance is both costly and complex
2. 36The mobility of our remote workers may also subject us to an increased risk of regulatory claims if our remote employees establish a nexus for our business in unanticipated jurisdictions. This could cause us to be subject to tax and employment claims in the applicable jurisdiction
3. 37Beverage and restaurant companies have been the target of class action lawsuits and other proceedings that are costly, divert management attention and, if successful, could result in our payment of substantial damages or settlement costs
4. 38Legislation and regulations requiring the display and provision of nutritional information for our menu offerings could affect consumer preferences and negatively impact our business, financial condition and results of operations
5. 39Changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our results of operations and financial condition

Risks Related to Our Organizational Structure

1. 40Following a contribution of such excess cash to Black Rock OpCo we may make an adjustment to the outstanding number of LLC Units held by holders of LLC Units (other than us)
2. 41The Tax Receivable Agreement with Black Rock OpCo and the TRA Parties requires us to make cash payments to the TRA Parties in respect of certain tax benefits to which we may become entitled, and we expect that such payments will be substantial
3. 42Our organizational structure, including the Tax Receivable Agreement, confers certain benefits upon the Continuing Equity Owners that do not benefit holders of our Class A common stock to the same extent that they benefit the Continuing Equity Owners
4. 43In certain cases, payments under the Tax Receivable Agreement to the TRA Parties may be accelerated or significantly exceed any actual benefits we realize in respect of the tax attributes subject to the Tax Receivable Agreement
5. 44We will not be reimbursed for any payments made to the TRA Parties under the Tax Receivable Agreement in the event that any tax benefits are disallowed
6. 45The acceleration of payments under the Tax Receivable Agreement in the case of certain changes of control may impair our ability to consummate change of control transactions or negatively impact the value received by owners of our Class A common stock

Risks Related to Our Indebtedness

1. 46Our outstanding indebtedness could materially adversely affect our financial condition and our ability to operate our business, pursue our growth strategy, and react to changes in the economy or industry
2. 47Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly
3. 48Restrictions imposed by our outstanding indebtedness and any future indebtedness may limit our ability to operate our business, execute our growth strategy, and to finance our future operations or capital needs or to engage in other business activities
4. 49We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful

Risks Related to the Ownership of Our Class A Common Stock

1. 50We cannot predict the impact our multi-class structure may have on the market price of our Class A common stock
2. 51Our Co-Founders and Sponsor have significant influence over us, which could limit your ability to influence the outcome of matters submitted to shareholders for a vote
3. 52control or if investors view, or any potential future purchaser of our company views, the superior voting rights of the Class C common stock to have value
4. 53Neither our shares of Class B common stock nor Class C common stock have economic rights. All of our Class B common stock is held by certain Continuing Equity Owners, including our Sponsor, and all our Class C common stock is held by our Co-Founders and certain of their affiliates
5. 54We are a “controlled company” within the meaning of Nasdaq rules and, as a result, qualify for, and rely on, exemptions and relief from certain corporate governance requirements. Our shareholders do not have the same protections afforded to shareholders of companies that are subject to such requirements
6. 55One of our directors has a relationship with our Sponsor, which may cause conflicts of interest with respect to our business
7. 56Our amended and restated certificate of formation provides that the doctrine of “corporate opportunity” does not apply with respect to any director or shareholder who is not employed by us or our subsidiaries
8. 57There are provisions in our amended and restated certificate of formation and bylaws that may make it difficult for a third party to acquire, or attempt to acquire, control of our Company, even if a change in control was considered favorable by our shareholders
9. 58Additional stock issuances (including pursuant to the redemption of LLC Units from our Continuing Equity Owners) could result in significant dilution to our shareholders and cause the trading price of our Class A common stock to decline
10. 59Future sales, or the perception of future sales, by us or our existing shareholders in the public market could cause the market price for our Class A common stock to decline
11. 60Our trading price and trading volume could decline if securities or industry analysts do not publish research about our business, or if they publish unfavorable research
12. 61We do not intend to pay dividends for the foreseeable future
13. 62financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to other public companies

General Risks

1. 63Our financial condition and results of operations are subject to, and may be adversely affected by, a number of economic or political factors, many of which are also largely outside our control and as such our results may fluctuate significantly and may not fully reflect the underlying performance of our business
2. 64Unstable market and economic conditions that are largely beyond our control may adversely affect consumer behavior and the results of our operations
3. 65Changes in statutory, regulatory, accounting, and other legal requirements, including changes in accounting principles generally accepted in the United States, could potentially impact our operating and financial results
4. 66As a newly public company, we incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies in the United States, which may harm our business
5. 67A failure to establish and maintain an effective system of disclosure controls and internal control over financial reporting, could adversely affect our ability to produce timely and accurate financial statements or comply with applicable regulations
6. 68controls that result in delays in their implementation or increased costs to correct any post-implementation issues that may arise
7. 69We may engage in merger and acquisition activities or strategic partnerships, which could require significant management attention, disrupt our business, dilute shareholder value, and adversely affect our business, results of operations, and financial condition
8. 70We may need additional capital, and we cannot be sure that additional financing will be available
9. 71Catastrophic events may disrupt our business