Krispy Kreme (DNUT) risk factors, FY2024 10-K

Risks Related to Food Safety and Consumer Preferences

1. 01Our business may be adversely affected by food safety issues, including food-borne illnesses, tampering, contamination, or cross-contamination
2. 02Changes in consumer preferences and demographic trends, including in response to unfavorable economic conditions, could negatively impact our business

Risks Related to Cybersecurity, Data Privacy, Information Technology, and Internal Controls

1. 03We rely on information technology in our operations. Any material failure, inadequacy, or interruption of that technology has and may in the future adversely affect our ability to effectively operate our business and result in financial or other loss
2. 04Breaches or failures of our information technology systems or other cybersecurity or data security-related incidents have and may in the future have an adverse effect on our business, financial condition, and results of operations

Risks Related to Executing Our Business Strategy

1. 05We may not realize the anticipated benefits from past or potential future acquisitions, divestitures, investments, or other strategic transactions
2. 06We periodically assess and may engage in mergers, acquisitions, full or partial divestitures, joint ventures, strategic partnerships, minority investments, or other strategic initiatives to execute on our growth strategy. We make these decisions based on individual circumstances
3. 07Our franchisees may affect our operating results and reputation
4. 08Our DFD business channels depend on key customers and are subject to risks if such key customers reduce their purchases or terminate their relationships with us
5. 09Our reputation and brand image are essential to our business success
6. 10Our success depends on our ability to compete with many food service businesses
7. 11If we cannot keep pace with technological changes impacting our industry, we may be unable to compete effectively, and our results of operations could be negatively affected
8. 12We have incurred significant indebtedness, which could adversely affect us, including decreasing our business flexibility and increasing our interest expense

Risks Related to Our Global Expansion and Growth

1. 13A key portion of our growth strategy depends on opening new Krispy Kreme shops and Points of Access both domestically and internationally
2. 14We face risks as we continue to focus on expansion of our omni-channel business model
3. 15Political, economic, currency, and other risks associated with our international operations could have a material adverse effect on our and our international franchisees’ operating results

Risks Related to Our Supply Chain

1. 16We are the exclusive or primary supplier of doughnut mixes and other key ingredients to shops worldwide and any problems supplying these ingredients could negatively affect our and our franchisees’ ability to make doughnuts
2. 17We are the only manufacturer of our doughnut-making equipment. Any problems producing this equipment could negatively affect our shops’ ability to make doughnuts
3. 18We have limited vendors for many of the product components and services that we rely on, and we have a single vendor for our glaze flavoring. Any interruption in supply could impair our ability to make and deliver our signature products, adversely affecting our business, financial condition, and results of operations
4. 19Our reliance on a single vendor for nearly all distribution of materials and supplies in the U.S. and Canada poses risks to our and our franchisees’ ability to make doughnuts if the vendor fails to provide these materials and supplies in accordance with our agreement
5. 20We may be unable to secure an alternative distribution channel in a timely manner or at all to mitigate these disruptions and challenges. In some cases, we may need to temporarily halt production at the affected shops until suitable alternative arrangements can be put in place
6. 21Our profitability is sensitive to changes in the cost of raw materials and other commodities and we may not be able to increase prices to fully offset inflationary pressures on costs, which may adversely affect our financial condition or results of operations

Risks Related to Our Human Capital

1. 22An inability to recruit and retain personnel could have a material adverse effect on our operations
2. 23As our business continues to grow, it becomes increasingly challenging to identify and hire a sufficient number of employees and provide comprehensive training to ensure consistent product quality and outstanding consumer experiences worldwide
3. 24Changes in the availability or cost of labor could adversely affect our business, financial condition, and results of operations

Risks Related to Regulation and Litigation

1. 25We may be subject to litigation that could adversely affect us by increasing our expenses, diverting management attention, or subjecting us to significant monetary damages and other remedies
2. 26Our business may be adversely affected by litigation, regulation and publicity concerning food quality, health, and other issues, which could negatively affect public policy and consumer preferences toward our products
3. 27Furthermore, in the event that any such lawsuits or claims result in unfavorable judgments or due to litigation costs, regardless of the final outcome, we may face significant liabilities
4. 28Healthcare legislation and other potential employment legislation could adversely affect our business, financial condition, and results of operations
5. 29Our annual effective income tax rate can change materially as a result of changes in our geographic mix of U.S. and foreign earnings and other factors, including changes in tax laws and changes made by regulatory authorities
6. 30The full realization of our deferred tax assets may be affected by a number of factors, including future earnings and the feasibility of ongoing planning strategies
7. 31We may be affected by matters related to environmental, social, and governance (“Responsibility”) trends and events, including governmental regulation and supply chain disruptions, that may adversely affect our business and reputation
8. 32Recent years have seen the introduction of new Responsibility disclosure requirements in various jurisdictions. The evolving nature and complexity of these rules and regulations, together with evolving stakeholder expectations, render compliance more challenging and uncertain

Risks Related to Our Intellectual Property

1. 33Our failure or inability to obtain, maintain, protect, and enforce our trademarks or other intellectual property could adversely affect our business and the value of our brand

Risks Related to Crises, Catastrophic Events, and Business Continuity

1. 34Public health outbreaks, epidemics, or pandemics have disrupted and may in the future disrupt, our business, and could have a material adverse effect on our business, financial condition, and results of operations
2. 35While we have implemented measures to address significant public health risks on a large scale, we acknowledge the potential for future outbreaks to impact our shops and other facilities. Such outbreaks may result in a substantial portion of our workforce or the workforce of our business partners being unable to work
3. 36Adverse weather conditions, natural disasters, war or terrorist attacks, pandemics, or other catastrophic events could have an adverse effect on our business

Risks Related to Ownership of our Common Stock

1. 37Certain provisions of Delaware Law, our certificate of incorporation, and our bylaws and the Investor Rights Agreement could hinder, delay, or prevent a change in control of us, which could adversely affect the price of our common stock
2. 38Several provisions within Delaware Law, our certificate of incorporation, and our bylaws are designed to create obstacles for third-party acquisition attempts without the consent of our Board of Directors or JAB Holdings B.V. ("JAB"), our largest beneficial shareholder
3. 39Moreover, JAB wields substantial voting power over shares of our common stock eligible to vote in director elections and other shareholder votes through its affiliate, potentially influencing outcomes significantly
4. 40If the ownership of our common stock continues to be highly concentrated, it may prevent shareholders from influencing significant corporate decisions and may result in conflicts of interest
5. 41The market price of our common stock could be negatively affected by sales of substantial amounts of our common stock in the public markets
6. 42We may be unable to pay dividends on our common stock