Driven Brands Holdings (DRVN) risk factors, FY2025 10-K

Risks Relating to Our Business

1. 01Competition may harm our business and results of operations
2. 02Changes in consumer preferences and perceptions, and in economic, market, and other conditions could adversely affect our business and results of operations
3. 03Our business is affected by the financial results of our franchisees 46% rewritten
4. 04Our business is affected by advances in automotive technology
5. 05Certain restrictions may prevent us from providing our services and products to customers
6. 06Increases in operating costs, including labor and commodity costs and interest rates have, and may again in the future, adversely affect our results of operations31% rewritten
7. 07High levels of economic inflation may increase our operating costs, influence demand for our products, and impact the profitability of our business28% rewritten
8. 08Our locations may experience difficulty hiring and retaining qualified personnel, resulting in higher labor costs
9. 09Insurance coverage may not be adequate, and increased self-insurance and other insurance costs could adversely affect our results of operations
10. 10Increases in supply costs could adversely affect our results of operations32% rewritten
11. 11Geopolitical uncertainty, including tariffs imposed by the U.S. and/or other governments could increase our supply costs, which could materially and adversely affect our business and results of operations63% rewritten
12. 12Decreases in our product sourcing revenue could adversely affect our results of operations52% rewritten
13. 13We depend on key suppliers, including international suppliers, to deliver timely high-quality products at quantities and prices required for our businesses
14. 14Supply chain shortages and interruptions could adversely affect our business29% rewritten
15. 15Our business depends on the willingness of suppliers, distributors, and service providers to supply our locations with goods and services pursuant to customary credit arrangements which may be available in the future on less favorable terms or not at all
16. 16Our failure to build and maintain relationships with insurance partners could adversely affect our business28% rewritten
17. 17Substantially all of the assets of the Company are pledged as security under the terms of our Indebtedness
18. 18We may not be able to execute on our plans to open additional locations and enter new markets24% rewritten
19. 19Should we and our franchisees not succeed in opening additional locations or improving existing locations, there may be adverse impacts to our growth strategy and to our ability to generate additional profits, which in turn could materially and adversely affect our business and results of operations
20. 20Our acquisitions, dispositions, and strategic investments involve risks
21. 21Our business may be adversely impacted by our indebtedness, including additional leverage in connection with acquisitions and other capital expenditure initiatives
22. 22Guaranties associated with the lease obligations of divested entities could adversely affect our results of operations or financial conditionNew
23. 23Our business is subject to seasonality37% rewritten
24. 24Our business may be adversely impacted by the geographic concentration of our locations45% rewritten
25. 25Our operations are subject to various risks and uncertainties, including adverse economic conditions or a debt crisis, which could adversely affect our business65% rewritten
26. 26deterioration of economic conditions in, Canada could have a material adverse impact on financial markets and economic conditions in the U.S. and throughout the worldNew
27. 27Our success depends on the effectiveness of our marketing and advertising programs
28. 28Our failure or our franchisees’ failure to comply with health, employment, and other federal, state, local, and provincial laws, rules, and regulations may lead to losses and harm our brands35% rewritten
29. 29In addition to the risk of adverse legislation or regulations being enacted in the future, we cannot predict how existing or future laws or regulations will be administered or interpreted. Further, we cannot predict the amount of future expenditures that may be required to comply with any such laws or regulations
30. 30Our locations are subject to certain environmental laws and regulations
31. 31Complaints or litigation may adversely affect our business and reputation22% rewritten
32. 32We may have product liability exposure that adversely affects our results of operations
33. 33We are subject to payment-related risks
34. 34Catastrophic events may disrupt our business in a manner that adversely affects our business
35. 35Instability, disruption, or destruction caused by civil insurrection, social unrest, or government actions may affect the markets in which we operate, our suppliers, customers, sales of products, and customer service21% rewritten
36. 36We and our franchisees lease or sublease the land and buildings where a number of our locations are situated, which could expose us to possible liabilities and losses
37. 37Our current locations may become unattractive, and attractive new locations may not be available for a reasonable price, if at all, which could adversely affect our business
38. 38Our financial performance could be materially adversely affected if we fail to retain, or effectively respond to a loss of, key executives

Risks Related to Intellectual Property and Technology

1. 39We depend on our intellectual property to protect our brands, we may fail to establish trademark rights in the countries we operate and litigation to enforce or defend our intellectual property rights may be costly
2. 40If franchisees and other licensees do not observe the required quality and trademark usage standards, our brands may suffer reputational damage, which could in turn adversely affect our business
3. 41We may become subject to third-party infringement claims or challenges to intellectual property validity70% rewritten
4. 42We do not own certain software that is used in operating our business and our proprietary platforms and tools incorporate open-source software
5. 43We are heavily dependent on information systems and technology, and any significant failure, interruption, or security incident could impair our ability to efficiently operate our business or timely or accurately prepare financial reports24% rewritten
6. 44The occurrence of cyber incidents, or a deficiency in cybersecurity, could negatively impact our business by causing a disruption to our operations, a compromise, corruption, or loss of data, and/or damage to our employee and business relationships, all of which could lead to loss and harm our business
7. 45Changing regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information, and harm our brands in a manner that adversely affects our business

Risks Relating to the Franchisees

1. 46A majority of our locations are owned and operated by franchisees and, as a result, we are highly dependent upon our franchisees34% rewritten
2. 47Franchisee changes in control may adversely impact franchisee operations37% rewritten
3. 48Franchise documents are subject to termination and non-renewal
4. 49We may not be able to retain franchisees or maintain the quality of existing franchisees
5. 50Our location development plans under development agreements may not be implemented effectively by franchisees
6. 51There is no assurance that franchisees’ development and construction of locations will be completed, or that any such development will be completed in a timely manner . There is no assurance that present or future development plans will perform in accordance with expectations
7. 52If our franchisees do not comply with their franchise agreements and policies or participate in the implementation of our business model, our business could be harmedNew

Risks Related to our Indebtedness

1. 53Our substantial indebtedness could adversely affect our financial condition23% rewritten
2. 54In addition, the financial and other covenants we agreed to in our debt agreements may limit our ability to incur additional indebtedness, make investments, and engage in other transactions, and the leverage may cause potential lenders to be less willing to loan funds to us in the future
3. 55The documents governing our indebtedness have restrictive terms and our failure to comply with any of these terms could put us in default, which would have an adverse effect on our business and prospects
4. 56The Securitization Senior Notes Indenture governing the securitized debt facility may restrict the cash flow from the entities subject to the securitization to us and our subsidiaries and, upon the occurrence of certain events, cash flow would be further restricted

Risks Related to Ownership of Our Common Stock

1. 57Our stock price may fluctuate significantly
2. 58Our ability to raise capital in the future may be limited
3. 59We are a holding company and rely on dividends, distributions, and other payments, advances, and transfers of funds from our subsidiaries to meet our obligations26% rewritten
4. 60We are required to make payments under a Tax Receivable Agreement for certain tax benefits, which amounts are expected to be material51% rewritten
5. 61Our failure to prepare and timely file our periodic reports with the SEC limits our access to the public markets to raise debt or equity capital, restricts our ability to issue equity securities and could impact our listing on NasdaqNew
6. 62We reached a determination to restate certain of our previously issued consolidated financial statements, which resulted in unanticipated costs and may affect investor confidence and raise reputational issuesNew
7. 63Our Principal Stockholders collectively have significant influence over us, including control over decisions that require the approval of stockholders, which could limit your ability to influence the outcome of matters submitted to stockholders for a vote
8. 64We are a “controlled company” within the meaning of Nasdaq rules and, as a result, qualify for exemptions from certain corporate governance requirements that we have relied on in the past and may do so in the future
9. 65Our organizational documents and Delaware law may impede or discourage a takeover, which could deprive our investors of the opportunity to receive a premium on their shares
10. 66Our certificate of incorporation contains a provision renouncing our interest and expectancy in certain corporate opportunities65% rewritten
11. 67deferring, or preventing a change in control without further action by the stockholders, even where stockholders are offered a premium for their sharesNew
12. 68Our business could be negatively impacted as a result of shareholder activismNew
13. 69Future sales of our common stock in the public market, or the perception in the public market that such sales may occur, could reduce our stock price