Nathans Famous (NATH) risk factors, FY2025 10-K

Risks Related to Our Business and Operations

1. 01Our results of operations could be adversely affected by disease epidemics, public health concerns or other catastrophic events
2. 02A recurrence of coronavirus (“COVID-19”) or the emergence of other health epidemics or pandemics could substantially impact customer traffic at our Company-owned and franchised restaurants, as well as sales to our Branded Product Program customers and royalties earned from our licensing activities
3. 03Our results of operations could be adversely affected by increases in the cost of food, commodities and paper
4. 04We cannot assure that our Company-owned restaurants or our franchised restaurants will be able to purchase its food, commodity or paper products at reasonable prices, or that the cost of such food, commodity or paper products will remain stable in the future
5. 05Price increases may impact customer visits
6. 06Our licensing revenue and overall profitability is substantially dependent on our agreement with Smithfield Foods, Inc. and the loss or a significant reduction of this revenue would have a material adverse effect on our financial condition and results of operations
7. 07A significant amount of our Branded Product Program revenue is from a small number of accounts. The loss of any one or more of those accounts could harm our profitability and operating results
8. 08Smithfield Foods, Inc. currently has two manufacturing facilities producing different Nathan’s products and a long-term significant interruption of a primary facility could potentially disrupt our operations
9. 09The loss of one or more of our key suppliers could lead to supply disruptions, increased costs and lower operating results
10. 10Our earnings and business growth strategy depend in large part on the success of our product licensees and product manufacturers. Our reputation and the reputation of our brand may be harmed by actions taken by our product licensees or product manufacturers that are otherwise outside of our control
11. 11The quick-service restaurant business is highly competitive, and that competition could lower revenues, margins and market share
12. 12In addition, if patrons have a poor experience at a Company-owned or a franchised restaurant, we may experience a decrease in customer counts which, in turn, may result in a decline in Company-owned restaurant sales or franchise royalties
13. 13Changes in economic, market and other conditions could adversely affect us and our franchisees, and thereby our operating results
14. 14Current restaurant locations may become unattractive, and attractive new locations may not be available for a reasonable price, if at all, which may reduce our revenue
15. 15We are subject to risks affecting the food industry, including risks posed by the following: food spoilage or food contamination; consumer product liability claims; product tampering; and the potential cost and disruption of a product recall
16. 16Negative publicity, including complaints on social media platforms and other internet-based communications, could damage our reputation and harm our guest traffic, and in turn, negatively impact our business, financial condition, results of operations and prospects
17. 17Changing health or dietary preferences may cause consumers to avoid products offered by us in favor of alternative foods
18. 18We may not be able to adequately protect our intellectual property, which could decrease the value of our business or the value of our brands and products
19. 19Our earnings and business growth strategy depend in large part on the success of our restaurant franchisees and on new restaurant openings. Our corporate reputation or brand reputation may be harmed by actions taken by restaurant franchisees that are otherwise outside of our control
20. 20We rely on the performance of major retailers, wholesalers, specialty distributors and mass merchants for the success of our business, and should they perform poorly or give higher priority to other brands or products, our business could be adversely affected
21. 21The sophistication and buying power of our customers could have a negative impact on profits
22. 22Our annual and quarterly financial results may fluctuate depending on various factors, many of which are beyond our control, and, if we fail to meet the expectations of investors, our share price may decline
23. 23Our operations are influenced by adverse weather conditions
24. 24Climate change could adversely affect our results of operation and financial condition
25. 25Due to the concentration of our restaurants in particular geographic regions, our business results could be impacted by the adverse economic conditions prevailing in those regions regardless of the state of the national economy as a whole
26. 26We rely extensively on computer systems, our point-of-sales system and information technology to manage our business. Any disruption in our computer systems, our point-of-sales system or information technology may adversely affect our ability to run our business
27. 27Cyberattacks and breaches could cause operational disruptions, fraud or theft of sensitive information
28. 28Our international operations are subject to various factors of uncertainty
29. 29Our business operations and future development could be significantly disrupted if we lose key personnel
30. 30We face risks of litigation and pressure tactics, such as strikes, boycotts and negative publicity from customers, franchisees, suppliers, employees and others, which could divert our financial, and management resources and which may negatively impact our financial condition and results of operations

Risks Related to Regulatory Matters

1. 31Changes to minimum wage rates have increased our labor costs
2. 32Changes in franchise regulations and laws could impact our ability to obtain or retain licenses or approvals and adversely affect our business, financial condition, results of operations and prospects
3. 33We are subject to health, employment, environmental and other government regulations, and failure to comply with existing or future government regulations could expose us to litigation, damage our corporate reputation or the reputation of our brands and lower profits
4. 34Failure by third-party manufacturers or suppliers of raw materials to comply with food safety, environmental or other regulations may disrupt our supply of certain products and adversely affect our business
5. 35We are subject to many federal, state and local laws, as well as statutory and regulatory requirements. Failure to comply with, or changes in these laws or requirements, could have an adverse impact on our business
6. 36Our business is subject to an increasing focus on Environmental, Social, and Governance (ESG) matters
7. 37Changes in tax laws and unfavorable resolution of tax contingencies could adversely affect our tax expense

Risks Related to Our Common Stock and Organizational Structure

1. 38The market price of our common stock may be highly volatile or may decline regardless of our operating performance
2. 39Our certificate of incorporation and by-laws and other corporate documents include anti-takeover provisions which may deter or prevent a takeover attempt
3. 40While we have approved a quarterly dividend policy, there can be no assurance as to the declaration of future dividends or the amount of such dividends

Risks Related to our Indebtedness

1. 41Our significant amount of indebtedness makes us more sensitive to adverse economic conditions, may limit our ability to plan for or respond to significant changes in our business, and requires a significant amount of cash to service our debt payment obligations that we may be unable to generate or obtain
2. 42imposing restrictive covenants on our operations as the result of the terms of our indebtedness, which, if not complied with, could result in an event of default, which in turn, if not cured or waived, could result in the acceleration of our debt
3. 43If drawn upon, our undrawn revolving credit facility would subject us to interest rate risk, which could cause our debt service obligations to increase