FRS » Topics » ITEM 1A. RISK FACTORS

This excerpt taken from the FRS 10-Q filed Apr 11, 2006.

ITEM 1A. RISK FACTORS

The Company continually takes reasonable preventive measures to reduce the risks and uncertainties that it faces. However, the nature of some risks and uncertainties offers little control to the Company. The materialization of any of the risks and uncertainties identified herein, together with those risks previously disclosed in Exchange Act reports (and not specifically repeated or restated here) or those that are presently unforeseen, could result in significant adverse effects on the Company’s financial position, results of operations and cash flows, which could include the permanent closure of the affected restaurant(s) with an impairment of assets charge taken against earnings, and could adversely affect the price at which shares of the Company’s common stock trade.

Food Safety

Food safety is the most significant risk to any company that operates in the restaurant industry. It has become the focus of increased government regulatory initiatives at the local, state and federal levels. To limit the Company’s exposure to the risk of food contamination, management rigorously emphasizes and enforces the Company’s food safety policies in all of the Company’s restaurants, and at the commissary and food manufacturing plant that the Company operates for Big Boy restaurants. These policies are designed to work cooperatively with programs established by health agencies at all levels of government authority, including the federal Hazard Analysis of Critical Control Points (HACCP) program. In addition, the Company makes use of ServSafe Training, a nationally recognized program developed by the National Restaurant Association. The ServSafe program provides accurate, up-to-date science-based information to all levels of restaurant workers on all aspects of food handling, from receiving and storing to preparing and serving. All restaurant managers are required to be certified in ServSafe Training and are required to be re-certified every five years.

Economic Factors

The Company’s operations are predominantly located in Ohio, Indiana and Kentucky, where consumer confidence has been weakened by a soft economy and the steep cost of gasoline. The effects of higher gasoline prices in particular may impact consumer spending in restaurants. The Company’s costs are also affected by increasing energy prices. Petroleum based material is often used to package certain products for distribution. The cost to transport these products from the commissary to restaurant operations will rise with each increase in gasoline prices. Higher natural gas prices have resulted in much higher costs to heat restaurant facilities and to cook food. Inflationary pressure on food costs and labor can also negatively impact the operation of the business.

Competition

The restaurant industry is highly competitive and many of the Company’s competitors are substantially larger and possess greater financial resources than does the Company. Both the Big Boy and Golden Corral operating segments have numerous competitors, including national chains, regional and local chains, as well as independent operators. None of these competitors, in the opinion of the Company, is presently dominate the family-style sector of the restaurant industry in the Company’s operating markets. That could change at any time due to changes in economic conditions, demographics, consumer perceptions of value and consumer preferences. New competitors enter the Company’s markets from time to time and competition continues to increase from supermarkets and other non-traditional competitors, as home meal replacement continues to grow in popularity. Proper staffing levels and employee training have also become competitive factors in recent years. In addition to competition for customers, sharp competition exists for qualified restaurant managers and hourly restaurant workers, which increases costs.

Development Plans

The Company’s business strategy and development plans also face risks and uncertainties. These include the inherent risk of poor management selection of sites on which to build restaurants, the ever rising cost and availability of desirable sites and increasingly rigorous requirements on the part of local governments to obtain various permits and licenses. Lower than expected revenue from the operation of Golden Corral restaurants has resulted in the Company’s decision to slow down expansion plans. Golden Corral same-store sales declines have been experienced for ten consecutive quarters. During the forty weeks ended March 5, 2006, four Golden Corral’s are cash flow negative. The ability of the Company to identify the root cause of the downturn, thereby allowing corrective measures to be set in place, being critical to the restoration of sales and margin growth, poses a significant risk that could ultimately result in charges to earnings to record impairment of assets.

 

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This excerpt taken from the FRS 10-Q filed Mar 27, 2006.

ITEM 1A. RISK FACTORS

Food safety is the most significant risk to any company that operates in the restaurant industry. It has become the focus of increased government regulatory initiatives at the local, state and federal levels. To limit the Company’s exposure to the risk of food contamination, management rigorously emphasizes and enforces the Company’s food safety policies in all of the Company’s restaurants, and at the commissary and food manufacturing plant that the Company operates for Big Boy restaurants. These policies are designed to work cooperatively with programs established by health agencies at all levels of government authority, including the federal Hazard Analysis of Critical Control Points (HACCP) program. In addition, the Company makes use of ServSafe Training, a nationally recognized program developed by the National Restaurant Association. The ServSafe program provides accurate, up-to-date science-based information to all levels of restaurant workers on all aspects of food handling, from receiving and storing to preparing and serving. All restaurant managers are required to be certified in ServSafe Training and are required to be re-certified every five years.

Severe winter weather could have a prominent negative impact upon revenue during the twelve-week third quarter of fiscal 2006 which spans most of the winter season from mid December through early March 2006. Consumer confidence, already weakened by a soft economy in the Company’s Midwest operating markets and the steep cost of gasoline, may decline further during the winter months as home heating costs soar and consumer debt payments are scheduled to rise, harming discretionary spending in general, and spending in restaurants in particular. The Company’s occupancy and other fixed operating costs will have a greater adverse impact on results of operations during any quarter that may experience disruptions to normal sales patterns.

The Company’s costs are also obviously affected by increasing energy prices. Petroleum based material is often used to package certain products for distribution. The cost to transport these products from the commissary to restaurant operations will rise with each increase in gasoline prices. Finally, and most significantly, rising natural gas prices are expected to result in much higher costs to heat dining rooms and cook food during the winter months.

Golden Corral same-store sales declines have been experienced for nine consecutive quarters. During the quarter for which this report on Form 10-Q is being filed, Golden Corral’s pre-tax earnings declined nearly $1,440,000 from the same period a year ago to a pre-tax loss of just over $850,000, resulting in a pre-tax loss of $226,000 for the first half of fiscal 2006. Seven Golden Corral’s are now cash flow negative. The ability of the Company to identify the root cause of the downturn, thereby allowing corrective measures to be set in place, being critical to the restoration of sales and margin growth, poses a significant risk.

The Company continually takes reasonable preventive measures to reduce the risks and uncertainties that it faces. However, the nature of some risks and uncertainties offers little control to the Company. The materialization of any of the risks and uncertainties identified herein, together with those risks previously disclosed in Exchange Act reports (and not specifically repeated or restated here) or those that are presently unforeseen, could result in significant adverse effects on the Company’s financial position, results of operations and cash flows, which could include the permanent closure of the affected restaurant(s) with an impairment of assets charge taken against earnings, and could adversely affect the price at which shares of the Company’s common stock trade.

 

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This excerpt taken from the FRS 10-Q filed Mar 17, 2006.

RISK FACTORS

Food safety is the most significant risk to any company that operates in the restaurant industry. It has become the focus of increased government regulatory initiatives at the local, state and federal levels. To limit the Company’s exposure to the risk of food contamination, management rigorously emphasizes and enforces the Company’s food safety policies in all of the Company’s restaurants, and at the commissary and food manufacturing plant that the Company operates for Big Boy restaurants. These policies are designed to work cooperatively with programs established by health agencies at all levels of government authority, including the federal Hazard Analysis of Critical Control Points (HACCP) program. In addition, the Company makes use of ServSafe Training, a nationally recognized program developed by the National Restaurant Association. The ServSafe program provides accurate, up-to-date science-based information to all levels of restaurant workers on all aspects of food handling, from receiving and storing to preparing and serving. All restaurant managers are required to be certified in ServSafe Training and are required to be re-certified every five years.

Other examples of risks and uncertainties facing the Company include, but are not limited to, the following:

 

  intense competition for customers;

 

  consumer perceptions of value, food quality and quality of service;

 

  changing consumer preferences, particularly based on concerns with nutritional content of the Company’s food or restaurant food in general;

 

  the effects of higher gasoline prices on discretionary spending by consumers in restaurants.

 

  changing demographics in neighborhoods in which the Company operates restaurants;

 

  changes in business strategy and development plans;

 

  the rising cost of quality sites on which to build restaurants;

 

  poor selection of restaurant sites on which to build;

 

  changes in the supply and cost of food;

 

  the effects of other inflationary pressures, especially higher costs for health care benefits and higher energy prices;

 

  rolling power outages, especially during the summer months;

 

  shortages of qualified labor;

 

  seasonal weather conditions, particularly during the winter months of the third quarter;

 

  natural disasters;

 

  fires or explosions;

 

  criminal acts, including bomb threats, robberies, hostage taking, kidnapping and other violent crimes;

 

  acts of terrorists or acts of war; and

 

  civil disturbances and boycotts.

Risks and uncertainties also include:

 

  rising variable interest rates;

 

  limitations on borrowing capacity;

 

  legal claims;

 

  changes in accounting standards;

 

  estimates used in preparing financial statements and the inherent risk that future events affecting them may cause actual results to differ markedly;

 

  disruptions to the business during transitions to new computer software;

 

  financial stability of technology vendors to support computer software over the long-term;

 

  unauthorized access to information systems;

 

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  changes in governmental regulations regarding the environment;

 

  exposure to penalties for potential violations of numerous governmental regulations in general, and immigration (I-9) and labor regulations regarding minors in particular;

 

  any future imposition by OSHA of costly ergonomics regulations on workplace safety;

 

  legislative changes affecting labor law, especially increases in the federal or state minimum wage requirements; and

 

  legislation or court rulings that result in changes to tax codes.

The Company continually takes reasonable preventive measures to reduce the risks and uncertainties that it faces. However, the nature of some risks and uncertainties offers little control to the Company. The materialization of any of the risks and uncertainties identified herein, together with those risks not specifically listed or those that are presently unforeseen, could result in significant adverse effects on the Company’s financial position, results of operations and cash flows, which could include the permanent closure of the affected restaurant(s) with an impairment of assets charge taken against earnings, and could adversely affect the price at which shares of the Company’s common stock trade.

This excerpt taken from the FRS 10-Q filed Jan 20, 2006.

ITEM 1A. RISK FACTORS

 

Food safety is the most significant risk to any company that operates in the restaurant industry. It has become the focus of increased government regulatory initiatives at the local, state and federal levels. To limit the Company’s exposure to the risk of food contamination, management rigorously emphasizes and enforces the Company’s food safety policies in all of the Company’s restaurants, and at the commissary and food manufacturing plant that the Company operates for Big Boy restaurants. These policies are designed to work cooperatively with programs established by health agencies at all levels of government authority, including the federal Hazard Analysis of Critical Control Points (HACCP) program. In addition, the Company makes use of ServSafe Training, a nationally recognized program developed by the National Restaurant Association. The ServSafe program provides accurate, up-to-date science-based information to all levels of restaurant workers on all aspects of food handling, from receiving and storing to preparing and serving. All restaurant managers are required to be certified in ServSafe Training and are required to be re-certified every five years.

 

Severe winter weather could have a prominent negative impact upon revenue during the twelve-week third quarter of fiscal 2006 which spans most of the winter season from mid December through early March 2006. Consumer confidence, already weakened by a soft economy in the Company’s Midwest operating markets and the steep cost of gasoline, may decline further during the winter months as home heating costs soar and consumer debt payments are scheduled to rise, harming discretionary spending in general, and spending in restaurants in particular. The Company’s occupancy and other fixed operating costs will have a greater adverse impact on results of operations during any quarter that may experience disruptions to normal sales patterns.

 

The Company’s costs are also obviously affected by increasing energy prices. Petroleum based material is often used to package certain products for distribution. The cost to transport these products from the commissary to restaurant operations will rise with each increase in gasoline prices. Finally, and most significantly, rising natural gas prices are expected to result in much higher costs to heat dining rooms and cook food during the winter months.

 

Golden Corral same-store sales declines have been experienced for nine consecutive quarters. During the quarter for which this report on Form 10-Q is being filed, Golden Corral’s pre-tax earnings declined nearly $1,440,000 from the same period a year ago to a pre-tax loss of just over $850,000, resulting in a pre-tax loss of $226,000 for the first half of fiscal 2006. Seven Golden Corral’s are now cash flow negative. The ability of the Company to identify the root cause of the downturn, thereby allowing corrective measures to be set in place, being critical to the restoration of sales and margin growth, poses a significant risk.

 

The Company continually takes reasonable preventive measures to reduce the risks and uncertainties that it faces. However, the nature of some risks and uncertainties offers little control to the Company. The materialization of any of the risks and uncertainties identified herein, together with those risks previously disclosed in Exchange Act reports (and not specifically repeated or restated here) or those that are presently unforeseen, could result in significant adverse effects on the Company’s financial position, results of operations and cash flows, which could include the permanent closure of the affected restaurant(s) with an impairment of assets charge taken against earnings, and could adversely affect the price at which shares of the Company’s common stock trade.

 

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This excerpt taken from the FRS 10-Q filed Oct 24, 2005.

RISK FACTORS

 

Food safety is the most significant risk to any company that operates in the restaurant industry. It has become the focus of increased government regulatory initiatives at the local, state and federal levels. To limit the Company’s exposure to the risk of food contamination, management rigorously emphasizes and enforces the Company’s food safety policies in all of the Company’s restaurants, and at the commissary and food manufacturing plant that the Company operates for Big Boy restaurants. These policies are designed to work cooperatively with programs established by health agencies at all levels of government authority, including the federal Hazard Analysis of Critical Control Points (HACCP) program. In addition, the Company makes use of ServSafe Training, a nationally recognized program developed by the National Restaurant Association. The ServSafe program provides accurate, up-to-date science-based information to all levels of restaurant workers on all aspects of food handling, from receiving and storing to preparing and serving. All restaurant managers are required to be certified in ServSafe Training and are required to be re-certified every five years.

 

Other examples of risks and uncertainties facing the Company include, but are not limited to, the following:

 

    intense competition for customers;

 

    consumer perceptions of value, food quality and quality of service;

 

    changing consumer preferences, particularly based on concerns with nutritional content of the Company’s food or restaurant food in general;

 

    the effects of higher gasoline prices on discretionary spending by consumers in restaurants.

 

    changing demographics in neighborhoods in which the Company operates restaurants;

 

    changes in business strategy and development plans;

 

    the rising cost of quality sites on which to build restaurants;

 

    poor selection of restaurant sites on which to build;

 

    changes in the supply and cost of food;

 

    the effects of other inflationary pressures, especially higher costs for health care benefits and higher energy prices;

 

    rolling power outages, especially during the summer months;

 

    shortages of qualified labor;

 

    seasonal weather conditions, particularly during the winter months of the third quarter;

 

    natural disasters;

 

    fires or explosions;

 

    criminal acts, including bomb threats, robberies, hostage taking, kidnapping and other violent crimes;

 

    acts of terrorists or acts of war; and

 

    civil disturbances and boycotts.

 

Risks and uncertainties also include:

 

    rising variable interest rates;

 

    limitations on borrowing capacity;

 

    legal claims;

 

    changes in accounting standards;

 

    estimates used in preparing financial statements and the inherent risk that future events affecting them may cause actual results to differ markedly;

 

    disruptions to the business during transitions to new computer software;

 

    financial stability of technology vendors to support computer software over the long-term;

 

    unauthorized access to information systems;

 

    changes in governmental regulations regarding the environment;

 

    exposure to penalties for potential violations of numerous governmental regulations in general, and immigration (I-9) and labor regulations regarding minors in particular;

 

    any future imposition by OSHA of costly ergonomics regulations on workplace safety;

 

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    legislative changes affecting labor law, especially increases in the federal or state minimum wage requirements; and

 

    legislation or court rulings that result in changes to tax codes.

 

The Company continually takes reasonable preventive measures to reduce the risks and uncertainties that it faces. However, the nature of some risks and uncertainties offers little control to the Company. The materialization of any of the risks and uncertainties identified herein, together with those risks not specifically listed or those that are presently unforeseen, could result in significant adverse effects on the Company’s financial position, results of operations and cash flows, which could include the permanent closure of the affected restaurant(s) with an impairment of assets charge taken against earnings, and could adversely affect the price at which shares of the Company’s common stock trade.

 

This excerpt taken from the FRS 10-K filed Aug 11, 2005.

Risk Factors

 

Food safety is the most significant risk to any company that operates in the restaurant industry. It has become the focus of increased government regulatory initiatives at the local, state and federal levels which adds higher compliance costs to the Company. To limit the Company’s exposure to the risk of food contamination, management rigorously emphasizes and enforces the Company’s food safety policies in all of the Company’s restaurants, and at the commissary and food manufacturing plant that the Company operates for Big Boy restaurants. These policies are designed to work cooperatively with programs established by health agencies at all levels of government authority, including the federal Hazard Analysis of Critical Control Points (HACCP) program. In addition, the Company makes use of ServSafe Training, a nationally recognized program developed by the National Restaurant Association. The ServSafe program provides accurate, up-to-date science-based information to all levels of restaurant workers on all aspects of food handling, from receiving and storing to preparing and serving. All restaurant managers are required to receive re-certification in ServSafe Training every five years.

 

Other examples of risks and uncertainties facing the Company include, but are not limited to, the following:

 

  intense competition for customers;

 

  consumer perceptions of value, food quality and quality of service;

 

  changing consumer preferences, particularly based on concerns with nutritional content of the Company’s food or restaurant food in general;

 

  the effects of higher gasoline prices on discretionary spending by consumers in restaurants;

 

  changing demographics in neighborhoods where the Company operates restaurants;

 

  changes in business strategy and development plans;

 

  the rising cost of quality sites on which to build restaurants;

 

  poor selection of restaurant sites;

 

  changes in the supply and cost of food;

 

  the effects of other inflationary pressures, especially higher costs for health care benefits and higher energy prices;

 

  rolling power outages;

 

  shortages of qualified labor;

 

  seasonal weather conditions, particularly during the winter months of the third quarter;

 

  natural disasters; fires or explosions;

 

  criminal acts, including bomb threats, robberies, hostage taking, kidnapping and other violent crimes;

 

  acts of terrorists or acts of war; and

 

  civil disturbances and boycotts.

 

Risks and uncertainties also include:

 

  rising variable interest rates;

 

  limitations on borrowing capacity;

 

  legal claims;

 

  changes in accounting standards;

 

  estimates used in preparing financial statements and the inherent risk that future events affecting them may cause actual results to differ markedly;

 

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  disruptions to the business during transitions to new computer software;

 

  financial stability of technology vendors to support computer software over the long-term;

 

  unauthorized access to information systems;

 

  changes in governmental regulations regarding the environment;

 

  exposure to penalties for potential violations of numerous governmental regulations in general, and immigration (I-9) and minor labor regulations in particular;

 

  any future imposition by OSHA of costly ergonomics regulations on workplace safety;

 

  legislative changes affecting labor law, especially increases in the federal or state minimum wage requirements; and

 

  legislation or court rulings that result in changes to tax codes.

 

The Company continually takes reasonable preventive measures to reduce its risks and uncertainties. However, the nature of some risks and uncertainties provides little control to the Company. The materialization of any of the risks and uncertainties identified herein, together with those risks not specifically listed or those that are presently unforeseen, could result in significant adverse effects on the Company’s financial position, results of operations and cash flows, which could include the permanent closure of any affected restaurant(s) with an impairment of assets charge taken against earnings, and could adversely affect the price at which shares of the Company’s common stock trade.

 

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