Even if you sell
pizza, there are very important legal
risks... and you have to disclose these
risks to the public:
"We do not have
long-term contracts with many of our suppliers,
and as a result they could seek to significantly
increase prices or fail to deliver.
We typically do not have written
contracts or long-term arrangements with our
suppliers.
Although in the past we have not
experienced significant problems with our
suppliers, our suppliers may implement significant
price increases or may not meet our requirements
in a timely fashion, if at all. The occurrence of
any of the foregoing could have a material adverse
effect on our results of operations.
We face risks of
litigation from customers, franchisees, employees
and others in the ordinary course of business,
which diverts our financial and management
resources. Any adverse
litigation or publicity may negatively impact our
financial condition and results of operations.
Claims of illness or injury relating
to food quality or food handling are common in the
food service industry. In addition, class action
lawsuits have been filed, and may continue to be
filed, against various quick service restaurants
alleging, among other things, that quick service
restaurants have failed to disclose the health
risks associated with high-fat foods and that
quick service restaurant marketing practices have
encouraged obesity.
In addition to
decreasing our sales and profitability and
diverting our management resources, adverse
publicity or a substantial judgment against us
could negatively impact our financial condition,
results of operations and brand reputation,
hindering our ability to attract and retain
franchisees and grow our business.
Further, we may be subject to
employee, franchisee and other claims in the
future based on, among other things, discrimination, harassment, wrongful
termination and wage, rest break and meal break
issues, including those relating to overtime
compensation.
We have been subject to these types
of claims in the past, and we are currently
subject to a purported class action claim of this
type in California relating to rest break and meal
break compensation, and if one or more of these
claims were to be successful or if there is a
significant increase in the number of these
claims, our business, financial condition and
operating results could be harmed.
"
In simple terms... we speak about
profits... but nobody knows what will happen...
because of the legal
risks.
The
Sarbanes Oxley Act immediately increased criminal
penalties, including both fines and
imprisonment, and provided new methods of
enforcement against persons who are found to be in
violation of securities laws.
Legal
risks:
The
“whistle-blower” protection for employees
who assist in investigations of securities fraud
claims against their companies (§
806)
An issuer may not discharge
or discriminate against an employee who assists in
an investigation, or participates in a proceeding
against the issuer, regarding any conduct that the
employee reasonably believes constitutes a
violation of securities laws or constitutes fraud
against the issuer’s shareholders.
Retaliation Against Informants (§
1107)
It is unlawful to
knowingly and intentionally retaliate against any
person, including interfering with the person’s
lawful employment, for providing a law enforcement
officer with any truthful information relating to
the commission or possible commission of a federal
offense. A violation of this provision may lead to
fines and imprisonment for up to 10
years.
The
destruction, alteration or falsification of
documents (§ 802)
The destruction of
corporate audit records (§ 802)
The
White-Collar Crimes (§ 903, 904)
The
"mistakes" or "omissions" in the certification by
corporate officers (§ 906)
It is
a criminal offense for the chief executive or
chief financial officer of an issuer to file
certifications of periodic reports, as required by
Section 906 of the Act, knowing that the periodic
report accompanying the statement does not comport
with all of the requirements of the securities
laws, as attested to in the certificate.
A "knowing" violation of
this provision carries a maximum punishment of a
fine of up to $1,000,000 and imprisonment for up
to 10 years. A "willful" violation of this
provision carries a maximum punishment of a fine
of up to $5,000,000 and imprisonment for up to 20
years.
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