If AmRest fails to comply with the obligation to open and run the minimum specified number of cafés, Starbucks Coffee International, Inc. has
the right to increase its share in these companies by acquiring shares from AmRest Sp. z o.o. at a price agreed between the parties based on
the valuation of the companies.
6. No exclusivity rights
International Franchise Agreements per se do not typically grant exclusivity rights to the franchisee in the relevant territories. In order to secure
exclusivity rights for a certain territory, franchisees aim to have either a master franchise agreement or a development agreement with the
franchisor. Currently, AmRest does not have master franchise agreements or development agreements in all territories and cannot secure that
it will have exclusivity on certain territories.
7. Risks related to the consumption of food products
Changes in consumer preferences arising from concerns over the nutritious properties of chicken, which is the main ingredient in the KFC
menu, or as a result of unfavorable information being circulated by the mass media concerning the quality of the products, could pose a threat
to the Group. Furthermore, diseases caused by these (ie food poisoning) and damages to health as a result of eating in AmRest restaurants
and restaurants of other franchisees of KFC, Pizza Hut, Burger King, Starbucks, La Tagliatella, Blue Frog, Bacoa and Sushi Shop, and as a
result of revealing unfavorable data prepared by the government or a given market sector concerning the products served in AmRest
restaurants and restaurants of other franchisees of KFC, Pizza Hut, Burger King, Starbucks, La Tagliatella, Blue Frog, Bacoa and Sushi Shop,
health-related issues and issues related to the functioning patterns of one or more restaurants run both by AmRest and the competition could
also pose a threat to the Group. The above-mentioned risks are mitigated by using the highest quality ingredients in AmRest restaurants, which
come from reliable and reputable suppliers, in compliance with strict quality control and hygiene standards and the use of top, modern
equipment and processes which ensure the absolute safety of the dishes.
8. Risks related to key personnel turnover in the Group and increasing labour costs
AmRest´s success depends, to some extent, on the individual effort of selected employees and key members of management. The methods
of remunerating and managing human resources developed by the Group help ensure a low rotation of the key personnel. Additionally, the
career planning system supports preparing successors ready to execute tasks in key positions. In the event of turnover, a personnel
replacement process will be triggered, minimising to the fullest extent possible the adverse effect on business activities and the operating
results of the Group.
Excessive turnover of employees and too frequent changes in managerial positions may pose a significant risk to the stability and quality of
the business activities. Due to the fact that salaries in the HORECA sector are still relatively lower than in other branches, there is a risk of the
outflow of qualified staff. In this regard, the Company is constantly evaluating the competitiveness of the remunerations offered to minimize the
risk and to remain market competitive. An additional risk in the employment area may be caused by fluctuations in the unemployment rate in
a given market.
9. Risks related to limited access to foodstuffs and the variability of their cost
AmRest´s situation is also affected by the need to ensure frequent deliveries of fresh agricultural products and foodstuffs and anticipating and
responding to changes in supplies costs. The Group cannot rule out the risk related to delivery shortage or interruptions caused by factors
such as unfavorable weather conditions, changes in legal regulations or withdrawing some foodstuffs from trading. Also the increased demand
for certain products accompanied by limited supply may lead to difficulties in obtaining these by the Group or to relevant price increases. Both
the shortages and product price increases may have an adverse effect on the Group‘s results, operations and financial standing. In order to
mitigate this risk (among others) AmRest Sp. z o.o. signed a contract with SCM Sp. z o.o. for the provisions of services comprising
intermediation and negotiating terms of delivery to restaurants, including negotiating terms of distribution agreements.
10. Risks related to opening restaurants in new countries
Opening or taking over restaurants operating in a new geographical and political area involves the risk of varying consumer preferences, a risk
of insufficient knowledge of the market, the risk of legal restrictions arising from local regulations and the political risk of these countries.
11. Currency risk
The results of AmRest are exposed to currency risk related to transactions and exchanges into currencies other than the currency in which
business transactions are measured in the individual Capital Group companies. The Group adjusts its currency portfolio of debt to the
geographical structure of its profile of activities. Additionally, AmRest uses forward contracts to secure transaction risks on a short-term basis.
12. Risks related to the current geopolitical situation
The Company conducts its business in countries where political climates are uncertain. Tensions around that subject may result in a negative
impact on economy, including instable currency, interest rates, liquidity, supply chain disruptions and consumer confidence deterioration. All
these events and uncertainty that accompanies them may have a significant impact on the Group’s operations and financial position, the effect
of which is difficult to predict. The future economic and regulatory situation may differ from the Management’s expectations however it is being
monitored in order to adjust strategic intentions and operational decisions, which will minimize business risks.
13. Risk of increased financial costs
AmRest and its subsidiaries are exposed to a certain extent to adverse impact of interest rate fluctuations in connection with obtaining financing
which bears floating interest rates and investing in assets bearing floating interest rates. The interest rates of bank loans and borrowings and
issued bonds are based on a combination of fixed and floating reference rates which are updated over periods shorter than one year.
Additionally, AmRest and its subsidiaries may, as part of the interest rate hedging strategy, enter into derivative and other financial contracts,
where the valuation of which is significantly affected by the level of reference rates.
14. Increases in the cost of commodities, raw materials and goods
Increases in the cost of commodities, raw materials and goods can have an adverse impact on Group's operating profit margins. In order to
mitigate these risks, the Group has implemented sourcing strategies, periodical tender procedures, and established preventative controls to
monitor deviations in actual expenditure, monitoring of pricing trends, and active review of tender processes.