For each risk, please determine if this risk can impact the Budgeting and Standard Cost Systems and/or the Capital Investment Analysis. For each risk associated with one of these chapters, please describe how the risk is related to the chapter and what management could do to minimize the stated risk.

1. Changes in consumer preferences and demographic trends could negatively impact our business. Food service businesses are often affected by changes in consumer tastes, dietary and health preferences, national, regional and local economic conditions, discretionary spending priorities, demographic trends, traffic patterns and the type, number and location of competing brands. In addition, the food service industry continues to be under heightened legal and legislative scrutiny related to menu labeling and packaging resulting from the perception that the products and practices of food service companies have contributed to nutritional, caloric intake, obesity, or other health concerns of their guests. If we are unable to adapt to changes in consumer preferences and trends, or if regulatory changes are implemented that impact any of our markets, our operating results could be negatively impacted.

2. Maintaining, extending, and expanding our reputation and brand image are essential to our business success.

Our success depends on our ability to maintain our brand image, extend our products to new markets and channels, expand our brand image with new product offerings and deliver consistently high-quality, delicious products to our consumers. While we seek to maintain, extend, and expand our brand image and reputation through marketing investments, including advertising and consumer promotions, most of our marketing initiatives rely heavily on social media. We increasingly rely on social media and online dissemination of advertising campaigns. Social and digital media increase the speed and extent that information or misinformation and opinions can be shared. Negative posts or comments about us, our brands, or our products on social or digital media, whether or not valid, could seriously damage our brands and reputation. These risks are especially pronounced in light of our reliance on our social-media presence to promote our brand and maintain consumer loyalty and engagement. In addition, increasing regulatory or legal action against us, product recalls or other adverse publicity could damage our reputation and brand image, undermine our consumers confidence, and reduce long-term demand for our products. If we do not maintain, extend, and expand our brand image, then our business, financial condition and results of operations could be materially and adversely affected.

3. The food service industry is affected by food safety issues, including food tampering or contamination. Food safety, including the possibility of food tampering or contamination is a concern for any food service business. Any report or publicity linking us or our franchisees to food safety issues, including food tampering or contamination, could adversely affect our reputation as well as our revenues and profits. Increased use of social media could amplify the effects of negative publicity. These risks may be increased as we introduce new products or increase distribution channels, such as our Branded Sweet Treat Line or DFD business channels. Food safety issues could also adversely affect the price and availability of affected ingredients, which could result in disruptions in our supply chain or lower margins for us and our franchisees. Additionally, food safety issues could expose us to litigation, governmental investigation, recalls or fines.

4. The food service industry is affected by litigation, regulation and publicity concerning food quality, health and other issues, which can cause consumers to avoid our products and result in liabilities. Food service businesses can be adversely affected by litigation, by regulation and by complaints from consumers or government authorities resulting from food quality, illness, injury or other health concerns or operating issues stemming from one shop or a limited number of shops, including shops operated by our franchisees, or as we introduce new products or increase distribution channels, such as our Branded Sweet Treat Line or DFD business channels. In addition, class action lawsuits have been filed and may continue to be filed against various food service businesses (including quick service restaurants) alleging, among other things, that food service businesses have failed to disclose the health risks associated with high-fat foods and that certain food service business marketing practices have encouraged obesity. Because one of our competitive strengths is the taste and quality of our doughnuts and other indulgence products, adverse publicity or regulations relating to food quality or other similar concerns affect us more than it would food service businesses that compete primarily on other factors. We could also incur significant liabilities if such a lawsuit or claim results in a decision against us or because of litigation costs, regardless of the result.

5. Adverse weather conditions could adversely affect our business.

Adverse weather conditions can impact guest traffic at our and our franchisees shops and, in more severe cases such as hurricanes, tornadoes, flooding or other natural disasters (which can be worsened by climate change), cause temporary closures, sometimes for prolonged periods, which would negatively impact our shop sales. Changes in weather could result in construction delays, interruptions to the availability of utilities, and shortages or interruptions in the supply of food items and other supplies, which could increase our costs.

6. We will face risks as we continue to focus on expansion of the DFD business and our Branded Sweet Treat Line. In fiscal 2020 and fiscal 2021, we completed the evolution of our legacy wholesale business by transforming our DFD model and introducing our new Branded Sweet Treat Line. We view continued expansion of these businesses to be part of our growth strategy. Such efforts have entailed significant costs and uncertainties arising from, among other things, building manufacturing capability, our transition to an omni-channel business model, building and developing our information technology and logistics systems and adapting our corporate organization and talent. Successful implementation of this transition relied and will continue to rely on our ability to capitalize and realize certain goals, including identifying retail partners, expanding the geographies we serve and developing and maintaining the manufacturing and logistical capacity to service our DFD and Branded Sweet Treat Line business channels. In addition, these may exacerbate or be exacerbated by other risk factors included herein, especially those related to our logistical and manufacturing capacity and ability to compete in the indulgence market. There is no guarantee that we will achieve the benefits we anticipate or achieve the costs savings, revenue generation and other positive effects necessary to offset the costs and risks discussed here. In addition, our Branded Sweet Treat Line has thus far been unprofitable and has only been deployed domestically. There is no guarantee that it will see success among customers in international markets or ever turn a profit either domestically or internationally. Any failure to recognize our expected benefits could materially and adversely affect our business, results of operations and financial condition.