please determine if this risk can impact the Budgeting and Standard Cost Systems and/or the Capital Investment Analysis, please describe what management could do to minimize the stated risk.

Political, economic, currency and other risks associated with our international operations could adversely affect our and our international franchisees operating results. As of January 2, 2022 and excluding Doughnut Factories, there were 1,227 Krispy Kreme shops operated outside of the U.S. and Canada, representing 68% of our total shop count. Of this total, 773 shops were owned and operated by franchisees. Our revenues from international operations and business segments are exposed to risks associated with doing business in foreign countries. Risks arising from our international operations include, but are not limited to:

Recessionary or expansive trends in international markets; Import or other business licensing requirements; Limitations on the repatriation of funds and foreign currency exchange restrictions due to current or new U.S. and international regulations; Difficulty in staffing, developing and managing foreign operations and supply chain logistics, including ensuring the consistency of our product quality and service; Disputes with our franchisees, or failures by our franchisees to operate successfully, to develop or finance new shops or build them on suitable sites or open them on schedule; Local laws that make it more expensive and complex to negotiate with, retain or terminate employees; Competition with entrenched competitors as we expand our international operations; and Increase in anti-American sentiment and the identification of the brand as an American brand.

Royalties from our franchisees are based on a percentage of net sales (as defined in our franchise agreements) generated by our foreign franchisees operations. Royalties payable to us by our international franchisees are based on a conversion of local currencies to U.S. dollars using the prevailing exchange rate, and changes in exchange rates could adversely affect our revenues. To the extent that the portion of our revenues generated from international operations increases in the future, our exposure to changes in foreign political and economic conditions and currency fluctuations will increase. We also are subject to governmental regulations throughout the world that impact the way we do business with our international franchisees and vendors. These include antitrust and tax requirements, anti-boycott regulations, import/export/customs regulations and other international trade regulations, the USA Patriot Act, the Foreign Corrupt Practices Act, and applicable local law. We typically export our products, principally our doughnut mixes and doughnut mix concentrates, to our franchisees in markets outside the U.S. Numerous government regulations apply to both the export of food products from the U.S. as well as the import of food products into other countries. If one or more of the ingredients in our products are banned, alternative ingredients would need to be identified. Although we intend to be proactive in addressing any product ingredient issues, such requirements may delay our ability to open shops in other countries in accordance with our desired schedule.