Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The discussion and analysis below for the Company, which contains forward-looking statements, should be read in conjunction with the unaudited consolidated financial statements and the notes to such financial statements included elsewhere in this quarterly report on Form 10-Q (Form 10-Q) and the audited consolidated financial statements and the notes thereto included in our Form 10-K for the fiscal year ended May 28, 2023 (Form 10-K). In addition to historical consolidated financial information, this discussion contains forward-looking statements that reflect our plans, estimates, and beliefs and involve numerous risks and uncertainties, including but not limited to those described in the “Item 1A. Risk Factors” section of the Form 10-K. Actual results may differ materially from those contained in any forward-looking statements. You should carefully read “Forward-Looking Statements” included elsewhere in this Form 10-Q.

To facilitate review of our discussion and analysis, the following table sets forth our financial results for the periods indicated. All information is derived from the unaudited consolidated statements of earnings for the quarters and three months ended August 27, 2023 and August 28, 2022.

															Three Months Ended
(in millions)																					August 27, 2023						August 28, 2022						% Chg
Sales																					$	2,730.6					$	2,446.1					11.6%
Costs and expenses:
Food and beverage																					851.0						795.3						7.0
Restaurant labor																					875.3						793.8						10.3
Restaurant expenses																					446.6						403.5						10.7
Marketing expenses																					38.6						30.3						27.4
General and administrative expenses																					153.3						88.3						73.6
Depreciation and amortization																					109.8						95.6						14.9
Impairments and disposal of assets, net																					3.1						(4.9)						NM
Total costs and expenses																					$	2,477.7					$	2,201.9					12.5
Operating income																					252.9						244.2						3.6
Interest, net																					29.7						19.8						50.0
Earnings before income taxes																					$	223.2					$	224.4					(0.5)
Income tax expense (1)																					28.4						30.8						(7.8)
Earnings from continuing operations																					$	194.8					$	193.6					0.6
Losses from discontinued operations, net of tax																					(0.3)						(0.6)						(50.0)
Net earnings																					$	194.5					$	193.0					0.8%
Diluted net earnings per share:
Earnings from continuing operations																					$	1.60					$	1.56					2.6%
Losses from discontinued operations																					(0.01)						—						NM
Net earnings																					$	1.59					$	1.56					1.9%
(1) Effective tax rate																					12.7		%				13.7		%
NM- Percentage not considered meaningful.

The following table details the number of company-owned restaurants currently reported in continuing operations that were open at the end of the first quarter of fiscal 2024, compared with the number open at the end of fiscal 2023 and the end of the first quarter of fiscal 2023.

						August 27, 2023						May 28, 2023						August 28, 2022
Olive Garden						906						905						887
LongHorn Steakhouse						562						562						549
Cheddar’s Scratch Kitchen						183						180						174
Yard House						86						86						85
Ruth’s Chris Steak House						77						—						—
The Capital Grille						64						62						61
Seasons 52						44						44						45
Bahama Breeze						42						42						42
Eddie V’s						30						29						29
The Capital Burger						4						4						3
Total						1,998						1,914						1,875

OVERVIEW OF OPERATIONS

Financial Highlights - Consolidated

• Total sales increased 11.6% to $2.73 billion for the first quarter of fiscal 2024 compared to $2.45 billion for the first quarter of fiscal 2023 driven by blended same-restaurant sales increases of 5.0%1 and sales from the addition of 77 Ruth's Chris Steak House (Ruth’s Chris) restaurants and 46 other net new restaurants.

• Our net earnings from continuing operations were $194.8 million for the first quarter of fiscal 2024 compared $193.6 million for the first quarter of fiscal 2023.

• Reported diluted net earnings per share from continuing operations were $1.60 for the first quarter of fiscal 2024 compared to $1.56 for the first quarter of fiscal 2023.

Outlook

We expect sales for fiscal 2024 to be between $11.5 and $11.6 billion, driven by same-restaurant sales growth of 2.5 to 3.5 percent1 and approximately 50 new restaurant openings inclusive of Ruth’s Chris new restaurant openings. Additionally, we expect capital expenditures incurred to build new restaurants, remodel and maintain existing restaurants and for technology initiatives to be $550 to $600 million.

1 Same-restaurant sales results excludes Ruth's Chris as they have not yet been owned and operated by Darden for a 16-month period.

SALES

The following table presents our sales by segment for the periods indicated.

									Three Months Ended
(in millions)																		August 27, 2023			August 28, 2022			% Chg			SRS (1)
Olive Garden																		$	1,227.9		$	1,130.7		8.6		%	6.1		%
LongHorn Steakhouse																		$	669.8		$	604.6		10.8		%	8.1		%
Fine Dining																		$	273.5		$	183.4		49.1		%	(2.8)		%
Other Business																		$	559.4		$	527.4		6.1		%	1.7		%

(1)Same-restaurant sales is a year-over-year comparison of each period’s sales volumes for a 52-week year and is limited to restaurants that have been open, and operated by Darden, for at least 16 months. Accordingly, Ruth’s Chris results will not be included in this calculation until the third quarter of fiscal 2025.

Olive Garden’s sales increase for the first quarter of fiscal 2024 was primarily driven by U.S. same-restaurant sales increases combined with revenue from new restaurants. The increase in U.S. same-restaurant sales for the first quarter of fiscal 2024 resulted from a 5.9 percent increase in average check combined with a 0.3 percent increase in same-restaurant guest counts.

LongHorn Steakhouse’s sales increase for the first quarter and months of fiscal 2024 was primarily driven by same-restaurant sales increases combined with revenue from new restaurants. The increase in same-restaurant sales for the first quarter of fiscal 2024 resulted from a 6.5 percent increase in average check combined with a 1.5 percent increase in same-restaurant guest counts.

Fine Dining’s sales increase for the first quarter of fiscal 2024 was primarily driven by the acquisition of Ruth’s Chris, offset by same restaurant sales decreases. The decrease in same-restaurant sales for the first quarter of fiscal 2024 resulted from a 6.9 percent decrease in same-restaurant guest counts offset by a 4.5 percent increase in average check.

Other Business’ sales increase for the first quarter of fiscal 2024 was primarily driven by same-restaurant sales increases combined with revenue from new restaurants. The increase in same-restaurant sales for the first quarter of fiscal 2024 resulted from a 3.4 percent increase in average check offset by a 1.6 percent decrease in same-restaurant guest counts.

COSTS AND EXPENSES

The following table sets forth selected operating data as a percent of sales for the periods indicated. All information is derived from the unaudited consolidated statements of earnings for the quarters ended August 27, 2023 and August 28, 2022.

									Three Months Ended
															August 27, 2023						August 28, 2022
Sales															100.0		%				100.0		%
Costs and expenses:
Food and beverage															31.2						32.5
Restaurant labor															32.1						32.5
Restaurant expenses															16.4						16.5
Marketing expenses															1.4						1.2
General and administrative expenses															5.6						3.6
Depreciation and amortization															4.0						3.9
Impairments and disposal of assets, net															0.1						(0.2)
Total operating costs and expenses															90.7		%				90.0		%
Operating income															9.3						10.0
Interest, net															1.1						0.8
Earnings before income taxes															8.2						9.2
Income tax expense															1.0						1.3
Earnings from continuing operations															7.1		%				7.9		%

Quarter Ended August 27, 2023 Compared to Quarter Ended August 28, 2022

• Food and beverage costs decreased as a percent of sales primarily due to a 2.0% impact from pricing leverage, partially offset by a 0.4% impact from inflation and a 0.3% impact from mix and other.

• Restaurant labor costs decreased as a percent of sales primarily due to a 1.6% impact from pricing and sales leverage, a 0.3% productivity improvement and a 0.2% impact related to brand mix including Ruth’s Chris, partially offset by a 1.8% impact from inflation.

• Restaurant expenses decreased as a percent of sales primarily due to a 0.8% impact from pricing and sales leverage, partially offset by a 0.5% impact from inflation and a 0.2% impact related to brand mix including Ruth’s Chris.

• Marketing expenses increased as a percent of sales primarily due to increased marketing and media.

• General and administrative expenses increased as a percent of sales primarily due to a 1.0% impact from Ruth’s Chris transaction and integration costs, a 0.5% impact from incentive pay, a 0.3% impact related to stock compensation, and a 0.1% impact related to mark to market adjustments.

• Depreciation and amortization expenses increased as a percent of sales primarily due to the acquisition of Ruth’s Chris.

• Impairment and disposal of assets, net increased as a percent of sales primarily due to four properties that either closed or will close during fiscal 2024 compared to gains on the sale of properties last year.

INTEREST EXPENSE

Net interest expense increased as a percent of sales for the first quarter of fiscal 2024 primarily due interest on the $600 million 3-year Term Loan Credit Agreement for the Ruth’s Chris acquisition.

INCOME TAXES

The effective income tax rate for continuing operations for the quarter ended August 27, 2023 was 12.7 percent compared to an effective income tax rate for the quarter ended August 28, 2022 of 13.7 percent. The decrease in the tax rate is driven by an increase in certain tax credits, primarily attributable to Ruth’s Chris, and higher tax benefits related to option exercises partially offset by certain non-deductible acquisition related costs.

The Inflation Reduction Act (“IRA”) was enacted on August 16, 2022. The IRA includes provisions imposing a 1 percent excise tax on share repurchases that occur after December 31, 2022 and introduces a 15 percent corporate alternative minimum tax (“CAMT”) on adjusted financial statement income. The IRA excise tax and CAMT are immaterial to our consolidated financial statements for the three months ended August 27, 2023.

LOSSES FROM DISCONTINUED OPERATIONS

On an after-tax basis, losses from discontinued operations for the first quarter of fiscal 2024 were $0.3 million ($0.01 per diluted share) compared with losses from discontinued operations for the first quarter of fiscal 2023 of $0.6 million ($0.00 per diluted share).

SEGMENT RESULTS

We manage our restaurant brands, Olive Garden, LongHorn Steakhouse, Cheddar’s Scratch Kitchen, Yard House, Ruth’s Chris, The Capital Grille, Seasons 52, Bahama Breeze, Eddie V’s and The Capital Burger in North America as operating segments. We aggregate our operating segments into reportable segments based on a combination of the size, economic characteristics and sub-segment of full-service dining within which each brand operates. Our four reportable segments are: (1) Olive Garden, (2) LongHorn Steakhouse, (3) Fine Dining and (4) Other Business (see Note 7 to our unaudited consolidated financial statements in Part I, Item 1 of Form 10-Q).

Our management uses segment profit as the measure for assessing performance of our segments. The following table presents segment profit margin1 for the periods indicated.

												Three Months Ended
Segment																								August 27, 2023						August 28, 2022						Change
Olive Garden																								21.4%						19.1%						230		BPS
LongHorn Steakhouse																								17.5%						15.2%						230		BPS
Fine Dining																								14.5%						16.4%						(190)		BPS
Other Business																								15.1%						13.7%						140		BPS
1 Segment profit margin calculated as (sales less costs of food & beverage, restaurant labor, restaurant expenses and marketing expenses) / sales.

The increase in Olive Garden’s segment profit margin for the first quarter of fiscal 2024 was driven primarily by positive same-restaurant sales, lower food and beverage and restaurant labor costs and restaurant expense, partially offset by increased marketing costs. The increase in Longhorn Steakhouse’s segment profit margin for the first quarter of fiscal 2024 was driven primarily by positive same-restaurant sales as well as lower food and beverage, restaurant labor and restaurant expenses. The decrease in Fine Dining’s segment profit margin for the first quarter of fiscal 2024 was driven primarily by negative same-restaurant sales, higher restaurant labor costs and restaurant expenses, partially offset by lower food and beverages costs. The increase in Other Business’ segment profit margin for the first quarter of fiscal 2024 was driven primarily by positive same-restaurant sales, increased franchise revenue with the addition of Ruth’s Chris and lower food and beverage costs, partially offset by increased restaurant labor costs.

SEASONALITY

Our sales volumes fluctuate seasonally. Typically, our average sales per restaurant are highest in the winter and spring, followed by the summer, and lowest in the fall. Holidays, changes in the economy, severe weather, effects of other conditions

may impact sales volumes seasonally in some operating regions. Because of the seasonality of our business, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.

LIQUIDITY AND CAPITAL RESOURCES

Typically, cash flows generated from operating activities are our principal source of liquidity, which we use to finance capital expenditures for new restaurants and to remodel and maintain existing restaurants, to pay dividends to our shareholders and to repurchase shares of our common stock. Since substantially all of our sales are for cash and cash equivalents, and accounts payable are generally paid in 5 to 90 days, we are typically able to carry current liabilities in excess of current assets.

We currently manage our business and financial ratios to target an investment-grade bond rating, which has historically allowed flexible access to financing at reasonable costs. Our publicly issued long-term debt currently carries the following ratings:

• Moody’s Investors Service “Baa2”;

• Standard & Poor’s “BBB”; and

• Fitch “BBB”.

Our commercial paper has ratings of:

• Moody’s Investors Service “P-2”;

• Standard & Poor’s “A-2”; and

• Fitch “F-2”.

These ratings are as of the date of the filing of this Form 10-Q and have been obtained with the understanding that Moody’s Investors Service, Standard & Poor’s and Fitch will continue to monitor our credit and make future adjustments to these ratings to the extent warranted. The ratings are not a recommendation to buy, sell or hold our securities, may be changed, superseded or withdrawn at any time and should be evaluated independently of any other rating.

On September 10, 2021, we entered into a $1 billion Revolving Credit Agreement (Revolving Credit Agreement) with Bank of America, N.A. (BOA), as administrative agent, and the lenders and other agents party thereto. The Revolving Credit Agreement is a senior unsecured credit commitment to the Company and contains customary representations and affirmative and negative covenants (including limitations on liens and subsidiary debt and a maximum consolidated lease adjusted total debt to total capitalization ratio of 0.75 to 1.00) and events of default usual for credit facilities of this type. As of August 27, 2023, we had no outstanding balances and were in compliance with all covenants under the Revolving Credit Agreement. As of August 27, 2023, $95.4 million of commercial paper was outstanding, which was backed by this facility. After consideration of commercial paper backed by the Revolving Credit Agreement, as of August 27, 2023, we had $904.6 million of credit available under the Revolving Credit Agreement.

The Revolving Credit Agreement matures on September 10, 2026, and the proceeds may be used for working capital and capital expenditures, the refinancing of certain indebtedness, certain acquisitions and general corporate purposes.

Effective May 31, 2023, we entered into an amendment to the Revolving Credit Agreement, which (i) replaced the LIBOR-based interest rate applicable to borrowings under the Revolving Credit Agreement with a Term SOFR-based interest rate in advance of the cessation of LIBOR, and (ii) made certain other conforming changes. All other material terms and conditions of the Revolving Credit Agreement were unchanged. Effective May 31, 2023, loans under the Revolving Credit Agreement bear interest at a rate of (a)Term SOFR (which is defined, for the applicable interest period, as the Term SOFR Screen Rate two U.S. Government Securities Business Days prior to the commencement of such interest period with a term equivalent to such interest period) plus a Term SOFR adjustment of 0.10 percent plus the relevant margin determined by reference to a ratings-based pricing grid (Applicable Margin), or (b) the base rate (which is defined as the highest of the BOA prime rate, the Federal Funds rate plus 0.500 percent, and the Term SOFR plus 1.00 percent) plus the relevant Applicable Margin. Assuming a “BBB” equivalent credit rating level, the Applicable Margin under the Revolving Credit Agreement is 1.000 percent for Term SOFR loans and 0.000 percent for base rate loans.

On May 31, 2023, the Company also entered into a senior unsecured $600 million 3-year Term Loan Credit Agreement (Term Loan Agreement) with Bank of America, N.A., as administrative agent, the lenders and other agents party thereto, the material terms of which are consistent with the Revolving Credit Agreement, as amended. The Term Loan Agreement provided for a single borrowing on any business day up to 90 days after May 31, 2023, and matures on the third anniversary of the funding date thereunder, June 14, 2023. We borrowed $600 million under the Term Loan Agreement to fund a portion of the consideration paid in connection with the acquisition of Ruth’s Chris.

As of August 27, 2023, our outstanding long-term debt consisted principally of:

• $600.0 million of unsecured 1-Month Term SOFR senior notes due in June 2026;

• $500.0 million of unsecured 3.850 percent senior notes due in May 2027;

• $96.3 million of unsecured 6.000 percent senior notes due in August 2035;

• $42.8 million of unsecured 6.800 percent senior notes due in October 2037; and

• $300.0 million of unsecured 4.550 percent senior notes due in February 2048.

The interest rate on our $42.8 million senior notes due in October 2037 is subject to adjustment from time to time if the debt rating assigned to such series of notes is downgraded below a certain rating level (or subsequently upgraded). The maximum adjustment is 2.000 percent above the initial interest rate and the interest rate cannot be reduced below the initial interest rate. As of August 27, 2023, no such adjustments are made to this rate.

Through our shelf registration statement on file with the SEC, depending on conditions prevailing in the public capital markets, we may from time to time issue equity securities or unsecured debt securities in one or more series, which may consist of notes, debentures or other evidences of indebtedness in one or more offerings.

From time to time, we or our affiliates, may repurchase our outstanding debt in privately negotiated transactions, open-market transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

From time to time we enter into interest rate derivative instruments. See Note 11 to our unaudited consolidated financial statements in Part I, Item 1 of this report, which is incorporated by reference.

Net cash flows provided by operating activities of continuing operations decreased to $269.1 million for the first three months of fiscal 2024, from $427.8 million for the three months of fiscal 2023. Net cash flows provided by operating activities include net earnings from continuing operations of $194.8 million and $193.6 million in the first three months of fiscal 2024 and 2023, respectively. Net cash flows provided by operating activities decreased in fiscal 2024 primarily due to the change in working capital compared to fiscal 2023.

Net cash flows used in investing activities of continuing operations were $854.2 million for the first three months of fiscal 2024, compared to $118.1 million for the first three months of fiscal 2023. Capital expenditures increased to $150.9 million for the first three months of fiscal 2024 from $122.8 million for the first three months of fiscal 2023 reflecting an increase in new restaurant construction and remodel activity during fiscal 2024. Net cash used in the acquisition of Ruth’s Chris was $699.9 million during fiscal 2024.

Net cash flows provided by financing activities of continuing operations were $409.4 million for the first three months of fiscal 2024, compared to net cash used by financing activities of $345.4 million for the first three months of fiscal 2023. Net cash flows provided by financing activities for the first three months of fiscal 2024 included net proceeds from issuance of short term debt of $95.4 million and proceeds from the Term Loan Agreement of $600.0 million, dividends paid of $158.5 million and share repurchases of $142.9 million. Net cash flows used in financing activities for the first three months of fiscal 2023 included dividends paid of $148.5 million and share repurchases of $199.0 million, partially offset by proceeds from the exercise of employee stock options. Dividends declared by our Board of Directors totaled $1.31 and $1.21 per share for the first three months of fiscal 2024 and 2023, respectively.

On June 22, 2022, our Board of Directors authorized a new share repurchase program under which we may repurchase up to $1 billion of our outstanding common stock. This repurchase program does not have an expiration. During the quarter ended August 27, 2023, we repurchased 0.9 million shares of our common stock, respectively, compared to 1.7 million shares of our common stock, respectively, during the quarter ended August 28, 2022.

We are not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, changes in financial condition, sales, costs or expenses, results of operations, liquidity, capital expenditures or capital resources.

Impairment of our assets, including goodwill or trademarks, adversely affects our financial position and results of operations, and our leverage ratio for purposes of our Revolving Credit Agreement. A leverage ratio exceeding the maximum permitted under our Revolving Credit Agreement would be a default under our Revolving Credit Agreement. At August 27, 2023, write-downs of goodwill, other indefinite-lived intangible assets, or any other assets in excess of approximately $707.8 million would have been required to cause our leverage ratio to exceed the permitted maximum. As our leverage ratio is determined on a quarterly basis, and due to the seasonal nature of our business, a lesser amount of impairment in future quarters could cause our leverage ratio to exceed the permitted maximum.

FINANCIAL CONDITION

Our current assets totaled $835.7 million as of August 27, 2023, compared to $997.7 million as of May 28, 2023. The decrease was primarily due to a decrease in cash and cash equivalents.

Our current liabilities totaled $2.09 billion as of August 27, 2023, compared to $1.94 billion as of May 28, 2023. The increase was primarily driven by an increase in short-term debt as well as an increase in other current liabilities and unearned revenues associated with the acquisition of Ruth’s Chris.

CRITICAL ACCOUNTING ESTIMATES

We prepare our consolidated financial statements in conformity with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales, costs and expenses during the reporting period. Actual results could differ from those estimates. We have discussed the development, selection and disclosure of those estimates with the Audit Committee. Our critical accounting estimates have not changed materially from those previously reported in our Annual Report on Form 10-K for the fiscal year ended May 28, 2023.

APPLICATION OF NEW ACCOUNTING STANDARDS

Information regarding application of new accounting standards is incorporated by reference from Note 1 to our unaudited consolidated financial statements in Part I, Item 1 of this report.

FORWARD-LOOKING STATEMENTS

Statements set forth in or incorporated into this report regarding the expected increase in the number of our restaurants and capital expenditures in fiscal 2024, projections for sales and all other statements that are not historical facts, including without limitation statements with respect to the financial condition, results of operations, plans, objectives, future performance and business of Darden Restaurants, Inc. and its subsidiaries that are preceded by, followed by or that include words such as “may,” “will,” “expect,” “intend,” “anticipate,” “continue,” “estimate,” “project,” “believe,” “plan,” “outlook” or similar expressions, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are included, along with this statement, for purposes of complying with the safe harbor provisions of that Act. Any forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update such statements for any reason to reflect events or circumstances arising after such date. By their nature, forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by such forward-looking statements. In addition to the risks and uncertainties of ordinary business obligations, and those described in information incorporated into this report, the forward-looking statements contained in this report are subject to the risks and uncertainties described in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended May 28, 2023 and in our Forms 10-Q (including this report), which are summarized as follows:

• A failure to address cost pressures, including rising costs for commodities, labor, health care and utilities used by our restaurants, and a failure to effectively deliver cost management activities and achieve economies of scale in purchasing;

• Economic and business factors and their impacts on the restaurant industry and general macroeconomic factors including unemployment, energy prices and interest rates;

• The inability to hire, train, reward and retain restaurant team members and determine and maintain adequate staffing;

• A failure to recruit, develop and retain effective leaders or the loss or shortage of personnel with key capacities and skills;

• Increases in labor and insurance costs;

• Health concerns arising from food-related pandemics, outbreaks of flu, viruses or other diseases;

• Failures to maintain food safety throughout the supply chain and food-borne illness concerns;

• Insufficient guest or employee facing technology or a failure to maintain a continuous or secure cyber network

• Increased costs related to compliance with privacy and data protection laws and government enforcement, litigation or adverse publicity relating to potential failures thereof;

• A failure to successfully integrate Ruth’s Chris Steak House operations into our business.

• Insufficient or ineffective response to legislation or government regulation may impact our cost structure, operational efficiencies and talent availability;

• Intense competition, or an insufficient focus on competition and the consumer landscape;

• Changes in consumer preferences that may adversely affect demand for food at our restaurants;

• An inability or failure to recognize, respond to and effectively manage the accelerated impact of social media;

• A failure to identify and execute innovative marketing and guest relationship tactics and ineffective or improper use of other marketing initiatives and increased advertising and marketing costs;

• Impacts of climate change, adverse weather conditions and natural disasters;

• The inability to cancel long-term, non-cancelable leases that we may want to cancel or the inability to renew the leases that we may want to extend at the end of their terms;

• Our inability or failure to execute a comprehensive business continuity plan following a major natural disaster such as a hurricane or manmade disaster, including terrorism;

• The impact of shortages, delay or interruptions in the delivery of food and other products from third-party vendors and suppliers;

• Our failure to drive both short-term and long-term profitable sales growth through brand relevance, operating excellence, opening new restaurants of existing brands and developing or acquiring new dining brands;

• A lack of suitable new restaurant locations or a decline in the quality of the locations of our current restaurants;

• Higher-than-anticipated costs or delays to open, close, relocate or remodel restaurants;

• Risks associated with doing business with franchisees and licensees;

• Risks associated with doing business with business partners and vendors in foreign markets;

• Volatility in the market value of derivatives we may use to hedge commodity and broader market prices;

• Volatility in the United States equity markets that may affect our ability to efficiently hedge exposures to our market risk related to equity-based compensation awards;

• Failure to protect our service marks or other intellectual property;

• Litigation, including allegations of illegal, unfair or inconsistent employment practices;

• Unfavorable publicity, or a failure to respond effectively to adverse publicity;

• Disruptions in the financial markets that may impact consumer spending patterns, affect the availability and cost of credit;

• Impairment of the carrying value of our goodwill or other intangible assets;

• Changes in tax laws or treaties and unanticipated tax liabilities; and

• A failure of our internal controls over financial reporting and future changes in accounting standards.

Any of the risks described above or elsewhere in this report or our other filings with the SEC could have a material impact on our business, financial condition or results of operations. It is not possible to predict or identify all risk factors. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also impair our business operations. Therefore, the above is not intended to be a complete discussion of all potential risks or uncertainties.