766004--3/31/2008--SBARRO

related topics

{financial, litigation, operation}

{personnel, key, retain}

{debt, indebtedness, cash}

{acquisition, growth, future}

{stock, price, operating}

{cost, regulation, environmental}

{customer, product, revenue}

{cost, operation, labor}

{control, financial, internal}

{property, intellectual, protect}

{competitive, industry, competition}

{tax, income, asset}

Risks Relating to Our Business The success of our business is dependent on a number of factors that are not within our control. The success of our growth strategy will depend, in part, upon our ability to expand our franchise operations. Our growth strategy requires us to extend the Sbarro concept into other high-pedestrian-traffic venues. We operate in a highly competitive environment against strong competition. The availability, quality and cost of our ingredients fluctuate, which affects our financial results. Increases in labor and occupancy costs could effect our profitability. We are dependent on obtaining and retaining attractive high-pedestrian-traffic locations. Negative publicity relating to one of our restaurants, including our franchised restaurants, could reduce sales at some or all of our other restaurants. Food-borne illness incidents could result in liability to us and could reduce our restaurant sales. We rely on one national independent wholesale distributor and replacing it could disrupt the flow of our food products and supplies. Our business is subject to governmental regulation. We depend on our senior management and other key employees. Our results of operations fluctuate due to the seasonality of our business. We may, in the future, incur goodwill, trademark, franchise relationship, franchise agreements and other asset impairment charges. We may not be able to protect our trademarks and other proprietary rights. Employment and workplace-related complaints or litigation may hurt us. We are implementing internal control procedures necessary to comply with the Sarbanes-Oxley Act of 2002, and will incur significant costs without assurance that the procedures and controls we implement will be cost effective. We are now controlled by MidOcean and its interests as an equity holder may conflict with creditor interests. Our substantial indebtedness could adversely affect our financial health and prevent us from fulfilling our obligations under the Senior Notes and our other financial obligations. Despite current indebtedness levels, we and our subsidiaries may still be able to incur substantially more debt. This could further exacerbate the risks associated with our substantial leverage.

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766004--3/31/2008--SBARRO_INC