What is the potential impact of cyber incidents on Benihana's information technology systems?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
is the negative impact on our business that such conditions might cause. Catastrophic weather conditions are likely to affect the supply of and costs for food products. If we do not anticipate or react to changing food costs by adjusting our purchasing practices or menu prices, our operating margins would likely deteriorate.
Terrorism, including cyber-terrorism or efforts to tamper with food supplies, could have an adverse impact on our brand and results of operations.
Security breaches, loss of data and other disruptions could compromise sensitive information related to our business, prevent us from accessing critical information or expose us to liability, which could adversely affect our business and our reputation
We utilize information technology systems and networks to process, transmit and store electronic information in connection with our business activities. As the use of digital technologies has increased, cyber incidents, including deliberate attacks and attempts to gain unauthorized access to computer systems and networks, have increased in frequency and sophistication. These threats pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data, all of which are vital to our operations and business strategy. There can be no assurance that we will be successful in preventing cyber-attacks or successfully mitigating their eff
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, cyber incidents pose a significant threat to the company's operations. Benihana utilizes information technology systems and networks to manage various aspects of its business, including processing transactions, transmitting data, and storing electronic information. As digital technologies become more prevalent, the frequency and sophistication of cyber incidents, such as deliberate attacks and unauthorized access attempts, have increased. These incidents can compromise the security of Benihana's systems and networks, as well as the confidentiality, availability, and integrity of its data, which are crucial for its operations and business strategy. While Benihana takes measures to prevent and mitigate cyber-attacks, there is no guarantee of complete success.
If Benihana experiences security breaches, data loss, or other disruptions, sensitive information related to its business could be compromised. This could prevent the company from accessing critical information or expose it to liability, which could adversely affect its business and reputation. A significant portion of Benihana's sales, approximately 80%, are processed through credit or debit cards, making it vulnerable to claims arising from fraudulent transactions due to actual or alleged theft of credit or debit card information. The company may also face lawsuits or other proceedings related to these types of incidents.
Benihana also relies on third-party providers whose information technology systems and databases are subject to similar risks. Breaches of these systems could result in unauthorized access, theft, use, destruction, or other compromises of customer or employee data, or confidential information. This could lead to a material loss of revenues due to damage to Benihana's reputation and brand, a decrease in customer retention and acquisition, significant costs (including data loss or recovery expenses), business loss, and disruption to the supply chain, business operations, and strategic plans. The company's logging capabilities, or those of its third-party providers, may not always be complete or sufficiently detailed, which could affect its ability to fully understand the scope of security breaches.
To mitigate these risks, Benihana has implemented a program managed by its Chief Information Officer, which includes mechanisms, controls, technologies, systems, policies, and other processes designed to prevent or mitigate data loss, theft, misuse, or other security incidents. These measures include risk-based penetration and vulnerability testing, ongoing risk assessments, and employee training on cyber and information security. Benihana also consults with outside advisors and experts to assess and manage cybersecurity risks. Additionally, the company outsources intrusion detection, intrusion prevention, and system incident and event monitoring to a cybersecurity firm. The Audit Committee of the Board of Directors oversees cybersecurity risks, receiving regular updates and reviews with management on the implementation and effectiveness of controls to monitor and mitigate these risks.