Black Rock Coffee Bar, Inc.

Location · Primary Function(s) · Square Feet

Tempe, AZ · Roasting and warehouse facility · 9,286

Scottsdale, AZ · Headquarters office space · 5,251

Lake Oswego, OR · Office space · 6,079

Vancouver, WA · Roasting and warehouse facility · 14,676

Our principal executive offices are located at 9170 East Bahia Drive, Scottsdale, Arizona, 85260. We believe our current facilities are suitable for our near-term needs. In addition, we expect to continue to add additional capacity on an as-needed basis.

For additional information regarding leases, see Note 2 (Basis of Presentation and Summary of Significant Accounting Policies) and Note 8 (Leases) in the audited consolidated financial statements included in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K.

• Tariffs on certain imports to the United States and other potential changes to U.S. trade policy could have a material adverse effect on our business, results of operations, prospects and financial condition.
• Increases or sustained inflation in the cost of high-quality arabica coffee beans, dairy or other commodities or decreases in the availability of high-quality arabica coffee beans, dairy or other commodities could have an adverse impact on our business and financial results.
• We may not successfully optimize, operate and manage our roasting facilities, which could have an adverse impact on our business and financial results.
• We are subject to the risks associated with leasing property.
• Our stores are geographically concentrated in the Western United States and Texas, and we could be negatively affected by conditions specific to those regions.
• We face potential liability with our gift cards under the property laws of some states.
• Risks Related to Our Brand
• Our brand is core to our success, and damage to our brand or reputation and negative publicity could negatively impact our business, financial condition and results of operations.
• If we fail to offer high-quality guest experience, our business and reputation will suffer.
• Our inability or failure to utilize, recognize, respond to, and effectively manage social media could have a material adverse effect on our business.
• We are subject to evolving rules and regulations with respect to ESG matters.
• Risks Related to People and Culture
• We believe our culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose employee engagement, which could harm our business and reputation.
• Our inability to identify, recruit and retain qualified individuals for our stores could slow our growth and adversely impact our ability to operate.
• Changes in the cost of labor could harm our business.
• Unionization activities may disrupt our operations and affect our results of operations.
• We depend on Jeff Hernandez and Daniel Brand (two of our Co-Founders), executive officers and other key employees, and the loss of one or more of these employees or an inability to attract and retain other highly skilled employees could harm our business.
• Risks Related to Information Technology Systems, Cybersecurity, Data Privacy and Intellectual Property
• If we or our third-party providers experience failures, outages, or sub-standard performance of our information technology systems, our operations could be disrupted and there may be damage to our business, reputation, results of operations, and financial condition.
• We are subject to cybersecurity risks and may incur increasing costs in an effort to minimize those risks, which efforts may or may not be effective. Security incidents may result in legal and financial exposure and reputational harm.
• Compliance with evolving federal and state laws and other requirements relating to data privacy is costly, and any failure by us or our vendors to comply may result in significant liability, negative publicity, and/or an erosion of trust, which could materially adversely affect our business, reputation, results of operations, and financial condition.
• We may not be able to adequately protect our intellectual property and we may become engaged in intellectual property-related disputes or litigation, any of which could harm the value of our brand and adversely affect our business, reputation, financial condition, and results of operations.
• Our use of AI may adversely impact our business, reputation, financial condition, and results of operations.
• If we or our vendors are unable to protect our guests’ credit and debit card data or other confidential information in connection with processing the same or our employees’ confidential information, we could be exposed to data loss, litigation, liability and reputational damage.
• We are subject to payment-related requirements and fraud, and any increase in or our failure to deal effectively with payment-related requirements or fraud, fraudulent activities, fictitious transactions, or illegal transactions would materially and adversely affect our business, results of operations, and financial condition.
• Risks Related to Regulation and Litigation
• We are subject to many federal, state and local laws with which compliance is both costly and complex.
• Beverage and restaurant companies have been the target of class action lawsuits and other proceedings that are costly, divert management attention and, if successful, could result in our payment of substantial damages or settlement costs.
• Legislation and regulations requiring the display and provision of nutritional information for our menu offerings could affect consumer preferences and negatively impact our business, financial condition and results of operations.
• Changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our results of operations and financial condition.
• Risks Related to Our Organizational Structure
• Our principal asset is our interest in Black Rock OpCo, and, as a result, we depend on distributions from Black Rock OpCo to pay our taxes and expenses (including payments under the Tax Receivable Agreement) and pay dividends, if any. Black Rock OpCo’s ability to make such distributions is subject to various limitations and restrictions.
• The Tax Receivable Agreement with Black Rock OpCo and the TRA Parties requires us to make cash payments to the TRA Parties in respect of certain tax benefits to which we may become entitled, and we expect that such payments will be substantial.
• Our organizational structure, including the Tax Receivable Agreement, confers certain benefits upon the Continuing Equity Owners that do not benefit holders of our Class A common stock to the same extent that they benefit the Continuing Equity Owners.
• In certain cases, payments under the Tax Receivable Agreement to the TRA Parties may be accelerated or significantly exceed any actual benefits we realize in respect of the tax attributes subject to the Tax Receivable Agreement.
• We will not be reimbursed for any payments made to the TRA Parties under the Tax Receivable Agreement in the event that any tax benefits are disallowed.
• The acceleration of payments under the Tax Receivable Agreement in the case of certain changes of control may impair our ability to consummate change of control transactions or negatively impact the value received by owners of our Class A common stock.
• If we were deemed to be an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”), as a result of our ownership of Black Rock OpCo, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business.
• Risks Related to Our Indebtedness
• Our outstanding indebtedness could materially adversely affect our financial condition and our ability to operate our business, pursue our growth strategy, and react to changes in the economy or industry.
• Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.
• Restrictions imposed by our outstanding indebtedness and any future indebtedness may limit our ability to operate our business, execute our growth strategy, and to finance our future operations or capital needs or to engage in other business activities.
• We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
• Risks Related to the Ownership of Our Class A Common Stock
• We cannot predict the impact our multi-class structure may have on the market price of our Class A common stock.
• Our Co-Founders and Sponsor have significant influence over us, which could limit your ability to influence the outcome of matters submitted to shareholders for a vote.
• We are a “controlled company” within the meaning of Nasdaq rules and, as a result, qualify for, and rely on, exemptions and relief from certain corporate governance requirements. Our shareholders do not have the same protections afforded to shareholders of companies that are subject to such requirements.
• An entity affiliated with our Co-Founders has entered into a margin loan and pledged LLC Units and underlying shares of our Class C common stock as collateral to secure such margin loan. If this entity were to default on its obligations under the margin loan, the lender may be entitled to foreclose on the LLC Units and shares pledged as collateral and sell the Class A common stock issuable upon the automatic exchange of such shares to the public, which could cause our stock price to decline and result in a significant change in beneficial ownership and voting power of our common stock.
• One of our directors has a relationship with our Sponsor, which may cause conflicts of interest with respect to our business.
• Our amended and restated certificate of formation provides that the doctrine of “corporate opportunity” does not apply with respect to any director or shareholder who is not employed by us or our subsidiaries.
• Provisions in our corporate charter documents and under Texas law may prevent or frustrate attempts by our shareholders to change our management or hinder efforts to acquire a controlling interest in us, and the market price of our Class A common stock may be lower as a result.
• Our amended and restated certificate of formation provides that the Business Court in the First Business Court Division of the State of Texas and, to the extent enforceable, the federal district courts of the United States of America are the exclusive forums for substantially all disputes between us and our shareholders, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or shareholders.
• Additional stock issuances (including pursuant to the redemption of LLC Units from our Continuing Equity Owners) could result in significant dilution to our shareholders and cause the trading price of our Class A common stock to decline.
• Future sales, or the perception of future sales, by us or our existing shareholders in the public market could cause the market price for our Class A common stock to decline.
• Our trading price and trading volume could decline if securities or industry analysts do not publish research about our business, or if they publish unfavorable research.
• We do not intend to pay dividends for the foreseeable future.
• The JOBS Act allows us to postpone the date by which we must comply with certain laws and regulations intended to protect investors and to reduce the amount of information we provide in our reports filed with the SEC. We cannot be certain if this reduced disclosure will make our Class A common stock less attractive to investors.
• If in the future we identify material weaknesses or otherwise fail to establish and maintain effective internal controls, we may be unable to produce timely and accurate financial statements, and we may conclude that our internal control over financial reporting is not effective, which could adversely impact our investors’ confidence and our Class A common stock price.
• General Risks
• Our financial condition and results of operations are subject to, and may be adversely affected by, a number of economic or political factors, many of which are also largely outside our control and as such our results may fluctuate significantly and may not fully reflect the underlying performance of our business.
• Unstable market and economic conditions that are largely beyond our control may adversely affect consumer behavior and the results of our operations.
• Changes in statutory, regulatory, accounting, and other legal requirements, including changes in accounting principles generally accepted in the United States, could potentially impact our operating and financial results.
• As a newly public company, we incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies in the United States, which may harm our business.
• A failure to establish and maintain an effective system of disclosure controls and internal control over financial reporting, could adversely affect our ability to produce timely and accurate financial statements or comply with applicable regulations.
• We may engage in merger and acquisition activities or strategic partnerships, which could require significant management attention, disrupt our business, dilute shareholder value, and adversely affect our business, results of operations, and financial condition.
• We may need additional capital, and we cannot be sure that additional financing will be available.
• Catastrophic events may disrupt our business.