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Item 7. Management’s Discussion and Analysis

2026-02-23 compared with 2025-02-24 · 98 added, 80 removed, 222 unchanged (45% of the section changed)

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We utilize a 52/53-week fiscal year ending on the Tuesday closest to December 31 for financial reporting purposes.

Fiscal years 2024 and 2023 each consisted of 52 weeks, while fiscal year 2022 consisted of 53 weeks.

Fiscal years 2025, 2024 and 2023 each consisted of 52 weeks.

Fiscal year 2026 will consist of 52 weeks.

The following MD&A includes a discussion comparing our results in fiscal 2025 to fiscal 2024.

For a discussion comparing our results from fiscal 2023 to fiscal 2022, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended January 2, 2024, filed with the SEC on February 26, 2024.

For a discussion comparing our results from fiscal 2024 to fiscal 2023, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 24, 2025.

Geopolitical and Other Macroeconomic Impacts to our Operating Environment

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Our commodity and wage inflationary environment began returning to more historical levels in fiscal 2024.

The impact of ongoing geopolitical and macroeconomic events could lead to further wage inflation, product and services cost inflation, disruptions in the supply chain, staffing challenges, shifts in consumer behavior, and delays in new restaurant openings.

The impact of ongoing geopolitical and macroeconomic events, including evolving government policies and global trade and tariff dynamics, could lead to further wage inflation, product and services cost inflation, disruptions in the supply chain, staffing challenges, shifts in consumer behavior, and delays in new restaurant openings.

Adverse weather conditions and natural disasters may further exacerbate a number of these factors.

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We are culinary forward and relentlessly focused on hospitality.

We currently own and operate 352 restaurants throughout the United States and Canada under brands including The Cheesecake Factory ® (215 locations), North Italia ® (43 locations), Flower Child ® (38 locations) and additional brands within our FRC portfolio (49 locations).

As of February 23, 2026, we owned and operated 368 restaurants throughout the United States and Canada under brands including The Cheesecake Factory ® (216 locations), North Italia ® (48 locations), Flower Child ® (43 locations) and additional brands within our FRC portfolio (55 locations).

Internationally, 35 The Cheesecake Factory ® restaurants operate under licensing agreements.

Our bakery division operates two facilities that produce quality cheesecakes and other baked products for our restaurants, international licensees and third-party bakery customers.

Our strategy is driven by our commitment to customer satisfaction and is focused primarily on menu innovation, service and operational execution to differentiate ourselves from other restaurant concepts, and drive competitively strong performance that is sustainable.

Financially, we are focused on prudently managing expenses at our restaurants, bakery facilities and corporate support center, and leveraging our size to make the best use of our purchasing power.

Our strategy is driven by our commitment to deliver exceptional food and hospitality, and is centered primarily on menu innovation, service and operational execution to differentiate our concepts and drive competitively strong performance that is sustainable over the long-term.

Financially, we are focused on prudently managing expenses at our restaurants, bakery facilities and corporate support center, while leveraging our scale, purchasing power and operational discipline to support financial performance.

Investing in new Company-owned restaurant development is our top long-term capital allocation priority, with a focus on opening our concepts in premier locations within both new and existing markets.

We plan to continue expanding The Cheesecake Factory, North Italia and Flower Child concepts.

In addition, our FRC subsidiary serves as an incubator, innovating new food, dining and hospitality experiences to create fresh, exciting concepts.

In addition, our FRC subsidiary serves as an incubator, innovating new food, dining and hospitality experiences to create differentiated, high-quality concepts.

Our revenue growth is primarily driven by new restaurant openings and increases in comparable restaurant sales.

For The Cheesecake Factory concept, our strategy is to increase comparable restaurant sales by growing average check and maintaining customer traffic through (1) continuing to offer innovative, high quality menu items that offer customers a wide range of options in terms of flavor, price and value, (2) focusing on service and hospitality with the goal of delivering an exceptional dining

experience and (3) continuing to provide our customers with convenient options for off-premise dining.

For The Cheesecake Factory concept, our strategy is to increase comparable restaurant sales by growing average check while maintaining customer traffic through (1) continuing to offer innovative, high quality menu items that offer customers a wide range of options in terms of flavor, price and value, (2) focusing on service and hospitality with the goal of delivering an exceptional dining experience and (3) continuing to provide our customers with convenient options for off-premise dining.

We are continuing our efforts on a number of initiatives, including menu innovation, increasing customer throughput in our restaurants, leveraging our gift card program, partnering with a third party to provide delivery services for our restaurants, increasing customer awareness of our online ordering capabilities and improving the pick-up experience, augmenting our marketing programs, including our Cheesecake Rewards ® program, enhancing our training programs and leveraging insights from our customer satisfaction measurement platform.

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Prior to fiscal 2022, we targeted menu price increases of approximately 2% to 3% annually, utilizing a market-based strategy to help mitigate cost pressure in higher-wage geographies.

In fiscal years 2023 and 2024, we implemented price increases above our historical levels, to help offset significant inflationary cost pressures.

In the last three fiscal years, we implemented price increases above our historical levels, to help offset significant inflationary cost pressures.

We will continue to take the cost and inflationary environment into consideration when implementing future pricing decisions.

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Margins are subject to fluctuations in commodity costs, labor, restaurant-level occupancy expenses, general and administrative (“G&A”) expenses and preopening expenses.

Our objective is to drive margin expansion, by leveraging incremental sales to increase restaurant-level margins at The Cheesecake Factory concept, leveraging our bakery operations, international and consumer packaged goods royalty revenue streams and G&A expense over time, and optimizing our restaurant portfolio.

We plan to employ a balanced capital allocation strategy, comprised of investing in new restaurants that are expected to meet our targeted returns, repaying borrowings under our Revolver Facility and returning capital to shareholders through our dividend and share repurchase programs, the latter of which offsets dilution from our equity compensation program and supports our earnings per share growth.

Future decisions to pay or to increase or decrease dividends or to repurchase shares are at the discretion of the Board and will be dependent on a number of factors, including limitations pursuant to the terms and conditions of the Loan Agreement and applicable law.

Our objective is to drive margin expansion over time by leveraging incremental sales to increase restaurant-level margins at The Cheesecake Factory concept, leveraging our bakery operations, international and consumer packaged goods royalty revenue streams and G&A expense, and optimizing our restaurant portfolio.

We plan to employ a balanced capital allocation strategy, comprised of investing in new restaurants that are expected to meet our targeted returns, managing our aggregate debt levels and returning capital to shareholders through our dividend and share repurchase programs, the latter of which offsets dilution from our equity compensation program and supports our earnings per share growth.

Future decisions to pay, increase or decrease dividends or to repurchase shares are at the discretion of the Board and will be dependent on a number of factors, including limitations pursuant to the terms and conditions of our Loan Agreement and applicable law.

Longer-term, we believe our domestic revenue growth (comprised of our targeted annual unit growth of 7% in aggregate across concepts and comparable sales growth) combined with margin expansion, planned debt repayments and an anticipated capital return program will support our long-term financial objective of 10% to 15% total return to shareholders, on average.

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Interest expense, net

Loss on extinguishment of debt

Other income, net

Income before income taxes

Income tax provision/(benefit)

Income tax provision

Fiscal 2025 Compared to Fiscal 2024

Revenues increased 4.1% to $3,581.7 million for fiscal 2024 compared to $3,439.5 million for fiscal 2023, primarily due to additional revenue related to new restaurant openings and an increase in comparable restaurant sales.

Revenues increased 4.7% to $3,751.8 million for fiscal 2025 compared to $3,581.7 million for fiscal 2024, primarily due to additional revenue related to new restaurant openings.

As part of our annual assessment of gift card breakage during fiscal 2025, we had a change in historical redemption pattern related to gift cards and aligned the recognition of gift card breakage to the updated estimated redemption pattern.

As a result, in fiscal 2025, we recognized $17.3 million of additional gift card breakage.

The Cheesecake Factory sales increased 1.0% to $2,688.8 million for fiscal 2025 compared to $2,661.6 million for fiscal 2024.

The Cheesecake Factory average sales per restaurant operating week increased 0.7% to $237,349 in fiscal 2024 from $235,701 in fiscal 2023.

Total operating weeks at The Cheesecake Factory restaurants increased 1.9% to 11,214 in fiscal 2024 compared to 11,010 in the comparable prior year period.

Excluding the impact of the additional gift card breakage recognized in fiscal 2025 (as discussed above), The Cheesecake Factory average sales per restaurant operating week increased 0.3% to $238,146 in fiscal 2025 from $237,349 in fiscal 2024.

Total operating weeks at The Cheesecake Factory restaurants remained relatively flat with 11,218 in fiscal 2025 and 11,214 in the comparable prior year period.

The Cheesecake Factory comparable sales increased by 0.1%, or $2.2 million, from fiscal 2024.

The increase from fiscal 2024 was primarily driven by an increase in average check of 2.4% (based on an increase of 4.3% in menu pricing, partially offset by a 1.9% negative change from menu mix), partially offset by decreased customer traffic of 2.3%.

We implemented effective menu price increases of approximately 2.5% and 2.0% in the first and third quarters of fiscal 2024, respectively.

We are in the process of implementing an approximate 2.4% price increase in the first quarter of fiscal 2025.

Sales through the off-premise channel comprised approximately 21% of our restaurant sales during fiscal 2024 as compared to 22% in fiscal 2023.

We implemented menu price increases of approximately 2.4% and 1.5% in the first and third quarters of fiscal 2025, respectively.

We are in the process of implementing an approximate 1.5% menu price increase in the first quarter of fiscal 2026.

Sales through the off-premise channel comprised approximately 21% of our restaurant sales during both fiscal 2025 and fiscal 2024.

We account for each off-premise order as one customer for traffic measurement purposes.

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North Italia average sales per restaurant operating week decreased 0.9% to $146,877 in fiscal 2025 from $148,231 in fiscal 2024.

Average sales per restaurant operating week are impacted by the acceleration of new restaurant openings that have not matured.

Average sales per restaurant operating week were impacted by the acceleration of new restaurant openings that have not matured.

Total operating weeks at North Italia increased 16.5% to 2,355 in fiscal 2025 compared to 2,021 in the prior year.

North Italia comparable sales increased approximately 2% from fiscal 2023.

The increase from fiscal 2023 was primarily driven by an increase in average check of approximately 3% (based on an increase of 6% in menu pricing, partially offset by a 3% negative impact from mix), partially offset by decreased customer traffic of 1%.

We implemented effective menu price increases of approximately 2.2% and 2.3% in the second and fourth quarters of fiscal 2024, respectively.

North Italia comparable sales decreased approximately 2% from fiscal 2024.

The decrease from fiscal 2024 was primarily driven by decreased customer traffic of 5%, partially offset by an increase in average check of 3% (based on an increase of 4% in menu pricing, partially offset by a 1% negative impact from mix).

We implemented menu price increases of approximately 2.0% and 1.5% in the second and fourth quarters of fiscal 2025, respectively.

Flower Child sales increased 27.8% to $185.3 million for fiscal 2025 compared to $145.0 million for fiscal 2024.

Flower Child sales per restaurant operating week increased 4.0% to $87,684 in fiscal 2025 from $84,351 in fiscal 2024.

Total operating weeks

at Flower Child increased 7.5% to 1,719 in fiscal 2024 compared to 1,599 in the prior year.

Total operating weeks at Flower Child increased 22.9% to 2,113 in fiscal 2025 compared to 1,719 in the prior year.

Flower Child comparable sales increased approximately 5% from fiscal 2024.

The increase from fiscal 2024 includes an increase of 3% in menu pricing.

Other FRC sales increased 13.7% to $300.0 million for the fiscal 2024 compared to $263.9 million for fiscal 2023.

Other FRC average sales per restaurant operating week decreased 4.3% to $132,495 in fiscal 2024 from $138,469 in fiscal 2023.

Average sales per restaurant operating week are impacted by new restaurant openings as well as the concept mix.

Other FRC sales increased 18.4% to $355.1 million for fiscal 2025 compared to $300.0 million for fiscal 2024.

Other FRC average sales per restaurant operating week increased 0.2% to $132,733 in fiscal 2025 from $132,495 in fiscal 2024.

Average sales per restaurant operating week are impacted by new restaurant openings as well as the concept mix and a decrease in comparable sales.

Total operating weeks at Other FRC increased 18.2% to 2,675 in fiscal 2025 compared to 2,264 in the prior year.

Restaurants become eligible to enter the comparable sales base in their 19 th month of operation.

At December 31, 2024, there were eight The Cheesecake Factory restaurants and nine North Italia restaurants not yet in the comparable sales bases.

At December 30, 2025, there were seven The Cheesecake Factory restaurants, nine North Italia restaurants and 11 Flower Child locations not yet in the comparable sales bases.

International licensed locations and restaurants that are no longer in operation, including those which we have relocated, are excluded from comparable sales calculations.

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Food and beverage costs consist of raw materials and ingredients used in the food and beverage products sold in our restaurants and to our third-party bakery customers.

As a percentage of revenues, food and beverage costs were 22.5% for fiscal 2024 compared to 23.4% for fiscal 2023, due primarily to menu price increases in excess of inflation across most categories (0.5%) and a shift in sales mix (0.2%).

As a percentage of revenues, food and beverage costs were 21.7% for fiscal 2025 compared to 22.5% for fiscal 2024, due primarily to favorable commodity inflation across most categories (0.5%) and a shift in sales mix (0.2%).

The Cheesecake Factory restaurant menus are among the most diversified in the foodservice industry and, accordingly, are not overly dependent on a few select commodities.

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As a percentage of revenues, labor expenses, which include restaurant-level labor costs and bakery production labor, including associated fringe benefits, were 35.0% and 35.3% in fiscal 2025 and fiscal 2024, respectively.

This decrease was primarily due to menu price increases in excess of wage rate inflation (0.6%), partially offset by higher management salaries due to improved staffing levels (0.2%).

This decrease was primarily due to menu price increases in excess of wage rate inflation and improved staffing levels (0.5%) and the benefit from gift card breakage revenue (0.2%), partially offset by higher group medical cost due to larger claim activity (0.3%).

For new restaurants, labor expenses are typically higher for a period of time after opening while our management team becomes more accustomed to predicting and managing the sales volumes at the new restaurants.

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As a percentage of revenues, other operating costs and expenses were 27.0% and 26.7% in fiscal 2025 and fiscal 2024, respectively.

This variance was primarily driven by higher facility-related costs (0.2%).

G&A expenses consist of the restaurant management recruiting and training program, restaurant field supervision, corporate support and bakery administrative organizations, as well as gift card commissions to third-party distributors.

As a percentage of revenues, G&A expenses were 6.5% and 6.4% for fiscal 2025 and fiscal 2024, respectively.

This variance was primarily driven by a write-down of gift card inventory in fiscal 2025 (0.2%).

Impairment of Assets and Lease Termination Expenses

During fiscal 2025, we recorded $23.0 million of expense primarily related to the impairment of long-lived assets for one North Italia, one Grand Lux Cafe and four Other FRC locations (one previously partially impaired) and lease termination expense, net related to two Grand Lux Cafes (one that closed in fiscal 2023 and one that closed in early 2026) and one Other FRC (that closed in early 2026).

During fiscal 2024, we recorded impairment of assets and lease terminations expense of $13.6 million primarily related to impairment of long-lived assets for one The Cheesecake Factory (previously partially impaired) and six Other FRC locations (one previously partially impaired), partially offset by lease termination income, net for four The Cheesecake Factory restaurants (including two relocations), one Grand Lux Cafe location, one Flower Child location, one Social Monk location and one Other FRC location (that closed in early fiscal 2025).

During fiscal 2023, we recorded impairment of assets and lease termination expenses of $29.5 million primarily related to the impairment of long-lived assets for three The Cheesecake Factory (one previously partially impaired), one North Italia (previously partially impaired), one Other FRC and two Grand Lux Cafe lease terminations.

See Notes 1 and 6 of Notes to Consolidated Financial Statements in Part 1V, Item 15 of this report for further discussion of our long-lived and intangible assets.

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We recorded $14.4 million and $2.4 million of expense during fiscal 2025 and 2024, respectively, of acquisition-related contingent consideration, compensation and amortization.

In fiscal 2024, we recorded $4.3 million of amortization, partially offset by a $1.9 million decrease in the fair value of the contingent consideration and compensation liability primarily stemming from a change in the volatility factors, as well as a decrease in fiscal 2025 revenues and estimated future revenues utilized in the calculation.

In fiscal 2023, there was a $7.3 million increase in the fair value primarily stemming from a change in the volatility factors, as well as an increase in fiscal 2023 revenues and estimated future revenues utilized in the calculation and $4.4 million of amortization.

In fiscal 2025, we recorded a $10.5 million increase in the fair value of the contingent consideration and compensation liability primarily stemming from updating the probability of achievement due to passage of time as well as recent performance and $3.9 million of amortization.

In fiscal 2024, we recorded $4.3 million of amortization, partially offset by a $1.9 million decrease in the fair value of the contingent consideration and compensation liability primarily stemming from a change in the volatility factors, as well as a decrease in estimated fiscal 2025 revenues and future revenues utilized in the calculation.

Preopening Costs

Preopening costs were $33.1 million for fiscal 2025 compared to $27.5 million for fiscal 2024.

We opened 23 restaurants in fiscal 2024 comprised of three The Cheesecake Factory (including two relocations), six North Italia, eight Other FRC, and six Flower Child locations compared to 16 restaurants in fiscal 2023 comprised of six The Cheesecake Factory, three North Italia, six Other FRC, and one Flower Child location.

We opened 25 restaurants in fiscal 2025 comprised of four The Cheesecake Factory, six North Italia, nine Other FRC, and six Flower Child locations compared to 23 restaurants in fiscal 2024 comprised of three The Cheesecake Factory (including two relocations), six North Italia, eight Other FRC, and six Flower Child locations.

Restaurant-level preopening costs include all costs to relocate and compensate restaurant management staff members during the preopening period, costs to recruit and train hourly restaurant staff members, and wages, travel and lodging costs for our opening training team and other support staff members.

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Preopening costs can fluctuate significantly from period to period based on the number, mix and timing of restaurant openings and the specific preopening costs incurred for each restaurant.

Income Tax Provision/(Benefit)

In fiscal 2024, we had an income tax provision of $14.3 million, an effective tax rate of 8.3%, compared to an income tax benefit of $1.3 million, an effective tax rate of (1.3%) in fiscal 2023.

The increase was primarily due to leverage on higher income before taxes, predominantly related to employment credits, (11.3%) and a larger amount of non-deductible executive compensation (0.5%).

These factors were offset by a larger reduction to our reserve for uncertain tax positions (0.7%) and a higher amount of employment tax credits (1.5%).

(See Note 17 of Notes to Consolidated Financial Statement in Part IV, Item 15 of this report for further discussion of income taxes.)

Loss on Extinguishment of Debt

In fiscal 2025, we recorded a $15.9 million loss on early debt extinguishment.

On February 28, 2025, we repurchased approximately $276.0 million aggregate principal amount of the 2026 Notes (as defined below) for aggregate consideration of $289.8 million, which included a premium of $13.8 million.

The repurchase was accounted for as a debt extinguishment.

In addition, we recorded $2.1 million of unamortized issuance costs.

(See Note 10 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion on our debt.)

Income Tax Provision

In fiscal 2025, we had an income tax provision of $14.5 million, an effective tax rate of 8.9%, compared to an income tax provision of $14.3 million, an effective tax rate of 8.3%, in fiscal 2024.

The increase was primarily due to a change to our reserve for uncertain tax positions (2.0%), non-deductible costs in fiscal 2025 associated with the repurchase of our 2026 Notes (1.6%) and a larger amount of non-deductible executive compensation (0.6%).

These factors were offset by leverage on lower income before taxes, predominantly related to employment credits (0.9%), a tax windfall in fiscal 2025 as compared to a tax shortfall in fiscal 2024 related to equity compensation (2.2%) and lower state taxes in relation to income before taxes (0.3%).

(See Note 17 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of income taxes.)

Non-GAAP Measures

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Acquisition-related contingent consideration, compensation and amortization expenses

Gift card adjustment, net (1)

Loss on extinguishment of debt (2)

Uncertain tax positions (3)

Tax effect of adjustments (4)

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Acquisition-related contingent consideration, compensation and amortization expenses

Gift card adjustment, net (1)

Loss on extinguishment of debt (2)

Uncertain tax positions (3)

Tax effect of adjustments (4)

Adjusted diluted net income per common share (5)

(1) Represents gift card breakage revenue of $17.3 million as a result of a change in historical redemption patterns, partially offset by a non-recurring $7.9 million write-down of gift card inventory.

(2) See Note 10 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion on our debt.

(3) Represents a reserve for uncertain tax position related to tenant improvement allowances and Section 199 deductions.

Uncertain tax positions taken in a tax return are recognized in the financial statements when it is more likely than not that the position will be sustained upon examination by tax authorities based on technical merits, taking into account available administrative remedies and litigation.

(4) Based on the federal statutory rate and an estimated blended state tax rate, the tax effect on all adjustments assumes a 26% tax rate.

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Interest expense, net

Income tax provision/(benefit)

Income tax provision

Impairment of assets and lease termination expenses

Acquisition-related contingent consideration, compensation and amortization expenses

Gift card adjustment, net

Loss on extinguishment of debt

Stock-based compensation (1)

Adjusted EBITDA

(1) See Note 15 of Notes to Consolidated Financial Statement in Part IV, Item 15 of this report for further discussion of stock-based compensation.

(1) See Note 15 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of stock-based compensation.

Liquidity and Capital Resources

Our corporate financial objectives are to maintain a sufficiently strong and conservative balance sheet to support our operating initiatives and unit growth while maintaining financial flexibility to provide the financial resources necessary to protect and enhance the competitiveness of our restaurant and bakery brands and to provide a prudent level of financial capacity to manage the

risks and uncertainties of conducting our business operations under various economic and industry cycles.

Typically, cash flows generated from operating activities are our principal source of liquidity, which we use to finance our restaurant expansion plans, ongoing maintenance of our restaurants and bakery facilities and investment in our corporate and information technology infrastructures.

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Additions to property and equipment

Acquisition-related deferred consideration and compensation

Borrowings on credit facility

Repayments on credit facility

Proceeds from long-term convertible debt

Repayment on long-term convertible debt, including premium on extinguishment

Issuance cost associated with long-term debt

Proceeds from exercise of stock options

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Cash Provided by Operating Activities

Cash flows from operations increased by $49.9 million from fiscal 2023 primarily due to higher net income and a decrease in prepaid expenses due to a higher balance in fiscal 2023 related to the timing of January rent payments, partially offset by lower impairment of assets and lease termination expenses, a payment of deferred consideration and compensation related to the FRC acquisition in excess of acquisition-date fair value and an increase in inventory levels.

Cash flows from operations increased by $33.0 million from fiscal 2024 primarily due to higher net income after excluding non-cash activity, timing of operating lease commencements and a decrease in inventory levels, partially offset by lower gift card liabilities, a decrease in prepaid expenses during fiscal 2024 due to a higher balance in fiscal 2023 related to the timing of January rent payments and higher income tax payments.

Typically, our requirement for working capital has not been significant since our restaurant customers pay for their food and beverage purchases in cash or cash equivalents at the time of sale, and we are able to sell many of our restaurant inventory items before payment is due to the suppliers of such items.

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Capital expenditures also included $63.2 million and $53.0 million for our existing restaurants and $12.5 million and $8.4 million for bakery and corporate capacity and infrastructure investments in fiscal 2025 and 2024, respectively.

We opened 23 restaurants in fiscal 2024 comprised of three The Cheesecake Factory, six North Italia, eight Other FRC and six Flower Child locations compared to 16 restaurants in fiscal 2023 comprised of six The Cheesecake Factory, three North Italia, six Other FRC and one Flower Child location.

We expect to open as many as 25 new restaurants in fiscal 2025 across our portfolio of concepts, with approximately half of the openings occurring in the first half of fiscal 2025.

We anticipate approximately $190 million to $210 million in capital expenditures to support this level of unit development, as well as required maintenance on our restaurants.

We opened 25 restaurants in fiscal 2025 comprised of four The Cheesecake Factory, six North Italia, nine Other FRC and six Flower Child locations compared to 23 restaurants in fiscal 2024 comprised of three The Cheesecake Factory, six North Italia, eight Other FRC and six Flower Child locations.

We expect to open as many as 26 new restaurants in fiscal 2026 across our portfolio of concepts, with approximately one third of the openings occurring in the first half of fiscal 2026.

We anticipate approximately $210 million in capital expenditures to support this level of unit development, as well as required maintenance on our restaurants.

This estimate includes new restaurant construction expenses, some of which may be classified as operating lease assets instead of additions to property and equipment in the statement of cash flows.

Acquisition-Related Deferred Consideration and Compensation

During fiscal 2023, we made payments of $11.3 million for deferred consideration related to the FRC acquisition.

During fiscal 2023, we also made payments of $13.0 million for deferred consideration and contingent consideration and compensation related to the FRC acquisition.

During fiscal 2024, we made payments of $6.5 million for contingent consideration and compensation related to the FRC acquisition that was included in cash provided by operating activities.

Convertible Senior Notes

On June 15, 2021, we issued $345.0 million in aggregate principal amount of convertible senior notes (“Notes”), which will mature on June 15, 2026, unless earlier repurchased, redeemed or converted.

The net proceeds from the sale of the Notes were approximately $334.9 million after deducting issuance costs related to the Notes.

At December 31, 2024, the conversion rate for the Notes was 13.8741 shares of common stock per $1,000 principal amount of the Notes, which represents a conversion price of approximately $72.08 per share of common stock.

In connection with the cash dividend that was declared by our Board on February 13, 2025, on March 5, 2025 we will adjust the conversion rate (which is expected to increase) and the conversion price (which is expected to decrease) of the Notes in accordance with the terms.

(See Note 10 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of the Notes.)

Credit Facility

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In the fourth quarter of fiscal 2024, we repaid $20.0 million on the Revolver Facility.

As of December 31, 2024, we had net availability for borrowings of $256.5 million, based on a $110.0 million outstanding debt balance and $33.5 million in standby letters of credit under the Revolver Facility.

In the first quarter of fiscal 2025, we repaid $110.0 million on the Revolver Facility.

As of December 30, 2025, we had net availability for borrowings of $366.5 million, based on no outstanding debt balance and $33.5 million in standby letters of credit under the Revolver Facility.

Under the Revolver Facility, we are subject to financial covenants, as well as to customary events of default that, if triggered, could result in acceleration of the maturity of the Revolver Facility.

Subject to certain exceptions, the Revolver Facility also limits distributions with respect to our equity interests, such as cash dividends and share repurchases, based on a defined ratio, and also sets forth negative covenants that restrict indebtedness, liens, investments, sales of assets, fundamental changes and other matters.

At December 31, 2024, we were in compliance with all covenants in effect at that date.

(See Note 10 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of our long-term debt.)

December 30, 2025, we were in compliance with all covenants in effect at that date.

(See Note 10 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of our debt.)

2030 Convertible Senior Notes

On February 28, 2025, we issued $575.0 million in aggregate principal amount of convertible senior notes (“2030 Notes”), which will mature on March 15, 2030, unless earlier repurchased, redeemed or converted.

The net proceeds from the sale of the 2030 Notes were approximately $558.5 million after deducting issuance costs of $16.5 million.

As of December 30, 2025, the 2030 Notes had a balance of $561.3 million, net of unamortized issuance costs of $13.7 million.

As of December 30, 2025, the conversion rate for the 2030 Notes was 14.1377 shares of common stock per $1,000 principal amount of the 2030 Notes, which represents a conversion price of approximately $70.73 per share of common stock.

In connection with the cash dividend that was declared by our Board on February 12, 2026, on March 4, 2026, we will adjust the conversion rate (which is expected to increase) and the conversion price (which is expected to decrease) of the 2030 Notes in accordance with the terms.

(See Note 10 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of our debt.)

2026 Convertible Senior Notes

On June 15, 2021, we issued $345.0 million in aggregate principal amount of convertible senior notes (“2026 Notes”), which will mature on June 15, 2026, unless earlier repurchased, redeemed or converted.

The net proceeds from the sale of the 2026 Notes were approximately $334.9 million after deducting issuance costs related to the 2026 Notes.

On February 28, 2025, we used part of the net proceeds from the issuance of the 2030 Notes to repurchase approximately $276.0 million aggregate principal amount of the 2026 Notes in a privately-negotiated transaction for aggregate consideration of $289.8 million, which included a premium of $13.8 million.

As of December 30, 2025, the 2026 Notes had a gross principal balance of $69.0 million and a balance of $68.8 million, net of unamortized issuance costs of $0.2 million.

At December 30, 2025, the conversion rate for the 2026 Notes was 14.1644 shares of common stock per $1,000 principal amount of the 2026 Notes, which represents a conversion price of approximately $70.61 per share of common stock.

(See Note 10 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of our debt.)

Common Stock Dividends

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Share Repurchases

On October 26, 2022, our Board increased the authorization to repurchase our common stock by 5.0 million shares to 61.0 million shares.

Under this authorization, we have cumulatively repurchased 57.1 million shares at a total cost of $1,829.7 million, excluding excise tax through December 31, 2024.

We repurchased 0.5 million shares at a cost of $18.0 million, excluding excise tax, during fiscal 2024 compared to 1.4 million shares at a cost of $46.1 million, excluding excise tax, during fiscal 2023.

Under authorization by our Board to repurchase up to 61.0 million shares of our common stock, we have cumulatively repurchased 59.9 million shares at a total cost of $1,983.6 million, excluding excise tax through December 30, 2025.

In the first quarter of fiscal 2025, we used approximately $130.0 million of the net proceeds from the 2030 Note issuance to repurchase approximately 2.4 million shares of our common stock.

In total, we repurchased 2.9 million shares at a cost of $153.9 million, excluding excise tax, during fiscal 2025.

We repurchased 0.5 million shares at a cost of $18.0 million, excluding excise tax, during fiscal 2024.

Our objectives with regard to share repurchases have been to offset the dilution to our shares outstanding that results from equity compensation grants and to supplement our earnings per share growth.

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The timing and number of shares repurchased are also subject to legal constraints and financial covenants under our credit facility that limit share repurchases based on a defined ratio.

(See Note 14 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of our repurchase authorization and methods.)

(See Notes 14 and 19 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of our repurchase authorization and methods and increased authorized amount under our share repurchase program, respectively.)

Contractual Obligations and Commercial Commitments

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Recorded contractual obligations:

Operating leases liabilities (1)

Long-term debt

Operating lease liabilities (1)

Uncertain tax positions (2)

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Amounts exclude agreements that are cancelable without significant penalty.

Also includes the commitments associated with the third bakery production facility.

The FRC acquisition agreement also included a contingent consideration provision which is payable annually from 2022 through 2027 and is based on achievement of revenue and profitability targets for the FRC brands other than North Italia and Flower Child.

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We consider the following policies to be the most critical in understanding the judgment that is involved in preparing our consolidated financial statements.

Contingent Consideration and Compensation Liability

The FRC acquisition agreement included a contingent consideration provision, a portion of which was considered part of the acquisition consideration and the remainder of which was considered future compensation expense.

This contingent consideration and

compensation is payable annually from 2022 through 2027 and is based on achievement of revenue and profitability targets for the FRC brands other than North Italia and Flower Child.

The fair value of the contingent consideration and compensation liability is determined utilizing a Monte Carlo model based on estimated future revenues, margins, volatility factors and discount rates, among other variables and estimates and has no minimum or maximum payment.

The undiscounted range of outcomes per the Monte Carlo model was $0 to $142.4 million at December 31, 2024 and $2.6 million to $235.4 million at January 2, 2024.

During fiscal 2024, the fair value of the contingent consideration and compensation liability decreased by $5.3 million to $20.2 million due to a payment of $6.5 million per the FRC acquisition agreement and a $1.9 million decrease in the fair value primarily stemming from a change in the volatility factors, as well as a decrease in fiscal 2025 revenues and estimated future revenues utilized in the calculation, partially offset by $3.1 million of amortization.

The fair value of the contingent consideration and compensation liability is highly subjective, and results could change materially if different estimates and assumptions were used.

Indefinite-Lived Intangible Assets

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These estimates are subjective and our ability to realize future cash flows and asset fair values is affected by factors such as changes in economic conditions and operating performance.

In fiscal 2025, we recorded $23.0 million of expense primarily related to the impairment of long-lived assets for one North Italia, one Grand Lux Cafe and four Other FRC locations (one previously partially impaired) and lease termination related to two Grand Lux Cafes (one that closed in fiscal 2023 and one that closed in early 2026) and one Other FRC (that closed in early 2026).

In fiscal 2024, we recorded impairment of assets and lease termination expenses of $13.6 million primarily related to impairment of long-lived assets for one The Cheesecake Factory (previously partially impaired) and six Other FRC locations (one previously partially impaired) and lease termination income, net for four The Cheesecake Factory restaurants, one Grand Lux Cafe location, one Flower Child location, one Social Monk location and one Other FRC location (that closed in early fiscal 2025).

In fiscal 2023, we recorded $29.5 million of expense primarily related to the impairment of three The Cheesecake Factory (one previously impaired), one North Italia (previously impaired), one Other FRC and two Grand Lux Cafe lease terminations.

In fiscal 2022, we recorded $31.4 million of expense primarily related to the impairment of three The Cheesecake Factory, one Other FRC and three Grand Lux Cafe locations.

(See Note 1 in Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion related to long-lived asset impairment.)

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis