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Our profitability is dependent on, among other things, our ability to anticipate and react to changes in the costs of key operating resources, including food and beverage, energy, fuel costs and other commodities.
−Removed: We have been able to partly offset cost increases resulting from a number of factors, including market conditions, shortages or interruptions in supply due to weather, the macroeconomic impacts of the Russia-Ukraine conflict or other conditions beyond our control, governmental regulations and inflation, by increasing our menu prices, as well as making other operational adjustments that increase productivity.
+Added: We have been able to partly offset cost increases resulting from a number of factors, including market conditions, shortages or interruptions in supply due to weather, the macroeconomic impacts of regional conflicts, including the ongoing Russia-Ukraine conflict, or other conditions beyond our control, governmental regulations and inflation, by increasing our menu prices, as well as making other operational adjustments that increase productivity.
However, elevated inflation in commodity markets and substantial increases in costs and expenses could impact our results of operations to the extent that such increases cannot be offset by menu price increases.
Currently we do not use financial instruments to hedge our commodity risk.
−Removed: The Company’s market basket experienced cost deflation of 50 basis points in 2023.
−Removed: In 2024, we expect cost inflation for our entire market basket in the range of 2% to 4%.
−Removed: In 2024, we have locked prices for approximately 32% of our market basket.
−Removed: Other commodities are purchased based upon negotiated price ranges established with vendors and are subject to fixed prices or fixed formulas for 30-to-90 day periods.
+Added: The Company’s market basket experienced cost inflation of 320 basis points in 2024.
+Added: We expect a high-single digit percentage increase in our 2025 commodity prices as compared to the prior year.
+Added: In 2024, we have negotiated annual pricing for approximately 30% of our market basket.
+Added: Other commodities are purchased based upon price ranges established with vendors and are subject to fixed prices or fixed formulas for 30-to-90 day periods.
Interest Rate Risk
As of December 29, 2024, we had $193.8 million in outstanding borrowings, excluding unamortized debt discount and deferred issuance costs.
−Removed: Our loans pursuant to our Credit Agreement incur interest at a floating rate and we also pay an unused commitment fee of between 25 and 50 basis points on the undrawn commitments under our Revolving Credit Facility, depending on the Total Rent Adjusted Net Leverage Ratio, as defined in our Credit Agreement.
+Added: Our loans pursuant to our Credit Agreement incur interest at a floating rate and we also pay an unused commitment fee of between 37.5 and 50 basis points on the undrawn commitments, depending on the Total Rent Adjusted Net Leverage Ratio, as defined in our Credit Agreement.
On June 23, 2023, we entered into a variable-to-fixed interest rate swap agreement with two financial institutions to hedge $90 million of the outstanding variable rate debt.
Under the terms of the interest rate swap agreements, the Company will pay a weighted average fixed rate of 4.16% on the notional amount and will receive payments from the counterparties based on the three-month secured overnight financing rate.
+Added: On May 17, 2024, the Company entered into two additional variable-to-fixed interest rate swaps.
+Added: These interest rate swaps have an aggregate notional amount of $60 million and mature on June 30, 2027.
+Added: Under the terms of the interest rate swaps, the Company will pay a weighted average fixed rate of 4.42% on the notional amount and will receive payments from the counterparties based on the three-month secured overnight financing rate.
Refer to Note 10, Debt, and Note 11, Interest Rate Swaps , in the accompanying notes to the consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K for more information.
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