El Pollo Loco Holdings, Inc. 10-Q

Item 1. Financial Statements. EL POLLO LOCO HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Amounts in thousands, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ September 29, December 30, ​ 2021 2020 Assets ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ Cash and cash equivalents ​ $ 24,669 ​ $ 13,219 Accounts and other receivables, net ​ 11,510 ​ 9,963 Inventories ​ 2,127 ​ 2,100 Prepaid expenses and other current assets ​ 3,041 ​ 3,865 Income tax receivable ​ — ​ 2,522 Total current assets ​ 41,347 ​ 31,669 Property and equipment, net ​ 74,836 ​ 79,642 Property and equipment held under finance lease, net ​ 1,666 ​ 1,661 Property and equipment held under operating leases, net ("ROU asset") ​ 172,823 ​ 177,129 Goodwill ​ 248,674 ​ 248,674 Trademarks ​ 61,888 ​ 61,888 Deferred tax assets ​ 2,136 ​ 3,166 Other assets ​ 915 ​ 1,392 Total assets ​ $ 604,285 ​ $ 605,221 Liabilities and Stockholders’ Equity ​ ​ Current liabilities: ​ ​ Current portion of obligations under finance leases ​ $ 149 ​ $ 70 Current portion of obligations under operating leases ​ 19,718 ​ 19,907 Accounts payable ​ 7,391 ​ 7,472 Accrued salaries and vacation ​ 8,050 ​ 10,166 Accrued insurance ​ 11,031 ​ 10,416 Accrued income taxes payable ​ 1,094 ​ - Accrued interest ​ 90 ​ 89 Current portion of income tax receivable agreement payable ​ 1,638 ​ 1,577 Other accrued expenses and current liabilities ​ 20,546 ​ 16,715 Total current liabilities ​ 69,707 ​ 66,412 Revolver loan ​ 40,000 ​ 62,800 Obligations under finance leases, net of current portion ​ 1,742 ​ 1,692 Obligations under operating leases, net of current portion ​ 172,797 ​ 178,658 Deferred taxes ​ 6,334 ​ 5,227 Income tax receivable agreement payable, net of current portion ​ 1,432 ​ 1,562 Other noncurrent liabilities ​ 8,355 ​ 11,292 Total liabilities ​ 300,367 ​ 327,643 Commitments and contingencies (Note 7) ​ ​ Stockholders’ equity ​ ​ Preferred stock, $ 0.01 par value, 100,000,000 shares authorized; none issued or outstanding ​ — ​ — Common stock, $ 0.01 par value, 200,000,000 shares authorized; 36,671,447 and 36,423,505 shares issued and outstanding as of September 29, 2021 and December 30, 2020, respectively ​ 366 ​ 364 Additional paid-in-capital ​ 342,656 ​ 339,561 Accumulated deficit ​ ( 38,571 ) ​ ( 61,514 ) Accumulated other comprehensive loss ​ ( 533 ) ​ ( 833 ) Total stockholders’ equity ​ 303,918 ​ 277,578 Total liabilities and stockholders’ equity ​ $ 604,285 ​ $ 605,221 ​ See notes to condensed consolidated financial statements (unaudited). ​ 3 Table of Contents EL POLLO LOCO HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (Amounts in thousands, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended Thirty-Nine Weeks Ended ​ ​ September 29, 2021 ​ September 23, 2020 ​ September 29, 2021 ​ September 23, 2020 ​ Revenue ​ ​ ​ ​ Company-operated restaurant revenue ​ $ 99,986 ​ $ 97,276 ​ $ 301,117 ​ $ 277,617 ​ Franchise revenue ​ 8,918 ​ 7,781 ​ 24,919 ​ 21,562 ​ Franchise advertising fee revenue ​ 6,796 ​ 5,922 ​ 19,370 ​ 16,567 ​ Total revenue ​ 115,700 ​ 110,979 ​ 345,406 ​ 315,746 ​ Cost of operations ​ ​ ​ ​ ​ Food and paper cost ​ 26,698 ​ 24,922 ​ 78,971 ​ 73,357 ​ Labor and related expenses ​ 27,802 ​ 28,756 ​ 90,060 ​ 83,208 ​ Occupancy and other operating expenses ​ 25,108 ​ 23,836 ​ 74,288 ​ 67,867 ​ Gain on recovery of insurance proceeds, lost profits ​ ​ — ​ ​ ( 2,000 ) ​ ​ — ​ ​ ( 2,000 ) ​ Company restaurant expenses ​ 79,608 ​ 75,514 ​ 243,319 ​ 222,432 ​ General and administrative expenses ​ 9,357 ​ 9,803 ​ 30,354 ​ 29,599 ​ Franchise expenses ​ 8,545 ​ 7,572 ​ 24,457 ​ 21,110 ​ Depreciation and amortization ​ 3,685 ​ 4,092 ​ 11,540 ​ 12,629 ​ Loss on disposal of assets ​ 83 ​ 29 ​ 194 ​ 156 ​ Recovery of securities lawsuits related legal expenses and other insurance claims ​ — ​ — ​ — ​ ( 123 ) ​ Loss on disposition of restaurants ​ ​ 10 ​ ​ — ​ ​ 1,534 ​ ​ — ​ Impairment and closed-store reserves ​ 167 ​ 1,776 ​ 1,091 ​ 4,615 ​ Total expenses ​ 101,455 ​ 98,786 ​ 312,489 ​ 290,418 ​ Income from operations ​ 14,245 ​ 12,193 ​ 32,917 ​ 25,328 ​ Interest expense, net ​ 449 ​ 770 ​ 1,399 ​ 2,583 ​ Income tax receivable agreement expense (income) ​ ( 19 ) ​ ( 144 ) ​ ( 69 ) ​ 26 ​ Income before provision for income taxes ​ 13,815 ​ 11,567 ​ 31,587 ​ 22,719 ​ Provision for income taxes ​ 3,654 ​ 1,647 ​ 8,644 ​ 3,700 ​ Net income ​ $ 10,161 ​ $ 9,920 ​ $ 22,943 ​ $ 19,019 ​ Net income per share ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 0.28 ​ $ 0.28 ​ $ 0.64 ​ $ 0.54 ​ Diluted ​ $ 0.28 ​ $ 0.28 ​ $ 0.63 ​ $ 0.53 ​ Weighted-average shares used in computing net income per share ​ ​ ​ ​ ​ Basic ​ 36,067,754 ​ 35,471,452 ​ 35,930,246 ​ 34,989,007 ​ Diluted ​ 36,525,424 ​ 36,064,559 ​ 36,457,110 ​ 35,609,320 ​ ​ See notes to condensed consolidated financial statements (unaudited). ​ 4 Table of Contents EL POLLO LOCO HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (Amounts in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended Thirty-Nine Weeks Ended ​ ​ September 29, 2021 ​ September 23, 2020 ​ September 29, 2021 September 23, 2020 ​ Net income ​ $ 10,161 ​ $ 9,920 ​ $ 22,943 ​ $ 19,019 ​ Other comprehensive income (loss) ​ ​ ​ ​ ​ ​ ​ Changes in derivative instruments ​ ​ ​ ​ ​ ​ ​ Unrealized net (losses) gains arising during the period from interest rate swap ​ ( 32 ) ​ ( 36 ) ​ 44 ​ ( 1,791 ) ​ Reclassifications of losses into net income ​ 133 ​ 114 ​ 367 ​ 156 ​ Income tax (expense) benefit ​ ( 27 ) ​ ( 20 ) ​ ( 111 ) ​ 441 ​ Other comprehensive income (loss), net of taxes ​ 74 ​ 58 ​ ​ 300 ​ ( 1,194 ) ​ Comprehensive income ​ $ 10,235 ​ $ 9,978 ​ $ 23,243 ​ $ 17,825 ​ ​ ​ ​ ​ ​ ​ ​ See notes to condensed consolidated financial statements (unaudited). ​ ​ ​ ​ ​ ​ ​ ​ ​ 5 Table of Contents EL POLLO LOCO HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED) (Amounts in thousands, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended September 29, 2021 ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ Additional ​ ​ Other Total ​ ​ Common Stock ​ Paid-in ​ Accumulated ​ Comprehensive ​ Stockholders’ ​ Shares Amount Capital Deficit (Loss) Income Equity Balance, June 30, 2021 ​ 36,637,761 ​ $ 367 ​ $ 341,358 ​ $ ( 48,732 ) ​ $ ( 607 ) ​ $ 292,386 Stock-based compensation ​ — ​ — ​ 1,042 ​ — ​ — ​ 1,042 Issuance of common stock upon exercise of stock options ​ 41,216 ​ ​ — ​ ​ 300 ​ ​ — ​ ​ — ​ ​ 300 Shares repurchased for employee tax withholdings ​ ( 2,446 ) ​ ​ — ​ ​ ( 45 ) ​ ​ — ​ ​ — ​ ​ ( 45 ) Forfeiture of common stock related to restricted shares ​ ( 5,084 ) ​ ( 1 ) ​ 1 ​ — ​ — ​ — Other comprehensive income, net of tax ​ — ​ — ​ — ​ — ​ 74 ​ 74 Net income ​ — ​ — ​ — ​ 10,161 ​ — ​ 10,161 Balance, September 29, 2021 ​ 36,671,447 ​ $ 366 ​ $ 342,656 ​ $ ( 38,571 ) ​ $ ( 533 ) ​ $ 303,918 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended September 23, 2020 ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ Additional ​ ​ Other Total ​ ​ Common Stock ​ Paid-in ​ Accumulated ​ Comprehensive ​ Stockholders’ ​ Shares Amount Capital Deficit Loss Equity Balance, June 24, 2020 ​ 35,854,122 ​ $ 359 ​ $ 334,088 ​ $ ( 76,889 ) ​ $ ( 999 ) ​ ​ 256,559 Stock-based compensation ​ — ​ — ​ 909 ​ — ​ — ​ 909 Issuance of common stock related to restricted shares ​ 2,798 ​ — ​ — ​ — ​ — ​ — Issuance of common stock upon exercise of stock options ​ 593,180 ​ 6 ​ 3,675 ​ — ​ — ​ 3,681 Shares repurchased for employee tax withholdings ​ ( 2,925 ) ​ — ​ ( 51 ) ​ — ​ — ​ ( 51 ) Forfeiture of common stock related to restricted shares ​ ( 5,806 ) ​ ​ ( 1 ) ​ ​ 1 ​ ​ — ​ ​ — ​ ​ — Other comprehensive income, net of tax ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 58 ​ ​ 58 Net income ​ — ​ — ​ — ​ 9,920 ​ — ​ 9,920 Balance, September 23, 2020 ​ 36,441,369 ​ $ 364 ​ $ 338,622 ​ $ ( 66,969 ) ​ $ ( 941 ) ​ $ 271,076 ​ ​ 6 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirty-Nine Weeks Ended September 29, 2021 ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ Additional ​ ​ Other Total ​ ​ Common Stock ​ Paid-in ​ Accumulated ​ Comprehensive ​ Stockholders’ ​ Shares Amount Capital Deficit (Loss) Income Equity Balance, December 30, 2020 ​ 36,423,505 ​ $ 364 ​ $ 339,561 ​ $ ( 61,514 ) ​ $ ( 833 ) ​ $ 277,578 Stock-based compensation ​ — ​ — ​ 2,936 ​ — ​ — ​ 2,936 Issuance of common stock related to restricted shares ​ 206,098 ​ ​ 2 ​ ​ ( 2 ) ​ ​ — ​ ​ — ​ ​ — Issuance of common stock upon exercise of stock options ​ 132,760 ​ ​ 1 ​ ​ 865 ​ ​ — ​ ​ — ​ ​ 866 Shares repurchased for employee tax withholdings ​ ( 40,384 ) ​ ​ — ​ ​ ( 705 ) ​ ​ — ​ ​ — ​ ​ ( 705 ) Forfeiture of common stock related to restricted shares ​ ( 50,532 ) ​ ( 1 ) ​ 1 ​ — ​ — ​ — Other comprehensive income, net of tax ​ — ​ — ​ — ​ — ​ 300 ​ 300 Net income ​ — ​ — ​ — ​ 22,943 ​ — ​ 22,943 Balance, September 29, 2021 ​ 36,671,447 ​ $ 366 ​ $ 342,656 ​ $ ( 38,571 ) ​ $ ( 533 ) ​ $ 303,918 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirty-Nine Weeks Ended September 23, 2020 ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ Additional ​ ​ Other Total ​ ​ Common Stock ​ Paid-in ​ Accumulated ​ Comprehensive ​ Stockholders’ ​ Shares Amount Capital Deficit (Loss) Income Equity Balance, December 25, 2019 ​ 35,126,582 ​ $ 351 ​ $ 330,950 ​ $ ( 85,988 ) ​ $ 253 ​ $ 245,566 Stock-based compensation ​ — ​ — ​ 2,170 ​ — ​ — ​ 2,170 Issuance of common stock related to restricted shares ​ 439,061 ​ 4 ​ ( 4 ) ​ — ​ — ​ — Issuance of common stock upon exercise of stock options ​ 965,736 ​ 10 ​ 5,836 ​ — ​ — ​ 5,846 Shares repurchased for employee tax withholdings ​ ( 23,118 ) ​ — ​ ( 331 ) ​ — ​ — ​ ( 331 ) Forfeiture of common stock related to restricted shares ​ ( 66,892 ) ​ ​ ( 1 ) ​ ​ 1 ​ ​ — ​ ​ — ​ ​ — Other comprehensive income, net of tax ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 1,194 ) ​ ​ ( 1,194 ) Net income ​ — ​ — ​ — ​ 19,019 ​ — ​ 19,019 Balance, September 23, 2020 ​ 36,441,369 ​ $ 364 ​ $ 338,622 ​ $ ( 66,969 ) ​ $ ( 941 ) ​ $ 271,076 ​ ​ ​ ​ See notes to condensed consolidated financial statements (unaudited) ​ ​ ​ ​ ​ ​ ​ 7 Table of Contents EL POLLO LOCO HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Amounts in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirty-Nine Weeks Ended ​ September 29, 2021 ​ September 23, 2020 Cash flows from operating activities: ​ ​ ​ ​ ​ Net income ​ $ 22,943 ​ $ 19,019 ​ Adjustments to reconcile net income to net cash flows provided by operating activities: ​ ​ ​ ​ ​ Depreciation and amortization ​ 11,540 ​ 12,629 ​ Bad debt expense ​ ​ — ​ ​ 190 ​ Stock-based compensation expense ​ 2,936 ​ 2,170 ​ Income tax receivable agreement (income) expense ​ ( 69 ) ​ 26 ​ Loss on disposition of restaurants ​ ​ 1,534 ​ ​ — ​ Loss on disposal of assets ​ 194 ​ 156 ​ Impairment of property and equipment ​ 701 ​ 3,478 ​ Amortization of deferred financing costs ​ 188 ​ 189 ​ Deferred income taxes, net ​ 2,026 ​ ( 110 ) ​ Changes in operating assets and liabilities: ​ ​ ​ ​ ​ Accounts and other receivables ​ ( 1,547 ) ​ ( 2,527 ) ​ Inventories ​ ( 27 ) ​ 72 ​ Prepaid expenses and other current assets ​ 825 ​ 3,163 ​ Income taxes payable ​ 3,616 ​ 2,264 ​ Other assets ​ 289 ​ 159 ​ Accounts payable ​ ( 507 ) ​ 476 ​ Accrued salaries and vacation ​ ( 2,116 ) ​ 1,311 ​ Accrued insurance ​ 615 ​ 816 ​ Other accrued expenses and liabilities ​ ( 809 ) ​ ( 9,962 ) ​ Net cash flows provided by operating activities ​ 42,332 ​ 33,519 ​ Cash flows from investing activities: ​ ​ ​ ​ ​ ​ Proceeds from disposition of restaurants ​ 4,556 ​ — ​ Purchase of property and equipment ​ ( 12,699 ) ​ ( 4,349 ) ​ Net cash flows used in investing activities ​ ( 8,143 ) ​ ( 4,349 ) ​ Cash flows from financing activities: ​ ​ ​ Proceeds from borrowings on revolver and swingline loans ​ — ​ 52,500 ​ Payments on revolver and swingline loan ​ ( 22,800 ) ​ ( 65,700 ) ​ Minimum tax withholdings related to net share settlements ​ ( 705 ) ​ ( 331 ) ​ Proceeds from issuance of common stock upon exercise of stock options, net of expenses ​ ​ 866 ​ ​ 5,846 ​ Payment of obligations under finance leases ​ ( 100 ) ​ ( 26 ) ​ Net cash flows used in financing activities ​ ( 22,739 ) ​ ( 7,711 ) ​ Increase in cash and cash equivalents ​ 11,450 ​ 21,459 ​ Cash and cash equivalents, beginning of period ​ 13,219 ​ 8,070 ​ Cash and cash equivalents, end of period ​ $ 24,669 ​ $ 29,529 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirty-Nine Weeks Ended ​ ​ September 29, 2021 ​ September 23, 2020 ​ Supplemental cash flow information ​ ​ Cash paid during the period for interest ​ $ 828 ​ $ 2,381 ​ Cash paid during the period for income taxes ​ $ 4,088 ​ $ 1,632 ​ Unpaid purchases of property and equipment ​ $ 2,259 ​ $ 881 ​ ​ See notes to condensed consolidated financial statements (unaudited). ​ 8 Table of Contents EL POLLO LOCO HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Overview El Pollo Loco Holdings, Inc. (“Holdings”) is a Delaware corporation headquartered in Costa Mesa, California. Holdings and its direct and indirect subsidiaries are collectively referred to herein as “we,” “us” or the “Company.” The Company’s activities are conducted principally through its indirect wholly-owned subsidiary, El Pollo Loco, Inc. (“EPL”), which develops, franchises, licenses, and operates quick-service restaurants under the name El Pollo Loco® and operates under one operating segment. At September 29, 2021, the Company operated 190 and franchised 290 El Pollo Loco restaurants. Basis of Presentation The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments necessary for a fair statement of the Company’s consolidated financial position and results of operations and cash flows for the periods presented. Interim results of operations are not necessarily indicative of the results that may be achieved for the full year. The condensed consolidated financial statements and related notes do not include all information and footnotes required by GAAP for annual reports. This quarterly report should be read in conjunction with the consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 30, 2020. The Company uses a 52- or 53-week fiscal year ending on the last Wednesday of the calendar year. In a 52-week fiscal year, each quarter includes 13 weeks of operations; in a 53-week fiscal year, the first, second and third quarters each include 13 weeks of operations, and the fourth quarter includes 14 weeks of operations. Every six or seven years, a 53-week fiscal year occurs. Fiscal 2021 is a 52-week year ending on December 29, 2021, and fiscal 2020 was a 53-week year ended on December 30, 2020. Revenues, expenses, and other financial and operational figures may be elevated in a 53-week year. Holdings has no material assets or operations. Holdings and Holdings’ direct subsidiary, EPL Intermediate, Inc. (“Intermediate”), guarantee EPL’s 2018 Revolver (as defined below) on a full and unconditional basis (see Note 4, “Long-Term Debt”), and Intermediate has no subsidiaries other than EPL. EPL is a separate and distinct legal entity and has no obligation to make funds available to Intermediate. EPL and Intermediate may pay dividends to Intermediate and to Holdings, respectively, subject to the terms of the 2018 Revolver. Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of Holdings and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and revenue and expenses during the periods reported. Actual results could materially differ from those estimates. The Company’s significant estimates include estimates for impairment of goodwill, intangible assets and property and equipment, insurance reserves, lease accounting matters, stock-based compensation, income tax receivable agreement liability, contingent liabilities and income tax valuation allowances. 9 Table of Contents COVID-19 During the COVID-19 pandemic, the Company has experienced periods of significant disruption to its restaurant operations. Following the pandemic declaration in March 2020, federal, state and local governments have periodically responded to the public health crisis by requiring social distancing, issuing “stay at home” directives, and implementing restaurant restrictions - including government-mandated dining room closures - that limited business to off-premise services only (take-out, drive-thru and delivery). Many state and local governments continue to periodically implement certain restrictions to try and contain the spread of the virus. As of September 29, 2021, all of the Company’s restaurants have dining rooms open at full capacity and continue to maintain take-away, mobile pick-up, delivery, and drive-thru operations where available. The Company continues to experience staffing challenges which resulted in reduced operating hours and service channels. Further, there have been inflationary pressures due to supply chain disruptions that impacted the Company’s business and results of operations during the thirteen and thirty-nine weeks ended September 29, 2021 . During the thirteen and thirty-nine weeks ended September 29, 2021, the Company incurred $ 0.5 million and $ 3.5 million, respectively, in COVID-19 related expenses, primarily due to leaves of absence and overtime pay. During the thirteen and thirty-nine weeks ended September 23, 2020, the Company incurred $ 0.9 million and $ 2.0 million, respectively, in COVID-19 related expenses, primarily due to leaves of absence and overtime pay. Subsequent Events Bernard Acoca, the Company’s Chief Executive Officer and President, resigned from his position as Chief Executive Officer and President and as a member of the Board of Directors of the Company (the “Board”), effective as of October 15, 2021. In connection with Mr. Acoca’s resignation, the Board appointed Laurance Roberts as interim Chief Executive Officer of the Company (“Interim CEO”), effective as of October 15, 2021. Mr. Roberts currently also serves as Chief Financial Officer of the Company and will continue in that role during his tenure as Interim CEO. The Company has evaluated subsequent events that have occurred after September 29, 2021, and determined that there were no other events or transactions occurring during this reporting period that require recognition or disclosure in the condensed consolidated financial statements. Cash and Cash Equivalents The Company considers all liquid instruments with an original maturity of three months or less at the date of purchase to be cash equivalents. Liquidity The Company’s principal liquidity and capital requirements are new restaurants, existing restaurant capital investments (remodels and maintenance), interest payments on its debt, lease obligations and working capital and general corporate needs. At September 29, 2021, the Company’s total debt was $ 40.0 million. The Company’s ability to make payments on its indebtedness and to fund planned capital expenditures depends on available cash and its ability to generate adequate cash flows in the future, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory, and other factors that are beyond the Company’s control. Based on current operations, the Company believes that its cash flow from operations and available cash of $ 24.7 million at September 29, 2021 will be adequate to meet the Company’s liquidity needs for the next twelve months from the date of filing of these condensed consolidated financial statements. However, depending on the severity and longevity of the COVID-19 pandemic, the Company’s financial performance and liquidity could be further impacted and could impact the Company’s ability to meet certain covenants required in its 2018 Credit Agreement (as defined below), specifically the lease-adjusted coverage ratio and fixed-charge coverage ratio. Loss on Disposition of Restaurants On July 1, 2021 the Company completed the sale of eight restaurants within the Sacramento area to an existing franchisee. The Company has determined that these restaurant dispositions represent multiple element arrangements, and as a result, the cash consideration received was allocated to the separate elements based on their relative standalone selling price. Cash proceeds included upfront consideration for the sale of the restaurants and franchise fees, as well as 10 Table of Contents future cash consideration for royalties. The cash consideration per restaurant related to franchise fees is consistent with the amounts stated in the related franchise agreements, which are charged for separate standalone arrangements. The Company initially defers and subsequently recognizes the franchise fees over the term of the franchise agreement. Future royalty income is also recognized in revenue as earned. ​ This sale resulted in cash proceeds of $ 4.6 million and a net loss on sale of restaurants of less than $ 0.1 million and $ 1.5 million for the thirteen and thirty-nine weeks ended September 29, 2021, respectively. These restaurants are now included in the total number of franchised El Pollo Loco restaurants. Recently Adopted Accounting Pronouncements In July 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-05, “Leases (Topic 842): Lessors – Certain Leases with Variable Lease Payments” which no longer requires a lessor to recognize a selling loss upon commencement of a lease with variable lease payments that prior to the amendment would have been classified as a sales-type or direct financing lease. The Company adopted this ASU during the third quarter of 2021. The adoption of ASU 2021-05 did not have a significant impact on the Company’s consolidated financial position or results of operations. In January 2021, the FASB issued ASU No. 2021-01, “Reference Rate Reform (Topic 848): Scope” which clarifies the FASB’s recent rate reform guidance in Topic 848, Reference Rate Reform, that optional expedients and exceptions therein for contract modification and hedge accounting apply to derivatives that are affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) and the use of new interest rate benchmarks. ASU 2021-01 is effective immediately. Entities may choose to apply the amendments retrospectively as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively to new modifications from any date within an interim period that includes or is subsequent to January 7, 2021, up to the date that financial statements are available to be issued. The Company adopted this ASU on January 7, 2021. The adoption of ASU 2021-01 did not have a significant impact on the Company’s consolidated financial position or results of operations. In October 2020, the FASB issued ASU No. 2020-10, “Codification Improvements,” which improve the consistency of the codification by including all disclosure guidance in the appropriate Disclosure Section (Section 50). ASU 2020-10 is effective for annual periods beginning after December 15, 2020, and for interim periods within annual periods beginning after December 15, 2020. The Company adopted this ASU during the first quarter of 2021. The adoption of ASU 2020-10 did not have a significant impact on the Company’s consolidated financial position or results of operations. In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”, which modifies Topic 740 to simplify the accounting for income taxes. ASU 2019-12 is effective for financial statements issued for annual periods beginning after December 15, 2020, and for the interim periods therein. The Company adopted this ASU during the first quarter of 2021. The adoption of ASU 2019-12 did not have a significant impact on the Company’s consolidated financial position or results of operations. Concentration of Risk Cash and cash equivalents are maintained at financial institutions and, at times, these balances may exceed federally-insured limits. The Company has never experienced any losses related to these balances. The Company had no suppliers to whom amounts due totaled greater than 10% of the Company’s accounts payable at September 29, 2021. At December 30, 2020, the Company had two suppliers to whom amounts due totaled 24.2 % and 11.4 % of the Company’s accounts payable. Purchases from the Company’s largest supplier totaled 27.0 % and 28.1 % of total expenses for the thirteen and thirty-nine weeks ended September 29, 2021, respectively, and 26.7 % and 26.8 % of total expenses for the thirteen and thirty-nine weeks ended September 23, 2020, respectively. Company-operated and franchised restaurants in the greater Los Angeles area generated, in the aggregate, approximately 71.6 % and 70.8 % of total revenue for the thirteen and thirty-nine weeks ended September 29, 2021, respectively, and 71.2 % and 71.5 % for the thirteen and thirty-nine weeks ended September 23, 2020, respectively. 11 Table of Contents Goodwill and Indefinite Lived Intangible Assets The Company’s indefinite-lived intangible assets consist of trademarks. Goodwill represents the excess of cost over fair value of net identified assets acquired in business combinations accounted for under the purchase method. The Company does not amortize its goodwill and indefinite-lived intangible assets. Goodwill resulted from the acquisition of certain franchise locations. Upon the sale or closure of a restaurant, the Company evaluates whether there is a decrement of goodwill. The amount of goodwill included in the cost basis of the asset sold is determined based on the relative fair value of the portion of the reporting unit disposed of compared to the fair value of the reporting unit retained. The Company performs an annual impairment test for goodwill during the fourth fiscal quarter of each year, or more frequently if impairment indicators arise. The Company reviews goodwill for impairment utilizing either a qualitative assessment or a fair value test by comparing the fair value of a reporting unit with its carrying amount. If the Company decides that it is appropriate to perform a qualitative assessment and concludes that the fair value of a reporting unit more likely than not exceeds its carrying value, no further evaluation is necessary. If the Company performs the fair value test, the Company will compare the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. If the carrying amount of a reporting unit exceeds its fair value, the Company will recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized cannot exceed the total amount of goodwill allocated to that reporting unit. The Company performs an annual impairment test for indefinite-lived intangible assets during the fourth fiscal quarter of each year, or more frequently if impairment indicators arise. An impairment test consists of either a qualitative assessment or a comparison of the fair value of an intangible asset with its carrying amount. The excess of the carrying amount of an intangible asset over its fair value is recognized as an impairment loss. The assumptions used in the estimate of fair value are generally consistent with the past performance of the Company’s reporting segment and are also consistent with the projections and assumptions that are used in current operating plans. These assumptions are subject to change as a result of changing economic and competitive conditions. The Company determined that there were no indicators of potential impairment of its goodwill and indefinite-lived intangible assets during the thirteen and thirty-nine weeks ended September 29, 2021. Accordingly, the Company did not record any impairment to its goodwill or indefinite-lived intangible assets during the thirteen and thirty-nine weeks ended September 29, 2021. T he ultimate severity and longevity of the COVID-19 pandemic is unknown, and therefore, it is possible that impairments could be identified in future periods, and such amounts could be material. Fair Value Measurements Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories: ● Level 1: Quoted prices for identical instruments in active markets. ● Level 2: Observable prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs or significant value drivers are observable. ● Level 3: Unobservable inputs used when little or no market data is available. During fiscal 2019, the Company entered into an interest rate swap, which is required to be measured at fair value on a recurring basis. The fair value was determined based on Level 2 inputs, which include valuation models, as reported by the Company’s counterparty. These valuation models use a discounted cash flow analysis on the cash flows of the derivative based on the terms of the contract and the forward yield curves adjusted for the Company’s credit risk. The 12 Table of Contents key inputs for the valuation models are observable market prices, discount rates, and forward yield curves. See Note 4, “Long-Term Debt” for further discussion regarding our interest rate swaps. The following table presents fair value for the interest rate swap at September 29, 2021 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements Using ​ ​ Fair Value Level 1 Level 2 Level 3 Other non-current liabilities - Interest rate swap ​ $ 729 ​ $ — ​ $ 729 ​ $ — ​ ​ The following table presents fair value for the interest rate swap at December 30, 2020 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements Using ​ ​ Fair Value Level 1 Level 2 Level 3 Other non-current liabilities - Interest rate swap ​ $ 1,139 ​ $ — ​ $ 1,139 ​ $ — ​ ​ Certain assets and liabilities are measured at fair value on a nonrecurring basis. In other words, the instruments are not measured at fair value on an ongoing basis, but are subject to fair value adjustments only in certain circumstances (e.g., when there is evidence of impairment). The following non-financial instruments were measured at fair value, on a nonrecurring basis, as of and for the thirteen and thirty-nine weeks ended September 29, 2021, reflecting certain property and equipment assets and right-of-use (“ROU”) assets for which certain assets were classified as held for sale, and an impairment loss was recognized during the corresponding periods, as discussed under Note 2, “Property and Equipment” and immediately below under “Impairment of Long-Lived Assets and ROU Assets” (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks ​ Thirty-Nine Weeks ​ ​ ​ ​ ​ Fair Value Measurements at September 29, 2021 Using ​ Ended September 29, 2021 ​ Ended September 29, 2021 ​ Total Level 1 Level 2 Level 3 ​ Impairment Losses ​ Impairment Losses Certain property and equipment, net ​ $ — ​ $ — ​ $ — ​ $ — $ 34 ​ $ 293 Certain ROU assets, net ​ $ 424 ​ $ — ​ $ — ​ $ 424 ​ $ — ​ $ 407 ​ ​ The following non-financial instruments were measured at fair value on a nonrecurring basis as of and for the thirteen and thirty-nine weeks ended September 23, 2020, reflecting certain property and equipment assets and ROU assets for which an impairment loss was recognized during the corresponding periods, as discussed immediately below under “Impairment of Long-Lived Assets and ROU Assets” (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks ​ Thirty-Nine Weeks ​ ​ ​ ​ ​ Fair Value Measurements at September 23, 2020 Using ​ Ended September 23, 2020 ​ Ended September 23, 2020 ​ Total Level 1 Level 2 Level 3 Impairment Losses Impairment Losses Certain property and equipment, net ​ $ — ​ $ — ​ $ — ​ $ — $ 1,506 ​ $ 2,935 Certain ROU assets, net ​ $ 911 ​ $ — ​ $ — ​ $ 911 ​ $ — ​ $ 543 ​ Impairment of Long-Lived Assets and ROU Assets The Company reviews its long-lived and ROU assets for impairment on a restaurant-by-restaurant basis whenever events or changes in circumstances indicate that the carrying value of certain long-lived and ROU assets may not be recoverable. The Company considers a triggering event related to long-lived assets or ROU assets in a net asset position to have occurred related to a specific restaurant if the restaurant’s cash flows for the last twelve months are less than a minimum threshold or if consistent levels of undiscounted cash flows for the remaining lease period are less than the carrying value of the restaurant’s assets. Additionally, the Company considers a triggering event related to ROU assets to have occurred related to a specific lease if the location has been subleased and future estimated sublease income is less than lease payments under the head lease. If the Company concludes that the carrying value of certain long-lived and 13 Table of Contents ROU assets will not be recovered based on expected undiscounted future cash flows, an impairment loss is recorded to reduce the long-lived or ROU assets to their estimated fair value. The fair value is measured on a nonrecurring basis using unobservable (Level 3) inputs. There is uncertainty in the projected undiscounted future cash flows used in the Company’s impairment review analysis, which requires the use of estimates and assumptions. If actual performance does not achieve the projections, or if the assumptions used change in the future, the Company may be required to recognize impairment charges in future periods, and such charges could be material. The Company determined that triggering events occurred for certain restaurants during the thirteen and thirty-nine weeks ended September 29, 2021 that required an impairment review of certain of the Company’s long-lived and ROU assets. Based on the results of the analysis, the Company recorded non-cash impairment charges of $ 0.1 million and $ 0.7 million for the thirteen and thirty-nine weeks ended September 29, 2021, respectively, primarily related to the carrying value of the ROU assets of one restaurant in Texas that closed in 2019, the carrying value of the ROU assets of one restaurant in California and the long-lived assets of three restaurants in California. The Company recorded a non-cash impairment charge of $ 1.5 million and $ 3.5 million for the thirteen and thirty-nine weeks ended September 23, 2020, respectively, primarily related to the carrying value of the ROU assets of one restaurant in Texas and the long-lived assets of four restaurants in California. Given the inherent uncertainty in projecting results for newer restaurants in newer markets, as well as the impact of the COVID-19 pandemic, the Company is monitoring the recoverability of the carrying value of the assets of several restaurants on an ongoing basis. For these restaurants, if expected performance is not realized, an impairment charge may be recognized in future periods, and such charge could be material. Closed-Store Reserves When a restaurant is closed, the Company will evaluate the ROU asset for impairment, based on anticipated sublease recoveries. The remaining value of the ROU asset is amortized on a straight-line basis, with the expense recognized in closed-store reserve expense. Additionally, any property tax and common area maintenance (“CAM”) payments relating to closed restaurants are included within closed-store expense. During the thirteen and thirty-nine weeks ended September 29, 2021, the Company recognized less than $ 0.1 million and $ 0.4 million, respectively, of closed-store reserve expense related to the amortization of ROU assets, property taxes and CAM payments for its closed locations. During the thirteen and thirty-nine weeks ended September 23, 2020, the Company recognized $ 0.3 million and $ 1.1 million of closed-store reserve expense, respectively, primarily related to the amortization of ROU assets, property taxes and CAM payments for its closed locations. Derivative Financial Instruments The Company uses an interest rate swap, a derivative instrument, to hedge interest rate risk and not for trading purposes. The derivative contract is entered into with a financial institution. The Company records the derivative instrument on its condensed consolidated balance sheets at fair value. The derivative instrument qualifies as a hedging instrument in a qualifying cash flow hedge relationship, and the gain or loss on the derivative instrument is reported as a component of accumulated other comprehensive (loss) income (“AOCI”) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. For any derivative instruments not designated as hedging instruments, the gain or loss will be recognized in earnings immediately. If a derivative previously designated as a hedge is terminated, or no longer meets the qualifications for hedge accounting, any balances in AOCI will be reclassified to earnings immediately. As a result of the use of an interest rate swap, the Company is exposed to risk that the counterparty will fail to meet their contractual obligations. To mitigate the counterparty credit risk, the Company will only enter into contracts with major financial institutions, based upon their credit ratings and other factors, and will continue to assess the creditworthiness of the counterparty. As of September 29, 2021, the counterparty to the Company’s interest rate swap has performed in accordance with its contractual obligation. Income Taxes The provision for income taxes, income taxes payable and deferred income taxes is determined using the asset and liability method. Deferred tax assets and liabilities are determined based on temporary differences between the financial carrying amounts and the tax bases of assets and liabilities using enacted tax rates in effect in the years in which the 14 Table of Contents temporary differences are expected to reverse. On a periodic basis, the Company assesses the probability that its net deferred tax assets, if any, will be recovered. If, after evaluating all of the positive and negative evidence, a conclusion is made that it is more likely than not that some portion or all of the net deferred tax assets will not be recovered, a valuation allowance is provided by charging to tax expense a reserve for the portion of deferred tax assets which are not expected to be realized. The Company reviews its filing positions for all open tax years in all U.S. federal and state jurisdictions where the Company is required to file. When there are uncertainties related to potential income tax benefits, in order to qualify for recognition, the position the Company takes has to have at least a “more likely than not” chance of being sustained (based on the position’s technical merits) upon challenge by the respective authorities. The term “more likely than not” means a likelihood of more than 50 percent. Otherwise, the Company may not recognize any of the potential tax benefit associated with the position. The Company recognizes a benefit for a tax position that meets the “more likely than not” criterion at the largest amount of tax benefit that is greater than 50 percent likely of being realized upon its effective resolution. Unrecognized tax benefits involve management’s judgment regarding the likelihood of the benefit being sustained. The final resolution of uncertain tax positions could result in adjustments to recorded amounts and may affect the Company’s consolidated financial position, results of operations, and cash flows. The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties at September 29, 2021 or at December 30, 2020. During fiscal 2020 the Company recognized interest of $ 0.1 million related to the Notice of Proposed Adjustment (“NOPA”), discussed below. The Company did not recognize interest or penalties during the thirteen and thirty-nine weeks ended September 23, 2020, since there were no material unrecognized tax benefits. Management believes no significant changes to the amount of unrecognized tax benefits will occur within the next twelve months. On July 30, 2014, the Company entered into the income tax receivable agreement (the “TRA”), which calls for the Company to pay to its pre-initial public offering (“IPO”) stockholders 85 % of the savings in cash that the Company realizes in its income taxes as a result of utilizing its net operating losses (“NOLs”) and other tax attributes attributable to preceding periods. For both the thirteen and thirty-nine weeks ended September 29, 2021, the Company recorded income tax receivable agreement income of less than $ 0.1 million, and for the thirteen and thirty-nine weeks ended September 23, 2020, the Company recorded income tax receivable agreement income of $ 0.1 million and income tax receivable agreement expense of less than $ 0.1 million, respectively, related to the amortization of interest expense related to the total expected TRA payments and changes in estimates for actual tax returns filed and future forecasted taxable income. On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was signed into law as a stimulus package, and contained several tax provisions, including a correction of a previous drafting error related to quality improvement property (“QIP”) and immediate refundability of all remaining alternative minimum tax (“AMT”) credits. The new provisions did not have a material impact on the Company’s condensed consolidated financial statements. During fiscal 2020, the Company received a NOPA for the years ended December 27, 2017 and December 28, 2016, related to the Company’s methodology regarding its ordering of utilization of AMT NOLs. Resolution of this NOPA resulted in a payment of $ 0.4 million, and the audit is closed. As a result of the CARES Act, this amount was immediately refundable upon filing of a Form 1139. The Company filed the Form 1139 during the year ended December 30, 2020 and received a refund totaling $ 0.5 million. The CARES Act also provides for the deferral of employer Social Security taxes that are otherwise owed for wage payment and the creation of refundable employee retention credits. The total amount deferred as of December 30, 2020 is $ 4.9 million, of which 50 % is due by December 31, 2021 and another 50 % is due by December 31, 2022. The Company assessed its eligibility for the business relief provision under the CARES Act known as the Employee Retention Credit ("ERC"), a refundable payroll tax credit for 50% of qualified wages paid during 2020. The American Rescue Plan passed into law on March 11, 2021 extended the ERC through December 31, 2021, and the credit was increased to 70 % of qualified wages paid from January 1, 2021 through December 31, 2021. During the third quarter of 2021, the Company filed amended Form 941s with the Internal Revenue Service and recognized a credit of $ 3.2 million for the thirteen and thirty-nine weeks ended September 29, 2021 for the ERC, which is recorded as an offset to the 15 Table of Contents deferred portion of the employer social security tax liability and corresponding payroll tax expense and is classified as part of the labor and other operating expenses on the condensed consolidated statements of income and condensed consolidated balance sheet, respectively. 2. PROPERTY AND EQUIPMENT The costs and related accumulated depreciation and amortization of major classes of property and equipment are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ September 29, 2021 December 30, 2020 Land ​ $ 12,323 ​ $ 12,323 Buildings and improvements ​ 144,766 ​ 147,939 Other property and equipment ​ 78,720 ​ 77,177 Construction in progress ​ 2,879 ​ 3,567 ​ ​ 238,688 ​ 241,006 Less: accumulated depreciation and amortization ​ ( 163,852 ) ​ ( 161,364 ) ​ ​ $ 74,836 ​ $ 79,642 ​ Depreciation expense was $ 3.7 million and $ 4.1 million for the thirteen weeks ended September 29, 2021 and September 23, 2020, respectively, and $ 11.5 million and $ 12.6 million for the thirty-nine weeks ended September 29, 2021 and September 23, 2020, respectively. Based on the Company’s review of its long-lived assets for impairment, the Company recorded non-cash impairment charges of less than $ 0.1 million and $ 0.3 million for the thirteen and thirty-nine weeks ended September 29, 2021, primarily related to the carrying value of the long-lived assets of three restaurants in California. ​ During the thirteen and thirty-nine weeks ended September 23, 2020, the Company recorded non-cash impairment charges of $ 1.5 million and $ 2.9 million, respectively, primarily related to the carrying value of the long-lived assets of four restaurants in California. D epending on the severity and longevity of the COVID-19 pandemic, the Company’s financial performance could be further impacted and it is possible that material impairments could be identified in future periods. See Note 1, “Basis of Presentation and Summary of Significant Accounting Policies – Impairment of Long-Lived Assets and ROU Assets” for additional information. ​ ​ 3. STOCK-BASED COMPENSATION At September 29, 2021, options to purchase 1,112,730 shares of common stock were outstanding, including 698,329 vested and 414,401 unvested. Unvested options vest over time; however, upon a change in control, the Board of Directors may accelerate vesting. At September 29, 2021, 212,196 premium options, which are options granted above the stock price at date of grant, remained outstanding. A summary of stock option activity as of September 29, 2021 and changes during the thirty-nine weeks ended September 29, 2021 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-Average Aggregate ​ ​ Weighted-Average Contractual Life Intrinsic Value ​ ​ Shares ​ Exercise Price Life (Years) (in thousands) Outstanding - December 30, 2020 1,030,866 ​ $ 9.82 ​ ​ ​ ​ ​ ​ Grants 256,172 ​ 17.55 ​ ​ ​ ​ ​ ​ Exercised ( 132,760 ) ​ 6.52 ​ ​ ​ ​ ​ ​ Forfeited, cancelled or expired ( 41,548 ) ​ $ 15.99 ​ ​ ​ ​ ​ ​ Outstanding - September 29, 2021 1,112,730 ​ $ 11.76 ​ ​ 6.05 ​ $ 6,104 Vested and expected to vest at September 29, 2021 1,106,140 ​ $ 11.73 ​ ​ 6.04 ​ $ 6,093 Exercisable at September 29, 2021 698,329 ​ $ 10.01 ​ ​ 4.56 ​ $ 4,999 ​ The fair value of each stock option was estimated on the grant date using an exercise price of the closing stock price on the day prior to date of grant and the Black-Scholes option-pricing model with the following weighted average assumptions: ​ 16 Table of Contents ​ ​ ​ ​ ​ ​ ​ September 29, 2021 September 23, 2020 Expected volatility ​ 46.9 % — % Risk-free interest rate 1.1 % — % Expected term (years) 6.25 — ​ Expected dividends — — ​ ​ At September 29, 2021, the Company had total unrecognized compensation expense of $ 2.2 million related to unvested stock options, which it expects to recognize over a weighted-average period of 3.03 years. A summary of restricted share activity as of September 29, 2021 and changes during the thirty-nine weeks ended September 29, 2021 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-Average ​ ​ Shares ​ Fair Value Unvested shares at December 30, 2020 742,404 ​ $ 11.68 Granted 182,059 ​ $ 17.55 Released ( 245,828 ) ​ $ 11.96 Forfeited, cancelled, or expired ( 50,532 ) ​ $ 13.93 Unvested shares at September 29, 2021 628,103 ​ $ 13.09 ​ Unvested shares at September 29, 2021 included 568,006 unvested restricted shares, 36,058 unvested performance stock units and 24,039 unvested restricted units. At September 29, 2021, the Company had unrecognized compensation expense of $ 6.6 million related to unvested restricted shares, which it expects to recognize over a weighted-average period of 2.66 years, unrecognized compensation expense of $ 0.1 million related to unvested performance stock units, which it expects to recognize over a weighted-average period of 1.61 years, and unrecognized compensation expense of $ 0.2 million related to unvested restricted units, which it expects to recognize over a weighted-average period of 0.61 years. Total stock-based compensation expense was $ 1.0 million and $ 2.9 million for the thirteen and thirty-nine weeks ended September 29, 2021, respectively, and $ 0.9 million and $ 2.2 million for the thirteen and thirty-nine weeks ended September 23, 2020, respectively. ​ 4. LONG-TERM DEBT The Company, as a guarantor, is a party to a credit agreement (the “2018 Credit Agreement”) among EPL, as borrower, Intermediate, as a guarantor, Bank of America, N.A., as administrative agent, swingline lender, and letter of credit issuer, the lenders party thereto, and the other parties thereto, which provides for a $ 150.0 million five-year senior secured revolving credit facility (the “2018 Revolver”). The 2018 Revolver includes a sub limit of $ 15.0 million for letters of credit and a sub limit of $ 15.0 million for swingline loans. The 2018 Revolver and 2018 Credit Agreement will mature on July 13, 2023 . The obligations under the 2018 Credit Agreement and related loan documents are guaranteed by the Company and Intermediate. The obligations of the Company, EPL and Intermediate under the 2018 Credit Agreement and related loan documents are secured by a first priority lien on substantially all of their respective assets. Under the 2018 Revolver, Holdings may not make certain payments such as cash dividends, except that it may, inter alia, (i) pay up to $ 1.0 million per year to repurchase or redeem qualified equity interests of Holdings held by past or present officers, directors, or employees (or their estates) of the Company upon death, disability, or termination of employment, (ii) pay under its TRA, and (iii) so long as no default or event of default has occurred and is continuing, (a) make non-cash repurchases of equity interests in connection with the exercise of stock options by directors, officers and management, provided that those equity interests represent a portion of the consideration of the exercise price of those stock options, (b) pay up to $ 0.5 million in any 12 month consecutive period to redeem, repurchase or otherwise acquire equity interests of any subsidiary that is not a wholly-owned subsidiary from any holder of equity interest in such subsidiary, (c) pay up to $ 2.5 million per year pursuant to stock option plans, employment agreements, or incentive plans, (d) make up to $ 5.0 million in other restricted payments per year, and (e) make other restricted payments, subject to its compliance, on a pro forma basis, with (x) a lease-adjusted consolidated leverage ratio not to exceed 4.25 times and (y) the financial covenants applicable to the 2018 Revolver. 17 Table of Contents Borrowings under the 2018 Credit Agreement (other than any swingline loans) bear interest, at the borrower’s option, at rates based upon either LIBOR or a base rate, plus, for each rate, a margin determined in accordance with a lease-adjusted consolidated leverage ratio-based pricing grid. The base rate is calculated as the highest of (a) the federal funds rate plus 0.50 %, (b) the published Bank of America prime rate, or (c) LIBOR plus 1.00 %. For LIBOR loans, the margin is in the range of 1.25 % to 2.25 %, and for base rate loans the margin is in a range of 0.25 % to 1.25 %. Borrowings under the 2018 Revolver may be repaid and reborrowed. The interest rate range was 1.34 % to 1.35 % and 1.34 % to 1.65 % for the thirteen and thirty-nine weeks ended September 29, 2021, respectively, and 1.67 % to 1.68 % and 1.67 % to 3.29 % for the thirteen and thirty-nine weeks ended September 23, 2020, respectively. The 2018 Credit Agreement contains certain financial covenants. The Company was in compliance with the financial covenants as of September 29, 2021. At September 29, 2021, $ 8.4 million of letters of credit and $ 40.0 million in borrowings under the 2018 Revolver were outstanding. The Company had $ 101.6 million in borrowing availability under the 2018 Revolver at September 29, 2021. Maturities During the thirty-nine weeks ended September 29, 2021, the Company elected to pay down $ 22.8 million on its 2018 Revolver. No amounts were paid on the 2018 Revolver during the thirteen weeks ended September 29, 2021. During the thirteen weeks ended September 23, 2020, the Company elected to pay down $ 55.0 million on its 2018 Revolver. During the thirty-nine weeks ended September 23, 2020, the Company paid down $ 13.2 million, net of borrowings of $ 52.5 million on the Company’s 2018 Revolver. There are no required principal payments prior to maturity for the 2018 Revolver. Interest Rate Swap During the year ended December 25, 2019, the Company entered into a variable-to-fixed interest rate swap agreement with a notional amount of $ 40.0 million that matures in June 2023. The objective of the interest rate swap was to reduce the Company’s exposure to interest rate risk for a portion of its variable-rate interest payments on its borrowings under the 2018 Revolver. Under the terms of the swap agreement, the variable LIBOR-based component of interest payments was converted to a fixed rate of 1.31 %, plus applicable margin, which was 1.5 % for the thirteen and thirty-nine weeks ended September 29, 2021. The interest rate swap was designated as a cash flow hedge, as the changes in the future cash flows of the swap were expected to offset changes in expected future interest payments on the related variable-rate debt, in accordance with Accounting Standards Codification (“ASC”) 815 “Derivatives and Hedging.” The changes in the fair value of the interest rate swap are not included in earnings, but are included in other comprehensive (loss) income (“OCI”). These changes in fair value are subsequently reclassified into net earnings as a component of interest expense as the hedged interest payments are made on the variable rate borrowings. For the thirty-nine weeks ended September 29, 2021, the swap was a highly effective cash flow hedge. As of September 29, 2021, the estimated net loss included in AOCI related to the Company’s cash flow hedge that will be reclassified into earnings in the next 12 months is $ 0.6 million, based on current LIBOR interest rates. The following table shows the financial statement line item and amount of the Company’s cash flow hedge accounting on the condensed consolidated balance sheets (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 29, 2021 ​ December 30, 2020 ​ Notional Fair value Notional Fair value Other liabilities - Interest rate swap ​ $ 40,000 ​ $ 729 ​ $ 40,000 ​ $ 1,139 ​ 18 Table of Contents The following table summarizes the effect of the Company’s cash flow hedge accounting on the condensed consolidated statements of income (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended Thirty-Nine Weeks Ended ​ September 29, 2021 September 23, 2020 September 29, 2021 September 23, 2020 Interest expense on hedged portion of debt ​ $ 97 ​ $ 169 ​ $ 433 ​ ​ 810 Interest expense on interest rate swap ​ 133 ​ 114 ​ 367 ​ 156 Interest expense on debt and derivatives, net ​ $ 230 ​ $ 283 ​ $ 800 ​ $ 966 ​ The following table summarizes the effect of the Company’s cash flow hedge accounting on AOCI for the thirteen and thirty-nine weeks ended September 29, 2021 and September 23, 2020 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ Thirty-Nine Weeks Ended ​ ​ ​ ​ Loss Reclassified from ​ ​ ​ Loss Reclassified from ​ ​ Net Loss Recognized in OCI ​ AOCI into Interest expense ​ Net Gain (Loss) Recognized in OCI ​ AOCI into Interest expense ​ September 29, 2021 ​ September 23, 2020 ​ September 29, 2021 ​ September 23, 2020 September 29, 2021 ​ September 23, 2020 September 29, 2021 ​ September 23, 2020 Interest rate swap ​ $ ( 32 ) ​ $ ( 36 ) ​ $ 133 ​ $ 114 ​ $ 44 ​ $ ( 1,791 ) ​ $ 367 ​ $ 156 ​ See Note 1, “Basis of Presentation and Summary of Significant Accounting Policies” for information about the fair value of the Company’s derivative asset. ​ 5. OTHER ACCRUED EXPENSES AND CURRENT LIABILITIES Other accrued expenses and current liabilities consist of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ September 29, 2021 December 30, 2020 Accrued sales and property taxes ​ $ 5,375 ​ $ 5,216 Gift card liability ​ 3,686 ​ 4,008 Accrued advertising ​ ​ 4,162 ​ ​ — Accrued legal settlements and professional fees ​ 1,112 ​ 321 Deferred franchise and development fees ​ 642 ​ 503 Current portion of lease payment deferrals ​ ​ 353 ​ ​ 1,793 Other ​ 5,216 ​ 4,874 Total other accrued expenses and current liabilities ​ $ 20,546 ​ $ 16,715 ​ ​ 6. OTHER NONCURRENT LIABILITIES Other noncurrent liabilities consist of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ September 29, 2021 December 30, 2020 Deferred franchise and development fees ​ $ 5,802 ​ $ 5,125 Derivative liability ​ ​ 729 ​ ​ 1,139 Employer social security tax deferral ​ ​ 1,676 ​ ​ 4,853 Other ​ 148 ​ 175 Total other noncurrent liabilities ​ $ 8,355 ​ $ 11,292 ​ ​ 7. COMMITMENTS AND CONTINGENCIES Legal Matters On or about February 24, 2014 , a former employee filed a class action in the Superior Court of the State of California, County of Orange, under the caption Elliott Olvera, et al v. El Pollo Loco, Inc., et al (Case No. 30-2014-00707367-CU- 19 Table of Contents OE-CXC) on behalf of all putative class members (all hourly employees from 2010 to the present) alleging certain violations of California labor laws, including failure to pay overtime compensation, failure to provide meal periods and rest breaks, and failure to provide itemized wage statements. The putative lead plaintiff’s requested remedies include compensatory and punitive damages, injunctive relief, disgorgement of profits, and reasonable attorneys’ fees and costs. No specific amount of damages sought was specified in the complaint. The court recently certified two classes of plaintiffs - one class encompasses restaurant employees who were not provided proper rest breaks because they were not allowed to leave the premises during their breaks and the other class encompasses restaurant employees who were required to wait at the restaurant after they finished working for the night until the manager set the alarm for safety purposes. The parties reached a settlement in principle on January 24, 2019 of all claims brought on behalf of the 32,000 + putative class members in Olvera , as well as all claims for failure to pay overtime compensation, failure to provide meal periods and rest breaks, and failure to provide itemized wage statements brought in the class actions captioned Martha Perez v. El Pollo Loco, Inc. (Los Angeles Superior Court Case No. BC624001), Maria Vega, et al. v. El Pollo Loco, Inc. (Los Angeles Superior Court Case No. BC649719), and Gonzalez v. El Pollo Loco, Inc. (Los Angeles Superior Court Case No. BC712867). The settlement reached in principle in the Olvera , Perez , Vega , and Gonzalez actions resolves all potential claims from April 12, 2010 through April 1, 2019 that El Pollo Loco restaurant employees may have against El Pollo Loco for failure to pay for all compensation owed, failure to pay overtime compensation, failure to provide meal periods and rest breaks and failure to provide itemized wage statements, among other wage and hour related claims. A $ 16.3 million accrual of an expected settlement amount related to this matter was recorded as of December 26, 2018, and the court formally approved the settlement on January 31, 2020. The settlement payment was made on February 28, 2020. Purported class actions alleging wage and hour violations are commonly filed against California employers. The Company fully expects to have to defend against similar lawsuits in the future. On or about November 5, 2015, a purported Holdings shareholder filed a derivative complaint on behalf of Holdings in the Court of Chancery of the State of Delaware against certain Holdings officers, directors and Trimaran Pollo Partners, L.L.C., under the caption Armen Galustyan v. Sather, et al. (Case No. 11676-VCL). The derivative complaint alleges that these defendants breached their fiduciary duties to Holdings and were unjustly enriched when they sold shares of Holdings at artificially inflated prices due to alleged misrepresentations and omissions regarding EPL’s comparable store sales in the second quarter of 2015. The Holdings shareholder’s requested remedies include an award of compensatory damages to Holdings, as well as a court order to improve corporate governance by putting forward for stockholder vote certain resolutions for amendments to Holdings’ Bylaws or Certificate of Incorporation. The Holdings shareholder voluntarily dismissed the action on October 7, 2020. A second purported Holdings shareholder filed a derivative complaint on or about September 23, 2016, under the caption Diep v. Sather , CA 12760-VCL in the Delaware Court of Chancery. The Diep action is also purportedly brought on behalf of Holdings, names the same defendants and asserts substantially the same claims on substantially the same alleged facts as does Galustyan . Defendants moved to stay or dismiss the Diep action. On March 17, 2017, the Delaware court granted in part, and denied in part, the motion to stay the Diep action. The court denied defendants’ motion to dismiss the complaint for failure to state a claim. On January 17, 2018, the court entered an order granting the parties’ stipulation staying all proceedings in the Diep action for five months or until the completion of an investigation of the allegations in the action by a special litigation committee of the Holdings board of directors (the “SLC”). On February 13, 2019, after concluding its investigation, the SLC filed a motion to dismiss the Diep action. The SLC filed its investigative report under seal as an exhibit to the motion to dismiss. Following discovery related to the SLC’s motion, on September 25, 2020, the SLC filed a motion to dismiss the Diep action. On May 21, 2021, while the SLC’s motion to dismiss the Diep action was pending, the Company filed a notice of proposed partial settlement of the Diep action with respect to defendants Kay Bogeajis, Laurance Roberts, Stephen J. Sather, Edward J. Valle, Douglas K. Ammerman, and Samuel N. Borgese (collectively, the “Settling Defendants”). Defendant Trimaran Pollo Partners, LLC (“Trimaran”) was not a party to the settlement. The court approved the settlement of $ 625,000 , less Plaintiffs’ fees of $ 156,250 , on September 10, 2021, and dismissed all claims brought, or that could have been brought, against Settling Defendants. In connection with this settlement, the Company received $ 469,000 in insurance proceeds, which was recorded within general and administrative expenses in the Company’s statement of operations for the thirty-nine weeks ended September 29, 2021. On July 30, 2021, the court granted the SLC’s motion to dismiss with respect to the claims asserted against remaining defendant Trimaran. On October 4, 2021, Plaintiffs filed a notice of appeal of the court’s granting of the motion to dismiss against defendant Trimaran. 20 Table of Contents Janice P. Handlers-Bryman and Michael D. Bryman v. El Pollo Loco, Inc. , Los Angeles Superior Court (Case No. MC026045) (the “Lancaster Lawsuit”) was filed on February 9, 2016. Existing El Pollo Loco franchisees, Janice P. Handlers-Bryman and Michael D. Bryman, as individuals and in their capacities as trustees of the Handlers Bryman Trust (collectively, “Plaintiffs”), filed suit against us alleging, among other things, that we “imposed unreasonable time limitations” on their development of additional restaurant locations in Lancaster, California, and that we thereafter developed company-operated El Pollo Loco restaurants in the “market area” of Plaintiffs’ existing El Pollo Loco restaurant in Lancaster. Plaintiffs asserted claims against us for, among other things, (i) breach of the implied covenant of good faith and fair dealing, (ii) intentional interference with prospective business, and (iii) unfair business practices. In addition to an unspecified amount of damages and costs of the lawsuit, Plaintiffs sought reformation of the contract, declaratory relief, disgorgement of alleged revenues and profits, injunctive relief, and a judicial mandate requiring us to either transfer the company-operated locations to Plaintiffs or to continuously disgorge to Plaintiffs the unjust enrichment allegedly obtained by us through the operation of the company-operated restaurants in Lancaster. We denied Plaintiffs’ allegations as the franchise agreement did not grant Plaintiffs any exclusive territorial rights and, instead, expressly reserved for us the right to open and operate - and the right to grant others the right to open and operate - El Pollo Loco restaurants “in the immediate vicinity of or adjacent to” Plaintiffs’ restaurant in Lancaster. On April 24, 2017, four days before the commencement of trial, Plaintiffs filed a voluntary dismissal, without prejudice, of the Lancaster Lawsuit without any payment or other concession by us. The corresponding dismissal was entered by the court on April 25, 2017. On May 22, 2017, Plaintiffs filed a motion for relief from the dismissal which was granted by the court on June 29, 2017. The trial in the case was bifurcated between the liability and damages phases. The liability phase commenced on November 16, 2017. The only cause of action that the court allowed to go to the jury was the cause of action for breach of the covenant of good faith and fair dealing. The court elected not to present the cause of action for intentional interference with prospective business to the jury. (The causes of action for reformation due to mistake and unconscionability, unfair business practices under California Business & Professions Code §17200 et seq., and declaratory relief were not presented to the jury as these types of equitable claims are to be decided by the court as a matter of law.) On December 11, 2017, the jury returned a verdict in favor of Plaintiffs finding that the Company breached the implied covenant of good faith and fair dealing by (1) constructing the two new company-operated El Pollo Loco restaurants in Lancaster, and (2) not offering the two new company-operated El Pollo Loco restaurants in Lancaster to Plaintiffs. Because the trial was bifurcated, the December 11, 2017 verdict did not include a determination of damages. The damages phase of the trial commenced on April 20, 2018. On May 1, 2018, the jury returned a verdict on damages in favor of Plaintiffs in the following amounts: (1) $ 4,356,600 in “impact damages” arising out of our construction of the two new company-owned El Pollo Loco restaurants in Lancaster, and (2) $ 4,481,206 in “lost opportunity damages” arising out of our failure to offer the two new company-operated El Pollo Loco restaurants in Lancaster to Plaintiffs. On August 1, 2018, the court issued a final judgment and decision on the unfair business practices claim under California Business & Professions Code § 17200 et seq. As part of the final judgment, the court found El Pollo Loco liable and issued injunctive relief requiring El Pollo Loco to revise its franchise disclosure document and franchise agreement. The court also awarded Plaintiffs restitution of $ 4,356,600 for “impact damages” arising out of the Company’s construction of the two new company-operated El Pollo Loco restaurants in Lancaster. The court, reversing its previous position, held that these damages could be awarded in addition to the “lost opportunity damages” awarded by the jury. Thus, the court entered a total monetary judgment of $ 8,837,806 . There was no ruling on the causes of action for reformation due to mistake and declaratory relief, and on January 27, 2020, the court entered an amended judgment dismissing these claims. The trial court subsequently awarded the Plaintiffs $ 249,728 in costs and $ 1,391,703 in attorney fees. Post judgment interest is running at 10 % simple interest per year on the total amount of the monetary judgment, costs, and attorney fees. On August 27, 2018, the Company filed a notice of appeal as to the entire judgment. As required by California law, on or about August 16, 2018, the Company obtained an appeal bond through a Surety company to secure the trial court’s judgment during the pendency of the appeal. On March 19, 2020, the Surety, One Beacon, from whom the Company procured the appeal bond to secure the judgment against the Company in the matter of Janice P. Handlers-Bryman and Michael D. Bryman v. El Pollo Loco, Inc., issued a collateral demand to the Company. On April 17, 2020, the Company provided to One Beacon a Letter of Credit in the amount of $ 2,651,342 to satisfy the Surety’s collateral demand. On July 13, 2020, One Beacon agreed to release its collateral demand and returned the Letter of Credit to the Company. 21 Table of Contents During fiscal 2020, the Company reached an agreement with the Plaintiffs to resolve the lawsuit for a payment by the Company of $ 2.5 million, which was recorded within operating expenses in the Company’s statement of operations for the fiscal year ended December 30, 2020. Additionally, during fiscal 2020, the matter was formally resolved. On September 2, 2020, the California Court of Appeals entered an order, following a motion for stipulated reversal of the trial court’s judgment jointly filed by the parties, reversing the trial court’s judgment in the case and instructing the trial court to dismiss the matter with prejudice. On September 10, 2020, the trial court entered an order reversing its judgment and dismissing the case with prejudice. The settlement payment of $ 2.5 million has been made in the third quarter of 2020 and the appeal bond has been released. The Company is also involved in various other claims such as wage and hour and other legal actions that arise in the ordinary course of business. The outcomes of these actions are not predictable but the Company does not believe that the ultimate resolution of these other actions will have a material adverse effect on its financial position, results of operations, liquidity, or capital resources. A significant increase in the number of claims, or an increase in amounts owing under successful claims, could materially and adversely affect its business, consolidated financial condition, results of operations, and cash flows. Purchasing Commitments The Company has long-term beverage supply agreements with certain major beverage vendors. Pursuant to the terms of these arrangements, marketing rebates are provided to the Company and its franchisees from the beverage vendors based upon the dollar volume of purchases for system-wide restaurants which will vary according to their demand for beverage syrup and fluctuations in the market rates for beverage syrup. These contracts have terms extending through the end of 2024. At September 29, 2021, the Company’s total estimated commitment to purchase chicken was $ 11.0 million. Contingent Lease Obligations As a result of assigning the Company’s interest in obligations under real estate leases in connection with the sale of company-operated restaurants to some of the Company’s franchisees, the Company is contingently liable on four lease agreements. These leases have various terms, the latest of which expires in 2036 . As of September 29, 2021, the potential amount of undiscounted payments the Company could be required to make in the event of non-payment by the primary lessee was $ 2.6 million. The present value of these potential payments discounted at the Company’s estimated pre-tax cost of debt at September 29, 2021 was $ 2.4 million. The Company’s franchisees are primarily liable on the leases. The Company has cross-default provisions with these franchisees that would put them in default of their franchise agreements in the event of non-payment under the leases. The Company believes that these cross-default provisions reduce the risk that payments will be required to be made under these leases. Due to the current uncertainty related to the COVID-19 pandemic and the impact it has had on the ability of the Company’s franchisees to make their lease payments, the Company recorded a $ 0.1 million liability in the Company’s condensed consolidated financial statements related to these contingent liabilities. Employment Agreements As of September 29, 2021, the Company had employment agreements with three of the officers of the Company. These agreements provide for minimum salary levels, possible annual adjustments for cost-of-living changes, and incentive bonuses that are payable under certain business conditions. Indemnification Agreements The Company has entered into indemnification agreements with each of its current directors and officers. These agreements require the Company to indemnify these individuals to the fullest extent permitted under Delaware law against liabilities that may arise by reason of their service to the Company and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. The Company also intends to enter into indemnification agreements with future directors and officers. ​ 22 Table of Contents 8. EARNINGS PER SHARE Basic earnings per share (“EPS”) is calculated using the weighted-average number of shares of common stock outstanding during the thirteen and thirty-nine weeks ended September 29, 2021 and September 23, 2020. Diluted EPS is calculated using the weighted-average number of shares of common stock outstanding and potentially dilutive during the period, using the treasury stock method. Below are basic and diluted EPS data for the periods indicated (in thousands except for share and per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ Thirty-Nine Weeks Ended ​ ​ September 29, 2021 September 23, 2020 ​ September 29, 2021 September 23, 2020 Numerator: ​ ​ ​ ​ ​ Net income ​ $ 10,161 ​ $ 9,920 ​ $ 22,943 ​ $ 19,019 ​ Denominator: ​ ​ ​ ​ ​ Weighted-average shares outstanding—basic ​ 36,067,754 ​ 35,471,452 ​ 35,930,246 ​ 34,989,007 ​ Weighted-average shares outstanding—diluted ​ 36,525,424 ​ 36,064,559 ​ 36,457,110 ​ 35,609,320 ​ Net income per share—basic ​ $ 0.28 ​ $ 0.28 ​ $ 0.64 ​ $ 0.54 ​ Net income per share—diluted ​ $ 0.28 ​ $ 0.28 ​ $ 0.63 ​ $ 0.53 ​ Anti-dilutive securities not considered in diluted EPS calculation ​ 225,308 ​ 4,071 ​ 118,968 ​ 129,218 ​ ​ Below is a reconciliation of basic and diluted share counts: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended Thirty-Nine Weeks Ended ​ ​ September 29, 2021 ​ September 23, 2020 ​ September 29, 2021 ​ September 23, 2020 ​ Weighted-average shares outstanding—basic 36,067,754 35,471,452 35,930,246 34,989,007 Dilutive effect of stock options and restricted shares 457,670 593,107 526,864 620,313 Weighted-average shares outstanding—diluted 36,525,424 36,064,559 36,457,110 35,609,320 ​ ​ 9. RELATED PARTY TRANSACTIONS Trimaran Pollo Partners, L.L.C. (“LLC”) owns approximately 45.7 % of the Company’s outstanding common stock. This large position means that LLC and its majority owners—predecessors and affiliates of, and certain funds managed by, Trimaran Capital Partners and Freeman Spogli & Co. (collectively, “Trimaran” and “Freeman Spogli,” respectively)—possess significant influence when stockholders vote on matters such as election of directors, mergers, consolidations and acquisitions, the sale of all or substantially all of the Company’s assets, decisions affecting the Company’s capital structure, amendments to the Company’s amended and restated certificate of incorporation or amended and restated by-laws, and the Company’s winding up and dissolution. The Company’s amended and restated certificate of incorporation provides that (i) so long as LLC beneficially owns, directly or indirectly, more than 40 % of the Company’s common stock, any member of the Board of Directors or the entire Board of Directors may be removed from office at any time with or without cause by the affirmative vote of a majority of the Company’s common stock, and (ii) prior to the date the LLC ceases to beneficially own, directly or indirectly, 40 % or more of the Company’s common stock, stockholders representing at least 40 % of the Company’s common stock may call a special meeting of the Company’s stockholders. ​ 10. REVENUE FROM CONTRACTS WITH CUSTOMERS Revenue Recognition Nature of products and services The Company has two revenue streams, company-operated restaurant revenue and franchise related revenue. 23 Table of Contents Company-operated restaurant revenue Revenues from the operation of company-operated restaurants are recognized as food and beverage products are delivered to customers and payment is tendered at the time of sale. The Company presents sales, net of sales-related taxes and promotional allowances. The Company offers a loyalty rewards program, which awards a customer points for dollars spent. Customers earn points for each dollar spent and as of August 4, 2020, 50 points can be redeemed for a $ 5 reward to be used for a future purchase. Prior to August 4, 2020, 100 points could be redeemed for a $ 10 reward. If a customer does not earn or use points within a one-year period, their account is deactivated and all points expire. Additionally, if a reward is not used within six months , it expires. When a customer is part of the rewards program, the obligation to provide future discounts related to points earned is considered a separate performance obligation, to which a portion of the transaction price is allocated. The performance obligation related to loyalty points is deemed to have been satisfied, and the amount deferred in the balance sheet is recognized as revenue, when the points are transferred to a reward and redeemed, the reward or points have expired, or the likelihood of redemption is remote. A portion of the transaction price is allocated to loyalty points, if necessary, on a pro-rata basis, based on stand-alone selling price, as determined by menu pricing and loyalty points terms. As of September 29, 2021 and December 30, 2020, the revenue allocated to loyalty points that have not been redeemed was $ 0.7 million and $ 0.9 million, respectively, which is reflected in the Company’s accompanying condensed consolidated balance sheets within other accrued expenses and current liabilities. The Company expects the loyalty points to be redeemed and recognized over a one-year period. The Company sells gift cards to its customers in the restaurants and through selected third parties. The gift cards sold to customers have no stated expiration dates and are subject to actual and/or potential escheatment rights in several of the jurisdictions in which the Company operates. Furthermore, due to these escheatment rights, the Company does not recognize breakage related to the sale of gift cards due to the immateriality of the amount remaining after escheatment. The Company recognizes income from gift cards when redeemed by the customer. Unredeemed gift card balances are deferred and recorded as other accrued expenses on the accompanying condensed consolidated balance sheets. Franchise and franchise advertising revenue Franchise revenue consists of franchise royalties, initial franchise fees, license fees due from franchisees, IT support services, and rental income for subleases to franchisees. Franchise advertising revenue consists of advertising contributions received from franchisees. These revenue streams are made up of the following performance obligations: ● Franchise license - inclusive of advertising services, development agreements, training, access to plans and help desk services. ● Discounted renewal option. ● Hardware services. The Company satisfies the performance obligation related to the franchise license over the term of the franchise agreement, which is typically 20 years . Payment for the franchise license consists of three components, a fixed-fee related to the franchise/development agreement, a sales-based royalty fee and a sales-based advertising fee. The fixed fee, as determined by the signed development and/or franchise agreement, is due at the time the development agreement is entered into, and/or when the franchise agreement is signed, and does not include a finance component. The sales-based royalty fee and sales-based advertising fee are considered variable consideration and will continue to be recognized as revenue as such sales are earned by the franchisees. Both sales-based fees qualify under the royalty constraint exception, and do not require an estimate of future transaction price. Additionally, the Company is utilizing the practical expedient available under ASC Topic 606, “Revenue from Contracts with Customers” (“Topic 606”) regarding disclosure of the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied for sales-based royalties. In certain franchise agreements, the Company offers a discounted renewal to incentivize future renewals after the end of the initial franchise term. As this is considered a separate performance obligation, the Company allocates a portion of the initial franchise fee to this discounted renewal, on a pro-rata basis, assuming a 20-year renewal. This performance obligation is satisfied over the renewal term, typically 10 or 20 years , while payment is fixed and due at the time the renewal is signed. 24 Table of Contents The Company purchases hardware, such as scanners, printers, cash registers and tablets, from third party vendors, which it then sells to franchisees. As the Company is considered the principal in this relationship, payment for the hardware is considered revenue, and is received upon transfer of the goods from the Company to the franchisee. As of September 29, 2021, there were no performance obligations related to hardware services that were unsatisfied or partially satisfied. Disaggregated revenue The following table presents our revenues disaggregated by revenue source and market (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended Thirty-Nine Weeks Ended ​ September 29, September 23, ​ September 29, ​ September 23, ​ ​ ​ 2021 ​ 2020 ​ 2021 ​ ​ 2020 ​ Core Market (1) : ​ ​ ​ ​ ​ ​ Company-operated restaurant revenue ​ $ 95,292 ​ $ 90,207 ​ $ 281,945 ​ $ 257,493 ​ Franchise revenue ​ 4,184 ​ 3,660 ​ 11,956 ​ 10,376 ​ Franchise advertising fee revenue ​ 3,129 ​ 2,748 ​ 8,989 ​ 7,773 ​ Total core market ​ $ 102,605 ​ $ 96,615 ​ $ 302,890 ​ $ 275,642 ​ Non-Core Market (2) : ​ ​ ​ ​ ​ Company-operated restaurant revenue ​ $ 4,694 ​ $ 7,069 ​ $ 19,172 ​ $ 20,124 ​ Franchise revenue ​ 4,733 ​ 4,121 ​ 12,963 ​ 11,186 ​ Franchise advertising fee revenue ​ 3,668 ​ 3,174 ​ 10,381 ​ 8,794 ​ Total non-core market ​ $ 13,095 ​ $ 14,364 ​ $ 42,516 ​ $ 40,104 ​ Total revenue ​ $ 115,700 ​ $ 110,979 ​ $ 345,406 ​ $ 315,746 ​ (1) Core Market includes markets with existing company-operated restaurants at the time of the Company’s IPO on July 28, 2014. (2) Non-Core Market includes markets entered into by the Company subsequent to the IPO date. The following table presents our revenues disaggregated by geographic market: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ ​ Thirty-Nine Weeks Ended ​ ​ September 29, 2021 September 23, 2020 ​ September 29, 2021 September 23, 2020 Greater Los Angeles area market 71.6 % 71.2 % ​ 70.8 % 71.5 % Other markets 28.4 % 28.8 % ​ 29.2 % 28.5 % Total 100 % 100 % ​ 100 % 100 % ​ Contract balances The following table provides information about the change in the franchise contract liability balances during the thirty-nine weeks ended September 29, 2021 and September 23, 2020 (in thousands) : ​ ​ ​ ​ ​ December 30, 2020 ​ $ 5,628 Revenue recognized - beginning balance ​ ( 514 ) Additional contract liability ​ 1,330 September 29, 2021 ​ $ 6,444 ​ ​ ​ ​ December 25, 2019 ​ $ 6,317 Revenue recognized - beginning balance ​ ( 900 ) Additional contract liability ​ 10 September 23, 2020 ​ $ 5,427 ​ The Company’s franchise contract liability includes development fees, initial franchise and license fees, franchise renewal fees, lease subsidies and royalty discounts and is included within other accrued expenses and current liabilities and other noncurrent liabilities within the accompanying condensed consolidated balance sheets. The Company receives area development fees from franchisees when they execute multi-unit area development agreements. Initial franchise and license fees, or franchise renewal fees, are received from franchisees upon the execution of, or renewal of, a franchise 25 Table of Contents agreement. Revenue is recognized from these agreements as the underlying performance obligation is satisfied, which is over the term of the agreement. The following table illustrates the estimated revenue to be recognized in future periods related to performance obligations under the applicable contracts that are unsatisfied as of September 29, 2021 (in thousands): ​ ​ ​ ​ ​ ​ ​ Franchise revenues: ​ Remainder of 2021 ​ $ 168 2022 ​ 637 2023 ​ 565 2024 ​ 473 2025 ​ 428 Thereafter ​ 4,173 Total ​ $ 6,444 ​ Changes in the loyalty rewards program liability included in deferred revenue within other accrued expenses and current liabilities on the condensed consolidated balance sheets were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ September 29, ​ December 30, ​ ​ ​ 2021 ​ 2020 ​ Loyalty rewards liability, beginning balance ​ $ 900 ​ $ 1,084 ​ Revenue deferred ​ 2,030 ​ 2,463 ​ Revenue recognized ​ ( 2,183 ) ​ ( 2,647 ) ​ Loyalty rewards liability, ending balance ​ $ 747 ​ $ 900 ​ ​ The Company expects all loyalty points revenue related to performance obligations unsatisfied as of September 29, 2021 to be recognized within one year . Gift Cards The gift card liability included in other accrued expenses and current liabilities on the condensed consolidated balance sheets was as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ September 29, ​ December 30, ​ ​ 2021 ​ 2020 Gift card liability ​ $ 3,686 ​ $ 4,008 Revenue recognized from the redemption of gift cards that was included in other accrued expenses and current liabilities at the beginning of the year was as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ Thirty-Nine Weeks Ended ​ ​ September 29, 2021 ​ September 23, 2020 September 29, 2021 ​ September 23, 2020 ​ Revenue recognized from gift card liability balance at the beginning of the year $ 88 ​ $ 138 ​ $ 1,509 ​ $ 890 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Contract Costs The Company does not currently incur costs to obtain or fulfill a contract that would be considered contract assets under Topic 606. ​ 26 Table of Contents 11. LEASES Nature of leases The Company’s operations utilize property, facilities, equipment and vehicles leased from others. Additionally, the Company has various contracts with vendors that have been determined to contain an embedded lease in accordance with Topic 842. As of September 29, 2021, the Company had one lease that it had entered into, but had not yet commenced. The Company does not have control of the property until lease commencement. Building and facility leases The majority of the Company’s building and facilities leases are classified as operating leases; however, the Company currently has two facilities and nine equipment leases that are classified as finance leases. Restaurants are operated under lease arrangements that generally provide for a fixed base rent and, in some instances, contingent rent based on a percentage of gross operating profit or net revenues in excess of a defined amount. Additionally, a number of the Company’s leases have payments, which increase at pre-determined dates based on the change in the consumer price index. For all leases, the Company also reimburses the landlord for non-lease components, or items that are not considered components of a contract, such as CAM, property tax and insurance costs. While the Company determined not to separate lease and non-lease components, these payments are based on actual costs, making them variable consideration and excluding them from the calculations of the ROU asset and lease liability. The initial terms of land and restaurant building leases are generally 20 years , exclusive of options to renew. These leases typically have four 5-year renewal options, which have generally been excluded in the calculation of the ROU asset and lease liability, as they are not considered reasonably certain to be exercised, unless (1) the renewal had already occurred as of the time of adoption of Topic 842, or (2) there have been significant leasehold improvements that have a useful life that extend past the original lease term. Furthermore, there are no residual value guarantees and no restrictions imposed by the lease. During the thirteen and thirty-nine weeks ended September 29, 2021, the Company reassessed the lease terms on four and 16 restaurants, respectively, due to certain triggering events, such as the addition of significant leasehold improvements with useful lives that extend past the current lease expiration, the decision to terminate a lease, or the decision to renew. As a result of the reassessment, an additional $ 2.6 million and $ 13.8 million of ROU asset and lease liabilities for the thirteen and thirty-nine weeks ended September 29, 2021, respectively, were recognized and will be amortized over the new lease term. During the thirteen and thirty-nine weeks ended September 23, 2020, the Company reassessed the lease terms on two and nine restaurants, respectively, due to the addition of significant leasehold improvements with useful lives that extend past the current lease expiration, the decision to terminate a lease or the decision to renew leases. This reassessment resulted in an additional $ 0.3 million and $ 2.0 million of ROU asset and lease liability for the thirteen and thirty-nine weeks ended September 23, 2020, respectively, which will be recognized over the new lease term. The reassessments did not have any impact on the original lease classification. Additionally, as the Company adopted all practical expedients available under Topic 842, no reallocation between lease and non-lease components was necessary. The Company also subleases facilities to certain franchisees and other non-related parties which are also considered operating leases. Sublease income also includes contingent rental income based on net revenues. The vast majority of these leases have rights to extend terms via fixed rental increases. However, none of these leases have early termination rights, the right to purchase the premises or any residual value guarantees. The Company does not have any related party leases. During the thirty-nine weeks ended September 29, 2021, the Company determined that the carrying value of ROU assets at two restaurants was not recoverable. As a result, the Company recorded a $ 0.4 million non-cash impairment charge for the thirty-nine weeks ended September 29, 2021 related to one restaurant closed in Texas in 2019 and one restaurant in California. The Company recorded a $ 0.5 million non-cash impairment charge for the thirty-nine weeks ended September 23, 2020 related to one restaurant in Texas sold to franchisees in the prior year. See Note 1, “Basis of 27 Table of Contents Presentation and Summary of Significant Accounting Policies – Impairment of Long-Lived Assets and ROU Assets” for additional information. Equipment Leases of equipment primarily consist of restaurant equipment, copiers and vehicles. These leases are fixed payments with no variable component. Additionally, no optional renewal periods have been included in the calculation of the ROU asset, there are no residual value guarantees and no restrictions imposed. Significant Assumptions and Judgments In applying the requirements of Topic 842, the Company made significant assumptions and judgments related to determination of whether a contract contains a lease and the discount rate used for the lease. In determining if any of the Company’s contracts contain a lease, the Company made assumptions and judgments related to its ability to direct the use of any assets stated in the contract and the likelihood of renewing any short-term contracts for a period extending past twelve months. The Company also made significant assumptions and judgments in determining an appropriate discount rate for property leases. These included using a consistent discount rate for a portfolio of leases entered into at varying dates, using the full 20-year term of the lease, excluding any options, and using the total minimum lease payments. The Company utilizes a third-party valuation firm in determining the discount rate, based on the above assumptions. For all other leases, the Company uses the discount rate implicit in the lease, or the Company’s incremental borrowing rate. As the Company has adopted the practical expedient not to separate lease and non-lease components, no significant assumptions or judgments were necessary in allocating consideration between these components, for all classes of underlying assets. The following table presents the Company’s total lease cost, disaggregated by underlying asset (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ September 29, 2021 ​ September 23, 2020 ​ Property Equipment ​ ​ ​ Property ​ Equipment ​ ​ ​ ​ ​ Leases ​ Leases ​ Total ​ Leases ​ Leases ​ Total Finance lease cost: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amortization of right-of-use assets ​ $ 18 ​ $ 1 ​ $ 19 ​ $ — ​ $ — ​ $ — Interest on lease liabilities ​ ​ 14 ​ ​ 1 ​ ​ 15 ​ ​ 5 ​ ​ — ​ ​ 5 Operating lease cost ​ 6,552 ​ 267 ​ 6,819 ​ 6,502 ​ 297 ​ 6,799 Short-term lease cost ​ — ​ 7 ​ 7 ​ — ​ 6 ​ 6 Variable lease cost ​ 138 ​ 70 ​ 208 ​ 116 ​ 50 ​ 166 Sublease income ​ ( 1,128 ) ​ — ​ ( 1,128 ) ​ ( 883 ) ​ — ​ ( 883 ) Total lease cost ​ $ 5,594 ​ $ 346 ​ $ 5,940 ​ $ 5,740 ​ $ 353 ​ $ 6,093 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirty-Nine Weeks Ended ​ ​ September 29, 2021 ​ September 23, 2020 ​ ​ Property Equipment ​ ​ ​ Property Equipment ​ ​ ​ ​ Leases ​ Leases ​ Total ​ Leases ​ Leases ​ Total Finance lease cost: ​ ​ ​ ​ ​ ​ ​ ​ Amortization of right-of-use assets ​ $ 60 ​ $ 2 ​ $ 62 ​ $ — ​ $ — ​ $ — Interest on lease liabilities ​ 44 ​ 2 ​ 46 ​ 16 ​ — ​ 16 Operating lease cost ​ 19,935 ​ 861 ​ 20,796 ​ 19,577 ​ 911 ​ 20,488 Short-term lease cost ​ — ​ 17 ​ 17 ​ — ​ 18 ​ 18 Variable lease cost ​ 413 ​ 260 ​ 673 ​ 325 ​ 120 ​ 445 Sublease income ​ ( 2,722 ) ​ — ​ ( 2,722 ) ​ ( 2,424 ) ​ — ​ ( 2,424 ) Total lease cost ​ $ 17,730 ​ $ 1,142 ​ $ 18,872 ​ $ 17,494 ​ $ 1,049 ​ $ 18,543 28 Table of Contents ​ The following table presents the Company’s total lease cost on the condensed consolidated statements of income (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ ​ Thirty-Nine Weeks Ended ​ September 29, 2021 ​ September 23, 2020 ​ ​ September 29, 2021 September 23, 2020 Lease cost – Occupancy and other operating expenses ​ $ 5,811 ​ $ 5,786 ​ ​ $ 18,191 ​ $ 17,582 Lease cost – General & administrative ​ 97 ​ ​ 114 ​ ​ 316 ​ ​ 344 Lease cost – Depreciation and amortization ​ 18 ​ ​ 5 ​ ​ 60 ​ ​ 16 Lease cost – Interest expense ​ 14 ​ ​ — ​ ​ 44 ​ ​ — Lease cost - Closed-store reserve ​ — ​ ​ 188 ​ ​ 261 ​ ​ 601 Total lease cost ​ $ 5,940 ​ $ 6,093 ​ ​ $ 18,872 ​ $ 18,543 ​ During the thirty-nine weeks ended September 29, 2021 and September 23, 2020, the Company had the following cash and non-cash activities associated with its leases (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirty-Nine Weeks Ended September 29, 2021 ​ Thirty-Nine Weeks Ended September 23, 2020 ​ Property Equipment ​ ​ ​ Property ​ Equipment ​ ​ ​ ​ ​ Leases ​ Leases ​ Total ​ Leases ​ Leases ​ Total Cash paid for amounts included in the measurement of lease liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating cash flows used for operating leases ​ $ 19,371 ​ $ 831 $ 20,202 ​ $ 16,348 ​ $ 928 ​ $ 17,276 Financing cash flows used for finance leases ​ $ 67 ​ $ 33 $ 100 ​ $ 24 ​ $ 2 ​ $ 26 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-cash investing and financing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating lease ROU assets obtained in exchange for lease liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating lease ROU assets ​ $ 13,848 ​ $ — $ 13,848 ​ $ 3,180 ​ $ 41 ​ $ 3,221 Finance lease ROU assets obtained in exchange for lease liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Finance lease ROU assets ​ $ — ​ $ 196 ​ $ 196 ​ $ — ​ $ — ​ $ — Derecognition of ROU assets due to terminations, impairment or modifications ​ $ ( 4,513 ) ​ $ ( 99 ) $ ( 4,612 ) ​ $ ( 543 ) ​ $ ( 26 ) ​ $ ( 569 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other Information ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-average remaining lease term—finance leases ​ 18.56 ​ 4.27 ​ ​ ​ ​ 2.08 ​ ​ 4.83 ​ ​ ​ Weighted-average remaining lease term—operating leases ​ 11.37 ​ 1.66 ​ ​ ​ ​ 11.62 ​ ​ 2.59 ​ ​ ​ Weighted-average discount rate—finance leases ​ 2.84 % 1.54 % ​ ​ ​ 11.10 % ​ 1.68 % ​ ​ Weighted-average discount rate—operating leases ​ 4.43 % 3.91 % ​ ​ ​ 4.31 % ​ 3.89 % ​ ​ ​ Information regarding the Company’s minimum future lease obligations as of September 29, 2021 is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Finance ​ Operating Leases ​ Minimum Minimum Minimum ​ ​ Lease ​ Lease ​ Sublease For the Years Ending ​ Payments ​ Payments ​ Income December 29, 2021 ​ $ 50 ​ $ 7,272 ​ $ 857 29 Table of Contents December 28, 2022 ​ 190 ​ 27,651 ​ 3,468 December 27, 2023 ​ 145 ​ 25,593 ​ 3,571 December 25, 2024 ​ 145 ​ 23,491 ​ 3,456 December 31, 2025 ​ 141 ​ 21,247 ​ 3,106 Thereafter ​ 1,690 ​ 143,011 ​ 25,746 Total ​ $ 2,361 ​ $ 248,265 ​ $ 40,204 Less: imputed interest ( 1.54 % - 4.43 %) ​ ( 470 ) ​ ( 55,750 ) ​ Present value of lease obligations ​ 1,891 ​ 192,515 ​ Less: current maturities ​ ( 149 ) ​ ( 19,718 ) ​ Noncurrent portion ​ $ 1,742 ​ $ 172,797 ​ ​ Short-Term Leases The Company has multiple short-term leases, which have terms of less than 12 months, and thus were excluded from the recognition requirements of Topic 842. The Company has recognized these lease payments in its consolidated statements of operations on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments was incurred. In April 2020, the FASB issued guidance allowing entities to make a policy election whether to account for lease concessions related to the COVID-19 pandemic as lease modifications. The election applies to any lessor-provided lease concession related to the impact of the COVID-19 pandemic, provided the concession does not result in a substantial increase in the rights of the lessor or in the obligations of the lessee. During fiscal 2020, the Company received non-substantial concessions from certain landlords in the form of rent deferrals and abatements. The Company elected to not account for these rent concessions as lease modifications. The rent concessions are recorded as part of other accrued expenses. The recognition of rent concessions did not have a material impact on the Company’s condensed consolidated financial statements as of September 29, 2021. Lessor The Company is a lessor for certain property, facilities and equipment owned by the Company and leased to others, principally franchisees, under non-cancelable leases with initial terms ranging from three to 20 years . These lease agreements generally provide for a fixed base rent and, in some instances, contingent rent based on a percentage of gross operating profit or net revenues. All leases are considered operating leases. For the leases in which the Company is the lessor, there are options to extend the lease. However, there are no terms and conditions to terminate the lease, no right to purchase premises and no residual value guarantees. Additionally, there are no related party leases. The Company received $ 0.1 million of lease income from company-owned locations for each of the thirteen weeks ended September 29, 2021 and September 23, 2020. The Company received $ 0.3 million and $ 0.4 million of lease income from company-owned locations for the thirty-nine weeks ended September 29, 2021 and September 23, 2020, respectively. ​