What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-05 compared with 2022-11-04 · 162 added, 219 removed, 291 unchanged (57% of the section changed)

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These factors include, but are not limited to:

● the impacts of the ongoing COVID-19 pandemic or another pandemic, epidemic or infectious disease outbreak on our company, our employees, our customers, our partners, our industry and the economy as a whole, as well as our franchisees’ ability to maintain operations in their individual restaurants;

● the impacts of the uncertainty regarding a potential resurgence of the COVID-19 pandemic or another pandemic, epidemic or infectious disease outbreak on our company, our employees, our customers, our partners, our industry and the economy as a whole, as well as our franchisees’ ability to maintain operations in their individual restaurants;

● global economic or other business conditions that may affect the desire or ability of our customers to purchase our products such as inflationary pressures, high unemployment levels, increases in gas prices, and declines in median income growth, consumer confidence and consumer discretionary spending;

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● our ability to compete successfully with other quick-service and fast casual restaurants;

● vulnerability to changes in consumer preferences and political and economic conditions;

● our ability to attract, develop and retain employees;

● vulnerability to changes in political and economic conditions and consumer preferences;

● our ability to attract, develop, assimilate and retain employees;

● vulnerability to conditions in the greater Los Angeles area and to natural disasters given the geographic concentration and real estate intensive nature of our business;

● the possibility that we may continue to incur significant impairment of certain of our assets, in particular in our new markets;

● changes in food and supply costs, especially for chicken;

● changes in food and supply costs, especially for chicken, labor, construction and utilities;

● social media and negative publicity, whether or not valid, and our ability to respond to and effectively manage the accelerated impact of social media;

● our ability to continue to expand our digital business, delivery orders and catering;

● concerns about food safety and quality and about food-borne illness, particularly avian flu;

● dependence on frequent and timely deliveries of food and supplies and our dependence on a single supplier to distribute substantially all of our products to our restaurants;

● concerns about food safety and quality and about food-borne illness;

● dependence on frequent and timely deliveries of food and supplies;

● our ability to service our level of indebtedness;

● uncertainty related to the success of our marketing programs, new menu items, advertising campaigns and restaurant designs and remodels;

● our reliance on our franchisees, who may incur financial hardships, lose access to credit, close restaurants, or declare bankruptcy, and our limited control over our franchisees and potential liability for their acts;

● adverse changes in the economic environment, including inflation and increased labor and supply costs, which may affect our franchisees, with adverse consequences to us;

● our limited control over our franchisees and potential deterioration of our relations with existing or potential franchisees;

● potential exposure to unexpected costs and losses from our self-insurance programs;

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● the impact of any failure of our information technology system or any breach of our network security;

● the impact of any security breaches of confidential customer data or personal information in connection with our electronic process of credit and debit card transactions;

● the impact of any security breaches on our ability to protect our customers’ payment method data or personal information;

● our ability to enforce and maintain our trademarks and protect our other proprietary intellectual property;

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We qualify all of our forward-looking statements by these cautionary statements.

El Pollo Loco is a differentiated and growing restaurant concept that specializes in fire-grilling citrus-marinated chicken and operates in the limited service restaurant (“LSR”) segment.

El Pollo Loco is a differentiated and growing restaurant concept that specializes in fire-grilling citrus-marinated chicken and operates in the limited service restaurant segment.

We strive to offer food that integrates the culinary traditions of Mexico with the healthier lifestyle of Los Angeles, a combination that we call “LA-Mex.” Our distinctive menu features our signature product--citrus-marinated fire-grilled chicken--and a variety of Mexican and LA-inspired entrees that we create from our chicken.

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Market Trends and Uncertainties

We may face future business disruption and related risks resulting from the ongoing COVID-19 pandemic or from another pandemic, epidemic or infectious disease outbreak, or from broader macroeconomic trends, any of which could have a significant impact on our business.

During both thirteen weeks ended September 28, 2022 and September 29, 2021, respectively, we incurred $0.5 million in COVID-19 related expenses, primarily due to leaves of absence.

During the thirty-nine weeks ended September 28, 2022 and September 29, 2021, respectively, we incurred $3.1 million and $3.5 million, in COVID-19 related expenses, primarily due to leaves of absence and overtime pay.

In addition, while all of our restaurants had dining rooms open as of September 28, 2022, we continue to experience staffing challenges, including higher wage inflation, overtime costs and other labor related costs.

Labor costs could also be adversely impacted as a result of California Assembly Bill No.

We may face future business disruption and related risks resulting from the uncertainty regarding a potential resurgence of the COVID-19 pandemic or another pandemic, epidemic or infectious disease outbreak, or from broader macroeconomic trends, any of which could have a significant impact on our business.

During the thirteen weeks ended March 29, 2023 we incurred $0.1 million in COVID-19 related expenses, primarily due to leaves of absence.

During the thirteen weeks ended March 30, 2022 we incurred $2.3 million in COVID-19 related expenses, primarily due to leaves of absence and overtime pay.

In addition, while we continue to experience staffing challenges, higher wages, overtime costs and increased commodity prices, these cost pressures are beginning to moderate.

Additionally, labor costs could also be adversely impacted as a result of California Assembly Bill No.

257, the Fast Food Accountability and Standards Recovery Act (“FAST Act”), which was signed into law in September 2022 and authorizes the creation of a council to set minimum standards for industry workers in California, including minimum wages.

The FAST Act, currently subject to a referendum campaign , could result in increased labor cost at our California restaurants thereby potentially impacting the profitability of our California restaurants.

Further, this bill could prompt similar legislation in other states .

Further, we continue to experience inflationary pressures, which resulted in increased commodity prices and impacted our business

and results of operations during the thirteen and thirty-nine weeks ended September 28, 2022.

We expect these pressures to continue during the rest of fiscal 2022.

Due to the fluidity of the COVID-19 pandemic and current macroeconomic environment, we cannot determine the ultimate impact on our condensed consolidated financial condition, liquidity, and future results of operations, and therefore any prediction as to the ultimate materiality of the adverse impact on our condensed consolidated financial condition, liquidity, and future results of operations is uncertain.

The FAST Act, which will take effect if approved by voters in November 2024, could result in increased labor cost at our California restaurants thereby potentially impacting the profitability of our California restaurants .

While we believe the trend towards more moderate labor related costs and less inflationary pressure continues, we cannot determine the ultimate impact of a potential resurgence of the COVID-19 pandemic (and related economic effects) and the current macroeconomic environment will have on the Company’s condensed consolidated financial condition, liquidity, and future results of operations.

Therefore, any prediction as to the ultimate materiality of the adverse impact on our condensed consolidated financial condition, liquidity, and future results of operations is uncertain.

Growth Strategies and Outlook

As of September 28, 2022, we had 487 locations in six states.

In fiscal 2021, we opened two new company-operated restaurants, one in Nevada and one in California, and our franchisees opened two new restaurants, one in Texas and one in Louisiana.

For the thirty-nine weeks ended September 28, 2022, one new company-operated restaurant was opened in Nevada and two new company-operated restaurants were opened in California.

For the thirty-nine weeks ended September 28, 2022, seven new franchised restaurants were opened in California.

As of March 29, 2023, we had 490 locations in seven states.

In fiscal 2022, we opened four new company-operated restaurants, two in Nevada and two in California, and our franchisees opened nine new restaurants, seven in California, one in Colorado and one in Utah.

For the thirteen weeks ended March 29, 2023, there were no new company-operated or franchised restaurants opened.

We plan to continue to expand our business, drive restaurant sales growth, and enhance our competitive positioning, by executing the following strategies:

● develop a people-first culture ;

● differentiate the brand;

● simplify operations;

● accelerate new restaurant development.

● embed our unique El Pollo Loco culture ;

● build awareness and own our lane;

● deliver exceptional service – profitably;

● accelerate development.

To increase comparable restaurant sales, we plan to increase customer frequency, attract new customers, and improve per-person spend.

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Comparable Restaurant Sales

For the thirteen and thirty-nine weeks ended September 28, 2022, system-wide comparable restaurant sales increased by 3.8% and 6.3%, respectively, from the comparable period in the prior year.

For company-operated restaurants, comparable restaurant sales for the thirteen and thirty-nine weeks ended September 28, 2022 increased by 3.4% and 2.9%, respectively.

For company-operated restaurants, the quarter’s change in comparable restaurant sales consisted of an approximately 7.5% increase in average check size and a decrease in transactions of 4.1% and the year-to-date change in comparable restaurant sales consisted of a 4.1% decrease in transactions and a 7.0% increase in average check size .

For franchised restaurants, comparable restaurant sales increased 4.1% and 8.6% for the thirteen and thirty-nine weeks ended September 28, 2022, respectively.

For the thirteen weeks ended March 29, 2023, system-wide comparable restaurant sales increased by 0.8% from the comparable period in the prior year.

For company-operated restaurants, comparable restaurant sales for the thirteen weeks ended March 29, 2023 increased by 3.8%.

For company-operated restaurants, the quarter’s change in comparable restaurant sales consisted of an approximately 6.3% increase in average check size partially offset by a 2.4% decrease in transactions.

For franchised restaurants, comparable restaurant sales decreased 1.0% for the thirteen weeks ended March 29, 2023.

Refer to Comparable Restaurant Sales definition in “Key Performance Indicators” section below.

Restaurant Development

Our restaurant counts at the beginning and end of each of the last three fiscal years and the thirty-nine weeks ended September 28, 2022, were as follows:

Thirty-Nine Weeks Ended

Our restaurant counts at the beginning and end of each of the last three fiscal years and the thirteen weeks ended March 29, 2023, were as follows:

Thirteen Weeks Ended

Fiscal Year Ended

September 28, 2022

March 29, 2023

Company-operated restaurant activity:

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In 2020, we finalized a new restaurant design that we believe will clearly differentiate and communicate our brand, both on the exterior and interior.

We believe that our remodels using this new design will result in higher restaurant revenue and a strengthened brand.

During the year ended September 28, 2022, we have completed four company-operated restaurant remodels and eight franchise remodels using the new asset design.

In fiscal 2022, we plan to continue our standard practices for remodels, which includes completing a total of six company and 20-30 franchise remodels using the new design.

As of March 29, 2023, we have completed seven company-operated restaurant remodels and seven franchise remodels using the new asset design.

In fiscal 2023, we plan to continue our standard practices for remodels, which includes completing a total of 10-15 company and 20-30 franchise remodels using the new design.

The cost of our restaurant remodels varies depending on the scope of the work required, but on average the investment is $0.3 million to $0.4 million per restaurant.

Our Loco Rewards loyalty program offers rewards that incentivize customers to visit our restaurants more often each month.

Customers earn points for each dollar spent and 50 points can be redeemed for a $5 reward to be used for a future purchase.

Customers earn points for each dollar spent and points can be redeemed for multiple redemption options.

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.

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As points are available for redemption past the quarter earned, a portion of the revenue associated with the earned points will be deferred until redemption or expiration.

As of September 28, 2022 and December 29, 2021, the revenue allocated to loyalty points that had not been redeemed was $0.5 million and $0.7 million, respectively, which is reflected in our accompanying condensed consolidated balance sheets within other accrued expenses and current liabilities.

We had over 3.1 million loyalty program members as of September 28, 2022.

As of both March 29, 2023 and December 28, 2022, the revenue allocated to loyalty points that had not been redeemed was $0.5 million, which is reflected in our accompanying condensed consolidated balance sheets within other accrued expenses and current liabilities.

We had over 3.3 million loyalty program members as of March 29, 2023.

Critical Accounting Policies and Use of Estimates

The preparation of our condensed consolidated financial statements in accordance with U.S.

generally accepted accounting principles (“GAAP”) requires us to make estimates and judgments that affect our reported amounts of assets, liabilities, revenue, and expenses, and related disclosures of contingent assets and liabilities.

generally accepted accounting principles (“GAAP”) requires us to make estimates and judgments that affect our reported amounts of assets,

liabilities, revenue, and expenses, and related disclosures of contingent assets and liabilities.

We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under current circumstances in making judgments about the carrying value of assets and liabilities that are not readily available from other sources.

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General and administrative expenses are comprised of expenses associated with corporate and administrative functions that support the development and operations of our restaurants, including compensation and benefits, travel expenses, stock compensation costs, legal and professional fees, and other related corporate costs.

Also included are pre-opening costs, and expenses above the restaurant level, including salaries for field management, such as area and regional managers, and franchise field operational support.

Also included are pre-opening

costs, and expenses above the restaurant level, including salaries for field management, such as area and regional managers, and franchise field operational support.

Franchise Expenses

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Comparison of Results of Operations

Our operating results for the thirteen weeks ended September 28, 2022 and September 29, 2021 and expressed as percentages of total revenue, with the exception of cost of operations and company restaurant expenses, which are expressed as percentages of company-operated restaurant revenue, are compared in the tables below.

Thirteen Weeks Ended

September 28, 2022

September 29, 2021

Increase / (Decrease)

Statements of Income Data

Company-operated restaurant revenue

Franchise revenue

Franchise advertising fee revenue

Total revenue

Cost of operations

Food and paper costs (1)

Labor and related expenses (1)

Occupancy and other operating expenses (1)

Company restaurant expenses (1)

General and administrative expenses

Franchise expenses

Depreciation and amortization

Loss on disposal of assets

Loss on disposition of restaurants

Impairment and closed-store reserves

Total expenses

Income from operations

Interest expense, net of interest income

Income tax receivable agreement income

Income before provision for income taxes

Provision for income taxes

(1) Percentages for line items relating to cost of operations and company restaurant expenses are calculated with company-operated restaurant revenue as the denominator.

All other percentages use total revenue.

Our operating results for the thirty-nine weeks ended September 28, 2022 and September 29, 2021 and expressed as percentages of total revenue, with the exception of cost of operations and company restaurant expenses, which are expressed as a percentage of company-operated restaurant revenue, are compared below.

Thirty-Nine Weeks Ended

September 28, 2022

September 29, 2021

Our operating results for the thirteen weeks ended March 29, 2023 and March 30, 2022 and expressed as percentages of total revenue, with the exception of cost of operations and company restaurant expenses, which are expressed as a percentage of company-operated restaurant revenue, are compared below.

Thirteen Years Ended

March 29, 2023

March 30, 2022

Increase / (Decrease)

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Occupancy and other operating expenses (1)

Gain on recovery of insurance proceeds, lost profits, net (1)

Company restaurant expenses (1)

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Loss on disposal of assets

Loss on disposition of restaurants

Gain on recovery of insurance proceeds, property, equipment and expenses

Gain on disposition of restaurants

Impairment and closed-store reserves

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Company-Operated Restaurant Revenue

For the quarter, company-operated restaurant revenue increased $3.2 million, or 3.2%, from the comparable period in the prior year.

For the quarter ended March 29, 2023, company-operated restaurant revenue increased $3.9 million, or 4.2%, from the comparable period in the prior year.

The increase in company-operated restaurant sales was primarily due to an increase in company-operated comparable restaurant revenue of $3.5 million, or 3.8%.

The company-operated comparable restaurant sales increase consisted of an approximately 6.3% increase in average check size due to increases in menu prices, partially offset by a 2.4% decrease in transactions.

In addition, company-operated restaurant revenue was favorably impacted by $0.9 million of additional sales from restaurants opened during or after the third quarter of 2021 and a $0.1 million increase in revenue recognized for our loyalty points program.

This company-operated restaurant sales increase was partially offset by a $1.1 million decrease in revenue from the closure of three restaurants during or subsequent to the third quarter of 2021.

Year-to-date, company-operated restaurant revenue increased $2.5 million, or 0.8%, from the comparable period in the prior year.

The increase in company-operated restaurant sales was primarily due an increase in company-operated comparable restaurant revenue of $8.3 million, or 2.9%.

The company-operated comparable restaurant sales increase consisted of an approximately 7.0% increase in average check size due to increases in menu prices, partially offset by a 4.1% decrease in transactions.

In addition, company-operated restaurant revenue was favorably impacted by $1.9 million of additional sales from restaurants opened during or after the third quarter of 2021 and a $0.2 million increase in revenue from restaurants that were temporarily closed due to the COVID-19 pandemic during or subsequent to the third quarter of 2021.

This company-operated restaurant sales increase was partially offset by a $5.3 million decrease in revenue from the eight company-operated restaurants sold by the Company to an existing franchisee and a $2.6 million decrease in revenue from the closure of three restaurants, in each case, during or subsequent to the first quarter of 2021.

In addition, company-operated restaurant revenue was favorably impacted by $1.5 million of additional sales from restaurants opened during or after the first quarter of 2022 and a $0.3 million increase in revenue from restaurants that were temporarily closed due to the COVID-19 pandemic during the first quarter of 2022 .

This company-operated restaurant sales increase was partially offset by a $1.5 million decrease in revenue from the closure of two restaurants and the four company-operated restaurants sold by the Company to existing franchisees, in each case, during or subsequent to the first quarter of 2022.

Franchise Revenue

For the quarter, franchise revenue increased $0.6 million, or 7.0%, from the comparable period in the prior year.

This increase was primarily due to a franchise comparable restaurant sales increase of 4.1%, the opening of nine restaurants and eight company-operated restaurants sold by the Company to an existing franchisee, in each case, during or subsequent to the third quarter of 2021.

This franchise revenue increase was partially offset by the closure of two franchise locations during or subsequent to the third quarter of 2021.

Year-to-date, franchise revenue increased $3.9 million, or 15.8%, from the comparable period in the prior year.

This increase was primarily due to a franchise comparable restaurant sales increase of 8.6% and the opening of nine restaurants during or subsequent to the third quarter of 2021.

The remainder of the franchise revenue increase is attributed to the pass through income related to a corresponding increase in franchise expenses.

This franchise revenue increase was partially offset by the closure of three franchise locations during or subsequent to the first quarter of 2021.

For the quarter ended March 29, 2023, franchise revenue increased $0.4 million, or 4.5%, from the comparable period in the prior year.

This increase was primarily due to nine franchise-restaurants openings and four company-operated

restaurants sold by the Company to an existing franchisees during or subsequent to the first quarter of 2022.

This franchise revenue increase was partially offset by a franchise comparable restaurant sales decrease of 1.0%.

Franchise Advertising Fee Revenue

For the quarter, franchise advertising fee revenue increased $0.4 million, or 5.4%, from the comparable period in the prior year.

Y ear-to-date, franchise advertising fee revenue increased $2.2 million, or 11.5%, from the comparable period in the prior year.

As advertising fee revenue is a percentage of franchisees’ revenue, the quarter-to-date and year-to-date fluctuations were due to the increases and decreases noted in franchise revenue above.

For the quarter ended March 29, 2023, franchise advertising fee revenue increased $0.1 million, or 2.1%, from the comparable period in the prior year.

As advertising fee revenue is a percentage of franchisees’ revenue, the quarter-to-date fluctuations were due to the increases and decreases noted in franchise revenue above.

Food and Paper Costs

For the quarter, food and paper costs increased $3.5 million, or 13.0%, from the comparable period in the prior year, primarily due to a $3.2 million increase in food costs and a $0.3 million increase in paper costs.

Year-to-date, food and paper costs increased $10.6 million, or 13.4%, from the comparable period in the prior year, due to a $1.4 million increase in paper costs and a $9.2 million increase in food costs.

The increase in food and paper costs for the quarter and year-to-date periods resulted primarily from commodity inflation, partially offset by lower transactions.

For the quarter, food and paper costs as a percentage of company-operated restaurant revenue were 29.2%, up from 26.7% in the comparable period of the prior year.

Year-to-date, food and paper costs as a percentage of company-operated restaurant revenue were 29.5%, up from 26.2% in the comparable period of the prior year.

The percentage increase for the quarter and year-to-date periods was primarily due to an investment in new elevated packaging, partially offset by an increase in pricing.

For the quarter ended March 29, 2023, food and paper costs decreased $0.8 million, or 3.0%, from the comparable period in the prior year.

The decrease in food and paper costs for the quarter resulted primarily due to lower transactions, partially offset by commodity inflation.

For the quarter, food and paper costs as a percentage of company-operated restaurant revenue were 27.5%, down from 29.5% in the comparable period of the prior year.

The percentage decrease for the quarter was primarily due to an increase in pricing, partially offset by the increase noted in food and paper costs above.

Labor and Related Expenses

For the quarter, labor and related expenses increased $5.5 million, or 19.7%, from the comparable period in the prior year.

The increase for the quarter was pr imarily due to recognizing a $3.2 million Employee Retention Credit (“ERC”) which was recorded as an offset to the corresponding payroll tax expense and was classified as part of the labor and other operating expenses on the condensed consolidated statements of income during the thirteen weeks ended September 29, 2021.

Further, the increase for the quarter was impacted by a $2.1 million increase primarily related to minimum wage increases in California during fiscal 2022 and other labor wage increases as a result of competitive pressures, a $1.0 million increase in other labor related expenses primarily related to overtime and payroll taxes and a $0.4 million increase from restaurants opened during or after the third quarter of the prior year and.

The increase in labor and related expenses for the quarter was partially offset by a $0.8 million decrease related to the 4.1% decrease in year-over-year transactions and a $0.4 million decrease in worker’s compensation expense .

Year-to-date, labor and related expenses increased $8.9 million, or 9.9%, from the comparable period in the prior year.

The increase for the year-to-date period was due to a $6.2 million increase related to higher minimum wage increases in California during fiscal 2022 and other labor wage increases as a result of competitive pressures , a $1.3 million increase in overtime, $0.8 million in higher payroll taxes, a $0.7 million increase from restaurants opened during or after the third quarter of the prior year and a $1.1 million increase in other labor related expenses primarily related to training.

Further, the increase for the year-to-date period was pr imarily due to recognizing a $3.2 million ERC which was recorded as an offset to the corresponding payroll tax expense and was classified as part of the labor and other operating expenses on the condensed consolidated statements of income during the thirty-nine weeks ended September 29, 2021.

The increase in labor and related expenses for the year-to-date period was partially offset by a $2.0 million reduction in labor related to the eight locations sold to an existing franchisee during the prior year, a $1.8 million decrease related to the 4.1% decrease in year-over-year transactions and a $0.6 million decrease in worker’s compensation expense .

For the quarter, labor and related expenses as a percentage of company-operated restaurant revenue were 32.3%, up from 27.8% in the comparable period in the prior year due to the cost increases highlighted above, partially offset by the higher menu prices.

Year-to-date labor and related expenses as a percentage of company-operated restaurant revenue were 32.6%, up from 29.9% in the comparable period in the prior year.

The year-to-date percentage was impacted by the cost increases highlighted above, partially offset by an increase in menu pricing.

For the quarter ended March 29, 2023, labor and related expenses decreased $1.1 million, or 3.5%, from the comparable period in the prior year.

The decrease in labor and related expenses for the quarter was primarily due to a $1.0 million decrease related to COVID-19 sick pay, a $1.0 million decrease in overtime due to improvements in operational execution, a $0.7 million decrease related to the 2.4% decrease in quarter-over-quarter sales transactions and a $0.6 million decrease in worker’s compensation expenses.

The decrease in labor and related expenses for the quarter was partially offset by a $1.2 million increase primarily related to minimum wage increases in California during fiscal 2023 and 2022 and other labor wage increases as a result of competitive pressure and $0.9 million increase in labor related costs due to improved management staffing.

For the quarter ended March 29, 2023, labor and related expenses as a percentage of company-operated restaurant revenue were 32.2%, down from 34.8% in the comparable period in the prior year primarily due to the increase in pricing, partially offset by the cost increases highlighted above.

Occupancy and Other Operating Expenses

For the quarter, occupancy and other operating expenses increased $1.8 million, or 7.2%, from the comparable period in the prior year.

The increase was primarily due to a $0.7 million increase in utilities, a $0.2 million increase in repairs and maintenance, a $0.2 million increase in market place delivery fees, a $0.2 million increase in occupancy costs and a $0.5 million increase in other operating supplies.

Year-to-date, occupancy and other operating expenses increased $2.3 million, or 3.1%, from the comparable period in the prior year.

The increase was primarily due to a $1.6 million increase in utilities, a $0.5 million increase in market place delivery fees, a $0.3 million increase in repairs and maintenance and a $0.4 million increase in other operating expenses.

The increase in occupancy and other operating expenses was partially offset by a $0.3 million decrease in occupancy costs and a $0.2 million decrease in operating services and supplies.

For the quarter, occupancy and other operating expenses as a percentage of company-operated restaurant revenue were 26.1%, up from 25.1% in the comparable period.

Year-to-date, occupancy and other operating expenses as a percentage of company-operated restaurant revenue were 25.2%, up from 24.7% in the comparable period of the prior year.

Both the quarter and year-to-date increases resulted from cost increases highlighted above.

For the quarter ended March 29, 2023, occupancy and other operating expenses increased $1.0 million, or 4.4%, from the comparable period in the prior year.

The increase was primarily due to a $0.3 million increase in repairs and maintenance, a $0.2 million increase in advertising fees, a $0.2 million increase in occupancy costs and a $0.3 million increase in other operating supplies.

For the quarter ended March 29, 2023, occupancy and other operating expenses as a percentage of company-operated restaurant revenue were consistent with the comparable period in the prior year .

Gain on Recovery of Insurance Proceeds

In September 2022, one of our restaurants incurred damage resulting from a fire.

In 2022, we disposed of less than $0.1 million of assets related to the fire.

The restaurant was reopened for business on October 27, 2022.

In fiscal 2023, we incurred costs directly related to the fire of less than $0.1 million.

We recognized gains of $0.2 million, related to the reimbursement of property and equipment and expenses incurred and $0.2 million related to the reimbursement of lost profits.

The gain on recovery of insurance proceeds and reimbursement of lost profits, net of the related costs is included in the accompanying condensed consolidated statements of income, for fiscal 2023, as a reduction of company restaurant expenses.

We received from the insurance company cash of $0.4 million, net of the insurance deductible, during fiscal 2023.

General and Administrative Expenses

For the quarter, general and administrative expenses increased $0.5 million, or 5.3%, from the comparable period in the prior year.

The increase for the quarter was primarily due to a $0.4 million increase in recruiting and training costs.

Year-to-date, general and administrative expenses decreased $0.9 million, or 2.9%, from the comparable period in the prior year.

The decrease for the year-to-date period was due primarily to a $0.5 million decrease in labor related costs, primarily related to a decrease in estimated management bonus expense and a $0.5 million decrease in legal and outside professional services.

This decrease was partially offset by a $0.1 million increase in professional services.

For the quarter, general and administrative expenses as a percentage of total revenue were 8.2%, up from 8.1% in the comparable period of the prior year.

Year-to-date, general and administrative expenses as a percentage of total revenue were 8.3%, down from 8.8% in the comparable period of the prior year.

For the quarter ended March 29, 2023, general and administrative expenses increased $1.2 million, or 12.5%, from the comparable period in the prior year.

The increase for the quarter was primarily due to a $0.8 million increase in labor related costs, primarily related to an increase in management bonus expense and a $0.3 million increase in special costs related to the recent share distribution (see Note 9, “Related Party Transactions” for further details on the share distribution).

For the quarter ended March 29, 2023, general and administrative expenses as a percentage of total revenue were 9.8%, up from 9.0% in the comparable period of the prior year.

The percentage increase for the quarterly period is primarily due to the cost increases discussed above.

The percentage decrease for the year-to-date period is primarily due to the cost decreases noted above.

Loss on Disposition of Restaurants

During the thirteen and thirty-nine weeks ended September 29, 2021, we completed the sale of our eight restaurants within the Sacramento area to an existing franchisee.

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.

Gain on Disposition of Restaurants

During the thirteen weeks ended March 29, 2023, we completed the sale of one restaurant within the Orange County area to an existing franchisee.

This sale resulted in cash proceeds of $0.2 million and a net gain on sale of restaurant of $0.1 million for the thirteen weeks ended March 29, 2023.

Impairment and Closed-Store Reserves

During the thirteen and thirty-nine weeks ended September 28, 2022, we recorded non-cash impairment charges of $0.1 million and $0.4 million, respectively, primarily related to the long-lived assets of one restaurant in California.

During the thirteen and thirty-nine weeks ended September 29, 2021, we recorded non-cash impairment charges of $0.1 million and $0.7 million, respectively, primarily related to the carrying value of the ROU assets of one restaurant in Texas closed in 2019, the ROU assets of one restaurant in California, and the long-lived assets of three restaurants in California .

During the thirteen weeks ended March 29, 2023, we recorded non-cash impairment charges of less than $0.1 million, primarily related to the carrying value of ROU assets of one restaurant in California.

During the thirteen weeks ended March 30, 2022, we recorded non-cash impairment charges of $0.1 million, primarily related to the long-lived assets of one restaurants in California .

Given the inherent uncertainty in projecting results for newer restaurants in newer markets we are monitoring the recoverability of the carrying value of the assets of several restaurants on an ongoing basis.

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Additionally, any property tax and CAM payments relating to closed restaurants are included within closed-store expense.

During the thirteen and thirty-nine weeks ended September 28, 2022, we recognized $0.1 million and $0.2 million, respectively, of closed-store reserve expense related to the amortization of ROU assets, property taxes and CAM payments for our closed locations.

During the thirteen and thirty-nine weeks ended September 29, 2021, we recognized $0.1 million and $0.4 million, respectively, of closed-store reserve expense, primarily related to the amortization of ROU assets, property taxes and CAM payments for our closed locations.

During both the thirteen weeks ended March 29, 2023 and March 30, 2022, we recognized less than $0.1 million of closed-store reserve expense related to the amortization of ROU assets, property taxes and CAM payments for our closed locations.

Interest Expense, Net

For the quarter, interest expense, net, decreased $0.3 million from t he comparable period in the prior year.

For the year-to-date period, interest expense, net, decreased $0.4 million from the comparable period in the prior year.

Both the quarter and year-to-date decreases in interest expense were primarily related to the unwinding of our interest rate swap and the corresponding payout that was recognized as part of interest income during the thirteen and thirty-nine weeks ended September 28, 2022 and lower outstanding balances on our 2022 Revolver (as defined below).

For the quarter ended March 29, 2023, interest expense, net, increased $0.6 million from t he comparable period in the prior year.

The increase in interest expense was primarily related to the higher outstanding balances on our 2022 Revolver (as defined below) as well as the higher interest rate in the current quarter versus t he comparable period in the prior year .

This increase was partially offset by the unwinding of our interest rate swap and the corresponding payout that was recognized as part of interest income during the thirteen weeks ended March 29, 2023.

Income Tax Receivable Agreement

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The TRA calls for us to pay to our pre-IPO stockholders 85% of the savings in cash that we realize in our taxes as a result of utilizing our net operating losses (“NOLs”) and other tax attributes attributable to preceding periods.

For the thirteen and thirty-nine weeks ended September 28, 2022, we recorded income tax receivable agreement income of less than $0.1 million and $0.3 million, respectively, and for both the thirteen and thirty-nine weeks ended September 29, 2021 we recorded income tax receivable agreement income of less than $0.1 million.

For the thirteen weeks ended March 29, 2023, we recorded income tax receivable agreement income $0.1 million and for the thirteen weeks ended March 30, 2022 we recorded income tax receivable agreement income of $0.1 million.

Provision for Income Taxes

For the quarter ended September 28, 2022, we recorded an income tax provision of $1.8 million, reflecting an estimated effective tax rate of 26.2%.

For the quarter ended September 29, 2021, we recorded an income tax provision of $3.7 million, reflecting an estimated effective tax rate of approximately 26.4%.

For the year-to-date period ended September 28, 2022, we recorded an income tax provision of $5.7 million, reflecting an estimated effective tax rate of approximately 28.7%.

For the year-to-date ended September 29, 2021, we recorded an income tax provision of $8.7 million, reflecting an estimated effective tax rate of approximately 27.4%.

The difference between the 21.0% statutory rate and our effective tax rate of 28.7% for the year-to-date ended September 28, 2022 is primarily a result of state taxes , the change in valuation allowance against certain state credits, a tax shortfall related to non-deductible executive compensation, partially offset by a Work Opportunity Tax Credit benefit .

For the quarter ended March 29, 2023, we recorded an income tax provision of $2.0 million, reflecting an estimated effective tax rate of 28.4%.

For the quarter ended March 30, 2022, we recorded an income tax provision of $0.9 million, reflecting an estimated effective tax rate of approximately 30.0%.

The difference between the 21.0% statutory rate and our effective tax rate of 28.4% for the quarter ended March 29, 2023 is primarily a result of state taxes , the change in

valuation allowance against certain state credits, a non-deductible executive compensation, partially offset by a Work Opportunity Tax Credit benefit .

Key Performance Indicators

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Thirteen Weeks Ended

Thirty-Nine Weeks Ended

(Dollar amounts in thousands)

September 28, 2022

September 29, 2021

September 28, 2022

September 29, 2021

March 29, 2023

March 30, 2022

Company-operated restaurant revenue

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Comparable restaurant sales exclude restaurants closed during the applicable period.

At September 28, 2022 and September 29, 2021, there were 466 and 462 comparable restaurants, 184 and 189 company-operated restaurants and 282 and 273 franchised restaurants, respectively.

At March 29, 2023 and March 30, 2022, there were 468 and 464 comparable restaurants, 181 and 182 company-operated restaurants and 287 and 282 franchised restaurants, respectively.

Comparable restaurant sales indicate the performance of existing restaurants, since new restaurants are excluded.

Because other companies may calculate this measure differently than we do, comparable restaurant sales as presented herein may not be comparable to similarly titled measures reported by other companies.

Management believes that comparable restaurant sales is a valuable metric for investors to evaluate the performance of our store base, excluding the impact of new stores and closed stores.

Comparable restaurant sales growth can be generated by an increase in the number of meals sold and/or by increases in the average check amount, resulting from a shift in menu mix and/or higher prices resulting from new products or price increases.

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Restaurant contribution and restaurant contribution margin are neither required by, nor presented in accordance with, GAAP.

Restaurant contribution is defined as company-operated restaurant revenue less company restaurant expenses

which includes food and paper cost, labor and related expenses and occupancy and other operating expenses, where applicable.

Restaurant contribution excludes certain costs, such as general and administrative expenses, depreciation and amortization, impairment and closed-store reserve and other costs that are considered normal operating costs and, accordingly, restaurant contribution is not indicative of overall Company results and does not accrue directly to the benefit of stockholders because of the exclusion of certain corporate-level expenses.

Restaurant contribution is defined as company-operated restaurant revenue less company restaurant expenses which includes food and paper cost, labor and related expenses and occupancy and other operating expenses, where applicable.

Restaurant contribution therefore excludes franchise revenue, franchise advertising fee revenue and franchise expenses as well as certain other costs, such as general and administrative expenses, franchise expenses, depreciation and amortization, asset impairment and closed-store reserve, loss on disposal of assets and other costs that are considered corporate-level expenses and are not considered normal operating costs of our restaurants.

Accordingly, restaurant contribution is not indicative of overall Company results and does not accrue directly to the benefit of stockholders because of the exclusion of certain corporate-level expenses.

Restaurant contribution margin is defined as restaurant contribution as a percentage of net company-operated restaurant revenue.

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Restaurant contribution and restaurant contribution margin have limitations as analytical tools, and you should not consider them in isolation, or superior to, or as substitutes for the analysis of our results as reported under GAAP.

Management uses restaurant contribution and restaurant contribution margin as key metrics to evaluate the profitability of incremental sales at our restaurants, to evaluate our restaurant performance across periods, and to evaluate our restaurant financial performance compared with our competitors.

Management uses restaurant contribution and restaurant contribution margin as a supplemental measure of restaurant performance.

Management believes that restaurant contribution and restaurant contribution margin are important tools for investors, because they are widely-used metrics within the restaurant industry to evaluate restaurant-level productivity, efficiency, and performance.

Restaurant contribution and restaurant contribution margin may also assist investors in evaluating our business and performance relative to industry peers and provide greater transparency with respect to our financial condition and results of operations.

Management further believes restaurant level operating is useful to investors to highlight trends in our core business that may not otherwise be apparent to investors when relying solely on GAAP financial measures.

A reconciliation of restaurant contribution and restaurant contribution margin to company-operated restaurant revenue is provided below:

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

(Dollar amounts in thousands)

September 28, 2022

September 29, 2021

September 28, 2022

September 29, 2021

March 29, 2023

March 30, 2022

Restaurant contribution:

4 unchanged sentences

Loss on disposal of assets

Loss on disposition of restaurants

Gain on recovery of insurance proceeds, property, equipment and expenses

Franchise revenue

1 unchanged sentence

Impairment and closed-store reserves

Gain on disposition of restaurants

Restaurant contribution

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New restaurants often open with an initial start-up period of higher-than-normal sales volumes, which subsequently decrease to stabilized levels.

New restaurants typically experience normal inefficiencies in the form of

higher food and paper, labor, and other direct operating expenses and, as a result, restaurant contribution margins are generally lower during the start-up period of operation.

New restaurants typically experience normal inefficiencies in the form of higher food and paper, labor, and other direct operating expenses and, as a result, restaurant contribution margins are generally lower during the start-up period of operation.

The average start-up period after which our new restaurants’ revenue and expenses normalize is approximately fourteen weeks.

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Thirteen Weeks Ended

Thirty-Nine Weeks Ended

(Amounts in thousands)

September 28, 2022

September 29, 2021

September 28, 2022

September 29, 2021

March 29, 2023

March 30, 2022

Non-GAAP adjustments:

4 unchanged sentences

Loss on disposal of assets (b)

Loss on disposition of restaurants (c)

Impairment and closed-store reserves (d)

Impairment and closed-store reserves (c)

Gain on disposition of restaurants (d)

Income tax receivable agreement income (e)

Securities class action legal expense (f)

Legal settlements (g)

Special legal expenses (h)

Pre-opening costs (i)

Special dividend (g)

Special legal (h)

Gain on recovery of insurance proceeds (i)

Pre-opening costs (j)

Adjusted EBITDA

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(b) Loss on disposal of assets includes the loss on disposal of assets related to retirements and replacement or write-off of leasehold improvements or equipment.

(c) During the thirteen and thirty-nine weeks ended September 29, 2021, we completed the sale of eight restaurants within the Sacramento area to an existing franchisee.

This sale resulted in cash proceeds of $4.6 million during the thirty-nine weeks ended September 29, 2021 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.

(d) Includes costs related to impairment of long-lived and ROU assets and closing restaurants.

During the thirteen and thirty-nine weeks ended September 28, 2022, we recorded non-cash impairment charges of $0.1 million and $0.4 million , respectively , primarily related to the long-lived assets of one restaurant in California.

During the thirteen and thirty-nine weeks ended September 29, 2021, we recognized $0.1 million and $0.4 million , respectively, of closed-store reserve expense, primarily related to the amortization of ROU assets, property taxes and CAM payments for our closed locations.

During the thirteen weeks ended March 30, 2022, we recorded non-cash impairment charges of $0.1 million primarily related to the long-lived assets of one restaurants in California .

(d) During the thirteen weeks ended March 29, 2023, we completed the sale of one restaurant within the Orange County area to an existing franchisee.

This sale resulted in cash proceeds of $0.2 million during the thirteen weeks ended March 29, 2023 and a net gain on sale of restaurant of $0.1 million for the thirteen weeks ended March 29, 2023.

(e) On July 30, 2014, we entered into the TRA.

This agreement calls for us to pay to our pre-IPO stockholders 85% of the savings in cash that we realize in our taxes as a result of utilizing our NOLs and other tax attributes attributable to preceding periods.

For the thirteen and thirty-nine weeks ended September 28, 2022 and September 29, 2021, income tax receivable agreement income consisted of the amortization of interest expense and changes in estimates for actual tax returns filed, related to our total expected TRA payments.

For the thirteen weeks ended March 29, 2023 and March 30, 2022, income tax receivable agreement income consisted of the amortization of interest expense and changes in estimates for actual tax returns filed, related to our total expected TRA payments.

(f) Consists of costs and recoveries related to the defense of securities lawsuits.

During the thirteen and thirty-nine weeks ended September 29, 2021, we received $0.5 million in insurance proceeds, net of legal expenses, related to a derivative complaint.

(g) Includes $0.5 million received from legal settlement, net of legal expenses.

(h) Consists of costs related to a special dividend declaration.

(g) Consists of costs related to a special dividend declaration.

On October 11, 2022, the Board of Directors declared a special dividend of $1.50 per share on the common stock of the Company.

(i) Pre-opening costs are a component of general and administrative expenses, and consist of costs directly associated with the opening of new restaurants and incurred prior to opening, including management labor costs, staff labor costs during training, food and supplies used during training, marketing costs, and other related pre-opening costs.

The special dividend was paid on November 9, 2022, to stockholders of record, including holders of restricted stock, at the close of business on October 24, 2022.

(h) Consists of legal costs related to the recent share distribution that occurred on March 28, 2023.

Refer to Note 9, “Related Party Transactions” for further details on the share distribution.

(i) In September 2022, one of our restaurants incurred damage resulting from a fire.

In 2022, we disposed of less than $0.1 million of assets related to the fire.

The restaurant was reopened for business on October 27, 2022.

In fiscal 2023, we incurred costs directly related to the fire of less than $0.1 million.

We recognized gains of $0.2 million, related to the reimbursement of property and equipment and expenses incurred and $0.2 million related to the reimbursement of lost profits.

We received from the insurance company cash of $0.4 million, net of the insurance deductible, during fiscal 2023.

(j) Pre-opening costs are a component of general and administrative expenses, and consist of costs directly associated with the opening of new restaurants and incurred prior to opening, including management labor costs, staff labor costs during training, food and supplies used during training, marketing costs, and other related pre-opening costs.

These are generally incurred over the three to five months prior to opening.

1 unchanged sentence

Liquidity and Capital Resources

Our primary sources of liquidity and capital resources have been cash provided from operations, cash and cash equivalents, and our revolving credit facility.

Our primary sources of liquidity and capital resources have been cash provided from operations, cash and cash equivalents, and our 2022 Revolver (defined below) .

Our primary requirements for liquidity and capital are new restaurants, existing restaurant capital investments (remodels and maintenance), legal defense costs, lease obligations, interest payments on our debt, working capital and general corporate needs.

4 unchanged sentences

The following table presents summary cash flow information for the periods indicated (in thousands):

Thirty-Nine Weeks Ended

Thirteen Weeks Ended

(Amounts in thousands)

September 28, 2022

September 29, 2021

March 29, 2023

March 30, 2022

Net cash provided by (used in)

2 unchanged sentences

Financing activities

Net increase (decrease) in cash

Net decrease in cash

Operating Activities

For the thirty-nine weeks ended September 28, 2022, net cash from operating activities changed by approximately $20.4 million from the comparable period of the prior year.

This change was due to unfavorable working capital fluctuations and lower profitability compared to the same period in the prior year.

For the thirteen weeks ended March 29, 2023, net cash from operating activities changed by approximately $6.1 million from the comparable period of the prior year.

This change was due to favorable working capital fluctuations and higher profitability compared to the same period in the prior year.

Investing Activities

For the thirty-nine weeks ended September 28, 2022, net cash used in investing activities changed by $4.9 million from the comparable period of the prior year.

This change was due primarily to the Company receiving a deposit of $4.6 million on the sale of eight restaurants within the Sacramento area during the thirty-nine weeks ended September 29, 2021.

For the thirteen weeks ended March 29, 2023, net cash used in investing activities changed by $1.9 million from the comparable period of the prior year.

This change was due primarily to remodeling seven restaurants in the thirteen weeks ended March 29, 2023, compared to opening one new company-operated restaurant and not remodeling any restaurants in the thirteen weeks ended March 30, 2022.

Financing Activities

For the thirty-nine weeks ended September 28, 2022, net cash from financing activities changed by $3.1 million from the comparable period of the prior year.

The change was due primarily to $22.8 million of net pay downs on the 2018 Revolver during the thirty-nine weeks ended September 29, 2021, compared to net pay downs of $20.0 million during the thirty-nine weeks ended September 28, 2022.

This change was partially offset by a $1.6 million cash inflow related to option exercises during the thirty-nine weeks ended September 28, 2022, compared to a $0.9 million cash inflow during the thirty-nine weeks ended September 29, 2021.

For the thirteen weeks ended March 29, 2023, net cash from financing activities changed by $15.3 million from the comparable period of the prior year.

The increase was due primarily to $8.0 million of net pay downs on the 2022 Revolver and repurchases of common stock of $5.9 million during the thirteen weeks ended March 29, 2023.

This change was offset by a $0.1 million received related to option exercises during the thirteen weeks ended March 29, 2023 compared to a $1.5 million cash inflow related to option exercises during thirteen weeks ended March 30, 2022.

Debt and Other Obligations

The Company, as a guarantor, is a party to a credit agreement (the “2022 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 “2022 Revolver”).

The 2022 Revolver, which is available pursuant to the 2022 Credit Agreement, includes a sub limit of $15.0 million for letters of credit and a sub limit of $15.0 million for swingline loans.

The 2022 Revolver, which is available pursuant to the 2022

Credit Agreement, includes a sub limit of $15.0 million for letters of credit and a sub limit of $15.0 million for swingline loans.

The 2022 Revolver and 2022 Credit Agreement will mature on July 27, 2027.

The obligations under the 2022

Credit Agreement and related loan documents are guaranteed by Holdings and Intermediate.

The obligations under the 2022 Credit Agreement and related loan documents are guaranteed by Holdings and Intermediate.

The obligations of Holdings, EPL and Intermediate under the 2022 Credit Agreement and related loan documents are secured by a first priority lien on substantially all of their respective assets.

The special dividend announced by the Company’s Board of Directors on October 11, 2022 is permitted under the terms of 2022 Revolver pursuant to both subclause (iii)(d) and (iii)(e) of the preceding sentence.

Under the 2022 Revolver, Holdings is restricted from making 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 our past or present officers, directors, or employees (or their estates) 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 2022 Revolver.

3 unchanged sentences

Borrowings under the 2022 Revolver may be repaid and reborrowed.

The interest rate range was 2.87% to 6.00% and 1.35% to 6.00% for the thirteen and thirty-nine weeks ended September 28, 2022 , respectively , and 1.34% to 1.35% and 1.34% to 1.65% for the thirteen and thirty-nine weeks ended September 29, 2021 , respectively .

The interest rate range was 5.69% to 6.30% for the thirteen weeks March 29, 2023 under the 2022 Revolver and 1.35% to 1.70% for the thirteen March 30, 2022 under the 2018 Revolver.

The 2022 Credit Agreement contains certain financial covenants.

We were in compliance with the financial covenants as of September 28, 2022.

At September 28, 2022, $10.0 million of letters of credit and $20.0 million of borrowings were outstanding under the 2022 Revolver.

There were $120.0 million remaining borrowings available under the 2022 Revolver at September 28, 2022.

During the year ended December 25, 2019, we entered into an interest rate swap with a notional amount of $40.0 million, related to the outstanding borrowings under our 2018 Revolver (defined below).

The interest rate swap was designated as a cash flow hedge and effectively converted a portion of our outstanding borrowings to a fixed rate of 1.31%, plus the applicable margin spread, which was 1.5% for the thirty-nine weeks ended September 28, 2022.

During the thirty-nine weeks ended September 28, 2022, we refinanced and terminated our credit agreement (the “2018 Credit Agreement”) among EPL, as borrower, the Company and Intermediate, as guarantors, 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 provided for a $150.0 million five-year senior secured revolving credit facility (the “2018 Revolver”) and entered into the 2022 Credit Agreement.

On July 29, 2022, we made a $20.0 million payment to the 2022 Revolver and the outstanding balance as of September 28, 2022 was $20.0 million.

We were in compliance with the financial covenants as of March 29, 2023.

At March 29, 2023, $9.8 million of letters of credit and $58.0 million of borrowings were outstanding under the 2022 Revolver.

There were $82.2 million remaining borrowings available under the 2022 Revolver at March 29, 2023.

During the year ended December 28, 2022, we refinanced and terminated our credit agreement (the “2018 Credit Agreement”) among EPL, as borrower, the Company and Intermediate, as guarantors, 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 provided for a $150.0 million five-year senior secured revolving credit facility (the “2018 Revolver”) and entered into the 2022 Credit Agreement.

See Note 4, “Long-term debt” for additional information.

Material Cash Requirements

Our material cash requirements as of September 28, 2022 have not changed materially since those disclosed under “Material Cash Requirements” in Part II, Item 7 of our annual report on Form 10-K for the year ended December 29, 2021.

Our material cash requirements as of March 29, 2023 have not changed materially since those disclosed under “Material Cash Requirements” in Part II, Item 7 of our annual report on Form 10-K for the year ended December 28, 2022.

Our material cash requirements relate mostly to future (i) debt payments, including expected interest expense, calculated based on current interest rates, (ii) restaurant operating lease payments, (iii) income tax receivable agreement payments, (iv) purchasing commitments for chicken, (v) restaurant finance lease payments, and (vi) capital expenditures .

Share Repurchase Program and Subsequent Borrowings

On October 11, 2022, our Board of Directors approved a share repurchase program under which the Company is authorized to repurchase up to $20.0 million of shares of our Common Stock.

The repurchase program will terminate on March 28, 2024, may be modified, suspended or discontinued at any time, and does not obligate us to acquire any particular number of shares.

In addition, on October 11, 2022, our Board of Directors declared a special dividend of $1.50 per share on our common stock.

The special dividend is payable on November 9, 2022, to stockholders of record, including holders of restricted stock and restricted stock units, at the close of business on October 24, 2022.

Lastly, on November 3, 2022, we borrowed $46.0 million on our 2022 Revolver and outstanding borrowings as of November 3, 2022 were $66.0 million.

After payment of the special dividend, we are expected to have approximately $10.0 million in cash on hand.

Share Repurchase Program

On October 11, 2022, the Company’s Board of Directors approved the 2022 Stock Repurchase Agreement under which the Company is authorized to repurchase up to $20.0 million of shares of its common stock.

The 2022 Stock Repurchase Agreement will terminate on March 28, 2024, may be modified, suspended or discontinued at any time, and does not obligate the Company to acquire any particular number of shares.

Under the 2022 Stock Repurchase Plan, the Company is permitted to repurchase its common stock from time to time, in amounts and at prices that the Company deemed appropriate, subject to market conditions and other considerations.

The Company’s repurchases will be executed using open market purchases, including pursuant to Rule 10b5-1 trading plans, and/or through privately negotiated transactions.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis