What changed in this filing

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Item 1. Financial Statements

2024-11-01 compared with 2024-08-02 · 183 added, 210 removed, 578 unchanged (40% of the section changed)

3 unchanged sentences

(Amounts in thousands, except share and per share data)

September 25,

Current assets:

31 unchanged sentences

Common stock, $ 0.01 par value, 200,000,000 shares authorized;

29,988,771 and 31,353,223 shares issued and outstanding as of June 26, 2024 and December 27, 2023, respectively

29,950,476 and 31,353,223 shares issued and outstanding as of September 25, 2024 and December 27, 2023, respectively

Additional paid-in-capital

7 unchanged sentences

Thirteen Weeks Ended

Twenty-Six Weeks Ended

June 26, 2024

June 28, 2023

June 26, 2024

June 28, 2023

Thirty-Nine Weeks Ended

September 25, 2024

September 27, 2023

September 25, 2024

September 27, 2023

Company-operated restaurant revenue

13 unchanged sentences

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

Loss (gain) on disposition of restaurants

(Gain) loss on disposition of restaurants

Impairment and closed-store reserves

2 unchanged sentences

Interest expense, net

Income tax receivable agreement expense (income)

Income tax receivable agreement expense

Income before provision for income taxes

7 unchanged sentences

Thirteen Weeks Ended

Twenty-Six Weeks Ended

June 26, 2024

June 28, 2023

June 26, 2024

June 28, 2023

Thirty-Nine Weeks Ended

September 25, 2024

September 27, 2023

September 25, 2024

September 27, 2023

Other comprehensive loss

8 unchanged sentences

(Amounts in thousands, except share data)

Thirteen Weeks Ended June 26, 2024

Thirteen Weeks Ended September 25, 2024

Comprehensive

1 unchanged sentence

(Loss) Income

Balance, March 27, 2024

Balance, June 26, 2024

Stock-based compensation

3 unchanged sentences

Repurchase of common stock

( 1,737,786 )

Repurchase of common stock - excise tax

Forfeiture of common stock related to restricted shares

Balance, June 26, 2024

Thirteen Weeks Ended June 28, 2023

Balance, September 25, 2024

Thirteen Weeks Ended September 27, 2023

Comprehensive

1 unchanged sentence

(Loss) Income

Balance, March 29, 2023

Balance, June 28, 2023

Stock-based compensation

6 unchanged sentences

Forfeiture of common stock related to restricted shares

Other comprehensive income, net of tax

Balance, June 28, 2023

Twenty-Six Weeks Ended June 26, 2024

Balance, September 27, 2023

Thirty-Nine Weeks Ended September 25, 2024

Comprehensive

10 unchanged sentences

Forfeiture of common stock related to restricted shares

Balance, June 26, 2024

Twenty-Six Weeks Ended June 28, 2023

Balance, September 25, 2024

Thirty-Nine Weeks Ended September 27, 2023

Comprehensive

11 unchanged sentences

Other comprehensive (loss) income, net of tax

Balance, June 28, 2023

Balance, September 27, 2023

See notes to condensed consolidated financial statements (unaudited).

2 unchanged sentences

(Amounts in thousands)

Twenty-Six Weeks Ended

June 26, 2024

June 28, 2023

Thirty-Nine Weeks Ended

September 25, 2024

September 27, 2023

Cash flows from operating activities:

2 unchanged sentences

Stock-based compensation expense

Income tax receivable agreement income

Income tax receivable agreement expense

Fire insurance proceeds for expenses paid and lost profit

8 unchanged sentences

Prepaid expenses and other current assets

Income taxes payable

Income taxes receivable/ payable

Accounts payable

20 unchanged sentences

Cash and cash equivalents, end of period

Twenty-Six Weeks Ended

June 26, 2024

June 28, 2023

Thirty-Nine Weeks Ended

September 25, 2024

September 27, 2023

Supplemental cash flow information

11 unchanged sentences

(“EPL”), which develops, franchises, licenses, and operates quick-service restaurants under the name El Pollo Loco® and operates under one operating segment.

At June 26, 2024, the Company operated 171 and franchised 324 El Pollo Loco restaurants in the United States.

At September 25, 2024, the Company operated 172 and franchised 324 El Pollo Loco restaurants in the United States.

The Company also licenses 10 restaurants in the Philippines.

27 unchanged sentences

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 June 26, 2024, the Company’s total debt was $ 87.0 million.

At September 25, 2024, the Company’s total debt was $ 76.0 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, available cash of $ 10.5 million at June 26, 2024, and the outstanding borrowing availability under the 2022 Revolver 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.

Based on current operations, the Company believes that its cash flow from operations, available cash of $ 7.9 million at September 25, 2024, and the outstanding borrowing availability under the 2022 Revolver 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.

Subsequent Events

Subsequent to the quarter-end, the Company paid down $ 4.0 million on its 2022 Revolver resulting in outstanding borrowings of $ 83.0 million as of August 1, 2024.

Subsequent to the quarter-end, the Company paid down $ 5.0 million on its 2022 Revolver resulting in outstanding borrowings of $ 71.0 million as of October 31, 2024.

Concentration of Risk

1 unchanged sentence

The Company has never experienced any losses related to these balances.

The Company had one supplier to whom amounts due totaled 11.9 % and 15.1 % of the Company’s accounts payable at June 26, 2024 and December 27, 2023, respectively.

Purchases from the Company’s largest supplier totaled 24.2 % and 24.4 % of total expenses for the thirteen and twenty-six weeks ended June 26, 2024, respectively, and 27.8 % and 27.3 % of total expenses for the thirteen and twenty-six weeks ended June 28, 2023, respectively.

Company-operated and franchised restaurants in the greater Los Angeles area generated, in the aggregate, approximately 71.8 % and 71.7 % of total revenue for the thirteen and twenty-six weeks ended June 26, 2024, respectively, and 70.9 % and 70.8 % for the thirteen and twenty-six weeks ended June 28, 2023, respectively.

The Company had no supplier for which amounts due totaled more than 10.0% of the Company’s accounts payable at September 25, 2024.

The Company had one supplier to whom amounts due totaled 15.1 % of the Company’s accounts payable at December 27, 2023.

Purchases from the Company’s largest supplier totaled 24.0 % and 24.3 % of total expenses for the thirteen and thirty-nine weeks ended September 25, 2024, respectively, and 26.6 % and 27.0 % of total expenses for the thirteen and thirty-nine weeks ended September 27, 2023, respectively.

Company-operated and franchised restaurants in the greater Los Angeles area generated, in the aggregate, approximately 72.5 % and 71.9 % of total revenue for the thirteen and thirty-nine weeks ended September 25, 2024, respectively, and 71.6 % and 71.1 % for the thirteen and thirty-nine weeks ended September 27, 2023, respectively.

Goodwill and Indefinite Lived Intangible Assets

9 unchanged sentences

As such, the fair value of the reporting unit retained can include expected cash flows from future royalties from those restaurants currently being refranchised, future royalties from existing franchise businesses and company restaurant operations.

The Company did no t record any decrement to goodwill related to the disposition of restaurants in fiscal 2023 or the twenty-six weeks ended June 26, 2024.

The Company did no t record any decrement to goodwill related to the disposition of restaurants in fiscal 2023 or the thirty-nine weeks ended September 25, 2024.

The Company performs an annual impairment test for goodwill during the fourth fiscal quarter of each year, or more frequently if impairment indicators arise.

10 unchanged sentences

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 twenty-six weeks ended June 26, 2024.

Accordingly, the Company did no t record any impairment to its goodwill or indefinite-lived intangible assets during the thirteen and twenty-six weeks ended June 26, 2024.

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 25, 2024.

Accordingly, the Company did no t record any impairment to its goodwill or indefinite-lived intangible assets during the thirteen and thirty-nine weeks ended September 25, 2024.

Fair Value Measurements

8 unchanged sentences

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).

There were no non-financial instruments measured at fair value on a nonrecurring basis as of and for the thirteen and twenty-six weeks ended June 26, 2024.

The following non-financial instruments were measured at fair value on a nonrecurring basis as of and for the thirteen and twenty-six weeks ended June 28, 2023, reflecting certain property and equipment assets and right of use (“ROU”) assets for which an impairment loss was recognized during the corresponding periods, as discussed immediately below under “Impairment of Property and Equipment and ROU Assets” (in thousands):

There were no non-financial instruments measured at fair value on a nonrecurring basis as of and for the thirteen and thirty-nine weeks ended September 25, 2024.

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 27, 2023, reflecting certain property and equipment assets and right of use (“ROU”) assets for which an impairment loss was recognized during the corresponding periods, as discussed immediately below under “Impairment of Property and Equipment and ROU Assets” (in thousands):

Thirteen Weeks

Twenty-Six Weeks

Fair Value Measurements at June 28, 2023 Using

Ended June 28, 2023

Thirty-Nine Weeks

Fair Value Measurements at September 27, 2023 Using

Ended September 27, 2023

Impairment Losses

Certain property and equipment, net

Certain ROU assets, net

7 unchanged sentences

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 twenty-six weeks ended June 26, 2024 that required an impairment review of certain of the Company’s property and equipment and ROU assets.

Based on the results of the analysis, the Company did no t record any non-cash impairment charges for the thirteen and twenty-six weeks ended June 26, 2024.

The Company recorded a non-cash impairment charge of less than $ 0.1 million for the thirteen and twenty-six weeks ended June 28, 2023, primarily related to the carrying value of the ROU assets of one restaurant in California.

The Company determined that triggering events occurred for certain restaurants during the thirteen and thirty-nine weeks ended September 25, 2024 that required an impairment review of certain of the Company’s property and equipment and ROU assets.

Based on the results of the analysis, the Company did no t record any non-cash impairment charges for the thirteen and thirty-nine weeks ended September 25, 2024.

The Company recorded a non-cash impairment charge of $ 1.0 million for both the thirteen and thirty-nine weeks ended September 27, 2023, primarily related to the carrying value of the ROU assets of one restaurant in California and the carrying value of the long-lived assets of one restaurant in Nevada.

Given the inherent uncertainty in projecting results for newer restaurants in newer markets, the Company monitors the recoverability of the carrying value of the assets of several restaurants on an ongoing basis.

4 unchanged sentences

Additionally, any property tax and common area maintenance (“CAM”) payments relating to closed restaurants are included within closed-store expense.

During both the thirteen and twenty-six weeks ended June 26, 2024 and June 28, 2023, the Company recognized less than $ 0.1 million of closed-store reserve expense related to the amortization of ROU assets, property taxes and CAM payments for its closed locations.

During both the thirteen and thirty-nine weeks ended September 25, 2024 and September 27, 2023, the Company recognized less than $ 0.1 million of closed-store reserve expense related to the amortization of ROU assets, property taxes and CAM payments for its closed location.

Gain on Recovery of Insurance Proceeds, Lost Profits

2 unchanged sentences

The Company received $ 0.4 million in cash, net of the insurance deductible, from the insurance company during fiscal 2023 for which the Company 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 for the reimbursement of property and

equipment and expenses and the reimbursement of lost profits, net of the related costs, is included in the accompanying condensed consolidated statements of income, for the twenty-six weeks ended June 28, 2023, as a reduction of company restaurant expenses.

The gain on recovery of insurance proceeds for the reimbursement of property and equipment and expenses and the reimbursement of lost profits, net of the related costs, is included in the accompanying condensed consolidated statements of income, for the thirty-nine weeks ended September 27, 2023, as a reduction of company restaurant expenses.

Loss (Gain) on Disposition of Restaurants

During the thirteen and twenty-six weeks ended June 26, 2024, the Company completed the sale of one restaurant within California to an existing franchisee due to an expiring lease term on April 30, 2024.

During the twenty-six weeks ended June 28, 2023, the Company completed the sale of one restaurant within California to an existing franchisee.

During the thirty-nine weeks ended September 25, 2024, the Company completed the sale of one restaurant within California to an existing franchisee due to an expiring lease term on April 30, 2024.

This sale resulted in cash proceeds of $ 0.1 million and a net loss on sale of restaurant of less than $ 0.1 million during the thirty-nine weeks ended September 25, 2024.

During the thirteen and thirty-nine weeks ended September 27, 2023, the Company completed the sale of 17 and 18 restaurants, respectively, within California, Utah and Texas to an existing franchisee.

During the thirteen and thirty-nine weeks ended September 27, 2023, these sales resulted in cash proceeds of $ 7.5 million and $ 7.7 million, respectively, and a net gain on sale of restaurant of $ 4.9 million and $ 5.0 million, respectively .

The Company determined that these restaurant dispositions represented multiple element arrangements, and as a result, the cash consideration received was allocated to the separate elements based on its relative standalone selling price.

2 unchanged sentences

The Company initially defers and subsequently recognizes the franchise fees over the term of the franchise agreement.

During the twenty-six weeks ended June 26, 2024 and June 28, 2023, these sales resulted in cash proceeds of $ 0.1 million and $ 0.2 million, respectively, and a net loss of sale of restaurant of less than $ 0.1 million and a net gain on sale of restaurant of $ 0.1 million, respectively.

Since the date of sale, this restaurant is now included in the total number of franchised El Pollo Loco restaurants.

During the thirty-nine weeks ended September 25, 2024, this sale resulted in cash proceeds of $ 0.1 million and a net loss on sale of restaurant of less than $ 0.1 million.

Since the date of sale, these restaurants are now included in the total number of franchised El Pollo Loco restaurants.

The provision for income taxes, income taxes payable and deferred income taxes is determined using the asset and liability method.

11 unchanged sentences

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 June 26, 2024 or at December 27, 2023.

The Company did no t recognize interest or penalties during the thirteen and twenty-six weeks ended June 26, 2024 and June 28, 2023, respectively, since there were no material unrecognized tax benefits.

The Company had no accrual for interest or penalties at September 25, 2024 or at December 27, 2023.

The Company did no t recognize interest or penalties during the thirteen and thirty-nine weeks ended September 25, 2024 and September 27, 2023, 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 the thirteen and twenty-six weeks ended June 26, 2024, the Company did no t record any income tax receivable agreement income or expense, and for the thirteen and twenty-six weeks ended June 28, 2023, the Company recorded income tax receivable agreement expense of $ 0.1 million and income tax receivable agreement income of less than $ 0.1 million 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.

For the thirteen and thirty-nine weeks ended September 25, 2024, the Company did no t record any income tax receivable agreement income or expense, and for both the thirteen and thirty-nine weeks ended September 27, 2023, the Company recorded income tax receivable agreement expense of $ 0.1 million 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 May 29, 2024, the Company terminated most of the obligations under the TRA, dated July 30, 2014, with respect to any payments or obligations owed to the FS Equity Partners V, L.P.

1 unchanged sentence

(together, the “Sellers”) thereunder in exchange for a payment to the Sellers of $ 398,896 .

As of June 26, 2024, an immaterial amount of obligations owed remained outstanding on the Company’s condensed consolidated balance sheets.

For the quarter ended June 26, 2024, the Company recorded an income tax provision of $ 3.2 million, reflecting an estimated effective tax rate of 29.3 %.

For the quarter ended June 28, 2023, the Company recorded an income tax provision of $ 2.7 million, reflecting an estimated effective tax rate of approximately 27.9 %.

For the year-to-date period ended June 26, 2024, the Company recorded an income tax provision of $ 5.4 million, reflecting an estimated effective tax rate of approximately 28.4 %.

For the year-to-date period ended June 28, 2023, the Company recorded an income tax provision of $ 4.7 million, reflecting an estimated effective tax rate of approximately 28.1 %.

The difference between the 21.0 % statutory rate and the effective tax rate of 28.4 % for the year-to-date period ended June 26, 2024 is primarily a result of state taxes , the impact of non-tax deductible executive compensation, a tax shortfall related to equity compensation deductible for tax as compared to the cumulative amount recorded as stock-based compensation expense, partially offset by a Work Opportunity Tax Credit benefit .

As of September 25, 2024, an immaterial amount of obligations owed remained outstanding on the Company’s condensed consolidated balance sheets.

For the quarter ended September 25, 2024, the Company recorded an income tax provision of $ 2.4 million, reflecting an estimated effective tax rate of 28.1 %.

For the quarter ended September 27, 2023, the Company recorded an income tax provision of $ 3.0 million, reflecting an estimated effective tax rate of approximately 24.4 %.

For the year-to-date period ended September 25, 2024, the Company recorded an income tax provision of $ 7.8 million, reflecting an estimated effective tax rate of approximately 28.3 %.

For the year-to-date period ended September 27, 2023, the Company recorded an income tax provision of $ 7.7 million, reflecting an estimated effective tax rate of approximately 26.5 %.

The difference between the 21.0 % statutory rate and the effective tax rate of 28.3 % for the year-to-date period ended September 25, 2024 is primarily a result of state taxes , the impact of non-tax deductible executive compensation, a tax shortfall related to equity compensation deductible for tax as compared to the cumulative amount recorded as stock-based compensation expense, partially offset by a Work Opportunity Tax Credit benefit .

Recently Issued Accounting Pronouncements

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The ASU is effective for fiscal years beginning after December 15, 2023 and interim periods beginning after December 15, 2024, with early adoption permitted.

It is required to be adopted retrospectively for all prior periods presented in the financial statements The Company is currently evaluating the impact of adopting this ASU on its disclosures.

It is required to be adopted retrospectively for all prior periods presented in the financial statements.

The Company will adopt on a retrospective basis the disclosures required by this ASU in its December 25, 2024 financial statements.

In December 2023, the FASB issued ASU No.

6 unchanged sentences

The costs and related accumulated depreciation and amortization of major classes of property and equipment are as follows (in thousands):

June 26, 2024

September 25, 2024

December 27, 2023

3 unchanged sentences

accumulated depreciation and amortization

Depreciation and amortization expense was $ 3.9 million and $ 3.7 million for the thirteen weeks ended June 26, 2024 and June 28, 2023, respectively, and $ 7.7 million and $ 7.3 million for the twenty-six weeks ended June 26, 2024 and June 28, 2023, respectively.

Based on the Company’s review of its property and equipment assets for impairment, the Company did no t record any non-cash impairment charges for the thirteen weeks and twenty-six weeks ended June 26, 2024 and June 28, 2023,

respectively.

See Note 1, “Basis of Presentation and Summary of Significant Accounting Policies – Impairment of Property and Equipment Assets and ROU Assets” for additional information.

Depreciation and amortization expense was $ 4.0 million and $ 3.9 million for the thirteen weeks ended September 25, 2024 and September 27, 2023, respectively, and $ 11.8 million and $ 11.3 million for the thirty-nine weeks ended September 25, 2024 and September 27, 2023, respectively.

Based on the Company’s review of its property and equipment assets for impairment, the Company did no t record any non-cash impairment charges for the thirteen weeks and thirty-nine weeks ended September 25, 2024.

The Company recorded non-cash impairment charges of $ 1.0 million for both the thirteen and thirty-nine weeks ended September 27, 2023.

See Note 1, “Basis of Presentation and Summary of Significant Accounting Policies – Impairment of Property and Equipment and ROU Assets” for additional information.

STOCK-BASED COMPENSATION

Stock Options

At June 26, 2024, options to purchase 1,121,783 shares of common stock were outstanding, including 335,325 vested and 786,458 unvested options.

At September 25, 2024, options to purchase 1,076,805 shares of common stock were outstanding, including 270,435 vested and 806,370 unvested options.

Unvested options vest over time;

however, upon a change in control, the Board of Directors may accelerate vesting.

A summary of stock option activity at June 26, 2024 and changes during the twenty-six weeks ended June 26, 2024 is as follows:

however, upon a change in control, the Board of Directors (the “Board”) may accelerate vesting.

A summary of stock option activity at September 25, 2024 and changes during the thirty-nine weeks ended September 25, 2024 is as follows:

Weighted-Average

6 unchanged sentences

Forfeited, cancelled or expired

Outstanding – June 26, 2024

Vested and expected to vest at June 26, 2024

Exercisable at June 26, 2024

Outstanding – September 25, 2024

Vested and expected to vest at September 25, 2024

Exercisable at September 25, 2024

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:

June 26, 2024

June 28, 2023

September 25, 2024

September 27, 2023

Expected volatility

2 unchanged sentences

Expected dividends

At June 26, 2024, the Company had total unrecognized compensation expense of $ 3.6 million related to unvested stock options, which it expects to recognize over a weighted-average period of 3.56 years.

At September 25, 2024, the Company had total unrecognized compensation expense of $ 3.4 million related to unvested stock options, which it expects to recognize over a weighted-average period of 3.37 years.

Restricted Shares

A summary of restricted share activity as of June 26, 2024 and changes during the twenty-six weeks ended June 26, 2024 is as follows:

A summary of restricted share activity as of September 25, 2024 and changes during the thirty-nine weeks ended September 25, 2024 is as follows:

Weighted-Average

1 unchanged sentence

Forfeited and cancelled

Unvested shares at June 26, 2024

Unvested shares at June 26, 2024, included 669,934 unvested restricted shares, 41,537 unvested performance stock units, and 41,963 unvested restricted units.

At June 26, 2024, the Company had unrecognized compensation expense of $ 6.3 million related to unvested restricted shares, which it expects to recognize over a weighted-average period of 3.06 years, unrecognized compensation expense of $ 0.4 million related to unvested performance stock units, which it expects to recognize over a weighted-average period of 2.51 years, and unrecognized compensation expense of $ 0.1 million related to unvested restricted units, which it expects to recognize over a weighted-average period of 0.37 years.

Total stock-based compensation expense was $ 0.9 million and $ 1.8 million for the thirteen and twenty-six weeks ended June 26, 2024, respectively, and $ 0.8 million and $ 1.6 million for the thirteen and twenty-six weeks ended June 28, 2023, respectively.

Unvested shares at September 25, 2024

Unvested shares at September 25, 2024, included 661,728 unvested restricted shares, 41,537 unvested performance stock units, and 41,963 unvested restricted stock units.

At September 25, 2024, the Company had unrecognized compensation expense of $ 5.7 million related to unvested restricted shares, which it expects to recognize over a weighted-average period of 2.91 years, unrecognized compensation expense of $ 0.3 million related to unvested performance stock units, which it expects to recognize over a weighted-average period of 2.26 years, and unrecognized compensation expense of less than $ 0.1 million related to unvested restricted stock units, which it expects to recognize over a weighted-average period of 0.12 years.

Total stock-based compensation expense was $ 1.1 million and $ 2.9 million for the thirteen and thirty-nine weeks ended September 25, 2024, respectively, and $ 0.9 million and $ 2.5 million for the thirteen and thirty-nine weeks ended September 27, 2023, respectively.

Share Repurchases

Share Repurchase Program

On November 2, 2023, the Company announced that its Board of Directors approved a share repurchase program (“Share Repurchase Program”) under which the Company is authorized to repurchase up to $ 20,000,000 of shares of the Company’s common stock.

On November 2, 2023, the Company announced that the Board approved a share repurchase program (“Share Repurchase Program”) under which the Company is authorized to repurchase up to $ 20,000,000 of shares of the Company’s common stock.

Under the Share Repurchase Program, 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.

5 unchanged sentences

Following completion of this repurchase, approximately $ 7.4 million of the Company’s common stock remained available for repurchase under the Share Repurchase Program at December 27, 2023.

For the thirteen and twenty-six weeks ended June 26, 2024, the Company repurchased 203,483 and 339,883 shares of common stock, respectively, under the Share Repurchase Program, using open market purchases, for total consideration of approximately $ 2.0 million and $ 3.2 million, respectively.

Following completion of these repurchases, approximately $ 4.2 million of the Company’s common stock remained available for repurchase under the Share Repurchase Program at June 26, 2024.

For the thirteen and thirty-nine weeks ended September 25, 2024, the Company repurchased 92,043 and 431,926 shares of common stock, respectively, under the Share Repurchase Program, using open market purchases, for total consideration of approximately $ 1.1 million and $ 4.3 million, respectively.

Following completion of these repurchases, approximately $ 3.1 million of the Company’s common stock remained available for repurchase under the Share Repurchase Program at September 25, 2024.

Other Share Repurchases

On May 29, 2024, the Company repurchased 1,534,303 shares for a total purchase price of $ 15.0 million under the Stock Repurchase Agreement with FS Equity Partners V, L.P.

During the thirty-nine week period ended September 25, 2024, the Company repurchased 1,534,303 shares for a total purchase price of $ 15.0 million under the Stock Repurchase Agreement with FS Equity Partners V, L.P.

and FS Affiliates V, L.P.

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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 subject to certain customary exceptions.

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

Under the 2022 Revolver, Holdings is restricted from making certain payments such as cash dividends or share repurchases, 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 2022 Revolver.

Borrowings under the 2022 Credit Agreement (other than any swingline loans) bear interest, at the borrower’s option, at rates based upon either the secured overnight financing rate (“SOFR”) or a base rate, plus, for each rate, a margin determined in accordance with a lease-adjusted consolidated leverage ratio-based pricing grid.

2 unchanged sentences

Borrowings under the 2022 Revolver may be repaid and reborrowed.

The interest rate range under the 2022 Revolver was 6.67 % to 6.94 % and 6.67 % to 6.96 % for the thirteen and twenty-six weeks ended June 26, 2024, respectively, and 6.22 % to 8.50 % and 5.69 % to 8.50 % for the thirteen and twenty-six weeks ended June 28, 2023 , respectively.

The interest rate range under the 2022 Revolver was 6.52 % to 6.95 % and 6.52 % to 6.96 % for the thirteen and thirty-nine weeks ended September 25, 2024, respectively, and 6.74 % to 6.93 % and 5.69 % to 8.50 % for the thirteen and thirty-nine weeks ended September 27, 2023 , respectively.

The 2022 Credit Agreement contains certain customary financial covenants, subject to certain exceptions.

The Company was in compliance with the financial covenants as of June 26, 2024.

At June 26, 2024, the Company had $ 87.0 million in outstanding borrowings under the 2022 Revolver and one letter of credit in the amount of $ 9.8 million outstanding, and as a result, the Company had $ 53.2 million in borrowing availability.

The Company was in compliance with the financial covenants as of September 25, 2024.

At September 25, 2024, the Company had $ 76.0 million in outstanding borrowings under the 2022 Revolver and one letter of credit in the amount of $ 9.8 million outstanding, and as a result, the Company had $ 64.2 million in borrowing availability.

Maturities, Borrowings and Paydowns

During the thirteen and twenty-six weeks ended June 26, 2024, the Company paid down $ 7.0 million and $ 11.0 million, respectively, on the 2022 Revolver.

During the twenty-six weeks ended June 28, 2023, the Company paid down $ 8.0 million on the 2022 Revolver.

During the thirteen and twenty-six weeks ended June 26, 2024, the Company borrowed $ 14.0 million on the 2022 Revolver.

During the thirteen and twenty-six weeks ended June 28, 2023, the Company borrowed $ 2.0 million on the 2022 Revolver.

During the thirteen and thirty-nine weeks ended September 25, 2024, the Company paid down $ 11.0 million and $ 22.0 million, respectively, on the 2022 Revolver.

During the thirty-nine weeks ended September 25, 2024, the Company borrowed $ 14.0 million on the 2022 Revolver.

During the thirteen and thirty-nine weeks ended September 27, 2023, the Company borrowed $ 23.0 million and $ 25.0 million, respectively, and paid down $ 3.0 million and $ 11.0 million, respectively, on the 2022 Revolver.

There are no required principal payments prior to maturity for the 2022 Revolver which matures on July 27, 2027.

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 with a maturity date 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.

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.”

In connection with the Company’s entry into the 2022 Credit Agreement, it terminated the interest rate swap on July 28, 2022, which was previously used to hedge interest rate risk.

Prior to the interest rate swap termination, the swap was a highly effective cash flow hedge.

In settlement of this swap, the Company received approximately $ 0.6 million and derecognized the corresponding interest rate swap asset.

The remaining amount in AOCI related to the hedging relationship was reclassified into earnings when the hedged forecasted transaction was reported in earnings.

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

Twenty-Six Weeks Ended

June 26, 2024

June 28, 2023

June 26, 2024

June 28, 2023

Interest expense on hedged portion of debt

Interest income on interest rate swap

Interest income on debt and derivatives, net

The following table summarizes the effect of the Company’s cash flow hedge accounting on AOCI for the thirteen and twenty-six weeks ended June 26, 2024 and June 28, 2023 (in thousands):

Thirteen Weeks Ended

Twenty-Six Weeks Ended

Gain Reclassified from

Net Gain Recognized in OCI

AOCI into Interest Income

Net Gain Recognized in OCI

AOCI into Interest Income

June 26, 2024

June 28, 2023

June 26, 2024

June 28, 2023

June 26, 2024

June 28, 2023

June 26, 2024

June 28, 2023

Interest rate swap

See Note 1, “Basis of Presentation and Summary of Significant Accounting Policies” for information about the fair value of the Company’s derivative asset.

OTHER ACCRUED EXPENSES AND CURRENT LIABILITIES

Other accrued expenses and current liabilities consist of the following (in thousands):

June 26, 2024

September 25, 2024

December 27, 2023

8 unchanged sentences

Other noncurrent liabilities consist of the following (in thousands):

June 26, 2024

September 25, 2024

December 27, 2023

3 unchanged sentences

Legal Matters

The Company is involved in various claims such as wage and hour and other legal actions that arise in the ordinary course of business.

The Company is involved in various claims such as wage and hour, consumer, 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.

4 unchanged sentences

These contracts have terms extending through the end of 2024.

At June 26, 2024, the Company’s total estimated commitment to purchase chicken was $ 16.6 million.

At September 25, 2024, the Company’s total estimated commitment to purchase chicken was $ 9.1 million.

Contingent Lease Obligations

1 unchanged sentence

These leases have various terms, the latest of which expires in 2038 .

As of June 26, 2024, the potential amount of undiscounted payments the Company could be required to make in the event of non-payment by the primary lessee was $ 3.4 million.

The present value of these potential payments discounted at the Company’s estimated pre-tax cost of debt at June 26, 2024 was $ 2.3 million.

As of September 25, 2024, the potential amount of undiscounted payments the Company could be required to make in the event of non-payment by the primary lessee was $ 3.6 million.

The present value of these potential payments discounted at the Company’s estimated pre-tax cost of debt at September 25, 2024 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 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.

Employment Agreements

As of June 26, 2024, the Company had employment agreements with three of the officers of the Company.

As of September 25, 2024, 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.

4 unchanged sentences

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 twenty-six weeks ended June 26, 2024 and June 28, 2023.

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 25, 2024 and September 27, 2023.

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.

1 unchanged sentence

Thirteen Weeks Ended

Twenty-Six Weeks Ended

June 26, 2024

June 28, 2023

June 26, 2024

June 28, 2023

Thirty-Nine Weeks Ended

September 25, 2024

September 27, 2023

September 25, 2024

September 27, 2023

Weighted-average shares outstanding—basic

5 unchanged sentences

Thirteen Weeks Ended

Twenty-Six Weeks Ended

June 26, 2024

June 28, 2023

June 26, 2024

June 28, 2023

Thirty-Nine Weeks Ended

September 25, 2024

September 27, 2023

September 25, 2024

September 27, 2023

Weighted-average shares outstanding—basic

15 unchanged sentences

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 June 26, 2024 and December 27, 2023, the revenue allocated to loyalty points that have not been redeemed was $ 0.8 million and $ 0.7 million, respectively, which is reflected in the Company’s accompanying condensed consolidated balance sheets within other accrued expenses and current liabilities.

As of September 25, 2024 and December 27, 2023, the revenue allocated to loyalty points that have not been redeemed was $ 0.8 million and $ 0.7 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.

4 unchanged sentences

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 and franchise advertising fee 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.

Franchise advertising fee revenue consists of advertising contributions received from franchisees.

These revenue streams are made up of the following performance obligations:

7 unchanged sentences

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.

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.

3 unchanged sentences

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 June 26, 2024, there were no performance obligations related to hardware services that were unsatisfied or partially satisfied.

As of September 25, 2024, there were no performance obligations related to hardware services that were unsatisfied or partially satisfied.

The following table presents the Company’s revenues disaggregated by geographic market:

Thirteen Weeks Ended

Twenty-Six Weeks Ended

June 26, 2024

June 28, 2023

June 26, 2024

June 28, 2023

Thirty-Nine Weeks Ended

September 25, 2024

September 27, 2023

September 25, 2024

September 27, 2023

Greater Los Angeles area market

1 unchanged sentence

Contract balances

The following table provides information about the change in the franchise contract liability balances during the twenty-six weeks ended June 26, 2024 and June 28, 2023 (in thousands):

The following table provides information about the change in the franchise contract liability balances during the thirty-nine weeks ended September 25, 2024 and September 27, 2023 (in thousands):

December 27, 2023

1 unchanged sentence

Additional contract liability

June 26, 2024

September 25, 2024

December 28, 2022

1 unchanged sentence

Additional contract liability

June 28, 2023

September 27, 2023

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.

2 unchanged sentences

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 June 26, 2024 (in thousands):

Franchise revenues:

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):

June 26, 2024

September 25, 2024

December 27, 2023

3 unchanged sentences

Loyalty rewards liability, ending balance

The Company expects all loyalty points revenue related to performance obligations unsatisfied as of June 26, 2024 to be recognized within one year .

The Company expects all loyalty points revenue related to performance obligations unsatisfied as of September 25, 2024 to be recognized within one year .

The gift card liability included in other accrued expenses and current liabilities on the condensed consolidated balance sheets was as follows (in thousands):

June 26, 2024

September 25, 2024

December 27, 2023

2 unchanged sentences

Thirteen Weeks Ended

Twenty-Six Weeks Ended

June 26, 2024

June 28, 2023

June 26, 2024

June 28, 2023

Thirty-Nine Weeks Ended

September 25, 2024

September 27, 2023

September 25, 2024

September 27, 2023

Revenue recognized from gift card liability balance at the beginning of the year

4 unchanged sentences

Additionally, the Company has various contracts with vendors that have been determined to contain an embedded lease in accordance with Topic 842.

As of June 26, 2024 , the Company had two leases that it had entered into, but had not yet commenced.

As of September 25, 2024 , 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.

7 unchanged sentences

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.

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 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 twenty-six weeks ended June 26, 2024, the Company reassessed the lease terms on 4 and 12 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 $ 1.8 million and $ 8.1 million of ROU asset and lease liabilities for the thirteen and twenty-six weeks ended June 26, 2024, respectively, were recognized and will be amortized over the new lease term.

During the thirteen and twenty-six weeks ended June 28, 2023, the Company reassessed the lease terms on 10 and 22 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.

This reassessment resulted in an additional $ 3.5 million and $ 13.6 million of ROU asset and lease liabilities for the thirteen and twenty-six weeks ended June 28, 2023, respectively, which were recognized and will be amortized over the new lease term.

During the thirteen and thirty-nine weeks ended September 25, 2024, the Company reassessed the lease terms on seven and 19 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 $ 4.6 million and $ 12.7 million of ROU asset and lease liabilities for the thirteen and thirty-nine weeks ended September 25, 2024, respectively, were recognized and will be amortized over the new lease term.

During the thirteen and thirty-nine weeks ended September 27, 2023, the Company reassessed the lease terms on five and 27 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.

This reassessment resulted in an additional $ 1.9 million and $ 15.4 million of ROU asset and lease liabilities for the thirteen and thirty-nine weeks ended September 27, 2023, respectively, which were recognized and will be amortized over the new lease term.

Additionally, as the Company adopted all practical expedients available under Topic 842, no reallocation between lease and non-lease components was necessary.

4 unchanged sentences

The Company does not have any related party leases.

During the twenty-six weeks ended June 26, 2024, the Company did no t record any non-cash impairment charges.

During the twenty-six weeks ended June 28, 2023, the Company recorded a less than $ 0.1 million non-cash impairment charge related to the carrying value of ROU assets of one restaurant in California.

See Note 1, “Basis of Presentation and Summary of Significant Accounting Policies – Impairment of Long-Lived Assets and ROU Assets” for additional information.

During the thirty-nine weeks ended September 25, 2024, the Company did no t record any non-cash impairment charges.

During the thirty-nine weeks ended September 27, 2023, the Company recorded a less than $ 0.1 million non-cash impairment charge related to the carrying value of ROU assets of one restaurant in California.

See Note 1, “Basis of Presentation and Summary of Significant Accounting Policies – Impairment of Property and Equipment and ROU Assets” for additional information.

Leases of equipment primarily consist of restaurant equipment, copiers and vehicles.

11 unchanged sentences

Thirteen Weeks Ended

June 26, 2024

June 28, 2023

September 25, 2024

September 27, 2023

Finance lease cost:

7 unchanged sentences

Total lease cost

Twenty-Six Weeks Ended

June 26, 2024

June 28, 2023

Thirty-Nine Weeks Ended

September 25, 2024

September 27, 2023

Finance lease cost:

9 unchanged sentences

Thirteen Weeks Ended

Twenty-Six Weeks Ended

June 26, 2024

June 28, 2023

June 26, 2024

June 28, 2023

Thirty-Nine Weeks Ended

September 25, 2024

September 27, 2023

September 25, 2024

September 27, 2023

Lease cost – Occupancy and other operating expenses

4 unchanged sentences

Total lease cost

During the twenty-six weeks ended June 26, 2024 and June 28, 2023, the Company had the following cash and non-cash activities associated with its leases (dollars in thousands):

Twenty-Six Weeks Ended June 26, 2024

Twenty-Six Weeks Ended June 28, 2023

During the thirty-nine weeks ended September 25, 2024 and September 27, 2023, the Company had the following cash and non-cash activities associated with its leases (dollars in thousands):

Thirty-Nine Weeks Ended September 25, 2024

Thirty-Nine Weeks Ended September 27, 2023

Cash paid for amounts included in the measurement of lease liabilities

12 unchanged sentences

Weighted-average discount rate—operating leases

Information regarding the Company’s minimum future lease obligations as of June 26, 2024 is as follows (in thousands):

Information regarding the Company’s minimum future lease obligations as of September 25, 2024 is as follows (in thousands):

Finance Leases

19 unchanged sentences

Additionally, there are no related party leases.

The Company received $ 0.1 million of lease income from company-owned locations for the thirteen weeks ended June 26, 2024 and June 28, 2023.

The Company received $ 0.2 million and $ 0.1 million of lease income from company-owned locations for the twenty-six weeks ended June 26, 2024 and June 28, 2023, respectively.

The Company received $ 0.1 million of lease income from company-owned locations for both of the thirteen weeks ended September 25, 2024 and September 27, 2023.

The Company received $ 0.3 million and $ 0.2 million of lease income from company-owned locations for the thirty-nine weeks ended September 25, 2024 and September 27, 2023, respectively.

SHAREHOLDER RIGHTS AGREEMENT

On August 8, 2023, the Company’s Board of Directors declared a dividend of one preferred share purchase right (a “Right”) for each share of common stock, par value $ 0.01 per share, of the Company (the “Common Shares”), outstanding on August 18, 2023, to the stockholders of record on that date.

On August 8, 2023, the Board declared a dividend of one preferred share purchase right (a “Right”) for each share of common stock, par value $ 0.01 per share, of the Company (the “Common Shares”), outstanding on August 18, 2023, to the stockholders of record on that date.

In connection with the distribution of the Rights, the Company entered into a Rights Agreement (the “Rights Agreement”), dated as of August 8, 2023, between the Company and Equiniti Trust Company, LLC, as rights agent.

Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Preferred Stock, par value $ 0.01 per share, of the Company (the “Preferred Shares”) at a price of $ 53.75 per one one-thousandth of a Preferred Share represented by a Right, subject to adjustment.

The Rights will expire at the close of business on August 7, 2024.

Under the Rights Agreement, the Rights are generally exercisable only in the event that a person or group of affiliated or associated persons (such person or group being an “Acquiring Person”), other than certain exempt persons, acquires (or commences a tender offer or exchange offer the consummation of which would result in) beneficial ownership of 12.5 % or more of the outstanding Common Shares.

In such case (with certain limited exceptions), each holder of a Right (other than the Acquiring Person, whose Rights shall become void) will have the right to receive, upon exercise at the then

current exercise price of the Right, Common Shares (or, if the Company’s Board of Directors so elects, cash, securities, or other property) having a value equal to two times (2x) the exercise price of the Right.

On August 4, 2024, the Board approved and entered into an Amendment (the “Amendment”) to the Rights Agreement (together with the Agreement, the “Amended Rights Agreement”).

Pursuant to the Amendment, the expiration date of the Rights has been extended until 11:59 p.m., Pacific Time, on the date that the votes of the stockholders of the Company with respect to the Company’s next annual meeting of stockholders are certified, unless stockholders approve the further extension of the Amended Rights Agreement beyond that date.

The Rights Agreement was initially adopted in August 2023 (as initially adopted, the “Rights Agreement”) in response to a rapid and significant accumulation of Company stock by Biglari Capital Corp.

(together with its affiliates, “Biglari Capital”).

In adopting the original Rights Agreement, the Board noted that Biglari Capital has a track record of acquiring substantial and sometimes controlling interests in public restaurant companies.

Since that time, members of the Board and leadership team have met with Biglari Capital on multiple occasions.

In approving the Amendment to extend the Rights Agreement, the Board considered, among other things, that during a recent meeting, a representative of Biglari Capital stated a desire to make substantial additional share accumulations in the public market if the Board terminated the Rights Agreement or allowed it to expire at the end of its initial term in August 2024.

The Amendment also amends the Rights Agreement to increase the Beneficial Ownership (as defined in the Amended Rights Agreement) triggering threshold for being deemed an Acquiring Person (as defined below), unless one of the enumerated exceptions is applicable, from 12.5 % to 15.0 %.

In all other respects, the terms of the Rights Agreement remain unmodified and in full force and effect.

Under the Amended Rights Agreement, the Rights are generally exercisable only in the event that a person or group of affiliated or associated persons (such person or group being an “Acquiring Person”), other than certain exempt persons, acquires (or commences a tender offer or exchange offer the consummation of which would result in) Beneficial Ownership of 15.0 % or more of the outstanding Common Shares.

In such case (with certain limited exceptions), each holder of a Right (other than the Acquiring Person, whose Rights shall become void) will have the right to receive, upon exercise at the then current exercise price of the Right, Common Shares (or, if the Board so elects, cash, securities, or other property) having a value equal to two times (2x) the exercise price of the Right.

Right to Exchange

8 unchanged sentences

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 1. Financial Statements