El Pollo Loco Holdings, Inc. 10-Q

Item 1. Financial Statements. EL POLLO LOCO HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Amounts in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ September 25, December 27, ​ 2024 2023 Assets ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ Cash and cash equivalents ​ $ 7,895 ​ $ 7,288 Accounts and other receivables, net ​ 10,608 ​ 10,148 Inventories ​ 1,851 ​ 1,911 Prepaid expenses and other current assets ​ 2,639 ​ 5,634 Income tax receivable ​ 493 ​ 153 Total current assets ​ 23,486 ​ 25,134 Property and equipment, net ​ 85,007 ​ 84,027 Property and equipment held under finance lease, net ​ 1,467 ​ 1,528 Property and equipment held under operating leases, net ("ROU asset") ​ 166,333 ​ 168,007 Goodwill ​ 248,674 ​ 248,674 Trademarks ​ 61,888 ​ 61,888 Other assets ​ 3,119 ​ 3,043 Total assets ​ $ 589,974 ​ $ 592,301 Liabilities and Stockholders’ Equity ​ ​ Current liabilities: ​ ​ Current portion of obligations under finance leases ​ $ 155 ​ $ 140 Current portion of obligations under operating leases ​ 19,869 ​ 19,490 Accounts payable ​ 8,548 ​ 12,541 Accrued salaries and vacation ​ 10,802 ​ 9,332 Accrued insurance ​ 12,108 ​ 11,831 Accrued income taxes payable ​ 513 ​ 70 Accrued interest ​ 285 ​ 394 Current portion of income tax receivable agreement payable ​ 23 ​ 422 Other accrued expenses and current liabilities ​ 23,284 ​ 18,361 Total current liabilities ​ 75,587 ​ 72,581 Revolver loan ​ 76,000 ​ 84,000 Obligations under finance leases, net of current portion ​ 1,559 ​ 1,617 Obligations under operating leases, net of current portion ​ 166,236 ​ 168,084 Deferred taxes ​ 9,146 ​ 8,878 Other noncurrent liabilities ​ 6,236 ​ 6,445 Total liabilities ​ 334,764 ​ 341,605 Commitments and contingencies (Note 7) ​ ​ Stockholders’ equity ​ ​ Preferred stock, $ 0.01 par value, 100,000,000 shares authorized; 100,000 shares designated as Series A Preferred Stock; none issued or outstanding ​ — ​ — Common stock, $ 0.01 par value, 200,000,000 shares authorized; 29,950,476 and 31,353,223 shares issued and outstanding as of September 25, 2024 and December 27, 2023, respectively ​ 299 ​ 313 Additional paid-in-capital ​ 221,218 ​ 236,421 Retained earnings ​ 33,693 ​ 13,962 Total stockholders’ equity ​ 255,210 ​ 250,696 Total liabilities and stockholders’ equity ​ $ 589,974 ​ $ 592,301 ​ See notes to condensed consolidated financial statements (unaudited). ​ 3 Table of Contents EL POLLO LOCO HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (Amounts in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended Thirty-Nine Weeks Ended ​ ​ September 25, 2024 ​ September 27, 2023 ​ September 25, 2024 ​ September 27, 2023 ​ Revenue ​ ​ ​ ​ Company-operated restaurant revenue ​ $ 101,178 ​ $ 102,703 ​ $ 300,638 ​ $ 304,477 ​ Franchise revenue ​ 11,330 ​ 10,255 ​ 34,329 ​ 30,046 ​ Franchise advertising fee revenue ​ 7,887 ​ 7,441 ​ 23,757 ​ 21,894 ​ Total revenue ​ 120,395 ​ 120,399 ​ 358,724 ​ 356,417 ​ Cost of operations ​ ​ ​ ​ ​ Food and paper cost ​ 25,401 ​ 27,552 ​ 76,751 ​ 82,928 ​ Labor and related expenses ​ 32,744 ​ 33,092 ​ 96,192 ​ 96,910 ​ Occupancy and other operating expenses ​ 26,088 ​ 27,289 ​ 74,609 ​ 77,751 ​ Gain on recovery of insurance proceeds, lost profits, net ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 151 ) ​ Company restaurant expenses ​ 84,233 ​ 87,933 ​ 247,552 ​ 257,438 ​ General and administrative expenses ​ 11,418 ​ 9,144 ​ 35,130 ​ 31,451 ​ Franchise expenses ​ 10,488 ​ 9,583 ​ 31,961 ​ 28,107 ​ Depreciation and amortization ​ 4,034 ​ 3,946 ​ 11,755 ​ 11,277 ​ Loss (gain) on disposal of assets ​ 77 ​ 16 ​ 181 ​ ( 34 ) ​ Gain on recovery of insurance proceeds, property, equipment and expenses ​ — ​ — ​ ( 41 ) ​ ( 242 ) ​ (Gain) loss on disposition of restaurants ​ ​ — ​ ​ ( 4,923 ) ​ ​ 7 ​ ​ ( 5,034 ) ​ Impairment and closed-store reserves ​ 8 ​ 1,008 ​ 45 ​ 1,123 ​ Total expenses ​ 110,258 ​ 106,707 ​ 326,590 ​ 324,086 ​ Income from operations ​ 10,137 ​ 13,692 ​ 32,134 ​ 32,331 ​ Interest expense, net ​ 1,536 ​ 1,382 ​ 4,627 ​ 3,362 ​ Income tax receivable agreement expense ​ — ​ 106 ​ — ​ 105 ​ Income before provision for income taxes ​ 8,601 ​ 12,204 ​ 27,507 ​ 28,864 ​ Provision for income taxes ​ 2,415 ​ 2,975 ​ 7,776 ​ 7,661 ​ Net income ​ $ 6,186 ​ $ 9,229 ​ $ 19,731 ​ $ 21,203 ​ Net income per share ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 0.21 ​ $ 0.28 ​ $ 0.66 ​ $ 0.61 ​ Diluted ​ $ 0.21 ​ $ 0.28 ​ $ 0.65 ​ $ 0.60 ​ Weighted-average shares used in computing net income per share ​ ​ ​ ​ ​ Basic ​ 29,199,971 ​ 33,412,674 ​ 30,072,637 ​ 35,026,731 ​ Diluted ​ 29,423,649 ​ 33,490,004 ​ 30,235,309 ​ 35,179,483 ​ ​ See notes to condensed consolidated financial statements (unaudited). ​ 4 Table of Contents EL POLLO LOCO HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (Amounts in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended Thirty-Nine Weeks Ended ​ ​ September 25, 2024 ​ September 27, 2023 ​ September 25, 2024 ​ September 27, 2023 ​ Net income ​ $ 6,186 ​ $ 9,229 ​ $ 19,731 ​ $ 21,203 ​ ​ Other comprehensive loss ​ ​ ​ ​ ​ ​ ​ ​ Changes in derivative instruments ​ ​ ​ ​ ​ ​ ​ ​ Reclassifications of loss into net income ​ — ​ — ​ — ​ ( 170 ) ​ ​ Income tax benefit ​ — ​ — ​ — ​ 44 ​ ​ Other comprehensive loss, net of taxes ​ — ​ — ​ ​ — ​ ( 126 ) ​ ​ Comprehensive income ​ $ 6,186 ​ $ 9,229 ​ $ 19,731 ​ $ 21,077 ​ ​ ​ ​ ​ See notes to condensed consolidated financial statements (unaudited). ​ ​ ​ ​ ​ ​ ​ ​ ​ 5 Table of Contents EL POLLO LOCO HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED) (Amounts in thousands, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended September 25, 2024 ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ Additional ​ Other Total ​ ​ Common Stock ​ Paid-in ​ Retained ​ Comprehensive ​ Stockholders’ ​ Shares Amount Capital Earnings (Loss) Income Equity Balance, June 26, 2024 ​ 29,988,771 ​ $ 299 ​ $ 220,772 ​ $ 27,507 ​ $ — ​ $ 248,578 Stock-based compensation ​ — ​ — ​ 1,080 ​ — ​ — ​ 1,080 Issuance of common stock related to restricted shares ​ 9,616 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Issuance of common stock upon exercise of stock options, net ​ 53,316 ​ ​ 1 ​ ​ 498 ​ ​ — ​ ​ — ​ ​ 499 Shares repurchased for employee tax withholdings ​ ( 4,731 ) ​ ​ — ​ ​ ( 64 ) ​ ​ — ​ ​ — ​ ​ ( 64 ) Repurchase of common stock ​ ( 92,043 ) ​ ​ ( 1 ) ​ ​ ( 1,061 ) ​ ​ — ​ ​ — ​ ​ ( 1,062 ) Repurchase of common stock - excise tax ​ — ​ ​ — ​ ​ ( 7 ) ​ ​ — ​ ​ — ​ ​ ( 7 ) Forfeiture of common stock related to restricted shares ​ ( 4,453 ) ​ — ​ — ​ — ​ — ​ — Net income ​ — ​ — ​ — ​ 6,186 ​ — ​ 6,186 Balance, September 25, 2024 ​ 29,950,476 ​ $ 299 ​ $ 221,218 ​ $ 33,693 ​ $ — ​ $ 255,210 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended September 27, 2023 ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ Additional ​ ​ Other Total ​ ​ Common Stock ​ Paid-in ​ Retained ​ Comprehensive ​ Stockholders’ ​ Shares Amount Capital Earnings (Loss) Income Equity Balance, June 28, 2023 ​ 35,643,747 ​ $ 356 ​ $ 276,222 ​ $ 382 ​ $ — ​ $ 276,960 Stock-based compensation ​ — ​ ​ — ​ ​ 926 ​ ​ — ​ ​ — ​ ​ 926 Issuance of common stock related to restricted shares ​ 28,222 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Issuance of common stock upon exercise of stock options, net ​ 35,666 ​ ​ — ​ ​ 347 ​ ​ — ​ ​ — ​ ​ 347 Shares repurchased for employee tax withholdings ​ ( 4,639 ) ​ ​ — ​ ​ ( 46 ) ​ ​ — ​ ​ — ​ ​ ( 46 ) Repurchase of common stock ​ ( 2,706,214 ) ​ ​ ( 27 ) ​ ​ ( 28,437 ) ​ ​ — ​ ​ — ​ ​ ( 28,464 ) Repurchase of common stock - excise tax ​ — ​ ​ — ​ ​ ( 280 ) ​ ​ — ​ ​ — ​ ​ ( 280 ) Forfeiture of common stock related to restricted shares ​ ( 39,312 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Net income ​ — ​ ​ — ​ ​ — ​ ​ 9,229 ​ ​ — ​ ​ 9,229 Balance, September 27, 2023 ​ 32,957,470 ​ $ 329 ​ $ 248,732 ​ $ 9,611 ​ $ — ​ $ 258,672 ​ 6 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirty-Nine Weeks Ended September 25, 2024 ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ Additional ​ Other Total ​ ​ Common Stock ​ Paid-in ​ Retained ​ Comprehensive ​ Stockholders’ ​ Shares Amount Capital Earnings (Loss) Income Equity Balance, December 27, 2023 ​ 31,353,223 ​ $ 313 ​ $ 236,421 ​ $ 13,962 ​ $ — ​ $ 250,696 Stock-based compensation ​ — ​ — ​ 2,897 ​ — ​ — ​ 2,897 Issuance of common stock related to restricted shares ​ 503,112 ​ ​ 5 ​ ​ ( 5 ) ​ ​ — ​ ​ — ​ ​ — Issuance of common stock upon exercise of stock options, net ​ 163,696 ​ ​ 2 ​ ​ 1,553 ​ ​ — ​ ​ — ​ ​ 1,555 Shares repurchased for employee tax withholdings ​ ( 19,025 ) ​ ​ — ​ ​ ( 212 ) ​ ​ — ​ ​ — ​ ​ ( 212 ) Repurchase of common stock ​ ( 1,966,229 ) ​ ​ ( 20 ) ​ ​ ( 19,272 ) ​ ​ — ​ ​ — ​ ​ ( 19,292 ) Repurchase of common stock - excise tax ​ — ​ ​ — ​ ​ ( 165 ) ​ ​ — ​ ​ — ​ ​ ( 165 ) Forfeiture of common stock related to restricted shares ​ ( 84,301 ) ​ ​ ( 1 ) ​ ​ 1 ​ ​ — ​ ​ — ​ ​ — Net income ​ — ​ — ​ — ​ 19,731 ​ — ​ 19,731 Balance, September 25, 2024 ​ 29,950,476 ​ $ 299 ​ $ 221,218 ​ $ 33,693 ​ $ — ​ $ 255,210 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirty-Nine Weeks Ended September 27, 2023 ​ ​ ​ ​ ​ ​ (Accumulated Accumulated ​ ​ ​ ​ ​ Additional Deficit) Other Total ​ ​ Common Stock ​ Paid-in ​ Retained ​ Comprehensive ​ Stockholders’ ​ Shares Amount Capital Earnings (Loss) Income Equity Balance, December 28, 2022 ​ 37,008,061 ​ $ 370 ​ $ 292,244 ​ $ ( 11,592 ) ​ $ 126 ​ $ 281,148 Stock-based compensation ​ — ​ ​ — ​ ​ 2,539 ​ ​ — ​ ​ — ​ ​ 2,539 Issuance of common stock related to restricted shares ​ 391,432 ​ ​ 4 ​ ​ ( 4 ) ​ ​ — ​ ​ — ​ ​ — Issuance of common stock upon exercise of stock options, net ​ 219,960 ​ ​ 2 ​ ​ 1,169 ​ ​ — ​ ​ — ​ ​ 1,171 Shares repurchased for employee tax withholdings ​ ( 23,129 ) ​ ​ — ​ ​ ( 217 ) ​ ​ — ​ ​ — ​ ​ ( 217 ) Repurchase of common stock ​ ( 4,530,850 ) ​ ​ ( 46 ) ​ ​ ( 46,570 ) ​ ​ — ​ ​ — ​ ​ ( 46,616 ) Repurchase of common stock - excise tax ​ — ​ ​ — ​ ​ ( 430 ) ​ ​ — ​ ​ — ​ ​ ( 430 ) Forfeiture of common stock related to restricted shares ​ ( 108,004 ) ​ ​ ( 1 ) ​ ​ 1 ​ ​ — ​ ​ — ​ ​ — Other comprehensive (loss) income, net of tax ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 126 ) ​ ​ ( 126 ) Net income ​ — ​ ​ — ​ ​ — ​ ​ 21,203 ​ ​ — ​ ​ 21,203 Balance, September 27, 2023 ​ 32,957,470 ​ $ 329 ​ $ 248,732 ​ $ 9,611 ​ $ — ​ $ 258,672 ​ See notes to condensed consolidated financial statements (unaudited). ​ ​ ​ ​ ​ ​ ​ 7 Table of Contents EL POLLO LOCO HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Amounts in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirty-Nine Weeks Ended ​ September 25, 2024 ​ September 27, 2023 Cash flows from operating activities: ​ ​ ​ ​ ​ Net income ​ $ 19,731 ​ $ 21,203 ​ Adjustments to reconcile net income to net cash flows provided by operating activities: ​ ​ ​ ​ Depreciation and amortization ​ 11,755 ​ 11,277 ​ Stock-based compensation expense ​ 2,897 ​ 2,539 ​ Income tax receivable agreement expense ​ — ​ 105 ​ Fire insurance proceeds for expenses paid and lost profit ​ ​ — ​ ​ 151 ​ Loss (gain) on disposition of restaurants ​ ​ 7 ​ ​ ( 5,034 ) ​ Loss (gain) on disposal of assets ​ 181 ​ ( 34 ) ​ Gain on recovery of insurance proceeds, property, equipment and expenses, net ​ ​ ( 41 ) ​ ​ ( 242 ) ​ Impairment of property and equipment ​ — ​ 1,032 ​ Amortization of deferred financing costs ​ 149 ​ 153 ​ Deferred income taxes, net ​ 268 ​ 1,138 ​ Changes in operating assets and liabilities: ​ ​ ​ ​ Accounts and other receivables ​ ( 460 ) ​ 462 ​ Inventories ​ 60 ​ 403 ​ Prepaid expenses and other current assets ​ 2,995 ​ 8 ​ Income taxes receivable/ payable ​ 103 ​ 6,391 ​ Other assets ​ ( 225 ) ​ ( 236 ) ​ Accounts payable ​ ( 2,617 ) ​ ( 5,798 ) ​ Accrued salaries and vacation ​ 1,470 ​ ( 1,619 ) ​ Accrued insurance ​ 277 ​ 437 ​ Payment related to tax receivable agreement ​ ( 399 ) ​ — ​ Other accrued expenses and liabilities ​ 4,995 ​ 173 ​ Net cash flows provided by operating activities ​ 41,146 ​ 32,509 ​ Cash flows from investing activities: ​ ​ ​ ​ ​ ​ Proceeds from disposition of restaurants ​ 100 ​ 7,722 ​ Proceeds from fire insurance for property and equipment ​ ​ 41 ​ ​ 163 ​ Purchase of property and equipment ​ ( 14,578 ) ​ ( 15,297 ) ​ Net cash flows used in investing activities ​ ( 14,437 ) ​ ( 7,412 ) ​ Cash flows from financing activities: ​ ​ ​ Proceeds from borrowings on revolver and swingline loans ​ 14,000 ​ 25,000 ​ Payments on revolver and swingline loan ​ ( 22,000 ) ​ ( 11,000 ) ​ Minimum tax withholdings related to net share settlements ​ ( 212 ) ​ ( 217 ) ​ Proceeds from issuance of common stock upon exercise of stock options, net of expenses ​ ​ 1,555 ​ ​ 1,171 ​ Payment of obligations under finance leases ​ ( 153 ) ​ ( 113 ) ​ Repurchases of common stock ​ ( 19,292 ) ​ ( 46,616 ) ​ Net cash flows used in by financing activities ​ ( 26,102 ) ​ ( 31,775 ) ​ Increase (decrease) in cash and cash equivalents ​ 607 ​ ( 6,678 ) ​ Cash and cash equivalents, beginning of period ​ 7,288 ​ 20,493 ​ Cash and cash equivalents, end of period ​ $ 7,895 ​ $ 13,815 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirty-Nine Weeks Ended ​ ​ September 25, 2024 ​ September 27, 2023 ​ Supplemental cash flow information ​ ​ Cash paid during the period for interest ​ $ 4,693 ​ $ 3,554 ​ Cash paid during the period for income taxes ​ $ 6,912 ​ $ 54 ​ Unpaid purchases of property and equipment ​ $ 3,252 ​ $ 4,476 ​ Unpaid repurchases of common stock and excise tax ​ $ 721 ​ $ 430 ​ ​ See notes to condensed consolidated financial statements (unaudited). ​ 8 Table of Contents EL POLLO LOCO HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Overview El Pollo Loco Holdings, Inc. (“Holdings”) is a Delaware corporation headquartered in Costa Mesa, California. Holdings and its direct and indirect subsidiaries are collectively referred to herein as the “Company.” The Company’s activities are conducted principally through its indirect wholly owned subsidiary, El Pollo Loco, Inc. (“EPL”), which develops, franchises, licenses, and operates quick-service restaurants under the name El Pollo Loco® and operates under one operating segment. At September 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. Basis of Presentation The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments necessary for a fair statement of the Company’s condensed consolidated financial position and results of operations and cash flows for the periods presented. Interim results of operations are not necessarily indicative of the results that may be achieved for the full year. The condensed consolidated financial statements and related notes do not include all information and footnotes required by GAAP for annual reports. This quarterly report should be read in conjunction with the consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 27, 2023. The Company uses a 52- or 53-week fiscal year ending on the last Wednesday of the calendar year. In a 52-week fiscal year, each quarter includes 13 weeks of operations; in a 53-week fiscal year, the first, second and third quarters each include 13 weeks of operations, and the fourth quarter includes 14 weeks of operations. Every six or seven years, a 53-week fiscal year occurs. Fiscal 2024 and 2023 are both 52-week years, ending on December 25, 2024 and December 27, 2023, respectively. Revenues, expenses, and other financial and operational figures may be elevated in a 53-week year. Holdings has no material assets or operations. Holdings and Holdings’ direct subsidiary, EPL Intermediate, Inc. (“Intermediate”), guarantee EPL’s 2022 Revolver (as defined in Note 4 below) on a full and unconditional basis (see Note 4, “Long-Term Debt”), and Intermediate has no subsidiaries other than EPL. EPL is a separate and distinct legal entity and has no obligation to make funds available to Intermediate. EPL and Intermediate may pay dividends to Intermediate and to Holdings, respectively, subject to the terms of the 2022 Revolver. Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of Holdings and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and revenue and expenses during the periods reported. Actual results could materially differ from those estimates. The Company’s significant estimates include estimates for impairment of goodwill, intangible assets and property and equipment, insurance reserves, lease accounting matters and contingent liabilities. 9 Table of Contents Cash and Cash Equivalents The Company considers all liquid instruments with an original maturity of three months or less at the date of purchase to be cash equivalents. Liquidity The Company’s principal liquidity and capital requirements are new restaurants, existing restaurant capital investments (remodels and maintenance), interest payments on its debt, lease obligations and working capital and general corporate needs. At September 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 $ 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 $ 5.0 million on its 2022 Revolver resulting in outstanding borrowings of $ 71.0 million as of October 31, 2024. Concentration of Risk Cash and cash equivalents are maintained at financial institutions and, at times, these balances may exceed federally-insured limits. The Company has never experienced any losses related to these balances. The Company had no 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 The Company’s indefinite-lived intangible assets consist of trademarks. Goodwill represents the excess of cost over fair value of net identified assets acquired in business combinations accounted for under the purchase method. The Company does not amortize its goodwill and indefinite-lived intangible assets. Goodwill resulted from the acquisition of certain franchise locations. Upon the sale or refranchising of a restaurant, the Company evaluates whether there is a decrement of goodwill. The amount of goodwill included in the cost basis of the asset sold is determined based on the relative fair value of the portion of the reporting unit disposed of compared to the fair value of the reporting unit retained. The Company reports as one reporting unit. The fair value of the portion of the reporting unit disposed of in a refranchising is determined by reference to the discounted value of the future cash flows expected to be generated by the restaurant and retained by the franchisee, which includes a deduction for the anticipated, future royalties the franchisee will pay the Company associated with the franchise agreement entered into simultaneously with the refranchising transition. The fair value of the reporting unit retained is based on the price a willing buyer would pay for the reporting unit and includes the value of franchise agreements. 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 thirty-nine weeks ended September 25, 2024. 10 Table of Contents The Company performs an annual impairment test for goodwill during the fourth fiscal quarter of each year, or more frequently if impairment indicators arise. The Company reviews goodwill for impairment utilizing either a qualitative assessment or a fair value test by comparing the fair value of a reporting unit with its carrying amount. If the Company decides that it is appropriate to perform a qualitative assessment and concludes that the fair value of a reporting unit more likely than not exceeds its carrying value, no further evaluation is necessary. If the Company performs the fair value test, the Company will compare the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. If the carrying amount of a reporting unit exceeds its fair value, the Company will recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized cannot exceed the total amount of goodwill allocated to that reporting unit. The Company performs an annual impairment test for indefinite-lived intangible assets during the fourth fiscal quarter of each year, or more frequently if impairment indicators arise. An impairment test consists of either a qualitative assessment or a comparison of the fair value of an intangible asset with its carrying amount. The excess of the carrying amount of an intangible asset over its fair value is recognized as an impairment loss. The assumptions used in the estimate of fair value are generally consistent with the past performance of the Company’s reporting segment and are also consistent with the projections and assumptions that are used in current operating plans. These assumptions are subject to change as a result of changing economic and competitive conditions. The Company determined that there were no indicators of potential impairment of its goodwill and indefinite-lived intangible assets during the thirteen and thirty-nine weeks ended September 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 Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories: ● Level 1: Quoted prices for identical instruments in active markets. ● Level 2: Observable prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs or significant value drivers are observable. ● Level 3: Unobservable inputs used when little or no market data is available. Certain assets and liabilities are measured at fair value on a nonrecurring basis. In other words, the instruments are not measured at fair value on an ongoing basis, but are subject to fair value adjustments only in certain circumstances (e.g., when there is evidence of impairment). ​ ​ 11 Table of Contents 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 ​ Thirty-Nine Weeks ​ ​ ​ ​ ​ Fair Value Measurements at September 27, 2023 Using ​ Ended September 27, 2023 ​ Ended September 27, 2023 ​ Total Level 1 Level 2 Level 3 Impairment Losses Impairment Losses Certain property and equipment, net ​ $ — ​ $ — ​ $ — ​ $ — $ 979 ​ $ 979 Certain ROU assets, net ​ $ 254 ​ $ — ​ $ — ​ $ 254 ​ $ — ​ $ 39 ​ Impairment of Property and Equipment and ROU Assets The Company reviews its property and equipment and ROU assets for impairment on a restaurant-by-restaurant basis whenever events or changes in circumstances indicate that the carrying value of certain property and equipment and ROU assets may not be recoverable. The Company considers a triggering event related to property and equipment assets or ROU assets in a net asset position to have occurred related to a specific restaurant if the restaurant’s average unit volume for the last twelve months is less than a minimum threshold or if consistent levels of undiscounted cash flows for the remaining lease period are less than the carrying value of the restaurant’s assets. Additionally, the Company considers a triggering event related to ROU assets to have occurred related to a specific lease if the location has closed or been subleased and future estimated sublease income is less than lease payments under the head lease. If the Company concludes that the carrying value of certain property and equipment and ROU assets will not be recovered based on expected undiscounted future cash flows, an impairment loss is recorded to reduce the property and equipment or ROU assets to their estimated fair value. The fair value is measured on a nonrecurring basis using unobservable (Level 3) inputs. There is uncertainty in the projected undiscounted future cash flows used in the Company’s impairment review analysis, which requires the use of estimates and assumptions. If actual performance does not achieve the projections, or if the assumptions used change in the future, the Company may be required to recognize impairment charges in future periods, and such charges could be material. The Company determined that triggering events occurred for certain restaurants during the thirteen and thirty-nine weeks ended September 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. For these restaurants, if expected performance is not realized, an impairment charge may be recognized in future periods, and such charge could be material. Closed-Store Reserves When a restaurant is closed, the Company will evaluate the ROU asset for impairment, based on anticipated sublease recoveries. The remaining value of the ROU asset is amortized on a straight-line basis, with the expense recognized in closed-store reserve expense. Additionally, any property tax and common area maintenance (“CAM”) payments relating to closed restaurants are included within closed-store expense. During 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. 12 Table of Contents Gain on Recovery of Insurance Proceeds, Lost Profits During fiscal 2022, one of the Company’s restaurants incurred damage resulting from a fire. In fiscal 2023, the Company incurred costs directly related to the fire of less than $ 0.1 million. 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 thirty-nine weeks ended September 27, 2023, as a reduction of company restaurant expenses. Loss (Gain) on Disposition of Restaurants 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. Cash proceeds included upfront consideration for the sale of the restaurant and franchise fees. The cash consideration per restaurant related to franchise fees is consistent with the amounts stated in the related franchise agreement, which are charged for separate standalone arrangements. The Company initially defers and subsequently recognizes the franchise fees over the term of the franchise agreement. 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. 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. Since the date of sale, these restaurants are now included in the total number of franchised El Pollo Loco restaurants. Income Taxes The provision for income taxes, income taxes payable and deferred income taxes is determined using the asset and liability method. Deferred tax assets and liabilities are determined based on temporary differences between the financial carrying amounts and the tax bases of assets and liabilities using enacted tax rates in effect in the years in which the temporary differences are expected to reverse. On a periodic basis, the Company assesses the probability that its net deferred tax assets, if any, will be recovered. If, after evaluating all of the positive and negative evidence, a conclusion is made that it is more likely than not that some portion or all of the net deferred tax assets will not be recovered, a valuation allowance is provided by charging to tax expense a reserve for the portion of deferred tax assets which are not expected to be realized. The Company reviews its filing positions for all open tax years in all U.S. federal and state jurisdictions where the Company is required to file. When there are uncertainties related to potential income tax benefits, in order to qualify for recognition, the position the Company takes has to have at least a “more likely than not” chance of being sustained (based on the position’s technical merits) upon challenge by the respective authorities. The term “more likely than not” means a likelihood of more than 50 percent. Otherwise, the Company may not recognize any of the potential tax benefit associated with the position. The Company recognizes a benefit for a tax position that meets the “more likely than not” criterion at the largest amount of tax benefit that is greater than 50 percent likely of being realized upon its effective resolution. Unrecognized tax benefits involve management’s judgment regarding the likelihood of the benefit being sustained. The final resolution of uncertain tax positions could result in adjustments to recorded amounts and may affect the Company’s condensed consolidated financial position, results of operations, and cash flows. 13 Table of Contents The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties at September 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 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. and FS Affiliates V, L.P. (together, the “Sellers”) thereunder in exchange for a payment to the Sellers of $ 398,896 . 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 In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure.” The ASU updates reportable segment disclosure requirements, primarily through requiring enhanced disclosures about significant segment expenses and information used to assess segment performance. These disclosures are required quarterly. 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 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. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The ASU includes amendments requiring enhanced income tax disclosures, primarily related to standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and should be applied prospectively with the option of retrospective application. The Company is currently evaluating the impact of adopting this ASU on its disclosures. The Company reviewed all other recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact to the condensed consolidated financial statements. ​ 14 Table of Contents 2. PROPERTY AND EQUIPMENT The costs and related accumulated depreciation and amortization of major classes of property and equipment are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ September 25, 2024 December 27, 2023 Land ​ $ 12,323 ​ $ 12,323 Buildings and improvements ​ 151,253 ​ 148,259 Other property and equipment ​ 90,989 ​ 86,423 Construction in progress ​ 9,545 ​ 7,270 ​ ​ 264,110 ​ 254,275 Less: accumulated depreciation and amortization ​ ( 179,103 ) ​ ( 170,248 ) ​ ​ $ 85,007 ​ $ 84,027 ​ 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. ​ 3. STOCK-BASED COMPENSATION Stock 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 (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 Aggregate ​ ​ Weighted-Average Contractual Life Intrinsic Value ​ ​ Shares ​ Exercise Price Life (Years) (in thousands) Outstanding – December 27, 2023 843,320 ​ $ 10.13 ​ ​ ​ ​ ​ ​ Grants 556,958 ​ 10.48 ​ ​ ​ ​ ​ ​ Exercised ( 163,696 ) ​ ​ 9.50 ​ ​ ​ ​ ​ ​ Forfeited, cancelled or expired ( 159,777 ) ​ ​ 10.66 ​ ​ ​ ​ ​ ​ Outstanding – September 25, 2024 1,076,805 ​ $ 10.33 ​ ​ 7.93 ​ $ 3,666 Vested and expected to vest at September 25, 2024 1,061,620 ​ $ 10.33 ​ ​ 7.90 ​ $ 3,613 Exercisable at September 25, 2024 270,435 ​ $ 11.20 ​ ​ 3.65 ​ $ 732 ​ 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: ​ ​ ​ ​ ​ ​ ​ ​ September 25, 2024 September 27, 2023 Expected volatility ​ 44.1 % 43.7 % Risk-free interest rate 4.6 % 3.6 % Expected term (years) 6.25 6.25 ​ Expected dividends — — ​ ​ 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. 15 Table of Contents Restricted Shares 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 ​ ​ Shares ​ Fair Value Unvested shares at December 27, 2023 537,461 ​ $ 9.94 Granted 503,112 ​ $ 10.33 Released ( 211,044 ) ​ $ 10.17 Forfeited and cancelled ( 84,301 ) ​ $ 10.91 Unvested shares at September 25, 2024 745,228 ​ $ 10.03 ​ 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 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. Pursuant to the Share Repurchase Program, the Company is authorized to effect repurchases using open market purchases, including pursuant to Rule 10b5-1 trading plans, and/or through privately negotiated transactions. The repurchase program does not obligate the Company to acquire any particular number of shares. The repurchase program will terminate on March 31, 2025. Further, on December 4, 2023, the Company repurchased 1.5 million shares for a total purchase price of $ 12.6 million under the Stock Repurchase Agreement with FS Equity Partners V, L.P. and FS Affiliates V, L.P. 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 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 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. 16 Table of Contents 4. LONG-TERM DEBT On July 27, 2022, the Company refinanced and terminated its 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”). The 2018 Revolver was refinanced pursuant to a credit agreement (the “2022 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 provides for a $ 150.0 million five-year senior secured revolving credit facility (the “2022 Revolver”). In connection with the refinancing, the 2018 Credit Agreement was terminated. The 2022 Revolver includes a sub limit of $ 15.0 million for letters of credit and a sub limit of $ 15.0 million for swingline loans. The 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 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. 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. The base rate is calculated as the highest of (a) the federal funds rate plus 0.50 %, (b) the published Bank of America prime rate, or (c) Term SOFR (as defined in the 2022 Credit Agreement) with a term of one-month SOFR plus 1.00 %. For Term SOFR loans, the margin is in the range of 1.25 % to 2.25 %, and for base rate loans the margin is in a range of 0.25 % to 1.25 %. Borrowings under the 2022 Revolver may be repaid and reborrowed. 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 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 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. 17 Table of Contents ​ ​ 5. OTHER ACCRUED EXPENSES AND CURRENT LIABILITIES Other accrued expenses and current liabilities consist of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ September 25, 2024 December 27, 2023 Accrued sales and property taxes ​ $ 5,867 ​ $ 5,229 Gift card liability ​ 4,454 ​ 4,877 Loyalty rewards program liability ​ ​ 801 ​ ​ 687 Accrued advertising ​ ​ 7,195 ​ ​ 3,010 Accrued legal settlements and professional fees ​ 516 ​ 720 Deferred franchise and development fees ​ 537 ​ 586 Other ​ 3,914 ​ 3,252 Total other accrued expenses and current liabilities ​ $ 23,284 ​ $ 18,361 ​ ​ 6. OTHER NONCURRENT LIABILITIES Other noncurrent liabilities consist of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ September 25, 2024 December 27, 2023 Deferred franchise and development fees ​ $ 6,209 ​ $ 6,411 Other ​ 27 ​ 34 Total other noncurrent liabilities ​ $ 6,236 ​ $ 6,445 ​ ​ 7. COMMITMENTS AND CONTINGENCIES Legal Matters 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. A significant increase in the number of claims, or an increase in amounts owing under successful claims, could materially and adversely affect its business, condensed consolidated financial condition, results of operations, and cash flows. Purchasing Commitments The Company has long-term beverage supply agreements with certain major beverage vendors. Pursuant to the terms of these arrangements, marketing rebates are provided to the Company and its franchisees from the beverage vendors based upon the dollar volume of purchases for system-wide restaurants which will vary according to their demand for beverage syrup and fluctuations in the market rates for beverage syrup. These contracts have terms extending through the end of 2024. At September 25, 2024, the Company’s total estimated commitment to purchase chicken was $ 9.1 million. Contingent Lease Obligations As a result of assigning the Company’s interest in obligations under real estate leases in connection with the sale of company-operated restaurants to some of the Company’s franchisees, the Company is contingently liable on three lease agreements. These leases have various terms, the latest of which expires in 2038 . 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 18 Table of Contents 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 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. Indemnification Agreements The Company has entered into indemnification agreements with each of its current directors and officers. These agreements require the Company to indemnify these individuals to the fullest extent permitted under Delaware law against liabilities that may arise by reason of their service to the Company and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. The Company also intends to enter into indemnification agreements with future directors and officers. ​ 8. EARNINGS PER SHARE Basic earnings per share (“EPS”) is calculated using the weighted-average number of shares of common stock outstanding during the thirteen and thirty-nine weeks ended September 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. Below are basic and diluted EPS data for the periods indicated (in thousands except for share and per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ Thirty-Nine Weeks Ended ​ ​ September 25, 2024 September 27, 2023 ​ September 25, 2024 September 27, 2023 Numerator: ​ ​ ​ ​ ​ Net income ​ $ 6,186 ​ $ 9,229 ​ $ 19,731 ​ $ 21,203 ​ Denominator: ​ ​ ​ ​ ​ Weighted-average shares outstanding—basic ​ 29,199,971 ​ 33,412,674 ​ 30,072,637 ​ 35,026,731 ​ Weighted-average shares outstanding—diluted ​ 29,423,649 ​ 33,490,004 ​ 30,235,309 ​ 35,179,483 ​ Net income per share—basic ​ $ 0.21 ​ $ 0.28 ​ $ 0.66 ​ $ 0.61 ​ Net income per share—diluted ​ $ 0.21 ​ $ 0.28 ​ $ 0.65 ​ $ 0.60 ​ Anti-dilutive securities not considered in diluted EPS calculation ​ 621,558 ​ 1,216,015 ​ 692,075 ​ 790,077 ​ ​ Below is a reconciliation of basic and diluted share counts: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended Thirty-Nine Weeks Ended ​ ​ September 25, 2024 ​ September 27, 2023 ​ September 25, 2024 ​ September 27, 2023 ​ Weighted-average shares outstanding—basic 29,199,971 33,412,674 30,072,637 35,026,731 Dilutive effect of stock options and restricted shares 223,678 77,330 162,672 152,752 Weighted-average shares outstanding—diluted 29,423,649 33,490,004 30,235,309 35,179,483 ​ ​ 9. RELATED PARTY TRANSACTIONS None. ​ 19 Table of Contents 10. REVENUE FROM CONTRACTS WITH CUSTOMERS Revenue Recognition Nature of products and services The Company has two revenue streams, company-operated restaurant revenue and franchise related revenue. Company-operated restaurant revenue Revenues from the operation of company-operated restaurants are recognized as food and beverage products are delivered to customers and payment is tendered at the time of sale. The Company presents sales, net of sales-related taxes and promotional allowances. The Company offers a loyalty rewards program, which awards points to a customer for dollars spent. 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. When a customer is part of the rewards program, the obligation to provide future discounts related to points earned is considered a separate performance obligation, to which a portion of the transaction price is allocated. The performance obligation related to loyalty points is deemed to have been satisfied, and the amount deferred in the balance sheet is recognized as revenue, when the points are transferred to a reward and redeemed, the reward or points have expired, or the likelihood of redemption is remote. A portion of the transaction price is allocated to loyalty points, if necessary, on a pro-rata basis, based on stand-alone selling price, as determined by menu pricing and loyalty points terms. As of September 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. The Company sells gift cards to its customers in the restaurants and through selected third parties. The gift cards sold to customers have no stated expiration dates and are subject to actual and/or potential escheatment rights in several of the jurisdictions in which the Company operates. Furthermore, due to these escheatment rights, the Company does not recognize breakage related to the sale of gift cards due to the immateriality of the amount remaining after escheatment. The Company recognizes income from gift cards when redeemed by the customer. Unredeemed gift card balances are deferred and recorded as other accrued expenses on the accompanying condensed consolidated balance sheets. Franchise and franchise advertising 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 fee revenue consists of advertising contributions received from franchisees. These revenue streams are made up of the following performance obligations: ● Franchise license - inclusive of advertising services, development agreements, training, access to plans and help desk services. ● Discounted renewal option. ● Hardware services. The Company satisfies the performance obligation related to the franchise license over the term of the franchise agreement, which is typically 20 years . Payment for the franchise license consists of three components, a fixed-fee related to the franchise/development agreement, a sales-based royalty fee and a sales-based advertising fee. The fixed fee, as determined by the signed development and/or franchise agreement, is due at the time the development agreement is entered into, and/or when the franchise agreement is signed, and does not include a finance component. The sales-based royalty fee and sales-based advertising fee are considered variable consideration and will continue to be recognized as revenue as such sales are earned by the franchisees. Both sales-based fees qualify under the royalty constraint exception, and do not require an estimate of future transaction price. Additionally, the Company is utilizing the practical expedient available under ASC Topic 606, “Revenue from Contracts with Customers” (“Topic 606”) 20 Table of Contents regarding disclosure of the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied for sales-based royalties. In certain franchise agreements, the Company offers a discounted renewal to incentivize future renewals after the end of the initial franchise term. As this is considered a separate performance obligation, the Company allocates a portion of the initial franchise fee to this discounted renewal, on a pro-rata basis, assuming a 20-year renewal. This performance obligation is satisfied over the renewal term, typically 10 or 20 years , while payment is fixed and due at the time the renewal is signed. The Company purchases hardware, such as scanners, printers, cash registers and tablets, from third party vendors, which it then sells to franchisees. As the Company is considered the principal in this relationship, payment for the hardware is considered revenue, and is received upon transfer of the goods from the Company to the franchisee. As of September 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 ​ ​ Thirty-Nine Weeks Ended ​ ​ ​ September 25, 2024 September 27, 2023 ​ September 25, 2024 September 27, 2023 Greater Los Angeles area market 72.5 % ​ 71.6 % ​ ​ 71.9 % ​ 71.1 % ​ Other markets 27.5 % ​ 28.4 % ​ ​ 28.1 % ​ 28.9 % ​ Total 100 % ​ 100 % ​ ​ 100 % ​ 100 % ​ ​ Contract balances The following table provides information about the change in the franchise contract liability balances during the thirty-nine weeks ended September 25, 2024 and September 27, 2023 (in thousands): ​ ​ ​ ​ ​ December 27, 2023 ​ $ 6,997 Revenue recognized - beginning balance ​ ( 477 ) Additional contract liability ​ 226 September 25, 2024 ​ $ 6,746 ​ ​ ​ ​ December 28, 2022 ​ $ 6,377 Revenue recognized - beginning balance ​ ( 545 ) Additional contract liability ​ 1,351 September 27, 2023 ​ $ 7,183 ​ The Company’s franchise contract liability includes development fees, initial franchise and license fees, franchise renewal fees, lease subsidies and royalty discounts and is included within other accrued expenses and current liabilities and other noncurrent liabilities within the accompanying condensed consolidated balance sheets. The Company receives area development fees from franchisees when they execute multi-unit area development agreements. Initial franchise and license fees, or franchise renewal fees, are received from franchisees upon the execution of, or renewal of, a franchise agreement. Revenue is recognized from these agreements as the underlying performance obligation is satisfied, which is over the term of the agreement. ​ ​ ​ 21 Table of Contents ​ The following table illustrates the estimated revenue to be recognized in future periods related to performance obligations under the applicable contracts that are unsatisfied as of September 25, 2024 (in thousands): ​ ​ ​ ​ ​ Franchise revenues: ​ 2024 ​ $ 139 2025 ​ 547 2026 ​ 525 2027 ​ 517 2028 ​ 489 Thereafter ​ 4,529 Total ​ $ 6,746 ​ Changes in the loyalty rewards program liability included in deferred revenue within other accrued expenses and current liabilities on the condensed consolidated balance sheets were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ September 25, 2024 December 27, 2023 Loyalty rewards liability, beginning balance ​ $ 687 ​ $ 526 ​ Revenue deferred ​ 1,620 ​ 2,065 ​ Revenue recognized ​ ( 1,506 ) ​ ( 1,904 ) ​ Loyalty rewards liability, ending balance ​ $ 801 ​ $ 687 ​ The Company expects all loyalty points revenue related to performance obligations unsatisfied as of September 25, 2024 to be recognized within one year . Gift Cards The gift card liability included in other accrued expenses and current liabilities on the condensed consolidated balance sheets was as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ September 25, 2024 ​ December 27, 2023 Gift card liability ​ $ 4,454 ​ $ 4,877 Revenue recognized from the redemption of gift cards that was included in other accrued expenses and current liabilities at the beginning of the year was as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ Thirty-Nine Weeks Ended ​ September 25, 2024 ​ September 27, 2023 September 25, 2024 ​ September 27, 2023 Revenue recognized from gift card liability balance at the beginning of the year $ 214 ​ $ 205 ​ $ 833 ​ $ 817 ​ Contract Costs The Company does not currently incur costs to obtain or fulfill a contract that would be considered contract assets under Topic 606. ​ 11. LEASES Nature of Leases The Company’s operations utilize property, facilities, equipment and vehicles leased from others. Additionally, the Company has various contracts with vendors that have been determined to contain an embedded lease in accordance with Topic 842. As of September 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. 22 Table of Contents Building and Facility Leases The majority of the Company’s building and facilities leases are classified as operating leases; however, the Company currently has one facility and 20 equipment leases that are classified as finance leases. Restaurants are operated under lease arrangements that generally provide for a fixed base rent and, in some instances, contingent rent based on a percentage of gross operating profit or net revenues in excess of a defined amount. Additionally, a number of the Company’s leases have payments that increase at pre-determined dates based on the change in the consumer price index. For all leases, the Company also reimburses the landlord for non-lease components, or items that are not considered components of a contract, such as CAM, property tax and insurance costs. While the Company determined not to separate lease and non-lease components, these payments are based on actual costs, making them variable consideration and excluding them from the calculations of the ROU asset and lease liability. The initial terms of land and restaurant building leases are generally 20 years , exclusive of options to renew. These leases typically have four 5-year renewal options , which have generally been excluded in the calculation of the ROU asset and lease liability, as they are not considered reasonably certain to be exercised, unless there have been significant leasehold improvements that have a useful life that extend past the original lease term. Furthermore, there are no residual value guarantees and no restrictions imposed by the lease. During the thirteen and thirty-nine weeks ended September 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. The Company also subleases facilities to certain franchisees and other non-related parties which are also considered operating leases. Sublease income also includes contingent rental income based on net revenues. The vast majority of these leases have rights to extend terms via fixed rental increases. However, none of these leases have early termination rights, the right to purchase the premises or any residual value guarantees. The Company does not have any related party leases. During the thirty-nine weeks ended September 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. Equipment Leases of equipment primarily consist of restaurant equipment, copiers and vehicles. These leases are fixed payments with no variable component. Additionally, no optional renewal periods have been included in the calculation of the ROU asset, there are no residual value guarantees and no restrictions imposed. Significant Assumptions and Judgments In applying the requirements of Topic 842, the Company made significant assumptions and judgments related to determination of whether a contract contains a lease and the discount rate used for the lease. 23 Table of Contents In determining if any of the Company’s contracts contain a lease, the Company made assumptions and judgments related to its ability to direct the use of any assets stated in the contract and the likelihood of renewing any short-term contracts for a period extending past twelve months. The Company also made significant assumptions and judgments in determining an appropriate discount rate for property leases. These included using a consistent discount rate for a portfolio of leases entered into at varying dates, using the full 20-year term of the lease, excluding any options, and using the total minimum lease payments. The Company utilizes a third-party valuation firm in determining the discount rate, based on the above assumptions. For all other leases, the Company uses the discount rate implicit in the lease, or the Company’s incremental borrowing rate. As the Company has adopted the practical expedient not to separate lease and non-lease components, no significant assumptions or judgments were necessary in allocating consideration between these components, for all classes of underlying assets. The following table presents the Company’s total lease cost, disaggregated by underlying asset (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ September 25, 2024 ​ September 27, 2023 ​ Property Equipment ​ ​ ​ Property ​ Equipment ​ ​ ​ ​ ​ Leases ​ Leases ​ Total ​ Leases ​ Leases ​ Total Finance lease cost: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amortization of right-of-use assets ​ $ 18 ​ $ 25 ​ $ 43 ​ $ 18 ​ $ 1 ​ $ 19 Interest on lease liabilities ​ ​ 8 ​ ​ 6 ​ ​ 14 ​ ​ 9 ​ ​ 1 ​ ​ 10 Operating lease cost: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fixed rent cost ​ ​ 7,012 ​ ​ 70 ​ ​ 7,082 ​ ​ 6,903 ​ ​ 43 ​ ​ 6,946 Short-term lease cost ​ — ​ 1 ​ 1 ​ — ​ 2 ​ 2 Variable lease cost ​ 164 ​ 308 ​ 472 ​ 150 ​ 332 ​ 482 Sublease income ​ ( 1,817 ) ​ — ​ ( 1,817 ) ​ ( 1,280 ) ​ — ​ ( 1,280 ) Total lease cost ​ $ 5,385 ​ $ 410 ​ $ 5,795 ​ $ 5,800 ​ $ 379 ​ $ 6,179 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirty-Nine Weeks Ended ​ ​ September 25, 2024 ​ September 27, 2023 ​ Property Equipment ​ ​ Property Equipment ​ ​ ​ ​ Leases ​ Leases ​ Total ​ Leases ​ Leases ​ Total Finance lease cost: ​ ​ ​ ​ ​ ​ ​ ​ Amortization of right-of-use assets ​ $ 56 ​ $ 73 ​ $ 129 ​ $ 55 ​ $ 2 ​ $ 57 Interest on lease liabilities ​ ​ 27 ​ ​ 14 ​ 41 ​ 29 ​ ​ 2 ​ 31 Operating lease cost: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fixed rent cost ​ ​ 21,220 ​ 222 ​ 21,442 ​ 20,589 ​ 342 ​ 20,931 Short-term lease cost ​ — ​ 2 ​ 2 ​ — ​ 6 ​ 6 Variable lease cost ​ 448 ​ 1,001 ​ 1,449 ​ 422 ​ 909 ​ 1,331 Sublease income ​ ( 5,354 ) ​ — ​ ( 5,354 ) ​ ( 3,773 ) ​ — ​ ( 3,773 ) Total lease cost ​ $ 16,397 ​ $ 1,312 ​ $ 17,709 ​ $ 17,322 ​ $ 1,261 ​ $ 18,583 24 Table of Contents The following table presents the Company’s total lease cost on the condensed consolidated statements of income (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ ​ Thirty-Nine Weeks Ended ​ September 25, 2024 September 27, 2023 ​ September 25, 2024 September 27, 2023 Lease cost – Occupancy and other operating expenses ​ $ 5,662 ​ $ 6,043 ​ ​ $ 17,228 ​ $ 18,101 Lease cost – General & administrative ​ 76 ​ ​ 107 ​ ​ 311 ​ ​ 375 Lease cost – Depreciation and amortization ​ 43 ​ ​ 19 ​ ​ 129 ​ ​ 57 Lease cost – Interest expense ​ 14 ​ ​ 10 ​ ​ 41 ​ ​ 31 Lease cost – Closed-store reserve ​ — ​ ​ — ​ ​ — ​ ​ 19 Total lease cost ​ $ 5,795 ​ $ 6,179 ​ ​ $ 17,709 ​ $ 18,583 ​ 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 ​ Property Equipment ​ ​ Property Equipment ​ ​ ​ ​ Leases ​ Leases ​ Total ​ Leases ​ Leases ​ Total Cash paid for amounts included in the measurement of lease liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating cash flows used for operating leases ​ $ 21,202 ​ $ 210 $ 21,412 ​ $ 20,797 ​ $ 297 ​ $ 21,094 Financing cash flows used for finance leases ​ $ 70 ​ $ 83 $ 153 ​ $ 70 ​ $ 43 ​ $ 113 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-cash investing and financing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating lease ROU assets obtained in exchange for lease liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating lease ROU assets ​ $ 11,457 ​ $ 1,286 $ 12,743 ​ $ 15,445 ​ $ 54 ​ $ 15,499 Finance lease ROU assets obtained in exchange for lease liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Finance lease ROU assets ​ $ — ​ $ 69 ​ $ 69 ​ $ — ​ $ — ​ $ — Derecognition of ROU assets due to terminations, impairment or modifications ​ $ — ​ $ — $ — ​ $ ( 40 ) ​ $ ( 4 ) ​ $ ( 44 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other Information ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-average remaining years in lease term—finance leases ​ 16.13 ​ 2.92 ​ ​ ​ ​ 17.12 ​ ​ 2.46 ​ ​ ​ Weighted-average remaining years in lease term—operating leases ​ 10.12 ​ 4.00 ​ ​ ​ ​ 10.56 ​ ​ 3.42 ​ ​ ​ Weighted-average discount rate—finance leases ​ 2.57 % 6.37 % ​ ​ ​ 2.57 % ​ 1.53 % ​ ​ Weighted-average discount rate—operating leases ​ 5.21 % 6.71 % ​ ​ ​ 4.85 % ​ 4.45 % ​ ​ ​ 25 Table of Contents Information regarding the Company’s minimum future lease obligations as of September 25, 2024 is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Finance Leases ​ Operating Leases ​ Minimum Minimum Minimum ​ ​ Lease ​ Lease ​ Sublease For the Years Ending ​ Payments ​ Payments ​ Income December 25, 2024 ​ $ 52 ​ $ 7,270 ​ $ 1,320 December 31, 2025 ​ 204 ​ 28,832 ​ 4,946 December 30, 2026 ​ 171 ​ 27,165 ​ 4,614 December 29, 2027 ​ 161 ​ 25,763 ​ 4,562 December 27, 2028 ​ 117 ​ 23,604 ​ 4,273 Thereafter ​ 1,376 ​ 129,896 ​ 26,024 Total ​ $ 2,081 ​ $ 242,530 ​ $ 45,739 Less: imputed interest ( 2.57 % - 6.71 %) ​ ( 367 ) ​ ( 56,425 ) ​ Present value of lease obligations ​ 1,714 ​ 186,105 ​ Less: current maturities ​ ( 155 ) ​ ( 19,869 ) ​ Noncurrent portion ​ $ 1,559 ​ $ 166,236 ​ ​ Short-Term Leases The Company has multiple short-term leases, which have terms of less than 12 months, and thus were excluded from the recognition requirements of Topic 842. The Company has recognized these lease payments in its condensed consolidated statements of income on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments was incurred. Lessor The Company is a lessor for certain property, facilities and equipment owned by the Company and leased to others, principally franchisees, under non-cancelable leases with initial terms ranging from three to 20 years . These lease agreements generally provide for a fixed base rent and, in some instances, contingent rent based on a percentage of gross operating profit or net revenues. All leases are considered operating leases. For the leases in which the Company is the lessor, there are options to extend the lease. However, there are no terms and conditions to terminate the lease, no right to purchase premises and no residual value guarantees. Additionally, there are no related party leases. The Company received $ 0.1 million of lease income from company-owned locations for 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. ​ 12. SHAREHOLDER RIGHTS AGREEMENT 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. 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. 26 Table of Contents 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 ​ At any time after any person or group becomes an Acquiring Person, the Board may exchange the Rights at an exchange ratio of one Common Share per Right (subject to adjustment). Flip-over Event If, at any time after a person or group becomes an Acquiring Person, (i) the Company engages in a consolidation or merger and, in connection there with all or part of the Common Shares are or will be changed into or exchanged for stock or other securities of any other person or cash or any other property; or (ii) 50 % or more of the Company’s consolidated assets or earning power are sold, then each holder of a Right will thereafter have the right to receive, upon exercise at the then current exercise price of the Right, that number of shares of common stock of the acquiring company having a market value of two times the exercise price of the Right. Redemption At any time prior to the time any person or group becomes an Acquiring Person, the Board may redeem the Rights at a price of $ 0.001 per Right (the “Redemption Price”). Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price. Rights of Holders Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends. ​ 27 Table of Contents ​