What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-07 compared with 2024-03-08 · 237 added, 268 removed, 859 unchanged (37% of the section changed)

43 unchanged sentences

We identified the Company’s estimation of undiscounted future cash flows for certain restaurants to determine the recoverability of the carrying value of restaurant property and equipment as a critical audit matter.

The future cash flows requires management to develop estimates and assumptions about future revenue transaction growth rates, menu pricing changes, and restaurant operating margins, which are made more uncertain by the impact of the current inflationary pressures on the Company’s business.

Auditing these significant assumptions involved especially challenging and subjective auditor judgment due to the nature and extent of audit effort required to addresses these matters.

Auditing certain assumptions used in the estimation of the undiscounted future cash flows, including future revenue transaction growth rates, menu pricing changes, and restaurant operating margins, involved especially challenging and subjective auditor judgments due to the nature and extent of audit effort required to addresses these matters.

The primary procedures we performed to address this critical audit matter included:

● Evaluating the reasonableness of management’s assumption over the future revenue transaction growth rates for select restaurants by (i) comparing them to historical information for both company-owned and franchised restaurants, and (ii) comparing them to restaurant industry data to determine if contradictory evidence existed.

● Evaluating the reasonableness of management’s assumption over the menu pricing changes for select restaurants by (i) comparing them to historical information for company-owned restaurants, and (ii) comparing them to market and industry data.

● Evaluating the reasonableness of management’s assumption over the restaurant operating margin for select restaurants by comparing them to market and industry data.

● Evaluating the reasonableness of management’s assumption over the future revenue transaction growth rates for certain restaurants by comparing them to historical financial information for both company-owned and franchised restaurants and industry data .

● Evaluating the reasonableness of management’s assumption over the menu pricing changes for certain restaurants by comparing them to historical financial information for company-owned restaurants and industry data.

● Evaluating the reasonableness of management’s assumption over the restaurant operating margins for certain restaurants by comparing them to historical financial information for those company-owned restaurants and industry data.

/s/ BDO USA, P.C.

30 unchanged sentences

Obligations under operating leases, net of current portion

Deferred taxes

Income tax receivable agreement payable, net of current portion

Deferred tax liabilities, net

Other noncurrent liabilities

8 unchanged sentences

Additional paid-in-capital

Retained earnings (accumulated deficit)

Accumulated other comprehensive income

Retained earnings

Total stockholders’ equity

23 unchanged sentences

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

(Gain) loss on disposition of restaurants

Loss (gain) 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 (income) expense

Income before provision for income taxes

10 unchanged sentences

Unrealized net gains arising during the period from interest rate swap

Reclassifications of (losses) gains into net income

Income tax benefit (expense)

Reclassifications of loss into net income

Income tax benefit (expenses)

Other comprehensive (loss) income, net of taxes

14 unchanged sentences

Other comprehensive loss, net of income tax

Common stock cash dividends ($ 1.50 per share)

Balance, December 28, 2022

3 unchanged sentences

Shares repurchased for employee tax withholdings

Repurchase of common stock

( 6,030,850 )

Repurchase of common stock - excise tax

Forfeiture of common stock related to restricted shares

Other comprehensive income, net of income tax

Common stock cash dividends ($ 1.50 per share)

Balance, December 27, 2023

7 unchanged sentences

Forfeiture of common stock related to restricted shares

Other comprehensive income, net of income tax

Balance, December 25, 2024

10 unchanged sentences

Fire insurance proceeds for expenses paid and lost profit

(Gain) loss on disposition of restaurants

Loss (gain) on disposition of restaurants

Loss on disposal of assets

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

Impairment of property and equipment

Impairment of property and equipment and ROU assets

Amortization of deferred financing costs

4 unchanged sentences

Income taxes receivable/ payable

Operating lease assets

Accounts payable

2 unchanged sentences

Payment related to tax receivable agreement

Operating lease liabilities

Other accrued expenses and liabilities

14 unchanged sentences

Repurchases of common stock

Net cash flows used in by financing activities

(Decrease) increase in cash and cash equivalents

Net cash flows used in financing activities

Decrease in cash and cash equivalents

Cash and cash equivalents, beginning of period

5 unchanged sentences

Unpaid purchases of property and equipment

Unpaid repurchases of common stock

Unpaid repurchases of common stock and excise tax

See notes to consolidated financial statements.

8 unchanged sentences

At December 25, 2024, the Company operated 173 ( 130 in the greater Los Angeles area) and franchised 325 ( 151 in the greater Los Angeles area) El Pollo Loco restaurants.

In addition, the Company currently licenses five restaurants in the Philippines.

In addition, as of December 25, 2024, the Company licensed 10 restaurants in the Philippines.

Holdings has no material assets or operations.

6 unchanged sentences

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company’s principal liquidity and capital requirements are new restaurants, existing restaurant capital investments (remodel and maintenance), interest payments on its debt, lease obligations and working capital and general corporate needs.

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 December 25, 2024, the Company’s total debt was $ 71.0 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 flows from operations, available cash of $ 7.3 million at December 27, 2023, and available borrowings under the 2022 Revolver (as defined in Note 6 “Long-Term Debt”) will be adequate to meet the Company’s liquidity needs for the next twelve months from the issuance of the consolidated financial statements.

Based on current operations, the Company believes that its cash flow from operations, available cash of $ 2.5 million at December 25, 2024, and the outstanding borrowing availability under the 2022 Revolver (as defined in Note 7 “Long-Term Debt”) will be adequate to meet the Company’s liquidity needs for the next twelve months from the issuance of the consolidated financial statements.

Basis of Presentation

6 unchanged sentences

53-week years may cause revenues, expenses, and other results of operations to be higher due to the additional week of operations.

Certain prior year amounts in the accompanying consolidated financial statements have been reclassified to conform with the current year presentation.

Principles of Consolidation

4 unchanged sentences

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“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 consolidated financial statements and revenue and expenses during the period 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, contingent liabilities and income tax valuation allowances.

M arket Trends and Uncertainties

On September 28, 2023, Governor Newsom signed AB 1228 into law, which repealed and replaced the Fast Food Accountability and Standards Recovery Act (“FAST Act”) on January 1, 2024.

Pursuant to AB 1228, the minimum wage at fast food restaurants that are part of brands which have more than 60 establishments nationwide will rise to $20 an hour on April 1, 2024, and a Fast Food Council created by AB 1228 will have limited power to approve annual wage increases until 2029.

Under the law, the Fast Food Council will also have the power to develop and propose minimum standards for fast food workers, including standards for working hours, working conditions, and health and safety.

As a result of AB 1228, the Company expects its labor and regulatory compliance costs will increase beginning in fiscal 2024 and that its results of operations and profitability will be adversely affected if it is not able to implement other measures to counter these increased costs.

The Company has experienced inflationary pressures affecting its operations in certain areas such as food cost, labor costs, construction costs and other restaurant operating costs.

The Company has been able to substantially offset these inflationary and other cost pressures through various actions, such as increasing menu prices, managing menu mix, and productivity improvements.

However, the Company expects these inflationary and other cost pressures to continue throughout fiscal year 2024 and it may not be able to offset cost increases in the future.

Cash and Cash Equivalents

The Company considers all liquid instruments with a maturity of three months or less at the date of purchase to be cash equivalents.

Subsequent Events

Subsequent to year-end, on February 13, 2024, the Company announced that its Board of Directors has appointed Elizabeth Williams as the new Chief Executive Officer of the Company and as a member of the Board, effective March 11, 2024.

Williams will succeed Maria Hollandsworth, who has served as the Company’s interim Chief Executive Officer since November 3, 2023.

Further, the Company paid down $ 3.0 million on its 2022 Revolver resulting in outstanding borrowings as of March 7, 2024 of $ 81.0 million.

The Company considers all liquid instruments with an original maturity of three months or less at the date of purchase to be cash equivalents.

Concentration of Risk

Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally-insured limits.

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.

2 unchanged sentences

Purchases from the Company’s largest supplier totaled 24.1 % of the Company’s purchases for fiscal 2024, 26.6 % for fiscal 2023 and 28.5 % for fiscal 2022 with no amounts payable at December 25, 2024 or December 27, 2023.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In fiscal 2024, 2023 and 2022, Company-operated and franchised restaurants in the greater Los Angeles area generated, in the aggregate, approximately 72.0 %, 71.3 %, and 71.2 %, respectively, of total revenue.

5 unchanged sentences

Accounts and other receivables also include credit/debit card receivables.

The need for an allowance for doubtful accounts is reviewed on a specific identification basis and takes into consideration past due balances and the financial strength of the obligor.

The need for an allowance for credit losses is reviewed on a specific identification basis and takes into consideration past due balances and the financial strength of the obligor.

Inventories consist principally of food, beverages and supplies and are valued at the lower of average cost or net realizable value.

3 unchanged sentences

Leasehold improvements and property held under finance leases are amortized over the shorter of their estimated useful lives or the remaining lease terms.

For leases with renewal periods at the Company’s option, the Company generally uses the original lease term, excluding the option periods, to determine estimated useful lives;

For leases with renewal periods at the Company’s option, the Company generally

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

uses the original lease term, excluding the option periods, to determine estimated useful lives;

if failure to exercise a renewal option imposes an economic penalty on the Company, such that management determines at the inception of the lease that renewal is reasonably assured, the Company may include the renewal option period in the determination of appropriate estimated useful lives.

11 unchanged sentences

These costs are included in property and amortized over the shorter of the life of the related buildings and leasehold improvements or the lease term.

Costs related to abandoned sites and other site selection costs that cannot be identified with specific restaurants are charged to general and administrative expenses in the accompanying consolidated statements of income, and were $ 0.2 million for the year ended December 27, 2023 and less than $ 0.1 million for each of the years ended December 28, 2022 and December 29, 2021.

Costs related to abandoned sites and other site selection costs that cannot be identified with specific restaurants are charged to general and administrative expenses in the accompanying consolidated statements of income, and there were none for the year ended December 25, 2024, $ 0.2 million for the year ended December 27, 2023, and less than $ 0.1 million for the year ended December 28, 2022.

The Company capitalized internal costs related to site selection and construction activities of $ 0.6 million, $ 1.8 million and $ 1.5 million for the years ended December 25, 2024, December 27, 2023 and December 28, 2022, respectively.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Impairment of Property and Equipment and ROU Assets

8 unchanged sentences

The Company determined that triggering events occurred for certain stores during the year ended December 25, 2024 that required an impairment review of the Company’s property and equipment and ROU assets.

Based on the results of this analysis, the Company recorded non-cash impairment charges of $ 1.5 million for the year ended December 27, 2023, primarily related to the carrying value of the ROU assets of one restaurant in California and the property and equipment assets of one restaurant in Nevada.

In fiscal 2022, the Company recorded non-cash impairment charges of $ 0.5 million primarily related to the carrying value of the ROU assets of one restaurant in California that closed in 2021 and the property and equipment assets of two restaurants in California.

In fiscal 2021, the Company recorded a non-cash impairment charge of $ 0.7 million primarily related to the carrying value of the ROU assets of one restaurant in Texas that closed in 2019, the carrying value of one restaurant in California that closed in 2021 and the property and equipment assets of three restaurants in California.

Based on the results of this analysis, the Company recorded non-cash impairment charges of $ 0.1 million primarily related to the property and equipment assets of two restaurants in Nevada for the year ended December 25, 2024.

In fiscal 2023, the Company recorded non-cash impairment charges of $ 1.5 million primarily related to the carrying value of the ROU assets of one restaurant in California and the property and equipment assets of one restaurant in Nevada.

In fiscal 2022, the Company recorded a non-cash impairment charge of $ 0.5 million primarily related to the carrying value of the ROU assets of one restaurant in California that closed in 2021.

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

For these restaurants, if expected performance is not realized, an impairment charge may be recognized in future periods, and such charge could be material.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 fiscal 2023, 2022 and 2021, the Company recognized $ 0.2 million, $ 0.3 million and $ 0.4 million, respectively, of closed-store reserve expense related to the amortization of ROU assets, property taxes and CAM payments for its closed locations.

The remaining value of the ROU asset is amortized on a straight-line basis, with the expense recognized in closed-store reserves expense.

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

During fiscal 2024, 2023 and 2022, the Company recognized $ 0.1 million, $ 0.2 million and $ 0.3 million, respectively, of closed-store reserves expense related to the amortization of ROU assets, property taxes and CAM payments for its closed locations.

Goodwill and Indefinite-Lived Intangible Assets

5 unchanged sentences

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 fair value of the

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 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.

1 unchanged sentence

The Company did no t record any decrement to goodwill related to the disposition of restaurants in fiscal 2024, 2023 and 2022.

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

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.

4 unchanged sentences

however, the loss recognized cannot exceed the total amount of goodwill allocated to that reporting unit.

The Company performs annual impairment tests for indefinite-lived intangible assets during the fourth fiscal quarter of each year, or more frequently if impairment indicators arise.

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 its impairment loss.

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.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company determined that there were no indicators of potential impairment of its goodwill and indefinite-lived intangible assets during fiscal 2024.

2 unchanged sentences

Deferred financing costs are capitalized and amortized over the period of the loan on a straight-line basis.

Included in other assets are deferred financing costs (net of accumulated amortization), related to the revolver, of $ 0.7 million and $ 0.9 million as of December 27, 2023 and December 28, 2022, respectively.

Amortization expense for deferred financing costs was approximately $ 0.2 million for the year ended December 27, 2023 and $ 0.3 million for both of the years ended December 28, 2022, and December 29, 2021, and is reflected as a component of interest expense in the accompanying consolidated statements of income.

Included in other assets are deferred financing costs (net of accumulated amortization), related to the Company’s revolving credit facility, of $ 0.5 million and $ 0.7 million as of December 25, 2024 and December 27, 2023, respectively.

Amortization expense for deferred financing costs was approximately $ 0.2 million for both of the years ended December 25, 2024 and December 27, 2023, and $ 0.3 million for the year ended December 28, 2022, and is reflected as a component of interest expense in the accompanying consolidated statements of income.

Insurance Reserves

4 unchanged sentences

These amounts are included in labor and related expenses and general and administrative expenses on the accompanying consolidated statements of income.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 presents revenue net of sales-related taxes and promotional allowances.

Promotional allowances amounted to approximately $ 6.3 million, $ 8.7 million and $ 7.5 million during the years ended December 25, 2024, December 27, 2023 and December 28, 2022, respectively.

12 unchanged sentences

Unredeemed gift card balances are deferred and recorded as other accrued expenses on the accompanying consolidated balance sheets.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franchise Revenue

Franchise revenue consists of franchise royalties, initial franchise fees, license fees due from franchisees and IT support services.

Franchise revenue consists of franchise royalties, initial franchise fees, license fees due from franchisees, sublease income and IT support services.

Rental income for subleases to franchisees are outside of the scope of the revenue standard and are within the scope of lease guidance.

Under Topic 842, sublease income is recorded on a net basis within the consolidated statements of income.

Franchise royalties are based upon a percentage of net sales of the franchisee and are recorded as income as such sales are earned by the franchisees.

3 unchanged sentences

This revenue stream is made up of the following performance obligations:

● Franchise License – inclusive of advertising services, development agreements, training, access to plans and help desk services;

● Franchise License – inclusive of advertising services, development agreements, training, access to restaurant development plans and help desk services;

● Discounted renewal option;

1 unchanged sentence

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

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

related to the franchise/development agreement, a sales-based royalty fee and a sales-based advertising fee.

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.

5 unchanged sentences

This performance obligation is satisfied over the renewal term, which is 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.

The Company purchases hardware, such as scanners, printers, cash registers, kiosks and tablets, from third-party vendors, which it then sells to franchisees.

As the Company is considered the principal in this relationship, payment received for the hardware is considered revenue, and is received upon transfer of the goods from the Company to the franchisee.

2 unchanged sentences

The Company presents advertising contributions received from franchisees as franchise advertising fee revenue and records all expenses of the advertising fund within franchise expenses.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Advertising Costs

11 unchanged sentences

For each of the years ended December 25, 2024, December 27, 2023, and December 28, 2022, preopening costs, which are included in general and administrative expenses on the accompanying consolidated statements of income were $ 0.3 million.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s operations utilize property, facilities, equipment and vehicles.

14 unchanged sentences

The Company subleases facilities to certain franchisees and other non-related parties which are recorded on a straight-line basis.

Gain on Recovery of Insurance Proceeds, Lost Profits

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Gain on Recovery of Insurance Proceeds, Lost Profits, Net and Gain on Recovery of Insurance Proceeds, Property, Equipment and Expenses

During fiscal 2023 and fiscal 2022, two 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 recognized gains of $ 0.2 million, related to the reimbursement of property and equipment and expenses incurred and $ 0.3 million related to the reimbursement of lost profits.

In fiscal 2023, the Company recognized gains of $ 0.2 million, related to the reimbursement of property and equipment and expenses incurred and $ 0.3 million related to the reimbursement of lost profits and in fiscal 2024, the Company recognized gains of less than $ 0.1 million related to the reimbursement of property and equipment and expenses.

The gain on recovery of insurance proceeds and reimbursement of lost profits, net of the related costs, is included in the accompanying consolidated statements of income, for the year ended December 27, 2023, as a reduction of Company restaurant expenses.

The Company received from the insurance company cash of $ 0.5 million, net of the insurance deductible, during fiscal 2023.

Gain (Loss) on Disposition of Restaurants

Loss (Gain) on Disposition of Restaurants

During fiscal 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 fiscal 2023, the Company completed the sale of 18 restaurants within California, Utah and Texas to existing franchisees.

During fiscal 2022, the Company completed the sale of three company-operated restaurants within the Orange County area to an existing franchisee.

During fiscal 2021, the Company completed the sale of eight restaurants within the Sacramento area to an existing franchisee.

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

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 their relative standalone selling price.

Cash proceeds included upfront consideration for the sale of the restaurants and franchise fees, as well as future cash consideration for royalties.

2 unchanged sentences

Future royalty income is also recognized in revenue as earned.

During 2024, the sale resulted in cash proceeds of $ 0.1 million and a net loss on sale of restaurant of less than $ 0.1 million.

During 2023, these sales resulted in cash proceeds of $ 7.7 million and a net gain on sale of restaurant of $ 5.0 million.

The Orange County sale during 2022 resulted in cash proceeds of $ 1.0 million and a net gain on sale of restaurants of $ 0.8 million for the year ended December 28, 2022.

The Sacramento sale resulted in cash proceeds of $ 4.6 million and a net loss on sale of restaurants of $ 1.5 million for the year ended December 29, 2021.

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

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Derivative Financial Instruments

3 unchanged sentences

The Company recorded the derivative instrument on its consolidated balance sheets at fair value.

The derivative instrument qualified as a hedging instrument in a qualifying cash flow hedge relationship, and the gain or loss on the derivative instrument was reported as a component of accumulated other comprehensive (loss) income (“AOCI”) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

The derivative instrument qualified as a hedging instrument in a qualifying cash flow hedge relationship, and the gain or loss on the derivative instrument was reported as a component of Accumulated Other Comprehensive Income (“AOCI”) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

For any derivative instruments not designated as hedging instruments, the gain or loss will be recognized in earnings immediately.

3 unchanged sentences

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.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company reviews its filing positions for all open tax years in all U.S.

10 unchanged sentences

Management believes no significant change to the amount of unrecognized tax benefits will occur within the next twelve months.

On July 30, 2014, the Company entered into the TRA, which calls for the Company to pay to its pre-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.

As of December 27, 2023 and December 28, 2022, the Company had accrued $ 0.4 million and $ 0.7 million, respectively, relating to expected TRA payments.

In fiscal 2023, 2022 and 2021, the Company paid $0.3 million, $ 0.4 million and $ 1.7 million, respectively, to its pre-IPO stockholders under the TRA.

Under the CARES Act, the Company was able to defer its employer Social Security taxes that are otherwise owed for wage payment and the creation of refundable employee retention credits.

The total amount deferred as of December 30, 2020 was $ 4.9 million, of which 50 % was due by December 31, 2021 and another 50 % was due by December 31, 2022.

As of December 28, 2022, the Company made all deferred payroll tax payments and did not have any corresponding balances included in other non-current liabilities on the Company’s consolidated balance sheet.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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-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 years ended December 25, 2024, December 27, 2023 and December 28, 2022, income tax receivable agreement (income) expense consisted of the amortization of interest expense and changes in estimates for actual tax returns filed, related to the Company total expected TRA payments.

On May 29, 2024, the Company terminated most of the obligations under the TRA, 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 $ 0.4 million.

As of December 25, 2024, there was no remaining obligations owed on the Company’s consolidated balance sheets.

Additionally, the Company assessed its eligibility for the business relief provision under the CARES Act known as the Employee Retention Credit (“ERC”), a refundable payroll tax credit for 50% of qualified wages paid during 2020.

The American Rescue Plan passed into law on March 11, 2021 extended the ERC through September 30, 2021, and the credit was increased to 70% of qualified wages paid from January 1, 2021 through September 30, 2021.

During fiscal 2021, the Company recognized the ERC credit in the amount of $ 3.4 million as income as it is probable that it will comply with the ERC eligibility requirements.

The Company has elected an accounting policy to present government assistance as a reduction of the related expense.

The ERC credit was initially recorded as a receivable as part of the accounts and other receivable on the consolidated balance sheet for the year ended December 29, 2021 and as an offset to the corresponding payroll expense which is classified as part of the labor and other operating expenses on the consolidated statements of income for the year ended December 29, 2021.

During fiscal 2022, the Company received $ 3.1 million in ERC and the remaining $ 0.3 million was received and recorded during fiscal 2023.

9 unchanged sentences

In other words, they are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment).

The following non-financial assets were measured at fair value, on a nonrecurring basis, as of and for the year ended December 27, 2023 reflecting certain property and equipment and ROU assets, for which an impairment loss was recognized during the corresponding periods, as discussed above under Impairment of Property and Equipment and ROU Assets (in thousands):

Impairment Losses

Certain property and equipment, net

Certain ROU assets, net

For the year ended December 25, 2024, the Company recorded non-cash impairment charges $ 0.1 million for certain property and equipment, which were measured at fair value on a nonrecurring basis.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following non-financial assets were measured at fair value, on a nonrecurring basis, as of and for the year ended December 27, 2023 reflecting certain property and equipment and ROU assets for which an impairment loss was recognized during the corresponding periods, as discussed above under "Impairment of Property and Equipment and ROU Assets" (in thousands):

3 unchanged sentences

The following non-financial assets were measured at fair value, on a nonrecurring basis, as of and for the year ended December 28, 2022 for which an impairment loss was recognized during the corresponding periods, as discussed above under "Impairment of Property and Equipment and ROU Assets" (in thousands):

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Impairment Losses

3 unchanged sentences

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and certain accrued expenses approximate fair value due to their short-term maturities.

The recorded value of the TRA approximates fair value, based on borrowing rates currently available to the Company for debts with similar terms and remaining maturities (Level 3 measurement).

The recorded value of the prior years’ TRA approximates fair value, based on borrowing rates currently available to the Company for debts with similar terms and remaining maturities (Level 3 measurement).

Stock-Based Compensation

Stock-based compensation expense is recognized using a fair-value based method for costs related to all share-based payments including stock options and restricted stock issued under the Company’s employee stock plans.

Stock-based compensation expense is recognized using a fair-value based method for costs related to all share-based payments including stock options, restricted stock and performance-based stock units issued under the Company’s employee stock plans.

The fair value of stock option awards is estimated on the date of grant using an option pricing model, which require the input of subjective assumptions.

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The cost is recognized on a straight-line basis over the period during which an employee is required to provide service, usually the vesting period.

For options or restricted shares that are based on a performance requirement, the cost is recognized on an accelerated basis over the period to which the performance criteria relate.

For performance-based stock units, the Company estimates the probability that performance conditions will be achieved.

Earnings per Share

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Recently Issued Accounting Pronouncements

In November 2023, the FASB issued ASU No.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2023-07, “Segment Reporting (Topic 280):

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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 adopted this standard during the year ended December 25, 2024.

See Note 17 below for the Company's updated segment disclosures.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In December 2023, the FASB issued ASU No.

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The Company is currently evaluating the impact of adopting this ASU on its disclosures.

In November 2024, the FASB issued ASU No.

2024-03, “Income Statement Reporting Comprehensive Income/Expense Disaggregation Disclosures”.

The ASU requires disaggregated disclosure of income statement expenses at interim and annual reporting periods.

The ASU is effective for fiscal year beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted.

The ASU can be adopted prospectively or retrospectively at the option of the Company.

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 consolidated financial statements.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franchise Development Option Agreement with Related Party

On July 11, 2014, EPL and Trimaran Pollo Partners, L.L.C (“Trimaran”) entered into a Franchise Development Option Agreement relating to development of restaurants in the New York–Newark, NY–NJ–CT–PA Combined Statistical Area (the “Territory”).

EPL granted Trimaran the exclusive option to develop and open 15 restaurants in the Territory over five years (the “Initial Option”), and, provided that the Initial Option is exercised, the exclusive option to develop and open up to an additional 100 restaurants in the Territory over ten years .

The Franchise Development Option Agreement terminates (i) ten years after execution, or (ii) if the Initial Option is exercised, five years after that exercise.

Trimaran may only exercise the Initial Option if EPL first determines to begin development of company-operated restaurants in the Territory or support the development of the Territory.

The Company has no current intention to begin development in the Territory and as of December 27, 2023, no stores have been opened in the Territory.

On March 28, 2023, Trimaran and certain of Trimaran’s affiliates, (collectively, the “Trimaran Group,”) distributed substantially all of the shares of the Company’s common stock held by the Trimaran Group to their respective investors, members and limited partners.

PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following (in thousands):

December 25, 2024

December 27, 2023

Prepaid insurance

Prepaid service fees

Other current assets

Total prepaid expenses and other current assets

PROPERTY AND EQUIPMENT

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See “Impairment of Property and Equipment and ROU Assets” in Note 2 “Summary of Significant Accounting Policies” for additional information.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

TRADEMARKS AND OTHER INTANGIBLE ASSETS

Domestic trademarks consist of the following (in thousands):

December 25, 2024

December 27, 2023

Accumulated impairment charges

Trademarks, net

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Nature of leases

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Additionally, a number of the Company’s leases have payments, which increase at pre-determined dates based on the change in the consumer price index.

For all leases, the Company also reimburses the landlord for non-lease components, or items that are not considered components of a contract, such as common area maintenance, property tax and insurance costs.

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.

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Furthermore, there are no residual value guarantees and no restrictions imposed by the lease.

During the year ended December 27, 2023, the Company reassessed the lease terms on 36 restaurants due to certain triggering events, such as the addition of significant leasehold improvements, the decision to terminate a lease, or the decision to renew.

As a result of the reassessment, an additional $ 21.5 million of ROU assets and lease liabilities for the year ended December 27, 2023 were recognized, and will be amortized over the new lease term.

During the year ended December 28, 2022, the Company reassessed the lease terms on 22 restaurants due to certain triggering events, such as the addition of significant leasehold improvements, the decision to terminate a lease, or the decision to renew.

As a result of the reassessment, an additional $ 13.0 million of ROU assets and lease liabilities for the year ended December 28, 2022 were recognized, and will be amortized over the new lease term.

There were no reassessments that impacted the original lease classification during the year ended December 27, 2023.

The reassessments had an impact on the original lease classification of one property during the year ended December 28, 2022 which represented $ 0.7 million of the $ 13.0 million total additional ROU asset and lease liabilities for fiscal 2022.

During the year ended December 25, 2024 and December 27, 2023, the Company reassessed the lease terms on 28 and 36 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 $ 20.5 million and $ 21.5 million, respectively, of ROU asset and lease liabilities were recognized for the year ended December 25, 2024 and December 27, 2023, and will be amortized over the new lease term.

There were no reassessments that impacted the original lease classification during the year ended December 25, 2024 or December 27, 2023 .

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

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The Company does not have any related party leases.

During fiscal 2023, the Company determined that the carrying value of an ROU assets at one restaurant was not recoverable.

As a result, the Company recorded a less than $ 0.1 million non-cash impairment charge for the year ended

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 27, 2023 related to one restaurant in California.

During fiscal 2024, the Company did no t record any non-cash impairment charges.

During fiscal 2023, the Company determined that the carrying value of an ROU assets at one restaurant was not recoverable.

As a result, the Company recorded a less than $ 0.1 million non-cash impairment charge for the year ended December 27, 2023 related to one restaurant in California.

During fiscal 2022, the Company determined that the carrying value of ROU assets at one restaurant were not recoverable.

As a result, the Company recorded a less than $ 0.1 million non-cash impairment charge for the year ended December 28, 2022 related to one restaurant closed in California.

During fiscal 2021, the Company determined that the carrying value of ROU assets at two restaurants were not recoverable.

As a result, the Company recorded a $ 0.4 million non-cash impairment charge for the year ended December 29, 2021 related to one restaurant closed in Texas in 2019 and one restaurant closed in California.

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

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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.

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The Company has multiple short-term leases, which have terms of less than 12 months, and thus were excluded from the recognition requirements of Topic 842.

The Company has recognized these lease payments in its consolidated statement

The Company has recognized these lease payments in its consolidated statement 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 is incurred.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL 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 is incurred.

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 3 to 20 years .

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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.

On July 27, 2022, the Company 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”).

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.

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.

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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

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 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 %.

1 unchanged sentence

For borrowings under the 2022 Revolver during fiscal 2024, the interest rate range was 5.7 % to 7.0 %.

For borrowings under the 2022 Revolver and the 2018 Revolver during fiscal 2022, the interest rate range was 1.4 % to 6.0 %.

For borrowings under the 2022 Revolver during fiscal 2023, the interest rate range was 5.7 % to 7.0 %.

The interest rate under the 2022 Revolver was 5.7 % at December 25, 2024 and 7.0 % at December 27, 2023.

For the year ended December 27, 2023, the Company had interest expense of $ 4.4 million under the 2022 Revolver.

For the years ended December 28, 2022 and December 29, 2021, the Company had interest expense of $ 0.9 million and $ 1.2 million, respectively, under the 2022 Revolver and the 2018 Revolver.

For the years ended December 25, 2024, December 27, 2023 and December 28, 2022, the Company had interest expense of $ 5.4 million, $ 4.4 million and $ 0.9 million, respectively, under the 2022 Revolver.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The 2022 Credit Agreement contains certain financial covenants.

3 unchanged sentences

At December 27, 2023, $ 9.8 million of letters of credit and $ 84.0 million of borrowings were outstanding under the 2022 Revolver.

The amount available under the 2022 Revolver was $ 74.2 million at December 28, 2022.

On July 27, 2022, the Company refinanced and terminated the 2018 Revolver pursuant to the 2022 Credit Agreement.

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

During the year ended December 27, 2023, the Company borrowed $ 18.0 million net of pay downs of $ 21.0 million on its 2022 Revolver.

During the year ended December 28, 2022, the Company borrowed $ 26.0 million net of pay downs of $ 20.0 million on its 2022 Revolver.

During the year ended December 25, 2024, the Company borrowed $ 14.0 million and paid down $ 27.0 million on its 2022 Revolver.

During the year ended December 27, 2023 , the Company borrowed $ 39.0 million and paid down $ 21.0 million on its 2022 Revolver.

There are no required principal payments prior to maturity for the 2022 Revolver.

1 unchanged sentence

During the year ended December 25, 2019, the Company entered into a variable-to-fixed interest rate swap agreement with a notional amount of $ 40.0 million that matures in June 2023.

The objective of the interest rate swap was to reduce the Company’s exposure to interest rate risk for a portion of its variable-rate interest payments on its borrowings under the 2018 Revolver.

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 previous credit agreement.

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.”

2 unchanged sentences

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 will be reclassified into earnings when the hedged forecasted transaction is reported in earnings.

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 consolidated statements of income (in thousands):

1 unchanged sentence

December 28, 2022

December 29, 2021

Interest expense on hedged portion of debt

Interest (income) expense on interest rate swap

Interest (income) expense on debt and derivatives, net

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the effect of the Company’s cash flow hedge accounting on AOCI for the years ended December 27, 2023, December 28, 2022 and December 29, 2021 (in thousands):

(Gain) Loss Reclassified from

Interest income on interest rate swap

Interest (income) expenses on debt and derivatives, net

The following table summarizes the effect of the Company’s cash flow hedge accounting on AOCI for the years ended December 27, 2023 and December 28, 2022 (in thousands):

Gain Reclassified from

Net Gain Recognized in OCI

4 unchanged sentences

December 28, 2022

December 29, 2021

Interest rate swap

See Note 2 “Summary of Significant Accounting Policies” for the fair value of the Company’s derivative asset.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

OTHER ACCRUED EXPENSES AND CURRENT LIABILITIES

40 unchanged sentences

After evaluating all of the positive and negative evidence, including the Company’s continued income from operations, the Company concluded that it is more likely than not that its deferred tax assets except for certain state credits will be realized.

In fiscal 2021 and 2022, the Company recorded a valuation allowance of approximately $ 0.1 million and $ 0.5 million, respectively, against its deferred tax asset resulting from certain tax credits that may not be realizable prior to the time the credits expire.

As of December 27, 2023, the Company released the corresponding valuation allowance since the ten-year carryover period for California Enterprise Zone credits expired at the end of fiscal 2023.

As of December 28, 2022, the deferred tax assets related to the California Enterprise Zone credits, net of valuation allowances are $ 0.5 million.

As of December 25, 2024, the Company had no valuation allowance.

During fiscal 2023, the Company released the corresponding valuation allowance since the ten-year carryover period for California Enterprise Zone credits expired at the end of fiscal 2023.

In fiscal 2022, the Company recorded a valuation allowance of approximately $ 0.5 million, against its deferred tax asset resulting from certain tax credits that may not be realizable prior to the time the credits expire.

On July 30, 2014, the Company entered into the TRA.

1 unchanged sentence

The TRA charge expense (benefit) is a permanent add-back to the Company’s taxable income.

In fiscal 2023, 2022 and 2021, TRA resulted in $ 0.1 million of expense, $ 0.4 million of income and less than $ 0.1 of expense, respectively, in each case as a result of 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 .

In fiscal 2023, 2022 and 2021, the Company paid $ 0.3 million, $ 0.4 million and $ 1.7 million, respectively, to its pre-IPO stockholders under the TRA.

In fiscal 2024, 2023 and 2022, TRA resulted in less than $ 0.1 million of income, $ 0.1 million of expense and $ 0.4 million of income, respectively, in each case as a result of 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 .

In fiscal 2023 and 2022, the Company paid $ 0.3 million and $ 0.4 million, respectively, to its pre-IPO stockholders under the TRA.

Further, on May 29, 2024, the Company terminated most of the obligations under the TRA, 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 $ 0.4 million.

As of December 25, 2024, there was no remaining obligations owed on the Company’s consolidated balance sheets.

EL POLLO LOCO HOLDINGS, INC.

5 unchanged sentences

Accrued workers’ compensation

Enterprise zone and other credits

Accrued payroll

Net operating losses

1 unchanged sentence

Total deferred tax assets

Valuation allowance

Net deferred tax assets

Deferred liabilities:

Prepaid expense

Deferred tax liabilities

Total deferred tax liabilities

Net deferred tax liability

The net deferred tax asset/(liability) amounts above as of December 25, 2024 and December 27, 2023 have been classified in the accompanying consolidated balance sheets as noncurrent assets/(liabilities) and are as follows (in thousands):

(Liabilities) assets - state

Assets (Liabilities) - state

Liabilities - federal

Net deferred tax liability

As of December 25, 2024 and December 27, 2023, the Company had no accrual for unrecognized tax benefits.

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The Company has authorized 5,652,240 shares of common stock for issuance in connection with stock awards.

On June 8, 2021, the Company’s stockholders approved amending the Equity Incentive Plan, formerly the 2018 Omnibus Equity Incentive Plan, under which the new aggregate share limit was increased to be 2,000,000 shares.

On May 28, 2024, the Company’s stockholders approved amending the Equity Incentive Plan, formerly the 2018 Omnibus Equity Incentive Plan, under which the new aggregate share limit was increased by 1,250,000 shares.

As of December 25, 2024, 1,011,980 shares were available for grant.

49 unchanged sentences

As of December 25, 2024, the Company had total unrecognized compensation expense of $ 3.3 million related to unvested stock options, which the Company expects to recognize over a weighted average period of 3.2 years.

The above assumptions generally require significant judgment.

The above assumptions generally require judgment.

If in the future the Company determines that another method is more reasonable, or if another method for calculating these input assumptions is prescribed by authoritative guidance, and, therefore, should be used to estimate volatility or expected term, the fair value calculated for the Company’s stock options could change significantly.

5 unchanged sentences

The effect of forfeiture adjustments was insignificant in fiscal 2024, 2023 and 2022.

The Company will continue to use significant judgment in evaluating the expected term, volatility, and forfeiture rate related to its stock-based compensation.

The Company will continue to use judgment in evaluating the expected term, volatility, and forfeiture rate related to its stock-based compensation.

Restricted Shares

1 unchanged sentence

These grants vest based on continued service over one year for directors and four years for employees.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Changes in restricted shares for the years ended December 25, 2024 and December 27, 2023, are as follows:

3 unchanged sentences

Unvested shares at December 27, 2023

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Forfeited, cancelled, or expired

Forfeited and cancelled

Unvested shares at December 25, 2024

As of December 27, 2023, there was total unrecognized compensation expense of $ 3.5 million related to unvested restricted share awards, which the Company expects to recognize over a weighted-average period of 2.48 years and unrecognized compensation expense of $ 0.3 million related to unvested restricted units, which it expects to recognize over a weighted-average period of 0.87 years .

As of December 25, 2024, there was total unrecognized compensation expense of $ 5.2 million related to unvested restricted share awards, which the Company expects to recognize over a weighted-average period of 2.77 years.

During fiscal 2024, the Company granted 41,537 restricted stock units subject to performance-based vesting conditions based on Adjusted EBITDA and restaurant contribution margin to certain officers.

Each performance-based restricted stock unit ("PSU") has a grant date fair value of $ 9.63 and a vesting period from the grant date through the date the audit of the Company's fiscal 2024 financial results is expected to be completed.

The fair value of each PSU is expensed based on management's current estimate of the level that the performance goal will be achieved.

As of December 25, 2024, based on the target level of performance, the total unrecognized compensation expense related to unvested performance stock units was $ 0.3 million, which is expected to be recognized over a weighted-average period of 2.01 years .

EARNINGS PER SHARE

1 unchanged sentence

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.

On October 11, 2022, the Company’s Board of Directors approved a share repurchase program (the “2022 Stock Repurchase Plan”) under which the Company was authorized to repurchase up to $ 20.0 million of shares of its common stock through March 28, 2024.

Under the 2022 Stock Repurchase Plan, the Company was 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 2022 Stock Repurchase Plan, the Company was authorized to effect repurchases using open market purchases, including pursuant to Rule 10b5-1 trading plans, and/or through privately negotiated transactions.

For the year ended December 27, 2023, the Company repurchased 2,030,850 shares of common stock under the 2022 Stock Repurchase Plan, using open market purchases, for total consideration of approximately $ 20.0 million.

The common stock repurchased under 2022 Stock Repurchase Plan were retired upon repurchase.

The 2022 Stock Repurchase Plan commenced on January 9, 2023, and was completed on July 12, 2023.

On August 7, 2023, the Company entered into a Stock Repurchase Agreement with FS Equity Partners V, L.P.

and FS Affiliates V, L.P.

(together, the “Sellers”), pursuant to which the Company agreed to purchase an aggregate of 2,500,000 shares of the Company’s common stock from the Sellers at a price of $ 10.63 per share, representing the closing price of such shares as listed on Nasdaq on August 7, 2023, for a total purchase price of $ 26.6 million.

The repurchase was completed in August 2023.

Prior to the repurchase, Freeman Spogli & Co.

(“Freeman Spogli”), collectively with the Sellers and certain other funds managed by Freeman Spogli, was the Company’s largest stockholder.

In addition, John Roth, a director of the Company until his resignation on August 16, 2023, is a general partner of Freeman Spogli and its chief executive officer.

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

Shares may be repurchased from time to time on the open market, in block trades, pursuant to structured or derivative transactions or in privately negotiated transactions.

The amount and timing of any shares repurchased under the program will be determined at the discretion of management and will depend on a number of factors, including the market price of the Company’s stock, trading volume, general market and economic conditions, the Company’s capital position, legal requirements, and other factors.

The Company may also from time to time establish one or more plans under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, for the repurchase of shares of its common stock under the program.

The repurchase program does not obligate the Company to acquire any particular number of shares.

The repurchase program will terminate on March 31, 2025 and may be modified, suspended or discontinued at any time.

On November 29, 2023, in accordance with the board approved share repurchase program, the Company entered into a second Stock Repurchase Agreement with the Sellers (the “Repurchase Agreement”), pursuant to which the Company agreed to purchase an aggregate of 1,500,000 shares of the Company’s common stock from the Sellers at a price of

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

$ 8.40 per share, representing the closing price of such shares as listed on Nasdaq on November 29, 2023, for a total purchase price of $ 12,600,000 .

The repurchase was completed on December 4, 2023.

Following completion of this repurchase, approximately $ 7.4 million of our common stock remained available for repurchase under the share repurchase program at December 27, 2023.

John Roth, a former director of the Company until his resignation effective August 16, 2023, is a general partner and chief executive officer of Freeman Spogli, which manages the Sellers.

Below are basic and diluted EPS data for the periods indicated, which are in thousands except for per share data.

10 unchanged sentences

Weighted-average shares outstanding—diluted

COMMITMENTS AND CONTINGENCIES

Legal Matters

On or about November 5, 2015, a purported Holdings shareholder filed a derivative complaint on behalf of Holdings in the Court of Chancery of the State of Delaware against certain Holdings officers, directors and Trimaran, under the caption Armen Galustyan v.

Sather, et al.

The derivative complaint alleges that these defendants breached their fiduciary duties to Holdings and were unjustly enriched when they sold shares of Holdings at artificially inflated prices due to alleged misrepresentations and omissions regarding EPL’s comparable store sales in the second quarter of 2015.

The Holdings shareholder’s requested remedies include an award of compensatory damages to Holdings, as well as a court order to improve corporate governance by putting forward for stockholder vote certain resolutions for amendments to Holdings’ Bylaws or Certificate of Incorporation.

The Holdings shareholder voluntarily dismissed the action on October 7, 2020.

A second purported Holdings shareholder filed a derivative complaint on or about September 23, 2016, under the caption Diep v.

Sather, CA 12760-VCL in the Delaware Court of Chancery.

The Diep action is also purportedly brought on behalf of Holdings, names the same defendants and asserts substantially the same claims on substantially the same alleged facts as does Galustyan.

Defendants moved to stay or dismiss the Diep action.

On March 17, 2017, the Delaware court granted in part, and denied in part, the motion to stay the Diep action.

The court denied defendants’ motion to dismiss the complaint for failure to state a claim.

On January 17, 2018, the court entered an order granting the parties’ stipulation staying all proceedings in the Diep action for five months or until the completion of an investigation of the allegations in the action by a special litigation committee of the Holdings board of directors (the “SLC”).

On September 25, 2020, after concluding its investigation, the SLC filed a motion to dismiss the Diep action and filed its investigative report under seal as an exhibit to the motion to dismiss.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On May 21, 2021, while the SLC’s motion to dismiss the Diep action was pending, the Company filed a notice of proposed partial settlement of the Diep action with respect to defendants Kay Bogeajis, Laurance Roberts, Stephen J.

Sather, Edward J.

Valle, Douglas K.

Ammerman, and Samuel N.

Borgese (collectively, the “Settling Defendants”).

Defendant Trimaran was not a party to the settlement.

The court approved the settlement of $ 625,000 , less Plaintiffs’ fees of $ 156,250 , on September 10, 2021, and dismissed all claims brought, or that could have been brought, against Settling Defendants.

In connection with this settlement, the Company received $ 469,000 in insurance proceeds, which was recorded within general and administrative expenses in the Company’s statement of income for the year ended December 29, 2021.

On July 30, 2021, the court granted the SLC’s motion to dismiss with respect to the claims asserted against remaining defendant Trimaran.

On October 4, 2021, Plaintiffs filed a notice of appeal of the court’s granting of the motion to dismiss against defendant Trimaran.

Plaintiff filed its opening brief on December 6, 2021.

SLC filed its answering brief on December 20, 2021 and the public version of the brief was filed on January 7, 2022.

Plaintiffs filed the reply brief on January 4, 2022.

The hearing on the appeal took place on March 30, 2022.

On June 28, 2022, the court’s granting of the motion to dismiss against Trimaran was affirmed.

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

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 the Sellers.

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 year ended December 25, 2024, the Company repurchased 535,628 shares of common stock under the Share Repurchase Program, using open market purchases, for total consideration of approximately $ 5.6 million.

Following the completion of these repurchases, approximately $ 1.8 million of our common stock remained available for repurchases under the Share Repurchase Program.

Other Share Repurchases

On August 7, 2023, the Company entered into a Stock Repurchase Agreement with the Sellers, as amended on August 4, 2024, pursuant to which the Company agreed to purchase an aggregate of 2,500,000 shares of the Company’s common stock from the Sellers at a price of $ 10.63 per share, representing the closing price of such shares as listed on Nasdaq on August 7, 2023, for a total purchase price of $ 26.6 million.

The repurchase was completed in August 2023.

Further, on May 23, 2024, the Company entered into a new Stock Repurchase Agreement with the Sellers, pursuant to which the Company agreed to purchase an aggregate of 1,534,303 shares of its common stock from the Sellers at a price of $ 9.785 per share for a total purchase price of $ 15.0 million.

The repurchase was completed in May 2024.

Prior to the repurchase, Freeman Spogli & Co.

(“Freeman Spogli”), collectively with the Sellers and certain other funds managed by Freeman Spogli, was the Company’s largest stockholder.

In addition, John Roth, a director of the Company until his resignation on August 16, 2023, is a general partner of Freeman Spogli and its chief executive officer.

COMMITMENTS AND CONTINGENCIES

Legal Matters

From time to time, 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 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.

2 unchanged sentences

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.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

syrup and fluctuations in the market rates for beverage syrup.

These contracts have terms extending through the end of 2025.

9 unchanged sentences

Employment Agreements

As of December 27, 2023, the Company had employment agreements with two of the officers of the Company.

As of December 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.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Indemnification Agreements

2 unchanged sentences

The Company also intends to enter into indemnification agreements with future directors and officers.

RELATED PARTY TRANSACTIONS

On March 28, 2023, Trimaran Group distributed substantially all of the shares of the Company’s common stock held by the Trimaran Group to their respective investors, members and limited partners.

Additionally, on November 29, 2023, the Company entered into the Stock Repurchase Agreement with the Sellers.

The Company previously repurchased 2,500,000 shares of its common stock from the Sellers pursuant to a Stock Repurchase Agreement, dated August 7, 2023, as previously reported on Current Report on Form 8-K filed with the Securities and Exchange Commission on August 8, 2023.

John Roth, a former director of the Company until his resignation effective August 16, 2023, is a general partner and chief executive officer of Freeman Spogli, which manages the Sellers.

See Note 12 “Earnings per Share” for additional information.

REVENUE FROM CONTRACTS WITH CUSTOMERS

6 unchanged sentences

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

Disaggregated revenue

The following table presents the Company’s revenues for the years ended December 27, 2023, December 28, 2022 and December 29, 2021 disaggregated by revenue source and market (in thousands):

December 27, 2023

December 28, 2022

December 29, 2021

Core Market (1) :

Company-operated restaurant revenue

Franchise revenue

Franchise advertising fee revenue

Total core market

Non-Core Market (2) :

Company-operated restaurant revenue

Franchise revenue

Franchise advertising fee revenue

Total non-core market

Total revenue

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Core Market includes markets with existing company-operated restaurants at the time of the Company’s Initial Public Offering ("IPO") on July 28, 2014.

(2) Non-Core Market includes markets entered into by the Company subsequent to the IPO date.

Disaggregated revenue

The following table presents the Company’s revenues disaggregated by geographic market for the years ended December 25, 2024, December 27, 2023 and December 28, 2022:

19 unchanged sentences

This resulted in a net gain on sale of restaurant of $ 5.0 million including an additional contract liability of $ 0.3 million, relating to allocation of the transaction price to various performance obligations under the applicable contracts of the sale .

For the year ended December 28, 2022, there was an increase to the contract liability balance due to the Company’s completion of the sale of three company-operated restaurants within the Orange County area to an existing franchisee.

This resulted in additional contract liability of $ 0.8 million, relating to allocation of the transaction price to various performance obligations under the applicable contracts of the sale .

The following table illustrates the estimated revenue to be recognized in the future related to performance obligations that are unsatisfied as of December 25, 2024 (in thousands):

5 unchanged sentences

December 27, 2023

December 29, 2021

Loyalty rewards liability, beginning balance

15 unchanged sentences

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.

Under the Rights Agreement, the Rights will generally be 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 Board so elects, cash, securities, or other property) having a value equal to two times 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 in 2025 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

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 will generally be 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.

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;

2 unchanged sentences

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.

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

SEGMENT REPORTING

Operating segments are defined as components of a company that engage in business activities from which it may earn revenue and incur expenses, and for which separate financial information is available and is regularly reviewed by the chief operating decision maker ( " CODM " ) to assess the performance of the individual segments and make decisions about company resources such as personnel and working capital to be allocated to the segments.

The Company derives revenue from three primary sources:

(1) company-operated restaurant revenue, (2) franchise revenue, which is comprised primarily of franchise royalties and, to a lesser extent, franchise fees and sublease rental

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

income, and (3) franchise advertising fee revenue.

All significant revenues relate to retail sales of food and beverages through either company-operated or franchised restaurants.

The Company determined that it has one operating segment and one reportable segment which is reflected in the Company’s current organizational and management structure.

The accounting policies of the segment are the same as those described in Note 2 “Summary of Significant Accounting Policies.”

The Company’s CODM is the Chief Executive Officer who manages the Company’s operations on a reportable segment basis.

The Company’s CODM reviews its operations and financial performance at a consolidated level by comparing actual results to budgeted figures and prior year results.

This approach allows the CODM to assess whether the Company’s operating segment is meeting its financial goals, identify trends and make more informed decisions about resource allocation and performance targets.

When evaluating the Company’s financial performance, the CODM regularly reviews total revenues, segment expenses and consolidated net income as reported on the Consolidated Statements of Operations as well as non-GAAP measures such as restaurant contribution margin and Adjusted EBITDA to allocate Company resources and assess the performance of the Company.

Segment asset information is not used by the CODM to assess performance and allocate resources.

The table below is a summary of the segment net income, including significant segment expenses for the years ended December 25, 2024, December 27, 2023 and December 28, 2022 (in thousands):

December 25, 2024

December 27, 2023

December 28, 2022

Total revenue

Food and paper costs

Labor and related expenses

General and administrative expenses

Franchise expenses

Occupancy expenses

Other operating expenses (1)

Depreciation and amortization

Other segment expenses (2)

Total operating expenses

Income from operations

Interest expenses, net

Provision for income taxes

Income tax receivable agreement (income) expenses

Total segment net income

(1) Other operating expenses are comprised of utilities, repairs and maintenance, advertising, credit card processing fees, delivery service provider fees, restaurant supplies and other restaurant operating costs.

(2) Other segment expenses include loss (gain) on disposal of assets, gain on recovery of insurance proceeds, property, equipment and expenses, (gain) loss on disposition of restaurants and impairment and closed-store reserves.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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-K

Item 8. Financial Statements and Supplementary Data