What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-05-02 compared with 2024-11-01 · 208 added, 296 removed, 465 unchanged (52% of the section changed)

3 unchanged sentences

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

September 25,

Current assets:

7 unchanged sentences

Property and equipment held under operating leases, net ("ROU asset")

Deferred tax assets

Liabilities and Stockholders’ Equity

7 unchanged sentences

Accrued interest

Current portion of income tax receivable agreement payable

Other accrued expenses and current liabilities

3 unchanged sentences

Obligations under operating leases, net of current portion

Deferred taxes

Deferred tax liabilities, net

Other noncurrent liabilities

6 unchanged sentences

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

30,059,485 and 29,839,721 shares issued and outstanding as of March 26, 2025 and December 25, 2024, respectively

Additional paid-in-capital

7 unchanged sentences

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

September 25, 2024

September 27, 2023

September 25, 2024

September 27, 2023

March 26, 2025

March 27, 2024

Company-operated restaurant revenue

6 unchanged sentences

Occupancy and other operating expenses

Gain on recovery of insurance proceeds, lost profits, net

Company restaurant expenses

2 unchanged sentences

Depreciation and amortization

Loss (gain) on disposal of assets

Loss on disposal of assets

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

(Gain) loss on disposition of restaurants

Impairment and closed-store reserves

2 unchanged sentences

Interest expense, net

Income tax receivable agreement expense

Income before provision for income taxes

4 unchanged sentences

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

Other comprehensive loss

Changes in derivative instruments

Reclassifications of loss into net income

Income tax benefit

Other comprehensive loss, net of taxes

Comprehensive income

See notes to condensed consolidated financial statements (unaudited).

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

Comprehensive

Stockholders’

(Loss) Income

Balance, June 26, 2024

Stock-based compensation

Issuance of common stock related to restricted shares

Issuance of common stock upon exercise of stock options, net

Shares repurchased for employee tax withholdings

Repurchase of common stock

Repurchase of common stock - excise tax

Forfeiture of common stock related to restricted shares

Balance, September 25, 2024

Thirteen Weeks Ended September 27, 2023

Comprehensive

Stockholders’

(Loss) Income

Balance, June 28, 2023

Stock-based compensation

Issuance of common stock related to restricted shares

Issuance of common stock upon exercise of stock options, net

Shares repurchased for employee tax withholdings

Repurchase of common stock

( 2,706,214 )

Repurchase of common stock - excise tax

Forfeiture of common stock related to restricted shares

Balance, September 27, 2023

Thirty-Nine Weeks Ended September 25, 2024

Comprehensive

Thirteen Weeks Ended March 26, 2025

Stockholders’

(Loss) Income

Balance, December 25, 2024

4 unchanged sentences

Repurchase of common stock

( 1,966,229 )

Repurchase of common stock - excise tax

Forfeiture of common stock related to restricted shares

Balance, September 25, 2024

Thirty-Nine Weeks Ended September 27, 2023

Comprehensive

Balance, March 26, 2025

Thirteen Weeks Ended March 27, 2024

Stockholders’

(Loss) Income

Balance, December 27, 2023

Stock-based compensation

Issuance of common stock related to restricted shares

Issuance of common stock upon exercise of stock options, net

Shares repurchased for employee tax withholdings

Repurchase of common stock

( 4,530,850 )

Repurchase of common stock - excise tax

Forfeiture of common stock related to restricted shares

Other comprehensive (loss) income, net of tax

Balance, September 27, 2023

Balance, March 27, 2024

See notes to condensed consolidated financial statements (unaudited).

2 unchanged sentences

(Amounts in thousands)

Thirty-Nine Weeks Ended

September 25, 2024

September 27, 2023

Thirteen Weeks Ended

March 26, 2025

March 27, 2024

Cash flows from operating activities:

2 unchanged sentences

Stock-based compensation expense

Income tax receivable agreement expense

Fire insurance proceeds for expenses paid and lost profit

Loss (gain) on disposition of restaurants

Loss (gain) on disposal of assets

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

Impairment of property and equipment

Loss on disposal of assets

Amortization of deferred financing costs

4 unchanged sentences

Income taxes receivable/ payable

Operating lease assets

Accounts payable

1 unchanged sentence

Accrued insurance

Payment related to tax receivable agreement

Operating lease liabilities

Other accrued expenses and liabilities

1 unchanged sentence

Cash flows from investing activities:

Proceeds from disposition of restaurants

Proceeds from fire insurance for property and equipment

8 unchanged sentences

Repurchases of common stock

Net cash flows used in by financing activities

Increase (decrease) in cash and cash equivalents

Net cash flows provided by (used in) financing activities

Increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Thirty-Nine Weeks Ended

September 25, 2024

September 27, 2023

Thirteen Weeks Ended

March 26, 2025

March 27, 2024

Supplemental cash flow information

8 unchanged sentences

El Pollo Loco Holdings, Inc.

(“Holdings”) is a Delaware corporation headquartered in Costa Mesa, California.

(“Holdings” or “Company”) 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.

At March 26, 2025, the Company operated 174 and franchised 325 El Pollo Loco restaurants in the United States.

The Company also licenses eight restaurants in the Philippines.

Two licensed restaurants in the Philippines were closed during the thirteen weeks ended March 26, 2025.

Basis of Presentation

9 unchanged sentences

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.

Fiscal 2025 is a 53-week year ending on December 31, 2025.

Fiscal 2024 was a 52-week year ended on December 25, 2024.

Revenues, expenses, and other financial and operational figures may be elevated in a 53-week year.

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

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.

(“Intermediate”), guarantee EPL’s 2022 Revolver (as defined in Note 5 below) on a full and unconditional basis 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.

EPL and Intermediate may pay dividends to Intermediate and to Holdings, respectively.

Principles of Consolidation

4 unchanged sentences

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.

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.

Cash and Cash Equivalents

1 unchanged sentence

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.

At March 26, 2025, the Company’s total debt was $ 73.0 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.

Based on current operations, the Company believes that its cash flow from operations, available cash of $ 4.3 million at March 26, 2025, 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.

Subsequent to the quarter-end, the Company borrowed $ 2.0 million on its 2022 Revolver resulting in outstanding borrowings of $ 75.0 million as of May 1, 2025.

Concentration of Risk

1 unchanged sentence

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 no supplier for which amounts due totaled more than 10.0% of the Company’s accounts payable at March 26, 2025.

The Company had one supplier to whom amounts due totaled 19.7 % of the Company’s accounts payable at December 25, 2024.

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.

Purchases from the Company’s largest supplier totaled 15.1 % of total expenses for the thirteen weeks ended March 26, 2025, and 24.7 % of total expenses for the thirteen weeks ended March 27, 2024, respectively.

Company-operated and franchised restaurants in the greater Los Angeles area generated, in the aggregate, approximately 71.6 % of total revenue for the thirteen weeks ended March 26, 2025, and 71.5 % for the thirteen weeks ended March 27, 2024, respectively.

Goodwill and Indefinite Lived Intangible Assets

8 unchanged sentences

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.

company restaurant operations.

The Company did no t record any decrement to goodwill related to the disposition of restaurants in fiscal 2024 or the thirteen weeks ended March 26, 2025.

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

10 unchanged sentences

These assumptions are subject to change as a result of changing economic and competitive conditions.

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

The Company determined that there were no indicators of potential impairment of its goodwill and indefinite-lived intangible assets during the thirteen weeks ended March 26, 2025.

Accordingly, the Company did no t record any impairment to its goodwill or indefinite-lived intangible assets during the thirteen weeks ended March 26, 2025.

Fair Value Measurements

8 unchanged sentences

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

There were no non-financial instruments measured at fair value on a nonrecurring basis as of and for the thirteen and 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

Impairment Losses

Certain property and equipment, net

Certain ROU assets, net

There were no non-financial instruments measured at fair value on a nonrecurring basis as of and for the thirteen weeks ended March 26, 2025 and March 27, 2024.

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.

The Company reviews its property and equipment and right-of-use assets (“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 (“AUV”) for the last twelve months are less than a minimum threshold or if consistent

levels of undiscounted cash flows for the remaining lease period are less than the carrying value of the restaurant’s assets.

Additionally, the Company considers a triggering event related to ROU assets to have occurred related to a specific lease if the location has been closed or subleased and future estimated sublease income is less than current lease payments.

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.

2 unchanged sentences

If actual performance does not achieve the projections, or if the assumptions used change in the future, the Company may be required to recognize impairment charges in future periods, and such charges could be material.

The Company determined that triggering events occurred for certain restaurants during the 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.

The Company determined that triggering events occurred for certain stores during the thirteen weeks ended March 26, 2025 that required an impairment review of certain of the Company’s property and equipment and ROU assets.

Based on the results of this analysis, the Company did no t record any non-cash impairment charges for the thirteen weeks ended March 26, 2025 and March 27, 2024.

Closed-Store Reserves

2 unchanged sentences

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

During both the thirteen and 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.

During both the thirteen weeks ended March 26, 2025 and March 27, 2024, the Company recognized less than $ 0.1 million of closed-store reserve expense related to the amortization of ROU assets, property taxes and CAM payments for its closed location.

Gain on Recovery of Insurance Proceeds, Lost Profits

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.

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

During the thirteen weeks ended March 27, 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 condensed consolidated statements of income, for the thirteen weeks ended March 27, 2024, as a reduction of company restaurant expenses.

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

11 unchanged sentences

The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense.

The Company had no accrual for interest or penalties at 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.

The Company had no accrual for interest or penalties at March 26, 2025 or at December 25, 2024.

The Company did no t recognize interest or penalties during the thirteen weeks ended March 26, 2025 and March 27, 2024, 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 .

For the thirteen weeks ended March 26, 2025 and March 27, 2024, the Company did no t record any income tax receivable agreement income or expenses.

As of March 26, 2025 and December 25, 2024, there was no remaining obligations owed on the Company’s condensed consolidated balance sheets.

For the quarter ended March 26, 2025, the Company recorded an income tax provision of $ 2.3 million, reflecting an estimated effective tax rate of 29.7 %.

For the quarter ended March 27, 2024, the Company recorded an income tax provision of 2.2 million, reflecting an estimated effective tax rate of approximately 27.1 %.

The difference between the 21.0 % statutory rate and the effective tax rate of 29.7 % for the quarter ended March 26, 2025 is primarily a result of state taxes and the impact of non-tax deductible executive compensation, 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.

In December 2023, the Financial Accounting Standard Board (“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.

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.

In November 2024, the FASB issued ASU No.

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

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

In January 2025, the FASB issued ASU No.

2025-01, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures:

Clarifying the Effective Date”, which clarifies that the ASU 2024-03 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 condensed consolidated financial statements.

PREPAID EXPENSES AND OTHER CURRENT ASSETS

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

March 26, 2025

December 25, 2024

Prepaid insurance

Prepaid service fees

Other current assets

Total prepaid expenses and other current assets

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

March 26, 2025

December 25, 2024

3 unchanged sentences

accumulated depreciation and amortization

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.

Total property and equipment, net

Depreciation and amortization expense was $ 3.9 million for both the thirteen weeks ended March 26, 2025 and March 27, 2024, 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 ended March 26, 2025 and March 27, 2024, respectively.

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

1 unchanged sentence

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.

At March 26, 2025, options to purchase 1,472,494 shares of common stock were outstanding, including 295,692 vested and 1,176,802 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:

A summary of stock option activity at March 26, 2025 and changes during the thirteen weeks ended March 26, 2025 is as follows:

Weighted-Average

6 unchanged sentences

Forfeited, cancelled or expired

Outstanding – September 25, 2024

Vested and expected to vest at September 25, 2024

Exercisable at September 25, 2024

Outstanding – March 26, 2025

Vested and expected to vest at March 26, 2025

Exercisable at March 26, 2025

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

March 26, 2025

March 27, 2024

Expected volatility

2 unchanged sentences

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.

At March 26, 2025, the Company had total unrecognized compensation expense of $ 5.0 million related to unvested stock options, which it expects to recognize over a weighted-average period of 2.96 years.

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:

A summary of restricted share activity as of March 26, 2025 and changes during the thirteen weeks ended March 26, 2025 is as follows:

Weighted-Average

1 unchanged sentence

Forfeited and cancelled

Unvested shares at September 25, 2024

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

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

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

Unvested shares at March 26, 2025

Unvested shares at March 26, 2025, included 998,109 unvested restricted shares and 30,254 shares subject to unvested but earned performance stock units.

At March 26, 2025, the Company had unrecognized compensation expense of $ 8.1 million related to unvested restricted shares, which it expects to recognize over a weighted-average period of 2.62 years.

During the thirteen weeks ended March 26, 2025, the Company granted 159,948 restricted stock units subject to performance-based vesting conditions based on revenue and restaurant contribution margin to certain officers.

Each performance-based restricted stock unit ("PSU") has a grant date fair value of $ 10.42 and a vesting period from the grant date through the date the audit of the Company's fiscal 2027 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 March 26, 2025, based on the target level of performance, the total unrecognized compensation expense related to unvested PSUs was $ 1.8 million, which is expected to be recognized over a weighted-average period of 2.80 years.

Total stock-based compensation expense was $ 1.0 million for the thirteen weeks ended March 26, 2025, and $ 0.9 million for the thirteen weeks ended March 27, 2024.

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.

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

Under the Share Repurchase Program, 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 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.

The Share Repurchase Program did not obligate the Company to acquire any particular number of shares.

The Share Repurchase Program was terminated on March 31, 2025.

For the thirteen weeks ended March 26, 2025, the Company repurchased 159,750 shares of common stock under the Share Repurchase Program, using open market purchases, for total consideration of approximately $ 1.8 million.

Following completion of these repurchases, less than $ 0.1 million of the Company’s common stock remained available for repurchase under the Share Repurchase Program at March 26, 2025.

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 entered into 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, to refinance its $ 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 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.

Under the 2022 Revolver, Holdings is restricted from making certain payments such as cash dividends, except that it may, inter alia, (i) pay up to $ 1.0 million per year to repurchase or redeem qualified equity interests of Holdings held by past or present officers, directors, or employees (or their estates) of the Company upon death, disability, or termination of employment, (ii) pay under its TRA, and (iii) so long as no default or event of default has occurred and is continuing, (a) make non-cash repurchases of equity interests in connection with the exercise of stock options by directors, officers and management, provided that those equity interests represent a portion of the consideration of the exercise price of those stock options, (b) pay up to $ 0.5 million in any 12 month consecutive period to redeem, repurchase or otherwise acquire equity interests of any subsidiary that is not a wholly-owned subsidiary from any holder of equity interest in such subsidiary, (c) pay up to $ 2.5 million per year pursuant to stock option plans, employment agreements, or incentive plans, (d) make up to $ 5.0 million in other restricted payments per year, and (e) make other restricted payments, subject to its compliance, on a pro forma basis, with (x) a lease-adjusted consolidated leverage ratio not to exceed 4.25 times and (y) the financial covenants applicable to the 2022 Revolver.

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 %.

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 %.

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 interest rate range under the 2022 Revolver was 5.65 % to 7.75 % for the thirteen weeks ended March 26, 2025, and 6.92 % to 6.96 % for the thirteen weeks ended March 27, 2024 .

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.

The Company was in compliance with the financial covenants as of March 26, 2025.

At March 26, 2025, the Company had $ 73.0 million in outstanding borrowings under the 2022 Revolver and one letter of credit in the amount of $ 10.3 million outstanding, and as a result, the Company had $ 66.7 million in borrowing availability.

During the thirteen weeks ended March 26, 2025, the Company borrowed $ 6.0 million and paid down $ 4.0 million on the 2022 Revolver.

During the thirteen weeks ended March 27, 2024, the Company paid down $ 4.0 million on the 2022 Revolver.

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

OTHER ACCRUED EXPENSES AND CURRENT LIABILITIES

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

September 25, 2024

March 26, 2025

December 25, 2024

8 unchanged sentences

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

September 25, 2024

March 26, 2025

December 25, 2024

3 unchanged sentences

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.

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.

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

Purchase Commitments

The Company has long-term beverage supply agreements with certain major beverage vendors.

1 unchanged sentence

These contracts have terms extending through the end of 2032.

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

At March 26, 2025, the Company’s total estimated commitment to purchase chicken was $ 19.1 million.

Contingent Lease Obligations

1 unchanged sentence

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.

As of March 26, 2025, the potential amount of undiscounted payments the Company could be required to make in the event of non-payment by the primary lessee was $ 3.4 million.

The present value of these potential payments discounted at the Company’s estimated pre-tax cost of debt at March 26, 2025 was $ 2.3 million.

The Company’s franchisees are primarily liable on the leases.

The Company has cross-default provisions with these franchisees that would put them in default of their franchise

agreements in the event of non-payment under the leases.

The Company has cross-default provisions with these franchisees that would put them in default of their franchise agreements in the event of non-payment under the leases.

The Company believes that these cross-default provisions reduce the risk that payments will be required to be made under these leases.

Employment Agreements

As of September 25, 2024, the Company had employment agreements with three of the officers of the Company.

As of March 26, 2025, the Company had employment agreements with three of the officers of the Company.

These agreements provide for minimum salary levels, possible annual adjustments for cost-of-living changes, and incentive bonuses that are payable under certain business conditions.

4 unchanged sentences

EARNINGS PER SHARE

Basic earnings per share (“EPS”) is calculated using the weighted-average number of shares of common stock outstanding during the thirteen and thirty-nine weeks ended September 25, 2024 and September 27, 2023.

Basic earnings per share (“EPS”) is calculated using the weighted-average number of shares of common stock outstanding during the thirteen weeks ended March 26, 2025 and March 27, 2024.

Diluted EPS is calculated using the weighted-average number of shares of common stock outstanding and potentially dilutive during the period, using the treasury stock method.

1 unchanged sentence

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

September 25, 2024

September 27, 2023

September 25, 2024

September 27, 2023

March 26, 2025

March 27, 2024

Weighted-average shares outstanding—basic

5 unchanged sentences

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

September 25, 2024

September 27, 2023

September 25, 2024

September 27, 2023

March 26, 2025

March 27, 2024

Weighted-average shares outstanding—basic

9 unchanged sentences

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.

The Company offers a loyalty rewards program, which awards a customer points for dollars spent.

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

3 unchanged sentences

A portion of the transaction price is allocated to loyalty points, if necessary, on a pro-rata basis, based on stand-alone selling price, as determined by menu pricing and loyalty points terms.

As of 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.

As of March 26, 2025 and December 25, 2024, the revenue allocated to loyalty points that have not been redeemed was $ 0.9 million and $ 0.8 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.

8 unchanged sentences

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.

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

● Discounted renewal option;

3 unchanged sentences

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.

The sales-based royalty fee and sales-based advertising fee are considered variable consideration and are recognized as revenue as such sales are earned by the franchisees.

Both sales-based fees qualify under the royalty constraint exception, and do not require an estimate of future transaction price.

Additionally, the Company is utilizing the practical expedient available under ASC Topic 606, “Revenue from Contracts with Customers” (“Topic 606”)

regarding disclosure of the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied for sales-based royalties.

Additionally, the Company is utilizing the practical expedient available under ASC Topic 606, “Revenue from Contracts with Customers” (“Topic 606”) regarding disclosure of the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied for sales-based royalties.

In certain franchise agreements, the Company offers a discounted renewal to incentivize future renewals after the end of the initial franchise term.

As this is considered a separate performance obligation, the Company allocates a portion of the initial franchise fee to this discounted renewal, on a pro-rata basis, assuming a 20-year renewal.

This performance obligation is satisfied over the renewal term, typically 10 or 20 years , while payment is fixed and due at the time the renewal is signed.

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.

As this is considered a separate performance obligation, the Company allocated 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, 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, 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.

As of March 26, 2025, 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

March 26, 2025

March 27, 2024

Greater Los Angeles area market

1 unchanged sentence

Contract balances

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

The following table provides information about the change in the franchise contract liability balances during the thirteen weeks ended March 26, 2025 and March 27, 2024 (in thousands):

December 25, 2024

1 unchanged sentence

Additional contract liability

September 25, 2024

March 26, 2025

December 27, 2023

1 unchanged sentence

Additional contract liability

September 27, 2023

March 27, 2024

The Company’s franchise contract liability includes development fees, initial franchise and license fees, franchise renewal fees, lease subsidies and royalty discounts and is included within other accrued expenses and current liabilities and other noncurrent liabilities within the accompanying condensed consolidated balance sheets.

2 unchanged sentences

Revenue is recognized from these agreements as the underlying performance obligation is satisfied, which is over the term of the agreement.

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

Franchise revenues:

Changes in the loyalty rewards program liability included in deferred revenue within other accrued expenses and current liabilities on the condensed consolidated balance sheets were as follows (in thousands):

September 25, 2024

March 26, 2025

December 25, 2024

3 unchanged sentences

Loyalty rewards liability, ending balance

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

The Company expects all loyalty points revenue related to performance obligations unsatisfied as of March 26, 2025 to be recognized within one year .

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

September 25, 2024

March 26, 2025

December 25, 2024

2 unchanged sentences

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

September 25, 2024

September 27, 2023

September 25, 2024

September 27, 2023

March 26, 2025

March 27, 2024

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

4 unchanged sentences

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

As of 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.

As of March 26, 2025, the Company had one lease that it had entered into, but had not yet commenced.

Building and Facility Leases

8 unchanged sentences

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.

During the thirteen weeks ended March 26, 2025, the Company reassessed the lease terms on two restaurants, 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 $ 1.4 million of ROU asset and lease liabilities for the thirteen weeks ended March 26, 2025, which were recognized and will be amortized over the new lease term.

During the thirteen weeks ended March 27, 2024, the Company reassessed the lease terms on eight restaurants 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 $ 5.9 million of ROU asset and lease liabilities for the thirteen weeks ended March 27, 2024, 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.

2 unchanged sentences

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.

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.

During both the thirteen weeks ended March 26, 2025 and March 27, 2024, the Company did no t record any non-cash impairment charges.

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

12 unchanged sentences

Thirteen Weeks Ended

September 25, 2024

September 27, 2023

Finance lease cost:

Amortization of right-of-use assets

Interest on lease liabilities

Operating lease cost:

Fixed rent cost

Short-term lease cost

Variable lease cost

Sublease income

Total lease cost

Thirty-Nine Weeks Ended

September 25, 2024

September 27, 2023

March 26, 2025

March 27, 2024

Finance lease cost:

8 unchanged sentences

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

March 26, 2025

March 27, 2024

Lease cost – Occupancy and other operating expenses

2 unchanged sentences

Lease cost – Interest expense

Lease cost – Closed-store reserve

Total lease cost

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

During the thirteen weeks ended March 26, 2025 and March 27, 2024, the Company had the following cash and non-cash activities associated with its leases (dollars in thousands):

March 26, 2025

March 27, 2024

Cash paid for amounts included in the measurement of lease liabilities

6 unchanged sentences

Finance lease ROU assets

Derecognition of ROU assets due to terminations, impairment or modifications

Other Information

3 unchanged sentences

Weighted-average discount rate—operating leases

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

Information regarding the Company’s minimum future lease obligations as of March 26, 2025 is as follows (in thousands):

Finance Leases

19 unchanged sentences

Additionally, there are no related party leases.

The Company received $ 0.1 million of lease income from company-owned locations for 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.

The Company received $ 0.1 million of lease income from company-owned locations for both the thirteen weeks ended March 26, 2025 and March 27, 2024.

SHAREHOLDER RIGHTS AGREEMENT

3 unchanged sentences

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.

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 in 2025, 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.

1 unchanged sentence

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 %.

Since that time, members of the Board and leadership team 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 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 amended 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.

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.

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.

8 unchanged sentences

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.

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 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 1 “Basis of Presentation and Summary of 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 thirteen weeks ended March 26, 2025 and March 27, 2024 (in thousands):

Thirteen Weeks Ended

March 26, 2025

March 27, 2024

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

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 on disposal of assets, gain on recovery of insurance proceeds, property, equipment and expenses and impairment and closed-store reserves.

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

What changed 10-Q

Item 1. Financial Statements