What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-01 compared with 2025-05-02 · 190 added, 117 removed, 333 unchanged (48% of the section changed)

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● any future offerings of debt or equity securities that may impact the market price of our common stock;

● the possibility that Delaware law, our organizational documents, our shareholder rights agreement, and our existing and future debt agreements may impede or discourage a takeover;

● the possibility that Delaware law, our organizational documents, and our existing and future debt agreements may impede or discourage a takeover;

● the impact of shareholder activism on our expenses, business and stock price;

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

We strive to make and serve food that is both “better for you” and flavorful.

We strive to make and serve food that is both high quality and flavorful.

Our distinctive menu features our signature product, citrus-marinated fire-grilled chicken, served in a variety of Mexican-inspired entrees, such as burritos and tostadas, healthier options, such as salads, and chicken meals, all available in a variety of sizes to feed individuals and larger groups.

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Our famous Creamy Cilantro dressing and salsas are prepared fresh daily, allowing our customers to create their favorite flavor profiles to enhance their culinary experience.

Our distinctive menu with “better for you” and more affordable healthier alternatives appeals to consumers across a wide variety of socio-economic backgrounds and drives our balanced composition of sales throughout the day (our “day-part mix”), including at lunch and dinner.

Our distinctive menu of quality, flavorful food that is affordable appeals to consumers across a wide variety of socio-economic backgrounds and drives our balanced composition of sales throughout the day (our “day-part mix”), including at lunch and dinner.

In 2025, El Pollo Loco launched a brand refresh, inclusive of a new advertising campaign, restaurant design, new products, and an emphasis on hospitality in our restaurants.

All these elements reinforce our position in the market of “Quality Chicken, Fast & Easy.”

Market Trends and Uncertainties

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Under AB 1228, the Fast Food Council also retains 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, we experienced an increase in our labor and regulatory compliance costs in fiscal 2024 and the first quarter of fiscal 2025.

Although we have been able to substantially offset these cost pressures through various actions, such as increasing menu prices, managing menu mix, and productivity improvements, we expect these cost pressures to continue into 2025 and we may not be able to offset cost increases in the future.

Additionally, we are impacted by macroeconomic challenges, such as inflationary pressures and changes in trade policies, that have in the past, and may continue in the future, to affect our operations in certain areas such as food cost, labor costs, construction costs and other restaurant operating costs.

As a result of AB 1228, we experienced an increase in our labor and regulatory compliance costs in fiscal 2024 and the first half of fiscal 2025.

Although we have been able to substantially offset these cost pressures through various actions, such as increasing menu prices, managing menu mix, and productivity improvements, we expect these cost pressures to continue for the remainder of 2025, and we may not be able to offset cost increases in the future.

Additionally, we are impacted by macroeconomic challenges, such as inflationary pressures and changes in trade policies, that have in the past affected, and may continue in the future, to affect our operations in certain areas such as food cost, labor costs, construction costs and other restaurant operating costs.

We have 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, we expect these inflationary and other cost pressures to continue into the remainder of fiscal 2025 and we may not be able to offset cost increases in the future.

Increased tariff duties on goods imported into the United States may have an adverse effect on our Company.

There is ongoing uncertainty regarding increased tariff duties on goods imported into the United States, which if imposed, may have an adverse effect on our Company.

Certain of the produce, packaging materials, and other items procured by our Company are sourced from outside the United States, including from Canada, Mexico and Asia.

Currently, many goods imported from countries other than Canada and Mexico are subject to a 10% tariff increase in addition to the base tariff rate, with the exception of Chinese-origin goods, which can be subject to additional tariff duties up to 145%.

Certain goods from Canada and Mexico that are not USMCA-compliant can be subject to a 25% tariff rate.

While we are still evaluating the potential impacts of increased tariff rates, as well as our ability to mitigate any such related impacts, we anticipate that these tariff actions will adversely impact our revenue and cost of goods sold in the United States.

Current and proposed tariff rates range widely, depending on the country of origin.

Certain goods from Canada and Mexico that are compliant with the United States-Mexico-Canada Agreement (USMCA) are, and may continue to be, exempt from new tariffs.

While we continue to evaluate the potential impacts of increased tariff rates, as well as our ability to mitigate any such related impacts, we anticipate that the imposition of tariffs on goods we import into the United States will adversely impact our revenue and cost of goods sold in the United States.

Any new or increased import duties, tariffs, or taxes, or other changes in U.S.

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Growth Strategies and Outlook

As of March 26, 2025, we had 499 locations in seven states.

As of June 25, 2025, we had 499 locations in seven states.

In fiscal 2024, we opened two new company-operated restaurants in Nevada, and our franchisees opened two new restaurants, one in California and one in Texas.

Additionally, we completed the sale of one restaurants within California to existing franchisees during fiscal 2024.

For the thirteen weeks ended March 26, 2025, our franchisees opened two new restaurants and closed one restaurant in both cases in California.

Additionally, during the thirteen weeks ended March 26, 2025, we completed the acquisition of one restaurant in California from an existing franchisee.

Additionally, we completed the sale of one restaurant within California to existing franchisees during fiscal 2024.

For the twenty-six weeks ended June 25, 2025, our franchisees opened one new restaurant in Arizona and two new restaurants in California, and they closed two restaurants in California.

Additionally, during the twenty-six weeks ended June 25, 2025, we completed the acquisition of one restaurant in California from an existing franchisee.

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

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Revenue Overview

For the thirteen weeks ended March 26, 2025, our total revenue was $119.2 million.

For the thirteen weeks ended March 26, 2025, our company-operated restaurant revenue was $98.4 million, and our franchise and franchise advertising fee revenue was $20.8 million.

For the thirteen and twenty-six weeks ended June 25, 2025, our total revenue was $125.8 million and $245.0 million, respectively.

For the thirteen weeks ended June 25, 2025, our company-operated restaurant revenue was $104.3 million

and $202.7 million, respectively, and our franchise and franchise advertising fee revenue was $21.5 million and $42.3 million, respectively.

Comparable Restaurant Sales

For the thirteen weeks ended March 26, 2025, system-wide comparable restaurant sales decreased by 0.6% from the comparable period in the prior year.

For company-operated restaurants, comparable restaurant sales for the thirteen weeks ended March 26, 2025 increased by 0.6%.

For company-operated restaurants, the quarter’s change in comparable restaurant sales consisted of a 4.6% increase in average check size, partially offset by a 3.8% decrease in transactions .

For franchised restaurants, comparable restaurant sales decreased 1.3% for the thirteen weeks ended March 26, 2025.

For the thirteen and twenty-six weeks ended June 25, 2025, system-wide comparable restaurant sales decreased by 0.3% and 0.4%, respectively, from the comparable period in the prior year.

For company-operated restaurants, comparable restaurant sales for the thirteen and twenty-six weeks ended June 25, 2025 increased by 1.2% and 0.9%, respectively.

For company-operated restaurants, the quarter’s change in comparable restaurant sales consisted of a 1.5% increase in average check size, partially offset by a 0.3% decrease in transactions, and the year-to-date change in comparable restaurant sales consisted of a 3.0% increase in average check size, partially offset by a 2.0% decrease in transactions .

For franchised restaurants, comparable restaurant sales decreased by 1.1% and 1.2% for the thirteen and twenty-six weeks ended June 25, 2025, respectively.

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

Restaurant Development

Our restaurant counts at the beginning and end of each of the last three fiscal years and the thirteen weeks ended March 26, 2025, were as follows:

Thirteen Weeks Ended

Our restaurant counts at the beginning and end of each of the last three fiscal years and the twenty-six weeks ended June 25, 2025, were as follows:

Twenty-Six Weeks Ended

Fiscal Year Ended

March 26, 2025

June 25, 2025

Company-operated restaurant activity (1) :

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Restaurants at end of period

(1) Our restaurant count above includes 499 domestic restaurants and excludes the eight licensed restaurants in the Philippines, as well as the two previously licensed restaurants in the Philippines that were closed during the thirteen weeks ended March 26, 2025.

Restaurant Remodeling

During the thirteen weeks ended March 26, 2025, we completed a total of four company-operated restaurant and franchise remodels.

During the twenty-six weeks ended June 25, 2025, we completed a total of 20 company-operated restaurant and franchise remodels.

Considering our efforts to finalize our new prototype design, we currently expect to complete 55-65 company-operated restaurant and franchise remodels for the remainder of fiscal 2025.

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

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

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

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

If a customer does not earn or use points within a one-year period, their account is deactivated and all points expire.

a customer does not earn or use points within a one-year period, their account is deactivated and all points expire.

When a customer is part of the rewards program, the obligation to provide future discounts related to points earned is considered a separate performance obligation, to which a portion of the transaction price is allocated.

The performance obligation related to loyalty points is deemed to have been satisfied, and the amount deferred in the balance sheet is recognized as revenue, when the points are transferred to a reward and redeemed, the reward or points have expired, or

the likelihood of redemption is remote.

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

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

As of March 26, 2025 and December 25, 2024, the revenue allocated to loyalty points that had not been redeemed was $0.9 million and $0.8 million, respectively, which is reflected in our accompanying condensed consolidated balance sheets within other accrued expenses and current liabilities.

We had over 4.4 million loyalty program members as of March 26, 2025.

As of June 25, 2025 and December 25, 2024, the revenue allocated to loyalty points that had not been redeemed was $1.0 million and $0.8 million, respectively, which is reflected in our accompanying condensed consolidated balance sheets within other accrued expenses and current liabilities.

We had over 4.5 million loyalty program members as of June 25, 2025.

Critical Accounting Policies and Use of Estimates

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Like other expense items, we expect labor costs to grow proportionately as our restaurant revenue grows.

Factors that influence labor costs include minimum wage and payroll tax legislation, state labor laws (which, in California, includes AB 1228), overtime, wage inflation, the frequency and severity of workers’ compensation claims, health care costs, and the performance of our restaurants.

Factors that influence labor costs include minimum wage and payroll tax legislation, state

labor laws (which, in California, includes AB 1228), overtime, wage inflation, the frequency and severity of workers’ compensation claims, health care costs, and the performance of our restaurants.

Occupancy Costs and Other Operating Expenses

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Comparison of Results of Operations

Our operating results for the thirteen weeks ended March 26, 2025 and March 27, 2024 are expressed as percentages of total revenue, with the exception of cost of operations and company restaurant expenses, which are expressed as percentages of company-operated restaurant revenue, and are compared in the tables below.

Our operating results for the thirteen and twenty-six weeks ended June 25, 2025 and June 26, 2024 are expressed as percentages of total revenue, with the exception of cost of operations and company restaurant expenses, which are expressed as percentages of company-operated restaurant revenue, and are compared in the tables below.

Thirteen Weeks Ended

March 26, 2025

March 27, 2024

June 25, 2025

June 26, 2024

Increase / (Decrease)

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Loss on disposal of assets

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

Loss on disposition of restaurants

Impairment and closed-store reserves

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All other percentages use total revenue.

Twenty-Six Weeks Ended

June 25, 2025

June 26, 2024

Increase / (Decrease)

Statements of Income Data

Company-operated restaurant revenue

For the quarter ended March 26, 2025, company-operated restaurant revenue increased $1.2 million, or 1.2%, from the comparable period in the prior year.

Franchise revenue

Franchise advertising fee revenue

Total revenue

Cost of operations (1)

Food and paper costs

Labor and related expenses

Occupancy and other operating expenses

Company restaurant expenses (1)

General and administrative expenses

Franchise expenses

Depreciation and amortization

Loss on disposal of assets

Gain on recovery of insurance proceeds, net

Loss on disposition of restaurants

Impairment and closed-store reserves

Total expenses

Income from operations

Interest expense, net of interest income

Income before provision for income taxes

Provision for income taxes

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

All other percentages use total revenue.

Company-Operated Restaurant Revenue

For the quarter ended June 25, 2025, company-operated restaurant revenue increased $2.0 million, or 2.0%, from the comparable period in the prior year.

The increase in company-operated restaurant revenue was mainly due to an increase in company-operated comparable restaurant revenue of $1.2 million, or 1.2%, as well as $0.9 million of additional sales from the opening of two restaurants during or after the second quarter of 2024.

The company-operated comparable restaurant sales increase consisted of a 1.5% increase in average check size due to increases in menu prices, partially offset by a 0.3% decrease in transactions.

Year-to-date, company-operated restaurant revenue increased $3.2 million, or 1.6%, from the comparable period in the prior year.

The increase in company-operated restaurant revenue was mainly due to an increase in company-operated comparable restaurant revenue of $1.8 million, or 0.9%, as well as $1.8 million of additional sales from the opening of two restaurants during or after the first quarter of 2024.

This company-operated restaurant revenue increase was partially offset by a $0.4 million decrease related to the one company-operated restaurant sold by us to our existing franchisee during or subsequent to the first quarter of 2024.

The company-operated comparable restaurant sales increase consisted of a 3.0% increase in average check size due to increases in menu prices, partially offset by a 2.0% decrease in transactions.

This company-operated restaurant revenue increase was partially offset by a $0.2 million decrease related to the one company-operated restaurant sold by us to our existing franchisee during or subsequent to the first quarter of 2024 .

Franchise Revenue

For the quarter ended March 26, 2025, franchise revenue increased $1.8 million, or 16.2%, from the comparable period in the prior year.

This increase was primarily due to the franchisee IT pass through revenue related to the franchisee rollout of the new Point of Sale (POS) system which is offset by a corresponding expense in franchise expenses.

In addition, the increase in franchise revenue was due to the four franchise-operated restaurant openings during or subsequent to the first quarter of 2024.

For the quarter ended June 25, 2025, franchise revenue increased $1.7 million, or 14.8%, from the comparable period in the prior year.

This increase was primarily due to the $1.6 million in franchisee IT pass through revenue related to the franchisee rollout of the new Point of Sale (POS) system which is offset by a corresponding increase in franchise expenses.

In addition, the increase in franchise revenue was due to the five franchise-operated restaurant openings during or subsequent to the second quarter of 2024.

The increase in franchise revenue was partially offset by a franchise comparable restaurant sales decrease of 1.1% .

Year-to-date, franchise revenue increased $3.6 million, or 15.5%, from the comparable period in the prior year.

This increase was primarily due to the $3.4 million in franchisee IT pass through revenue related to the franchisee rollout of the new POS system which is offset by a corresponding increase in franchise expenses.

In addition, the increase in franchise revenue was due to the five franchise-operated restaurant openings during or subsequent to the first quarter of 2024.

The increase in franchise revenue was partially offset by a franchise comparable restaurant sales decrease of 1.2% .

Franchise Advertising Fee Revenue

For the quarter ended March 26, 2025, franchise advertising fee revenue decreased less than $0.1 million, or 0.3%, from the comparable period in the prior year.

For the quarter ended June 25, 2025, franchise advertising fee revenue decreased less than $0.1 million, or 0.9%, from the comparable period in the prior year.

Year-to-date, franchise advertising fee revenue decreased $0.1 million, or 0.6%, from the comparable period in the prior year.

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

Food and Paper Costs

For the quarter ended March 26, 2025, food and paper costs decreased $0.9 million, or 3.4%, from the comparable period in the prior year.

The decrease in food and paper costs for the quarter was primarily due to a lower number of transactions combined with cost management initiatives, partially offset by commodity inflation.

For the quarter ended June 25, 2025, food and paper costs decreased $0.2 million, or 0.9%, from the comparable period in the prior year.

Year-to-date, food and paper costs decreased $1.1 million, or 2.2%, from the comparable period in the prior year.

The decrease in food and paper costs for both the quarter and year-to-date periods was primarily due to a lower number of transactions combined with cost-management initiatives and commodity deflation.

For the quarter, food and paper costs as a percentage of company-operated restaurant revenue were 24.5%, down from 25.2% in the comparable period of the prior year.

The percentage change for the quarter was primarily due to an increase in menu pricing combined with cost management initiatives, partially offset by commodity inflation.

Year-to-date, food and paper costs as a percentage of company-operated restaurant revenue were 24.8%, down from 25.7% in the comparable period of the prior year.

The percentage decrease for both the quarter and year-to-date periods was primarily due to menu price increases and the cost decreases highlighted above.

Labor and Related Expenses

For the quarter ended March 26, 2025, labor and related expenses increased $1.6 million, or 5.2%, from the comparable period in the prior year.

The increase in labor and related expenses for the quarter was primarily due to a $2.8 million increase in wage rates during fiscal 2025 as a result of legislative increases in the California state minimum wage, which became effective April 1, 2024, and a $0.2 million increase in other labor related expenses primarily related to training.

The increase in labor and related expenses for the quarter was partially offset by a $1.5 million reduction in costs related to improved labor efficiencies.

For the quarter ended March 26, 2025, labor and related expenses as a percentage of company-operated restaurant revenue were 32.7%, up from 31.5% in the comparable period in the prior year.

The percentage change for the quarter was driven by the higher wage rates, partially offset by higher menu prices and improved labor efficiencies .

For the quarter ended June 25, 2025, labor and related expenses decreased $0.7 million, or 2.2%, from the comparable period in the prior year.

The decrease in labor and related expenses for the quarter was primarily due to a $1.0 million reduction in costs related to improved labor efficiencies as part of our cost-management initiatives, partially offset by a $0.3 million increase in other labor-related expenses primarily related to higher wage rates.

Year-to-date, labor and related expenses increased $0.9 million, or 1.4%, from the comparable period in the prior year.

The increase for the year-to-date period was due primarily to a $3.0 million increase due to higher wage rates during fiscal 2025 as a result of legislative increases in the California state minimum wage, which became effective April 1, 2024, as well as a $0.4 million increase in other labor-related expenses.

The increase in labor and related expenses for the year was partially offset by $2.5 million reduction in costs related to the improved labor efficiencies discussed above.

For the quarter ended June 25, 2025, labor and related expenses as a percentage of company-operated restaurant revenue were 30.8%, down from 32.1% in the comparable period in the prior year.

Year-to-date labor and related expenses as a percentage of company-operated restaurant revenue were 31.7%, down from 31.8% in the comparable period in the prior year primarily.

The percentage change for both the quarter and year-to-date periods was driven by higher menu prices and the improved labor efficiencies , partially offset by the higher wage rates and higher labor-related costs.

Occupancy and Other Operating Expenses

For the quarter ended March 26, 2025, occupancy and other operating expenses increased $1.8 million, or 7.6%, from the comparable period in the prior year.

The increase was primarily due to a $1.8 million increase in occupancy, utilities, marketplace delivery fees, software maintenance, general liability insurance, and other operating expenses.

For the quarter ended March 26, 2025, occupancy and other operating expenses as a percentage of company-operated restaurant revenue were 26.1%, up from 24.6% in the comparable period in the prior year.

The increases resulted from the cost increases highlighted above.

For the quarter ended June 25, 2025, occupancy and other operating expenses increased $2.1 million, or 8.5%, from the comparable period in the prior year.

The increase was primarily due to increases of $0.4 million in occupancy, $0.4 million in utilities, $0.4 million in marketplace delivery fees, $0.2 million in software maintenance, $0.2 million in repairs and maintenance, and $0.5 million in other operating expenses.

Year-to-date, occupancy and other operating expenses increased $3.9 million, or 8.0%, from the comparable period in the prior year primarily due to increases of $0.7 million in occupancy, $0.8 million in utilities, $0.7 million in marketplace delivery fees, $0.5 million in software maintenance, $0.3 million in repairs and maintenance, $0.2 million in credit card charges and $0.7 million in other operating expenses.

For the quarter ended June 25, 2025, occupancy and other operating expenses as a percentage of company-operated restaurant revenue were 25.6%, up from 24.1% in the comparable period in the prior year.

Year-to-date, occupancy and other operating expenses as a percentage of company-operated restaurant revenue were 25.9%, up from 24.3% in the comparable period of the prior year.

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

General and Administrative Expenses

For the quarter ended March 26, 2025, general and administrative expenses decreased $0.7 million, or 5.6%, from the comparable period in the prior year.

The decrease for the quarter was primarily due to a $1.2 million decrease in restructuring and executive transition cost and a $0.6 million received from a legal settlement, net of legal expenses .

The general and administrative expenses decrease was partially offset by a $0.6 million in legal and professional fee costs related to shareholder activism and a $0.5 million increase in other general and administrative expenses.

For the quarter ended March 26, 2025, general and administrative expenses as a percentage of total revenue were 9.5%, down from 10.3% in the comparable period of the prior year .

The percentage decrease is primarily due to the cost decreases discussed above.

For the quarter ended June 25, 2025, general and administrative expenses increased $1.7 million, or 14.8%, from the comparable period in the prior year.

The increase for the quarter was primarily due to a $0.8 million increase in stock compensation expenses, a $0.8 million increase in legal and professional fee costs related to shareholder activism and related matters and a $0.7 million increase in restructuring and executive transition costs.

The general and administrative expenses increase was partially offset by a $0.6 million decrease in other general and administrative expenses.

Year-to-date, general and administrative expenses increased $1.1 million, or 4.6%, from the comparable period in the prior year.

The increase for the year-to-date period was due primarily to a $1.4 million increase in legal and professional fee costs related to shareholder activism and related matters, and $0.9 million increase in stock compensation expenses.

The general and administrative expenses increase was partially offset by a $0.5 million decrease in restructuring and executive transition costs, a $0.6 million received from a legal settlement, net of legal expenses and $0.1 million decrease in other general and administrative expenses.

For the quarter ended June 25, 2025, general and administrative expenses as a percentage of total revenue were 10.8%, up from 9.6% in the comparable period of the prior year .

Year-to-date, general and administrative expenses as a percentage of total revenue were 10.1%, up from 9.9% in the comparable period of the prior year.

The percentage increase for both the quarter and year-to-date periods is primarily due to the cost increases discussed above.

Franchise Expenses

For the quarter ended March 26, 2025, franchise expenses increased $1.8 million, or 17.4%, from the comparable period in the prior year .

The increase was due to the $1.8 million in IT pass through expense primarily due to the franchisees rolling out the new POS system.

For the quarter ended June 25, 2025, franchise expenses increased $1.8 million, or 16.2%, from the comparable period in the prior year .

Year-to-date, franchise expenses increased $3.6 million, or 16.7%, from the comparable period in the prior year.

The increase for both quarterly and year-to-date periods was due to the $1.6 million and $3.4 million in IT pass-through expenses, respectively, primarily resulting from franchisees rolling out the new POS system.

Loss on Disposition of Restaurants

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

We determined that the restaurant dispositions represent 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 agreements, which are charged for separate standalone arrangements.

We initially defer and subsequently recognize the franchise fees over the term of the franchise agreement.

This sale resulted in cash proceeds of $0.1 million and a net loss on sale of restaurant of less than $0.1 million for the thirteen and twenty-six weeks ended June 26, 2024.

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

Impairment and Closed-Store Reserves

During the thirteen weeks ended March 26, 2025 and March 27, 2024, we did not record any non-cash impairment charges.

During the thirteen and twenty-six weeks ended June 25, 2025 and June 26, 2024, we did not record any non-cash impairment charges.

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

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

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

During both the thirteen and twenty-six weeks ended June 25, 2025 and June 26, 2024, we recognized less than $0.1 million of closed-store reserve expense related to the amortization of ROU assets, property taxes and CAM payments for our closed locations.

Interest Expense, Net

For the quarter ended March 26, 2025, interest expense, net, decreased $0.4 million from t he comparable period in the prior year .

The decrease in interest expense was primarily related to the lower interest rates in the fiscal 2025 and lower outstanding balances on our 2022 Revolver (as defined below) versus t he comparable periods in the prior year .

For the quarter ended June 25, 2025, interest expense, net, decreased $0.3 million from t he comparable period in the prior year .

For the year-to-date period, interest expense, net, decreased $0.7 million from the comparable period in the prior year.

Both the quarter and year-to-date period decrease in interest expense was primarily related to the lower interest rates in the fiscal 2025 and lower outstanding balances on our 2022 Revolver (as defined below) versus t he comparable periods in the prior year .

Income Tax Receivable Agreement

On May 29, 2024, we terminated most of the obligations under the TRA, with respect to any payments or obligations owed to the FS Equity Partners V, L.P.

On May 29, 2024, we terminated most of the obligations under the Tax Receivable Agreement (“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 $398,896.

As of March 26, 2025, there was no remaining obligation owed on our condensed consolidated balance sheets.

As of June 25, 2025, there was no remaining obligation owed on our condensed consolidated balance sheets.

Provision for Income Taxes

For the quarter ended March 26, 2025, we 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, we 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 our 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 expense, partially offset by a Work Opportunity Tax Credit benefit .

For the quarter ended June 25, 2025, we recorded an income tax provision of $3.0 million, reflecting an estimated effective tax rate of 29.6%.

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

For the year-to-date period ended June 25, 2025, we recorded an income tax provision of $5.3 million, reflecting an estimated effective tax rate of approximately 29.7%.

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

The difference between the 21.0% statutory rate and our effective tax rate of 29.7% for the year-to-date period ended June 25, 2025 is primarily a result of state taxes and the impact of non-tax deductible executive compensation expense, and the impact of lower stock compensation expense related to vesting of restricted stock awards deductible for tax as compared to the cumulative amount recorded as stock-based compensation expense, partially offset by a Work Opportunity Tax Credit benefit .

Key Performance Indicators

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Management believes that system-wide sales are an important figure for investors, because they are widely used in the restaurant industry, including by our management, to evaluate brand scale and market penetration.

System-wide sales does not include the 8 licensed stores in the Philippines.

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

System-wide sales do not include the 8 licensed stores in the Philippines.

The total number of currently licensed stores reflects the closure of two licensed restaurants during the twenty-six weeks ended June 25, 2025.

The following table reconciles system-wide sales to company-operated restaurant revenue and total revenue (in thousands):

Thirteen Weeks

March 26, 2025

March 27, 2024

Thirteen Weeks Ended

Twenty-Six Weeks Ended

June 25, 2025

June 26, 2024

June 25, 2025

June 26, 2024

Company-operated restaurant revenue

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System-wide sales (1)

(1) System-wide sales do not include the eight licensed stores in the Philippines.

Company-Operated Restaurant Revenue

5 unchanged sentences

Comparable restaurant sales exclude restaurants closed during the applicable period.

At March 26, 2025 and March 27, 2024, there were 484 and 478 comparable restaurants, 170 and 168 company-operated restaurants, and 314 and 310 franchised restaurants, respectively.

At June 25, 2025 and June 26, 2024, there were 485 and 482 comparable restaurants, 171 and 168 company-operated restaurants, and 314 and 314 franchised restaurants, respectively.

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

11 unchanged sentences

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

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

Management further believes restaurant level

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

Management believes that restaurant contribution and restaurant contribution margin are important tools for investors, because they are widely-used metrics within the restaurant industry

to evaluate restaurant-level productivity, efficiency, and performance.

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

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

Thirteen Weeks Ended

Twenty-Six Weeks Ended

(Dollar amounts in thousands)

March 26, 2025

March 27, 2024

June 25, 2025

June 26, 2024

June 25, 2025

June 26, 2024

Restaurant contribution:

4 unchanged sentences

Loss on disposal of assets

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

Gain on recovery of insurance proceeds, net

Franchise revenue

1 unchanged sentence

Impairment and closed-store reserves

Loss on disposition of restaurants

Restaurant contribution

17 unchanged sentences

EBITDA and Adjusted EBITDA are not measurements of our financial performance under GAAP and should not be considered as alternatives to net income, operating income, or any other performance measures derived in accordance with GAAP, or as alternatives to cash flow from operating activities as a measure of our liquidity.

In addition, in evaluating EBITDA and Adjusted EBITDA, you should be aware that in the future we will incur expenses or charges such as those added back to calculate EBITDA and Adjusted EBITDA.

In addition, in evaluating EBITDA and Adjusted EBITDA, you should be aware that in the future we will incur expenses or charges such as those added back to calculate EBITDA and Adjusted

Our presentation of EBITDA and Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.

8 unchanged sentences

Thirteen Weeks Ended

Twenty-Six Weeks Ended

(Amounts in thousands)

March 26, 2025

March 27, 2024

June 25, 2025

June 26, 2024

June 25, 2025

June 26, 2024

Non-GAAP adjustments:

5 unchanged sentences

Impairment and closed-store reserves (c)

Legal settlements (d)

Special legal and professional fees expense (e)

Gain on recovery of insurance proceeds (f)

Executive transition costs (g)

Restructuring charges (h)

Loss on disposition of restaurants (d)

Legal settlements (e)

Special legal and professional fees expense (f)

Gain on recovery of insurance proceeds, net (g)

Restructuring and executive transition costs (h)

Pre-opening costs (i)

3 unchanged sentences

During both the thirteen weeks ended March 26, 2025 and March 27, 2024, we did not record any non-cash impairment charges.

(d) Includes $0.6 million received from legal settlement, net of legal expenses.

(e) Consists of legal and professional costs related to shareholder activism and related matters.

(f) 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.

(g) Includes costs associated with the transition of our former CEO, such as severance, executive recruiting costs and stock-based compensation costs.

(h) On March 8, 2024, we made the decision to eliminate and restructure certain positions in the organization, which resulted in one-time costs of approximately $0.6 million.

During both the thirteen and twenty-six weeks ended June 25, 2025 and June 26, 2024, we did not record any non-cash impairment charges.

During both the thirteen and twenty-six weeks ended June 25, 2025 and June 26, 2024, we

recognized less than $0.1 million of closed-store reserve expense related to the amortization of ROU assets, property taxes and CAM payments for our closed locations.

(d) During the thirteen and twenty-six weeks ended June 26, 2024, we 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 for the thirteen and twenty-six weeks ended June 26, 2024.

(e) Includes $0.6 million received from legal settlement, net of legal expenses.

(f) Consists of legal and professional costs related to shareholder activism and related matters.

(g) During the twenty-six weeks ended June 26, 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 lost profits, net of the related costs, is included in the accompanying condensed consolidated statements of income, for the twenty-six weeks ended June 26, 2024, as a reduction of company restaurant expenses.

(h) Consists of costs associated with the transition of certain executive officers, such as severance and stock-based compensations costs and costs associated with restructuring certain positions in the organization during the twenty-six weeks ended June 25, 2025 and June 26, 2024, respectively.

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

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

Thirteen Weeks Ended

Twenty-Six Weeks Ended

(Amounts in thousands)

March 26, 2025

March 27, 2024

June 25, 2025

June 26, 2024

Net cash provided by (used in)

2 unchanged sentences

Financing activities

Net decrease in cash

Net increase in cash

Operating Activities

For the thirteen weeks ended March 26, 2025, net cash from operating activities decreased by approximately $6.4 million from the comparable period of the prior year.

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

For the twenty-six weeks ended June 25, 2025, net cash from operating activities decreased by $9.2 million from the comparable period of the prior year.

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

Investing Activities

For the thirteen weeks ended March 26, 2025, net cash used in investing activities increased by $0.7 million from the comparable period of the prior year.

This change was primarily due to an increase in purchase of property and equipment mostly related to restaurant remodeling during the thirteen weeks ended March 26, 2025 when compared to the prior quarter.

For the twenty-six weeks ended June 25, 2025, net cash used in investing activities decreased by $2.1 million from the comparable period of the prior year.

This change was primarily due to a decrease in purchase of property and equipment mostly related to restaurant remodeling during the twenty-six weeks ended June 25, 2025 when compared to the prior year.

Financing Activities

For the thirteen weeks ended March 26, 2025, net cash used in financing activities changed by $5.7 million from the comparable period of the prior year.

The change was primarily due to repurchases of shares of our common stock of $1.8 million during the thirteen weeks ended March 26, 2025 compared to repurchases of shares of our common stock of $1.2 million during the thirteen weeks ended March 27, 2024.

The change was offset by a $2.0 million in net borrowings on

the 2022 Revolver during the thirteen weeks ended March 26, 2025 compared to a $4.0 million in payments during the thirteen weeks ended March 27, 2024.

For the twenty-six weeks ended June 25, 2025, net cash used in financing activities changed by $10.5 million from the comparable period of the prior year.

The change was primarily due to repurchases of shares of our common stock of $1.8 million during the twenty-six weeks ended June 25, 2025 compared to repurchases of shares of our common stock of $18.2 million during the twenty-six weeks ended June 26, 2024.

The change was offset by a $2.0 million in net paydown on the 2022 Revolver during the twenty-six weeks ended June 25, 2025 compared to a $3.0 million net borrowings during the twenty-six weeks ended June 26, 2024.

Debt and Other Obligations

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Borrowings under the 2022 Revolver may be repaid and reborrowed.

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 interest rate range under the 2022 Revolver was 5.67% to 5.93% and 5.65% to 7.75% for the thirteen and twenty-six weeks ended June 25, 2025 , respectively, and 6.67% to 6.94% and 6.67% to 6.96% for the thirteen and twenty-six weeks ended June 26, 2024, respectively.

The 2022 Credit Agreement contains certain financial covenants.

We were in compliance with the financial covenants as of March 26, 2025.

At March 26, 2025, we 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, we had $66.7 million in borrowing availability.

We were in compliance with the financial covenants as of June 25, 2025.

At June 25, 2025, we had $69.0 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, we had $70.7 million in borrowing availability.

See Note 5, “Long-term debt” in the “Notes to Condensed Consolidated Financial Statements” for additional information.

Material Cash Requirements

Our material cash requirements as of March 26, 2025 have not changed materially since those disclosed under “Material Cash Requirements” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 25, 2024.

Our material cash requirements as of June 25, 2025 have not changed materially since those disclosed under “Material Cash Requirements” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 25, 2024.

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

5 unchanged sentences

The Share Repurchase Program did not obligate us 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, we 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, approximately less than $0.1 million of our common stock remained available for repurchase under the Share Repurchase Program at March 26, 2025.

The Share Repurchase Program expired on March 31, 2025.

For the thirteen and twenty-six weeks ended June 25, 2025, we repurchased 3,479 shares and 163,229 of common stock, respectively, under the Share Repurchase Program, using open market purchases, for total consideration of less than approximately $0.1 million and $1.8 million, respectively.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis