What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-10-31 compared with 2025-08-01 · 126 added, 131 removed, 392 unchanged (40% of the section changed)

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Cautionary Statement Concerning Forward-Looking Statements

This report contains forward-looking statements that are subject to risks and uncertainties.

This report contains forward-looking statements within the meaning of federal securities laws that are subject to risks and uncertainties.

All statements other than statements of historical fact included in this report are forward-looking statements.

Forward-looking statements discuss our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business.

Examples of forward-looking statements in this report include, but are not limited to, discussions of our current expectations, projections, intentions, or beliefs relating to our financial condition, results of operations, liquidity, prospects, growth, trends, strategies, and the industry in which we operate.

You can identify forward-looking statements because they do not relate strictly to historical or current facts.

These statements may include words such as “aim,” “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “outlook,” “potential,” “project,” “projection,” “plan,” “intend,” “seek,” “may,” “could,” “would,” “will,” “should,” “can,” “can have,” “likely,” the negatives thereof and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events..

They appear in a number of places throughout this report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, trends, strategies and the industry in which we operate.

All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those that we expected.

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In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences we anticipate or affect us or our operations in the ways that we expect.

The forward-looking statements included in this report are made only as of the date hereof.

The forward-looking statements included in this report are made only as of the date hereof, and we caution you to not place undue reliance on any forward-looking statement made in this report.

We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law.

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Market Trends and Uncertainties

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

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

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 half of fiscal 2025.

As a result of recent California legislation increasing wages of fast food workers, we experienced an increase in our labor and regulatory compliance costs in fiscal 2024 and 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.

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Growth Strategies and Outlook

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

As of September 24, 2025, we had 498 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 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.

For the thirty-nine weeks ended September 24, 2025, our franchisees opened one new restaurant in Arizona and two new restaurants in California, and they closed three restaurants in California.

Additionally, during the thirty-nine weeks ended September 24, 2025, we completed the acquisition of one restaurant in California from an existing franchisee.

Subsequent to quarter-end, the Company announced the opening of its 500 th restaurant on October 14, 2025.

This milestone reflects the continued execution of the Company’s growth strategy and marks a significant step in its expansion beyond its core California market.

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 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.

For the thirteen and thirty-nine weeks ended September 24, 2025, our total revenue was $121.5 million and $366.5 million, respectively.

For the thirteen weeks ended September 24, 2025, our company-operated restaurant revenue was $100.7 million and $303.4 million, respectively, and our franchise and franchise advertising fee revenue was $20.8 million and $63.1 million, respectively.

Comparable Restaurant Sales

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.

For the thirteen and thirty-nine weeks ended September 24, 2025, system-wide comparable restaurant sales decreased by 0.8% and 0.6%, respectively, from the comparable period in the prior year.

For company-operated restaurants, comparable restaurant sales for the thirteen and thirty-nine weeks ended September 24, 2025 decreased by 1.1% and increased by 0.2%, respectively.

For company-operated restaurants, the quarter’s change in comparable restaurant sales consisted of a 1.3% decrease in average check size, partially offset by a 0.1% increase in transactions, and the year-to-date change in comparable restaurant sales consisted of a 1.6% increase in average check size, partially offset by a 1.3% decrease in transactions .

For franchised restaurants, comparable restaurant sales decreased by 0.6% and 1.0% for the thirteen and thirty-nine weeks ended September 24, 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 twenty-six weeks ended June 25, 2025, were as follows:

Twenty-Six Weeks Ended

Our restaurant counts at the beginning and end of each of the last three fiscal years and the thirty-nine weeks ended September 24, 2025, were as follows:

Thirty-Nine Weeks Ended

Fiscal Year Ended

June 25, 2025

September 24, 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 twenty-six weeks ended June 25, 2025.

(1) Our restaurant count includes 498 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 thirty-nine weeks ended September 24, 2025.

Restaurant Remodeling

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 approximately $0.4 million per restaurant.

During the thirty-nine weeks ended September 24, 2025, we completed a total of 34 remodels 7 of which were company-operated restaurant remodels.

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

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.

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

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

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

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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 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.

As of September 24, 2025 and December 25, 2024, the revenue allocated to loyalty points that had not been redeemed was $1.1 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 4.6 million loyalty program members as of September 24, 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 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.

Our operating results for the thirteen and thirty-nine weeks ended September 24, 2025 and September 25, 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

June 25, 2025

June 26, 2024

September 24, 2025

September 25, 2024

Increase / (Decrease)

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Loss on disposal of assets

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

Thirty-Nine Weeks Ended

September 24, 2025

September 25, 2024

Increase / (Decrease)

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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.

For the quarter ended September 24, 2025, company-operated restaurant revenue decreased $0.5 million, or 0.5%, from the comparable period in the prior year.

The decrease in company-operated restaurant revenue was mainly due to a decrease in company-operated comparable restaurant revenue of $1.2 million, or 1.1%, partially offset by $0.7 million of additional sales from the opening of two restaurants during or after the third quarter of 2024.

The company-operated comparable restaurant sales decrease consisted of a 1.3% decrease in average check size, partially offset by a 0.1% increase in transactions.

Year-to-date, company-operated restaurant revenue increased $2.8 million, or 0.9%, 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.

The increase in company-operated restaurant revenue was mainly due to $2.5 million of additional sales from the opening of two restaurants during or after the first quarter of 2024, as well as an increase in company-operated comparable restaurant revenue of $0.6 million, or 0.2%.

The company-operated comparable restaurant sales increase consisted of a 1.6% increase in average check size due to increases in menu prices, partially offset by a 1.3% 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 .

This company-operated restaurant revenue increase was partially offset by a $0.2 million decrease in revenue recognized for our loyalty program.

Franchise Revenue

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% .

For the quarter ended September 24, 2025, franchise revenue increased $1.5 million, or 13.5%, from the comparable period in the prior year.

This increase was primarily due to the $0.9 million in franchisee IT pass through revenue related to the franchisee rollout of the new Point of Sale (“POS”) system, which was 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 third quarter of 2024 and a true up of royalty rates, partially offset by a franchise comparable restaurant sales decrease of 0.6% .

Year-to-date, franchise revenue increased $5.1 million, or 14.8%, from the comparable period in the prior year.

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Franchise Advertising Fee Revenue

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.

For the quarter ended September 24, 2025, franchise advertising fee revenue increased less than $0.1 million, or 0.6%, from the comparable period in the prior year.

Year-to-date, franchise advertising fee revenue decreased less than $0.1 million, or 0.2%, 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 June 25, 2025, food and paper costs decreased $0.2 million, or 0.9%, from the comparable period in the prior year.

For the quarter ended September 24, 2025, food and paper costs decreased $0.5 million, or 2.1%, from the comparable period in the prior year.

Year-to-date, food and paper costs decreased $1.6 million, or 2.1%, 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.

The decrease in food and paper costs for both the quarter and year-to-date periods was primarily due to lower sales combined with cost-management initiatives and commodity deflation, partially offset by increased discounts.

For the quarter, food and paper costs as a percentage of company-operated restaurant revenue were 24.7%, down from 25.1% in the comparable period of the prior year.

Year-to-date, food and paper costs as a percentage of company-operated restaurant revenue were 24.8%, down from 25.5% 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.

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, partially offset by increased discounts.

Labor and Related Expenses

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.

For the quarter ended September 24, 2025, labor and related expenses decreased $2.1 million, or 6.4%, from the comparable period in the prior year.

The decrease in labor and related expenses for the quarter was primarily due to a $1.3 million reduction in costs related to improved labor efficiencies as part of our cost-management initiatives and $0.5 million decrease related to the decrease in sales and a $0.3 million decrease in other labor-related expenses.

Year-to-date, labor and related expenses decreased $1.2 million, or 1.3%, from the comparable period in the prior year.

The decrease for the year-to-date period was due primarily to $3.8 million reduction in costs related to the improved labor efficiencies discussed above, as well as a $0.6 million decrease in other labor-related expenses.

The decrease in labor and related expenses for the year was partially offset by a $3.2 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.

For the quarter ended September 24, 2025, labor and related expenses as a percentage of company-operated restaurant revenue were 30.4%, down from 32.4% in the comparable period in the prior year.

Year-to-date labor and related expenses as a percentage of company-operated restaurant revenue were 31.3%, down from 32.0% in the comparable period in the prior year primarily.

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Occupancy and Other Operating Expenses

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.

For the quarter ended September 24, 2025, occupancy and other operating expenses increased $0.6 million, or 2.5%, from the comparable period in the prior year.

The increase was primarily due to increases of $0.3 million in software maintenance, $0.3 million in occupancy and $0.2 million in marketplace delivery fees, partially offset by $0.2 million decrease in utilities and repairs and maintenance costs.

Year-to-date, occupancy and other operating expenses increased $4.5 million, or 6.1%, from the comparable period in the prior year primarily due to increases of $1.0 million in occupancy, $0.9 million in marketplace delivery fees, $0.8 million in software maintenance, $0.6 million in utilities, $0.3 million in operating supplies, $0.2 million in credit card charges and $0.7 million in other operating expenses.

For the quarter ended September 24, 2025, occupancy and other operating expenses as a percentage of company-operated restaurant revenue were 26.5%, up from 25.8% 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 26.1%, up from 24.8% in the comparable period of the prior year.

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General and Administrative Expenses

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.

For the quarter ended September 24, 2025, general and administrative expenses increased $0.9 million, or 8.1%, from the comparable period in the prior year.

The increase for the quarter was primarily due to a $0.3 million increase in stock

compensation expenses, a $0.2 million increase in legal and professional fee costs related to shareholder activism and related matters, a $0.2 million increase in restructuring costs, a $0.1 million increase related to additional rent expense in connection with our corporate office relocation and a $0.1 million increase due to the implementation of enterprise resource planning (“ERP”) system.

Year-to-date, general and administrative expenses increased $2.0 million, or 5.7%, from the comparable period in the prior year.

The increase for the year-to-date period was due primarily to a $1.6 million increase in legal and professional fee costs related to shareholder activism and related matters and $1.2 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 .

The general and administrative expenses increase was partially offset by $0.6 million received from a legal settlement, net of legal expenses and a $0.3 million decrease in restructuring and executive transition costs.

For the quarter ended September 24, 2025, general and administrative expenses as a percentage of total revenue were 10.2%, up from 9.5% 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 9.8% in the comparable period of the prior year.

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Franchise Expenses

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

For the quarter ended September 24, 2025, franchise expenses increased $0.9 million, or 8.8%, from the comparable period in the prior year .

Year-to-date, franchise expenses increased $4.5 million, or 14.1%, from the comparable period in the prior year.

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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.

During the thirty-nine weeks ended September 25, 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 thirty-nine weeks ended September 25, 2024.

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

Impairment and Closed-Store Reserves

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

During the thirteen and thirty-nine weeks ended September 24, 2025 and September 25, 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 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.

During both the thirteen and thirty-nine weeks ended September 24, 2025 and September 25, 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 June 25, 2025, interest expense, net, decreased $0.3 million from t he comparable period in the prior year .

For the quarter ended September 24, 2025, interest expense, net, decreased $0.4 million from t he comparable period in the prior year .

For the year-to-date period, interest expense, net, decreased $1.1 million from the comparable period in the prior year.

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

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

As of September 24, 2025, there was no remaining obligation owed on our condensed consolidated balance sheets.

Provision for Income Taxes

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 .

For the quarter ended September 24, 2025, we recorded an income tax provision of $3.0 million, reflecting an estimated effective tax rate of 28.8%.

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

For the year-to-date period ended September 24, 2025, we recorded an income tax provision of $8.3 million, reflecting an estimated effective tax rate of approximately 29.3%.

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

The difference between the 21.0% statutory rate and our effective tax rate of 29.3% for the year-to-date period ended September 24, 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 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.

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

The total number of currently licensed stores reflects the closure of two licensed restaurants during the thirty-nine weeks ended September 24, 2025.

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

Thirteen Weeks Ended

Twenty-Six Weeks Ended

June 25, 2025

June 26, 2024

June 25, 2025

June 26, 2024

Thirty-Nine Weeks Ended

September 24, 2025

September 25, 2024

September 24, 2025

September 25, 2024

Company-operated restaurant revenue

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Comparable restaurant sales exclude restaurants closed during the applicable period.

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.

At September 24, 2025 and September 25, 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.

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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 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.

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Thirteen Weeks Ended

Twenty-Six Weeks Ended

Thirty-Nine Weeks Ended

(Dollar amounts in thousands)

June 25, 2025

June 26, 2024

June 25, 2025

June 26, 2024

September 24, 2025

September 25, 2024

September 24, 2025

September 25, 2024

Restaurant contribution:

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EBITDA and Adjusted EBITDA as presented in this report are supplemental measures of our performance that are neither required by, nor presented in accordance with, GAAP.

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 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.

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.

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Thirteen Weeks Ended

Twenty-Six Weeks Ended

Thirty-Nine Weeks Ended

(Amounts in thousands)

June 25, 2025

June 26, 2024

June 25, 2025

June 26, 2024

September 24, 2025

September 25, 2024

September 24, 2025

September 25, 2024

Non-GAAP adjustments:

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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)

Duplicate rent expense for corporate office relocation (g)

ERP software implementation costs (h)

Gain on recovery of insurance proceeds, net (i)

Restructuring and executive transition costs (j)

Pre-opening costs (k)

Adjusted EBITDA

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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.

During both the thirteen and thirty-nine weeks ended September 24, 2025 and September 25, 2024, we did not record any non-cash impairment charges.

(d) During the thirty-nine weeks ended September 25, 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 thirty-nine weeks ended September 25, 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.

(g) Consists of duplicate rent expense for the corporate headquarter relocation.

(h) Represents costs incurred in connection with the implementation of new ERP system which are included in general and administrative expenses.

(i) During the thirty-nine weeks ended September 25, 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 thirty-nine weeks ended September 25, 2024, as a reduction of company restaurant expenses.

(j) 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 thirteen and thirty-nine weeks ended September 24, 2025 and September 25, 2024, respectively.

(k) 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.

These are generally incurred over the three to five months prior to opening.

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

Twenty-Six Weeks Ended

Thirty-Nine Weeks Ended

(Amounts in thousands)

June 25, 2025

June 26, 2024

September 24, 2025

September 25, 2024

Net cash provided by (used in)

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Operating Activities

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.

For the thirty-nine weeks ended September 24, 2025, net cash from operating activities decreased by $7.0 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 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.

For the thirty-nine weeks ended September 24, 2025, net cash used in investing activities decreased by $0.6 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 thirty-nine weeks ended September 24, 2025 when compared to the prior year.

Financing Activities

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.

For the thirty-nine weeks ended September 24, 2025, net cash used in financing activities changed by $14.1 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 thirty-nine weeks ended September 24, 2025 compared to repurchases of shares of our common stock of $19.3 million during the thirty-nine weeks ended September 25, 2024.

The change was offset by a $10.0 million in net paydown on the 2022 Revolver during the thirty-nine weeks ended September 24, 2025 compared to a $8.0 million net pay downs during the thirty-nine weeks ended September 25, 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 5.67% 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 interest rate range under the 2022 Revolver was 5.63% to 5.96% and 5.63% to 7.75% for the thirteen and thirty-nine weeks ended September 24, 2025 , respectively, and 6.52% to 6.95% and 6.52% to 6.96% for the thirteen and thirty-nine weeks ended September 25, 2024, respectively.

The 2022 Credit Agreement contains certain financial covenants.

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.

We were in compliance with the financial covenants as of September 24, 2025.

At September 24, 2025, we had $61.0 million in outstanding borrowings under the 2022 Revolver and two letters of credit in the amount of $10.3 million outstanding, and as a result, we had $78.7 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 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 as of September 24, 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 .

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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.

For the thirty-nine weeks ended September 24, 2025, we repurchased 163,229 of common stock under the Share Repurchase Program, using open market purchases, for total consideration of approximately $1.8 million.

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