What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-07 compared with 2025-05-08 · 210 added, 158 removed, 273 unchanged (57% of the section changed)

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(referred to as the “Company,” “Papa John’s,” “Papa Johns” or in the first-person notations of “we,” “us” and “our”) operates and franchises pizza delivery and carryout restaurants and, in certain international markets, dine-in and delivery restaurants under the trademark “Papa John’s.” Papa Johns began operations in 1984.

At March 30, 2025, there were 6,019 Papa John’s restaurants in operation, consisting of 552 Company-owned and 5,467 franchised restaurants operating in 50 countries and territories.

At June 29, 2025, there were 5,989 Papa John’s restaurants in operation, consisting of 554 Company-owned and 5,435 franchised restaurants operating in 50 countries and territories.

Our revenues are derived from retail sales of pizza and other food and beverage products to the general public by Company-owned restaurants, franchise royalties, and sales of franchise and development rights.

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Recent Developments and Trends

During the first quarter of 2025, we continued to build momentum and make progress on executing our strategic priorities as we position the business for long-term success while also navigating a dynamic macroeconomic and competitive environment.

During the second quarter of 2025, we remained focused on executing our strategic priorities and returned to growth in our key comparable sales metric in North America as we position the business for long-term success while continuing to navigate a dynamic macroeconomic and competitive environment.

We continue to put our efforts and investments toward initiatives that improve our price/value perception and improve our digital and loyalty experience to increase conversion and reduce friction within the customer experience.

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• Marketing strategy:

During the first quarter of 2025, we invested in our messaging and promotions on showcasing our BETTER INGREDIENTS.

BETTER PIZZA ® platform through the launch of our “Meet the Makers” marketing campaign, which highlights the craftsmanship and passion behind the products we serve.

During the second quarter of 2025, we furthered our investments in our messaging to showcase our BETTER INGREDIENTS.

BETTER PIZZA ® platform through our “Meet the Makers” marketing campaign, highlighting our six simple ingredients and fresh, never frozen dough and the craftsmanship behind the products we serve.

We also focused marketing efforts on improving our value perception, such as emphasizing our Papa Pairings at appropriately-valued price points.

We believe if we maintain an appropriate balance of value offerings and premium products, it will lead to improving sales trends and transactions over time.

In 2025, we anticipate spending up to an additional $25 million in marketing investments, including investments in our customer relationship management platform and our loyalty program, when compared with 2024.

We anticipate spending up to an additional $25 million in marketing investments throughout 2025, including investments in our customer relationship management platform and our loyalty program, when compared with 2024.

This incremental spend will focus on ensuring a strong presence nationally as well as in key regional and local markets while leveraging our data to create more personalized offers for our customers.

• Digital and loyalty strategy:

Most of our sales occur through digital channels and we are actively identifying opportunities for customers to more quickly access information, streamline the ordering journey and improve the overall user experience.

We are also placing additional focus on strategic investments in our technology infrastructure, with our recently announced partnership with Google Cloud to enhance our ordering and delivery experience serving as an example of our commitment to delivering a superior customer experience.

Most of our sales occur through digital channels, and we are placing additional focus on strategic investments in our technology infrastructure.

Our recently announced partnership with Google Cloud to enhance our ordering and delivery experience serves as an additional example of our commitment to delivering a superior customer experience.

We are currently developing and beta testing our new omnichannel experiences, including a new app for iOS and Android to improve navigation and order tracking.

We believe these rollouts will enable customers to streamline the ordering journey and simplify the overall user experience.

In the fourth quarter of 2024, we also updated our loyalty program to allow members to unlock redeemable rewards in the form of “Papa Dough” faster by converting points to Papa Dough in smaller increments.

We are pleased with the early response on the lower redemption threshold, which we believe will activate our members at higher rates to help drive transactions and frequency.

Though the lower redemption threshold slightly decreased our overall ticket size during the quarter, we are pleased with the response to the lower redemption threshold, which has activated our members at higher rates to help drive transactions and frequency.

We will continue evolving our loyalty and digital experiences as they must be flexible and easy to understand to create strong, emotionally connected consumer engagement that seamlessly integrates with our creative, paid, earned and owned messaging.

• Domestic commissary growth strategy:

We continue to evolve our commissary business to drive profitable growth and overall supply chain productivity that provides cost savings and incremental profit across the system.

Effective in the first quarter of 2025, we increased the fixed operating margin that Domestic QC Centers charge by 100 basis points, and we will continue to increase the margin by the same increment in each of the next two years, moving from 4% in 2023 to 8% in 2027.

To mitigate this cost for franchisees, we continue to offer opportunities for franchisees to earn annual incentive-based rebates as they increase volume and open new restaurants.

Additionally, we expect the incremental volume driven by increased marketing and additional development will reduce the shared supply chain costs across the system over time.

We are continuing to evaluate

opportunities to enhance productivity and profitability throughout the supply chain through improved operations and supplier relationships.

We continue to evolve our commissary business to drive profitable growth and improve overall supply chain productivity across the system.

We have undertaken an internal review of our supply chain and have identified several initiatives that we believe will optimize our commissary business in an effort to reduce the overall cost to serve our Domestic Company-owned and franchised restaurants.

Management has not yet finalized the timing and extent to which these initiatives will be implemented, but currently believe that we will begin recognizing cost savings from these initiatives in 2026.

• Development strategy:

Development is a key long-term growth driver as we believe there is significant opportunity to offer our quality product to more customers globally and domestically.

During the first quarter, we opened 47 new restaurants systemwide, comprised of 18 restaurant openings in North America and 29 restaurant openings in International markets.

During the second quarter, we opened 45 new restaurants systemwide, comprised of 19 restaurant openings in North America and 26 restaurant openings in International markets.

To pursue the opportunities we have identified in the United States and accelerate development, we are offering a three-year waiver of PJMF contributions for new restaurants opened in 2025, which is intended to deliver higher restaurant-level profit margins, add scale in key markets and attract growth-driven franchisees.

Additionally, we continue to evaluate refranchising Company-owned restaurants within various Domestic markets to provide opportunities for growth-minded franchisees to grow their businesses, along with considering strategic closures in certain International markets.

Additionally, in July 2025 we signed an agreement to sell our ownership stake in a joint venture that operates 85 restaurants, with the transaction expected to close by the end of 2025.

We are excited to offer growth-minded franchisees opportunities to expand their businesses and will continue to evaluate refranchising Company-owned restaurants within various Domestic markets, along with considering strategic closures in certain International markets.

International Transformation Plan

In December 2023, the Company announced international transformation initiatives (“International Transformation Plan”) designed to evolve our business structure to deliver an enhanced value proposition to our International customers and franchisees, ensure targeted investments and efficient resource management, and better position certain international markets, including the United Kingdom, for long-term profitable growth and brand strength.

Total estimated pre-tax costs associated with the International Transformation Plan are expected to be approximately $33 million to $35 million (inclusive of the $31.6 million incurred through the first quarter of 2025), the remainder of which we expect to be recognized in 2025.

Total estimated pre-tax costs associated with the International Transformation Plan are expected to be approximately $35 million (inclusive of the $34.1 million incurred through the second quarter of 2025), the remainder of which we expect to be recognized in 2025.

Restructuring” of “Notes to Condensed Consolidated Financial Statements” for additional details.

The Company is in the final stages of executing the International Transformation Plan, expected to be completed during 2025, which has resulted in the following key accomplishments:

• We evaluated and optimized our restaurant portfolio in the UK, which resulted in the closure of 43 underperforming UK Company-owned restaurants and 30 franchised locations.

We also completed the refranchising of 60 formerly Company-owned restaurants to primarily existing franchisees and continue to operate 13 Company-owned restaurants in the UK.

We have completed substantially all of the strategic restaurant closures in the UK market and the Company’s efforts have turned toward growth opportunities and mitigating closure-related costs as we complete the optimization of the portfolio through exiting leases and other contracts as well as transforming our operations to increase efficiency and effectiveness.

• We established hubs for our key regions – APAC (Asia Pacific), EMEA (Europe, Middle East and Africa), and Latin America to align global best practices in operations, marketing and technology with local preferences to accomplish our long-term objective of increasing market share in key markets around the world.

The Company is in the final stages of executing the International Transformation Plan, which is expected to be completed during 2025.

Global Restaurant Sales and Unit Information

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Comparable sales growth (decline) and Global system-wide restaurant sales information is also useful for comparison to industry trends and evaluating the strength of our brand.

Management believes the presentation of Global system-wide restaurant sales growth, excluding the impact of foreign currency, provides investors with useful information regarding underlying sales trends and the impact of new unit growth without being

impacted by swings in the external factor of foreign currency.

Franchise restaurant sales are not included in the Company’s revenues.

Three Months Ended

Amounts below exclude the impact of foreign currency March 30,

2025 March 31,

Three Months Ended Six Months Ended

Amounts below exclude the impact of foreign currency June 29,

2025 June 30,

2024 June 29,

2025 June 30,

Comparable sales growth (decline):

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International restaurants 3.7% (0.1)% 3.5% (1.4)%

Total comparable sales decline (1.3)% (2.0)%

Total comparable sales growth (decline) 1.6% (2.7)% 0.1% (2.4)%

System-wide restaurant sales growth (decline):

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International restaurants (a)

6.6% 5.1% 6.1% 3.3%

Total global system-wide restaurant sales growth (decline) (a)

3.5% (0.2)% 2.1% (0.5)%

(a) System-wide sales for the three months ended March 31, 2024 include $0.4 million of International sales related to the first quarter of 2024 that were erroneously omitted in prior periods.

Restaurant Progression Three Months Ended

2025 March 31,

___________________________________

(a) System-wide sales for the three and six months ended June 30, 2024 include $6.7 million and $7.1 million, respectively of International sales related to the first and second quarters of 2024 that were erroneously omitted in prior periods.

Restaurant Progression Three Months Ended Six Months Ended

2025 June 30,

2024 June 29,

2025 June 30,

North America Company-owned:

Beginning of period 539 536 539 531

Opened 2 1 3 6

Closed — — (1) —

End of period 541 537 541 537

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Beginning of period 2,977 2,911 2,975 2,902

Opened 17 9 34 25

Closed (18) (10) (33) (17)

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Beginning of period 13 117 13 117

Closed — (43) — (43)

Refranchised — (41) — (41)

End of period 13 33 13 33

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Beginning of period 2,490 2,350 2,503 2,356

Opened 26 56 55 79

Closed (57) (44) (99) (73)

Refranchised — 41 — 41

End of period 2,459 2,403 2,459 2,403

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During the year ended December 29, 2024, the Company implemented several financial statement changes in its Annual Report on Form 10-K, concurrent with the adoption of Accounting Standard Update (“ASU”) 2023-07, “Improvements to Reportable Segment Disclosures.” These changes evolve and modernize our financial statements and footnotes to increase transparency and better reflect management’s key performance metrics.

Presentation changes to the Condensed Consolidated Statements of Operations and the Condensed Consolidated Statements of Cash Flows have been applied retrospectively, and as such, the results from the three months ended March 31, 2024 have been reclassified for consistency with the current year presentation.

Presentation changes to the Condensed Consolidated Statements of Operations and the Condensed Consolidated Statements of Cash Flows have been applied retrospectively, and as such, the results from the three and six months ended June 30, 2024 have been reclassified for consistency with the current year presentation.

Additionally, during the year ended December 29, 2024, the Company updated its internal cost allocation methodology to better reflect current levels of time and effort spent managing our different segments.

These updates resulted in a higher allocation of previously unallocated corporate expenses to primarily each of the North America franchising and International segments.

This update in methodology did not impact total reported expenses and was implemented prospectively beginning with the year ended December 29, 2024, and as such comparative information has been recast.

This update in methodology did not impact total reported expenses and was implemented prospectively beginning with the year ended December 29, 2024, and as such prior-period comparative information has been recast.

The following table sets forth the various components of Revenues from the Condensed Consolidated Statements of Operations.

Three Months Ended Increase

(In thousands) March 30,

2025 March 31,

Three Months Ended Six Months Ended Increase

(In thousands) June 29,

2025 June 30,

2024 June 29,

2025 June 30,

Company-owned restaurant sales $ 178,989 $ 184,640 $ 352,870 $ 375,891 (3.1) % (6.1) %

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Restructuring” for additional information on these transactions.

Total revenues increased $4.4 million, or 0.9%, to $518.3 million for the three months ended March 30, 2025 as compared to the prior year comparable period.

Company-owned restaurant sales, which include sales from both Domestic and International Company-owned restaurants decreased $17.4 million, or 9.1%, for the three months ended March 30, 2025 as compared to the prior year comparable period.

The decrease was primarily due to an $11.9 million decline in revenues from our Company-owned restaurants in the UK due to the transactions discussed above.

The decrease also results from a $5.4 million decline in revenue from our Domestic Company-owned restaurants, reflecting a 4.6% decline in Domestic comparable sales as a result of lower transaction volumes and ticket sizes.

Franchise royalties and fees, which include revenues generated from both North American and International franchisees, increased $0.9 million, or 1.9%, for the three months ended March 30, 2025 as compared to each prior year comparable period.

The increase was primarily due to 2.7% growth in North America franchised equivalent units compared to the prior year comparable period and International comparable sales growth of 3.2%, partially offset by North America franchised comparable sales declining 2.3% for the three months ended March 30, 2025.

North America franchise restaurant sales decreased to $754.5 million, or 0.4% excluding the impact of foreign currency fluctuations, for the three months ended March 30, 2025 compared to the prior year comparable period.

Total revenues increased $21.3 million, or 4.2%, to $529.2 million for the three months ended June 29, 2025 and increased $25.7 million, or 2.5%, to $1.05 billion for the six months ended June 29, 2025, as compared to the prior year comparable periods.

Changes in total revenues were impacted by the transactions noted above and as detailed in the discussions below.

Company-owned restaurant sales, which include sales from both Domestic and International Company-owned restaurants, decreased $5.7 million, or 3.1%, for the three months ended June 29, 2025 and decreased $23.0 million, or 6.1%, for the six months ended June 29, 2025, as compared to the prior year comparable periods.

The decrease was primarily due to declines of $8.2 million and $20.2 million in revenues from our Company-owned restaurants in the UK, respectively, due to the transactions discussed above.

The decrease for the three months ended June 29, 2025 is partially offset by a $2.6 million increase in revenue from our Domestic Company-owned restaurants due to higher average ticket that drove comparable sales growth of 0.3%, partially offset by the refranchising of 15 restaurants in the prior year.

The decrease for the six months ended June 29, 2025 is also a result of a $2.8 million decline in revenue from our Domestic Company-

owned restaurants, reflecting a 2.1% decline in Domestic comparable sales as a result of lower transaction volumes and the refranchising of 15 restaurants in the prior year, partially offset by higher average ticket.

Franchise royalties and fees, which include revenues generated from both North American and International franchisees, increased $1.8 million, or 3.8%, for the three months ended June 29, 2025 and increased $2.7 million, or 2.8%, for the six months ended June 29, 2025, as compared to the prior year comparable periods.

The increases were primarily due to growth in North America franchised equivalent units of 2.7% and 2.8% and growth in International comparable sales of 3.7% and 3.5% for the three and six months ended June 29, 2025, respectively.

North America franchise restaurant sales increased to $752.3 million, or 2.7% excluding the impact of foreign currency fluctuations, for the three months ended June 29, 2025 as compared to the prior year comparable period.

North America franchise restaurant sales increased to $1.51 billion, or 1.1% excluding the impact of foreign currency fluctuations, for the six months ended June 29, 2025 as compared to the prior year comparable period.

North America franchise restaurant sales are not included in Company revenues;

however, our North America franchise royalties are derived from these sales.

The main drivers in the lower franchise restaurant sales were the North America comparable sales declines, partially offset by equivalent unit growth noted above.

International franchise restaurant sales increased $21.9 million to $297.3 million for the three months ended March 30, 2025 compared to the prior year comparable period.

The main driver in the higher franchise restaurant sales was the North America equivalent unit growth noted above.

International franchise restaurant sales increased $33.0 million to $324.8 million and increased $54.9 million to $622.1 million for the three and six months ended June 29, 2025, respectively.

As mentioned above, the UK transactions in the second and third quarters of 2024 impacted the comparability of International franchise restaurant sales earned in each period.

Excluding the impact of the UK restaurant changes and foreign currency fluctuations, International franchise restaurant sales would have increased $16.2 million, or 5.6% for the three months ended March 30, 2025.

Excluding the impact of the UK restaurant changes and foreign currency fluctuations, International franchise restaurant sales would have increased $21.0 million, or 7.0%, and increased $37.0 million, or 6.3%, for the three and six months ended June 29, 2025, respectively.

International franchise restaurant sales are not included in Company revenues;

however, our international royalty revenue is derived from these sales.

Commissary revenues, which includes sales from our North American and International QC Centers, increased $11.4 million or 5.3% for the three months ended March 30, 2025 as compared to the prior year comparable period.

The increase for the three months ended March 30, 2025 was primarily due to higher commodity prices during the quarter, particularly cheese and proteins, as well as the previously-disclosed annual 1% increase to our fixed operating margin charged to Domestic QC Centers that took effect at the beginning of the first quarter of 2025.

These increases were partially offset by lower transaction volumes during the quarter.

Other revenues, which primarily includes revenues derived from our online and mobile ordering business, increased $2.8 million, or 13.5% for the three months ended March 30, 2025 compared to the prior year comparable period primarily due to higher revenues generated from technology services as a result of an increase in the technology fee charged to franchisees that began in the second half of 2024.

Advertising funds revenue, which includes the operations of PJMF, local marketing funds and International marketing funds, increased $6.6 million, or 17.8%, for the three months ended March 30, 2025 compared to the prior year comparable period.

Beginning with the second quarter of 2024, PJMF increased its contribution percentage, which increased Advertising funds revenue.

The increases were due to growth in International comparable sales of 3.7% and 3.5% for the three and six months ended June 29, 2025, respectively, as well as restaurant growth.

Commissary revenues, which includes sales from our North American and International QC Centers, increased $20.3 million or 9.5% for the three months ended June 29, 2025 and increased $31.7 million or 7.3% for the six months ended June 29, 2025 as compared to the prior year comparable period.

The increase for the three and six months ended June 29, 2025 was primarily due to higher prices and higher transaction volumes as compared to the prior year comparable periods .

Other revenues, which primarily includes revenues derived from our online and mobile ordering business, increased $2.7 million, or 13.4%, and increased $5.5 million , or 13.4%, for the three and six months ended June 29, 2025, respectively, as compared to the prior year comparable periods primarily due to higher revenues generated from technology services as a result of an increase in the technology fee charged to franchisees that began in the second half of 2024.

Advertising funds revenue, which includes the operations of PJMF as well as local and International marketing funds, increased $2.2 million, or 5.2%, and increased $8.8 million , or 11.1% , for the three and six months ended June 29, 2025, respectively, as compared to the prior year comparable periods.

The increases for the three and six month periods were primarily driven by increases in the PJMF contribution percentage, which took effect in the second quarter of 2024, as well as increases to contribution percentages in certain International markets.

The increase in advertising funds revenue also results from global system-wide restaurant sales growth of 3.5% and 2.1% for the three and six months ended June 29, 2025, respectively.

Costs and Expenses

The following table sets forth the various components of Costs and expenses from the Condensed Consolidated Statements of Operations:

(In thousands) Three Months Ended

2025 March 31, 2024

(In thousands) Three Months Ended Six Months Ended Increase

June 29, 2025 June 30, 2024 June 29, 2025 June 30, 2024 QTD YTD

Costs and expenses:

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Total costs and expenses $ 504,676 $ 479,668 $ 999,020 $ 959,866 5.2 % 4.1 %

Total costs and expenses were approximately $494.3 million, or 95.4% of total revenues for the three months ended March 30, 2025, as compared to $480.2 million, or 93.4% of total revenues compared to the prior year comparable period.

This increase in total costs and expenses, as a percentage of revenues, was primarily due to the following:

Total costs and expenses were approximately $504.7 million, or 95.4% of total revenues, and $999.0 million , or 95.4% of total revenues, for the three and six months ended June 29, 2025, as compared to $479.7 million, or 94.4% of total revenues, and $959.9 million , or 93.9% of total revenues in the prior year comparable periods.

Cost of sales consists primarily of Company-owned restaurant and supply chain costs incurred to generate related revenues.

Components of cost of sales primarily include food and paper products, labor, freight and delivery, occupancy costs, advertising costs related to Company-owned restaurants, and insurance expense.

Cost of sales was $366.5 million for the three months ended March 30, 2025, a decrease of $1.2 million from the prior year comparable period.

Cost of sales was favorably impacted by approximately $11.0 million due to lower food and labor costs from our Company-owned restaurants in the UK as a result of the restaurant closures and refranchising transactions discussed above, offset by higher commodity costs for our Domestic QC Centers as well as higher food and advertising expenses for our Domestic Company-owned restaurants.

Costs of sales by segment for the three months ended March 30, 2025 and March 31, 2024, respectively, were as follows:

Three Months Ended

(Dollars in thousands) March 30, 2025 March 31, 2024 Increase/Decrease

Domestic Company-owned restaurants (b)

Cost of sales were $371.7 million and $738.2 million, respectively, for the three and six months ended June 29, 2025, an increase of $8.7 million and $7.5 million, respectively, from the prior year comparable periods.

The increases were due primarily to higher volumes for our Domestic QC Centers, higher food costs for our Domestic Company-owned restaurants, and higher local advertising costs for our Company-owned restaurants.

These increases were partially offset by decreases of approximately $5.7 million and $17.0 million for the three and six months ended June 29, 2025, respectively, due to lower food and labor costs from our Company-owned restaurants in the UK as a result of the restaurant closures and refranchising transactions discussed above.

Costs of sales by segment for the three and six months ended June 29, 2025 and June 30, 2024, respectively, were as follows:

Three Months Ended Six Months Ended

(In thousands) June 29, 2025 June 30, 2024 Increase (Decrease) June 29, 2025 June 30, 2024 Increase (Decrease)

Domestic Company-owned restaurants (a)

$ 156,233 $ 150,508 $ 5,725 $ 311,489 $ 301,937 $ 9,552

North America commissaries 235,731 226,287 9,444

International 19,785 30,855 (11,070)

Total cost of sales by segment 410,772 408,571 2,201

All other (a)

North America commissaries (a)

237,187 224,511 12,676 472,919 450,799 22,120

International (a)

24,386 30,209 (5,823) 44,170 61,064 (16,894)

Total cost of sales by segment (b)

417,806 405,228 12,578 828,578 813,800 14,778

All other (c)

12,551 12,531 20 25,181 25,426 (245)

Intersegment cost of sales (58,641) (54,721) (3,920) (115,547) (108,522) (7,025)

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___________________________________

(a) “ All other” refers to all other business units that do not meet the quantitative thresholds for determining reportable segments, which primarily includes our online and mobile ordering business and our marketing funds and are not operating segments.

(b) This information is presented on a GAAP basis.

As a result, amounts include stock-based compensation expenses that are excluded from our segment results, which are presented on an Adjusted basis (see “Note 11.

(a) Segment cost of sales include stock-based compensation expenses and other adjustments that are excluded from our segment results, which are presented on an adjusted basis (see “Note 11.

Segment Information”).

General and administrative expenses (“G&A”) expenses were $65.2 million, or 12.6% of revenues for the three months ended March 30, 2025, as compared to $57.9 million, or 11.3% of revenues for the prior year comparable period.

(b) The North America franchising segment does not incur costs of sales, and therefore is not included in total cost of sales by segment.

The North America franchising segment consists of our franchise sales and support activities for our franchisees located in the United States and Canada.

(c) “ All other” refers to all other business units that do not meet the quantitative or qualitative thresholds for determining reportable segments, and primarily includes our online and mobile ordering business and our marketing funds and are not operating segments.

General and administrative expenses (“G&A”) expenses were $70.1 million, or 13.3% of revenues, and $135.3 million or 12.9% of revenues, for the three and six months ended June 29, 2025, respectively, as compared to $57.0 million, or 11.2%

of revenues, and $114.9 million, or 11.2% of revenues for the prior year comparable periods, respectively.

G&A expenses consisted of the following:

Three Months Ended

(In thousands) March 30,

2025 March 31,

Three Months Ended Six Months Ended

(In thousands) June 29,

2025 June 30,

2024 June 29,

2025 June 30,

Administrative and other general expenses, net (a)

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International restructuring costs (b)

Net expenses due to natural disasters (c)

Strategic initiative costs (d)

2,475 6,129 4,631 15,652

Other costs (c)

2,838 4,000 4,305 4,000

General and administrative expenses $ 70,118 $ 57,046 $ 135,285 $ 114,923

___________________________________

(a) Administrative and other general expenses, net increased by $13.2 million during the three months ended March 30, 2025.

The increase was primarily due to costs incurred related to incremental marketing and loyalty investments and expenses resulting from our bi-annual franchise operating conference held in the first quarter of 2025.

The 2024 comparative period included lower equity compensation costs related to leadership changes during the first quarter of 2024.

(a) Administrative and other general expenses, net increased by $17.9 million and $31.1 million, respectively, for the three and six months ended June 29, 2025.

The increase for the three months ended June 29, 2025 was primarily due to $8.6 million of expenses incurred for incremental marketing investments and a $3.7 million increase from higher incentive compensation under our Management Incentive Plan as compared to prior year comparable period.

The six months ended June 29, 2025 were also impacted by expenses resulting from our bi-annual franchise operating conference held in the first quarter of 2025 and lower comparative-period equity compensation costs related to leadership changes during the first quarter of 2024.

(b) Represents costs associated with the Company’s International Restructuring plan.

Restructuring”.

(c) Represents expenses incurred, net of expected insurance recoveries, resulting from a tornado that struck our Texas QC Center in March 2025.

Significant Accounting Policies” for additional details.

(d) Represents costs associated with project-based strategic initiatives that are not related to our ongoing operations.

Depreciation and amortization expense was $18.3 million, or 3.5% of revenues for the three months ended March 30, 2025, as compared to $17.7 million, or 3.4% of revenues for the prior year comparable period.

Advertising funds expense was $44.3 million or 101.5% of advertising revenues for the three months ended March 30, 2025 as compared to $37.0 million or 99.8% of advertising revenues for the comparable prior period.

Losses on disposal of equipment incurred in connection with the termination of a COVID-era program that pre-purchased store equipment due to supply chain challenges;

Costs associated with project-based strategic initiatives that are not related to our ongoing operations, and;

Costs incurred, net of anticipated insurance recoveries, arising from tornadoes that struck the Texas Quality Control Center (“QC Center”) as well as the restaurant support center and QC Center in Louisville, Kentucky.

For the three and six months ended June 30, 2024, represents a non-cash impairment charge related to fixed and intangible assets related to certain Domestic restaurants.

Refer to Note 2.

Significant Accounting Policies of the “Notes to Condensed Consolidated Financial Statements” for further details.

Depreciation and amortization expenses were $18.8 million, or 3.6% of total revenues, and $37.2 million, or 3.5% of total revenues for the three and six months ended June 29, 2025, respectively, as compared to $17.6 million, or 3.5% of total revenues and $35.3 million or 3.5% of total revenues for the prior year comparable periods, respectively.

The increases were primarily due to higher depreciation expense related to our investments in technology platforms.

Advertising funds expenses were $44.0 million or 99.7% of advertising revenues and $88.4 million or 100.6% of advertising revenues for the three and six months ended June 29, 2025, respectively, as compared to $42.0 million or 100.0% of advertising revenues and $79.0 million or 99.9% of advertising revenues for the prior year comparable periods, respectively.

Advertising funds expense is comprised primarily of expenses incurred by PJMF, which is designed to operate at break-even as it spends all annual contributions received from the system.

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Segment Financial Performance

We evaluate the performance of our reportable segments and allocate resources to them based on earnings before interest, taxes, depreciation, amortization, stock-based compensation expense, and other, referred to as adjusted EBITDA.

See “Note 11.

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Adjusted EBITDA for each of our reportable segments is summarized in the table below.

Three Months Ended Increase (Decrease)

(In thousands) March 30,

2025 March 31,

Three Months Ended Six Months Ended Increase (Decrease)

(In thousands) June 29,

2025 June 30,

2024 June 29,

2025 June 30,

Domestic Company-owned restaurants $ 9,864 $ 13,474 $ 14,896 $ 28,413 $ (3,610) $ (13,517)

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International 5,637 3,713 11,019 7,906 1,924 3,113

Domestic Company-owned restaurants decreased $9.9 million for the three months ended March 30, 2025 primarily due to a 4.6% decline in Domestic comparable sales as well as higher food costs and local advertising costs for our Domestic Company-owned restaurants, offset by decreases in insurance costs.

North America franchising decreased $1.3 million for the three months ended March 30, 2025 primarily due to higher incentive compensation allocated to the segment for the three months ended March 30, 2025 compared to the prior year period, partially offset by higher royalty and franchise fee revenue as discussed above.

North America commissaries increased $2.2 million for the three months ended March 30, 2025 primarily due to the annual increase in the commissary fixed operating margin mentioned above.

This was offset by higher food costs, higher salaries and benefits, and increases in rent due to the sale and subsequent leaseback of two Domestic Quality Control Center properties (“QC Centers”) in Texas and Florida in the third quarter of 2024.

International increased $1.2 million for the three months ended March 30, 2025.

The increase was primarily due to operating losses attributable to the UK Company-owned restaurants during the prior year quarter, when we owned and operated more restaurants in the UK.

This was offset by increases in advertising costs in 2025.

Domestic Company-owned restaurants decreased $3.6 million for the three months ended June 29, 2025 primarily due to higher food and labor costs for our Domestic Company-owned restaurants during 2025.

Domestic Company-owned restaurants decreased $13.5 million for the six months ended June 29, 2025 primarily due to higher food costs and local advertising costs.

Results were also impacted by a 2.1% decline in comparable sales compared to the prior year period.

North America franchising decreased $0.4 million and $1.6 million for the three and six months ended June 29, 2025, respectively, primarily due to higher incentive compensation allocated to the segment compared to the prior year periods, partially offset by higher royalty and franchise fee revenue as discussed above.

North America commissaries increased $4.6 million and $6.8 million for the three and six months ended June 29, 2025, respectively, primarily due to higher prices mentioned previously.

This was offset by higher food costs, higher salaries and benefits, and increases in rent due to the sale and subsequent leaseback of two Domestic QC Centers in Texas and Florida in the third quarter of 2024.

International increased $1.9 million and $3.1 million for the three and six months ended June 29, 2025, respectively.

The increase was primarily due to operating losses attributable to the UK Company-owned restaurants during the prior year comparable periods, when we owned and operated more restaurants in the UK.

Items Below Operating Income

The following table sets forth the various items below Operating income from the Condensed Consolidated Statements of Operations:

Three Months Ended Increase (Decrease)

(In thousands, except per share amounts) March 30,

2025 March 31,

Three Months Ended Six Months Ended Increase (Decrease)

(In thousands, except per share amounts) June 29,

2025 June 30,

2024 June 29,

2025 June 30,

Operating income $ 24,490 $ 28,226 $ 48,455 $ 61,944 $ (3,736) $ (13,489)

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Diluted earnings per common share $ 0.28 $ 0.37 $ 0.56 $ 0.82 $ (0.09) $ (0.26)

(a) Note that we have changed the signage of income tax expense from historic presentation for consistency purposes.

(a) The signage of Income tax expense has been changed from the historic presentation for purposes of signage consistency with other expense items.

Net Interest Expense

Net interest expense decreased $1.0 million for the three months ended March 30, 2025.

The decrease for the three months ended March 30, 2025 was primarily due to lower average interest rates during the quarter.

Net interest expense decreased $0.3 million and $1.3 million for the three and six months ended June 29, 2025, respectively.

The decrease for the three and six months ended June 29, 2025 was primarily due to lower average interest rates during the respective periods.

Income Tax Expense

Our effective income tax rate was 32.7% for three months ended March 30, 2025 as compared to an income tax rate of 34.2% for the prior year comparable period.

The lower effective tax rate for three months ended March 30, 2025 was primarily driven by impairment charges related to the International Restructuring that created unrecognized tax losses and prevented the Company from generating foreign tax credits in 2024, partially offset by increased tax shortfall generated by stock option exercises and vesting of restricted shares in 2025 and increased foreign tax withholding on royalties.

Three Months Ended

(Dollars in thousands) March 30, 2025 March 31, 2024

Our effective income tax rates were 30.5% and 31.6% for the three and six months ended June 29, 2025, respectively, as compared to an income tax rate of 27.7% and 31.3% for the prior year comparable periods, respectively.

The higher effective tax rate for the three months ended June 29, 2025 was primarily due to lower pretax book income and tax shortfall generated by vesting of restricted shares in the second quarter of 2025.

The effective tax rate was materially consistent between the six months ended June 29, 2025 and the prior year comparable period.

Three Months Ended Six Months Ended

(Dollars in thousands) June 29, 2025 June 30, 2024 June 29, 2025 June 30, 2024

Income before income taxes $ 13,906 $ 17,330 $ 27,792 $ 39,985

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Net Income Attributable to Noncontrolling Interests

Net income included income of $0.1 million attributable to noncontrolling interests for three months ended March 30, 2025 as compared to income of $0.3 million for the prior year comparable period.

Net income included income of $0.1 million and $0.3 million, respectively, attributable to noncontrolling interests for the three and six months ended June 29, 2025 as compared to income of $0.3 million and $0.6 million, respectively, for the prior year comparable periods.

Diluted Earnings Per Common Share

Diluted earnings per common share was $0.27 for three months ended March 30, 2025 as compared to $0.44 for the prior year comparable period, representing an decrease of $0.17.

Adjusted diluted earnings per common share, a non-GAAP measure, was $0.36 for three months ended March 30, 2025 as compared to adjusted diluted earnings per common share of $0.67 for the prior year comparable period representing a decrease of $0.31.

Diluted earnings per common share were $0.28 and $0.56 for the three and six months ended June 29, 2025, respectively, as compared to $0.37 and $0.82 for the prior year comparable periods, respectively, representing a decrease of $0.09 and $0.26, respectively.

Adjusted diluted earnings per common share, a non-GAAP measure, was $0.41 and $0.77 for the three

and six months ended June 29, 2025, respectively, as compared to adjusted diluted earnings per common share of $0.61 and $1.28 for the prior year comparable periods, respectively, representing a decrease of $0.20 and $0.51, respectively.

See “Non-GAAP Measures” for additional information.

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The table below reconciles our GAAP financial results to our non-GAAP financial measures.

Three Months Ended

(In thousands, except per share amounts) March 30,

2025 March 31,

Three Months Ended Six Months Ended

(In thousands, except per share amounts) June 29,

2025 June 30,

2024 June 29,

2025 June 30,

Net income $ 9,671 $ 12,536 $ 19,014 $ 27,450

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Depreciation and amortization 18,819 17,594 37,162 35,268

International restructuring costs (a)

Net expenses due to natural disasters (b)

Strategic initiative costs (c)

Stock-based compensation expense 3,824 2,915 7,493 2,545

International restructuring costs (a)

2,451 6,185 4,631 15,728

Other costs (b)

3,031 4,000 4,498 4,000

Adjusted EBITDA $ 52,615 $ 58,920 $ 102,239 $ 119,485

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International restructuring costs (a)

Net expenses due to natural disasters (b)

Strategic initiative costs (c)

Tax effect of adjustments (d)

2,475 6,129 4,610 15,652

Other costs (b)

3,031 4,000 4,498 4,000

Tax effect of adjustments (c)

(1,250) (2,289) (2,068) (4,441)

Adjusted net income attributable to common shareholders $ 13,523 $ 20,083 $ 25,335 $ 42,090

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International restructuring costs (a)

Net expenses due to natural disasters (b)

Strategic initiative costs (c)

Tax effect of adjustments (d)

0.07 0.19 0.14 0.48

Other costs (b)

0.10 0.12 0.13 0.12

Tax effect of adjustments (c)

(0.04) (0.07) (0.06) (0.14)

Adjusted diluted earnings per common share $ 0.41 $ 0.61 $ 0.77 $ 1.28

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Restructuring” for additional details.

(b) Represents expenses incurred, net of expected insurance recoveries, resulting from a tornado that struck our Texas QC Center in March 2025.

Significant Accounting Policies” for additional details.

We consider these costs to be separate and distinct from other professional fees incurred in the ordinary course of business and not reflective of the ongoing costs to operate our business.

(d) The tax effect on non-GAAP adjustments was calculated by applying the marginal tax rates of 22.7% and 22.6% for the three months ended March 30, 2025 and March 31, 2024, respectively.

(b) For the three and six months ended June 29, 2025, other costs is comprised of the following:

Losses on disposal of equipment incurred in connection with the termination of a COVID-era program that pre-purchased store equipment due to supply chain challenges;

Costs associated with project-based strategic initiatives that are not related to our ongoing operations, and;

For the three and six months ended June 30, 2024, represents a non-cash impairment charge related to fixed and intangible assets related to certain Domestic restaurants.

Refer to Note 2.

Significant Accounting Policies of the “Notes to Condensed Consolidated Financial Statements” for further details.

(c) The tax effect on non-GAAP adjustments was calculated by applying the marginal tax rates of 22.7% for the three and six months ended June 29, 2025 and 22.6% for the three and six months ended June 30, 2024.

In addition, we present free cash flow in this report, which is a non-GAAP measure.

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Liquidity and Capital Resources

Our primary sources of liquidity and capital resources are cash flows from operations and borrowings under the Second Amended and Restated Credit Agreement, dated as of March 26, 2025, which amended and restated the Amended and Restated Credit Agreement dated as of September 14, 2021 and amended May 30, 2023.

Our primary sources of liquidity and capital resources are cash flows from operations and borrowings under the Second Amended and Restated Credit Agreement, dated as of March 26, 2025 ( the “Second Amended and Restated Credit Agreement”), which amended and restated the Amended and Restated Credit Agreement dated as of September 14, 2021 and amended May 30, 2023.

The Second Amended and Restated Credit Agreement provides for a senior secured term loan in a principal amount of $200.0 million (the “Term Loan”) and a senior secured revolving credit facility in an aggregate available principal amount of $600.0 million (the “PJI Revolving Facility” together with the Term Loan, the “PJI Credit Facilities”).

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The Company believes that its balances of cash and cash equivalents and borrowing capacity, along with cash generated by operations and from asset sales, will be sufficient to satisfy its cash requirements, cash dividends, interest payments and share repurchases over the next twelve months and beyond.

The table below summarizes our cash flows for the three months ended March 30, 2025 and March 31, 2024 (in thousands):

Three Months Ended

2025 March 31,

The table below summarizes our cash flows for the six months ended June 29, 2025 and June 30, 2024 (in thousands):

Six Months Ended

2025 June 30,

Total cash provided by (used in):

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Operating Activities

Total cash provided by operating activities was $31.3 million for the three months ended March 30, 2025 compared to $12.0 million for the corresponding period of 2024.

Total cash provided by operating activities was $66.8 million for the six months ended June 29, 2025 compared to $42.0 million for the corresponding period of 2024.

The increase of $24.9 million primarily reflects a favorable impact from timing of collections and marketing spend within our advertising fund as well as favorable changes in working capital accounts compared to the prior period.

Investing Activities

Total cash used in investing activities was $7.1 million for the three months ended March 30, 2025 compared to $10.2 million for the same period in 2024.

The decrease in cash used in investing activities is due primarily to the receipt of investment distributions of $4.7 million and $2.3 million during the three months ended March 30, 2025 and March 31, 2024, respectively, related to our deferred compensation plan.

Total cash used in investing activities was $19.4 million for the six months ended June 29, 2025 compared to $23.8 million for the same period in 2024.

The decrease in cash used in investing activities is due primarily to a $2.7 million year-over-year increase in repayments of notes issued and a $2.5 million year-over-year increase in investment distributions from our deferred compensation plan.

Our capital expenditures consisted primarily of capital investments for existing restaurants and new restaurant locations as well as investments in technology platforms.

We estimate that our capital expenditures during 2025 will be approximately $75 million to $85 million.

This estimate includes the acquisition of sites and construction costs for new Company-owned restaurants that have opened or that we expect to open during 2025.

We estimate that our capital expenditures during 2025 will be approximately $75 million to $85 million, which primarily consists of the acquisition of sites and construction costs for new Company-owned restaurants that have opened or that we expect to open during 2025.

This estimate also includes an estimated $8 million to $13 million of capital expenditures related to rebuilding tornado damage incurred at our Texas QC Center and Louisville restaurant support center and QC Center.

These amounts are subject to change as repair and reconstruction work is ongoing, and we anticipate these amounts will be recovered under our insurance policy, subject to our policy deductibles.

We intend to fund our capital expenditures with cash generated by operations and borrowings under our PJI Revolving Facility, as necessary.

Financing Activities

Total cash used in financing activities was $18.6 million for the three months ended March 30, 2025 compared to $14.6 million for the same period of 2024.

In the first quarter of 2025, the principal financing outflows were related to dividend payments of $15.2 million, $2.4 million in payments related to financing leases, and $1.1 million in tax payments on equity compensation award issuances.

Cash used in financing activities also reflects the impact of the refinancing of our debt via the Second Amended and Restated Credit Agreement, which resulted in borrowings of $200.0 million under the new Term Loan, from which the proceeds were used to repay $196.8 million to the PJI Revolving Facility during the quarter and $3.0 million in related issuance costs.

In the first quarter of 2024, the primary uses of cash for financing activities were $15.1 million in dividend payments, $3.2 million in tax payments on equity award issuances and $2.4 million in payments related to financing leases.

These outflows were offset by net borrowings of $3.5 million from the PJI Revolving Facility and $1.8 million from the PJMF revolving line of credit (the “PJMF Revolving Facility”).

There were no share repurchases in the first quarter of 2025 or 2024.

Our outstanding debt as of March 30, 2025 was $749.9 million, which was comprised of $400.0 million principal amount of our 3.875% senior notes (the “Notes”), $200.0 million of Term Loan borrowings, and $149.9 million outstanding under the PJI Revolving Facility.

Remaining availability under the PJI Revolving Facility was approximately $450.1 million as of March 30, 2025.

Our Second Amended and Restated Credit Agreement contains customary affirmative and negative covenants that, among other things, require customary reporting obligations, and restrict, subject to certain exceptions, the incurrence of additional indebtedness and liens, the consummation of certain mergers, consolidations, sales of assets and similar transactions, the making of investments, equity distributions and other restricted payments, and transactions with affiliates, in each case, that are substantially similar to our previous credit agreement (the “Existing Credit Agreement”).

In addition, the Company will be subject to the following financial covenants substantially similar to those in the Existing Credit Agreement (other than the new liquidity requirement described in clause (3)):

Total cash used in financing activities was $52.8 million for the six months ended June 29, 2025 compared to $34.4 million for the same period of 2024.

During the first six months of 2025, the principal financing outflows were related to dividend payments of $30.5 million and payments related to financing leases of $4.9 million.

Cash used in financing activities also reflects the impact of net repayments of $16.1 million under the PJI Revolving Facility throughout the year, which includes the refinancing of our debt via the Second Amended and Restated Credit Agreement during the first quarter of 2025 that resulted in borrowings of $200.0 million under the new Term Loan, from which the proceeds were used to repay $196.8 million to the PJI Revolving Facility as well as $3.2 million in related issuance costs.

In the first six months of 2024, the primary uses of cash for financing activities were $30.2 million in dividend payments, $3.3 million in tax payments on equity award issuances and $4.8 million in payments related to financing leases.

These outflows were partially offset by net borrowings of $3.0 million from the PJI Revolving Facility and the PJMF revolving line of credit (the “PJMF Revolving Facility”).

There were no share repurchases in the first six months of 2025 or 2024.

Our outstanding debt as of June 29, 2025 was $733.8 million, which was comprised of $400.0 million principal amount of our 3.875% senior notes (the “Notes”), $200.0 million of Term Loan borrowings, and $133.8 million outstanding under the PJI Revolving Facility.

Remaining availability under the PJI Revolving Facility was approximately $466.2 million as of June 29, 2025.

In addition, the Company is subject to the following financial covenants substantially similar to those in the Previous Credit Agreement (other than the new liquidity requirement described in clause (3)):

(1) a maximum Leverage Ratio of 5.25 to 1.00, subject to the Company’s election to increase the maximum Leverage Ratio by 0.5 to 1.0 in connection with material acquisitions if the Company satisfies certain requirements;

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The Company is also subject to certain financial covenants, as shown in the following table, that could restrict or impose constraints on the liquidity of our business:

Permitted Ratio Actual Ratio as of March 30, 2025

Permitted Ratio Actual Ratio as of June 29, 2025

Leverage ratio Not to exceed 5.25 to 1.0 3.4 to 1.0

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Our interest coverage ratio is defined as the sum of Consolidated EBITDA and consolidated rental expense for the most recent four fiscal quarters divided by the sum of consolidated interest expense and consolidated rental expense for the most recent four fiscal quarters.

We were in compliance with all financial covenants as of March 30, 2025.

We were in compliance with all financial covenants as of June 29, 2025.

In addition, the Indenture governing the Notes contains customary covenants that, among other things and subject to certain exceptions, limit our ability and the ability of certain of our subsidiaries to:

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We did not have any borrowings under the

PJMF Revolving Facility as of March 30, 2025 or December 29, 2024.

PJMF Revolving Facility as of June 29, 2025 or December 29, 2024.

The PJMF operating results and the related debt outstanding do not impact the financial covenants under the Company’s Second Amended and Restated Credit Agreement.

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As part of our long-term growth and capital allocation strategy, we are committed to investing in share repurchases to provide ongoing value and enhanced returns to our shareholders.

On October 28, 2021, our Board of Directors approved a share repurchase program with an indefinite duration for up to $425.0 million of the Company’s common stock.There was no share repurchase activity during the three months ended March 30, 2025 and March 31, 2024.

Approximately $90.2 million remained available under the Company’s share repurchase program as of March 30, 2025.

On October 28, 2021, our Board of Directors approved a share repurchase program with an indefinite duration for up to $425.0 million of the Company’s common stock.

There was no share repurchase activity during the three and six months ended June 29, 2025 or June 30, 2024.

Approximately $90.2 million remained available under the Company’s share repurchase program as of June 29, 2025.

The Company utilizes a written trading plan under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, from time to time to facilitate the repurchase of shares of our common stock under this share repurchase program.

There can be no assurance that we will repurchase shares of our common stock either through a Rule 10b5-1 trading plan or otherwise.

The Company paid aggregate cash dividends to common stockholders of $15.2 million ($0.46 per share) and $15.1 million ($0.46 per share) for the three months ended March 30, 2025 and March 31, 2024, respectively.

On May 1, 2025, our Board of Directors declared a second quarter dividend of $0.46 per common share (approximately $15.4 million in the aggregate), which will be paid on May 30, 2025 to stockholders of record as of the close of business on May 19, 2025.

The Company paid aggregate cash dividends to common stockholders of $30.5 million ($0.92 per share) and $30.2 million ($0.92 per share) for the six months ended June 29, 2025 and June 30, 2024, respectively.

On August 1, 2025, our Board of Directors declared a third quarter dividend of $0.46 per common share (approximately $15.4 million in the aggregate), which will be paid on August 29, 2025 to stockholders of record as of the close of business on August 18, 2025.

The declaration and payment of any future dividends will be at the discretion of our Board of Directors.

Enactment of the “One Big Beautiful Bill Act”

On July 4, 2025, the “One Big Beautiful Bill Act,” a comprehensive tax and spending bill, was signed into U.S.

The legislation includes changes to the U.S.

corporate tax system;

refer to “Note 12.

Subsequent Events” of the “Notes to Condensed Consolidated Financial Statements” for further details.

We anticipate that the enactment of this bill will result in an estimated $10 million to $15 million reduction in cash taxes to be paid during the second half of 2025 due to the reinstatement of 100% bonus depreciation and full expensing for domestic research and development expenditures.

Free Cash Flow

Free cash flow, a non-GAAP measure, is defined as net cash provided by operating activities (from the Condensed Consolidated Statements of Cash Flows) less the purchases of property and equipment.

Free cash flow, a non-GAAP measure, is defined as net cash provided by operating activities (from the Condensed Consolidated Statements of Cash Flows) less the purchases of property and equipment, excluding purchases of property and equipment related to damages from natural disasters.

We view free cash flow as an important financial measure because it is one factor that management uses in determining the amount of cash available for discretionary investment.

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Free cash flow should not be construed as a substitute for or a better indicator of the Company’s performance than the Company’s GAAP measures.

The Company’s free cash flow was as follows for the three month periods of 2025 and 2024 (in thousands):

Three Months Ended

2025 March 31,

The Company’s free cash flow was as follows for the six month periods of 2025 and 2024 (in thousands):

Six Months Ended

2025 June 30,

Net cash provided by operating activities $ 66,843 $ 41,957

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Refer to “Contractual Obligations” presented within “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 29, 2024 for additional information regarding our cash requirements.

Management’s Discussion and Analysis of Financial

Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 29, 2024 for additional information regarding our cash requirements.

Impact of Inflation and Macroeconomic Trends

In recent years, we have experienced price increases in food items and other commodities, labor and benefits, and fuel and other energy costs.

Inflationary pressures affect our profitability both directly, in our Company-owned restaurants and delivery mechanisms and through gross margins experienced by sales of food and supply items via our QC Centers, as well as indirectly, through higher food ingredient and paper and supply costs, rising fees from delivery aggregators driven by higher wage demands and increases in the cost of gasoline that, once reflected in upward price adjustments on their fees,

can exert downward pressure on unit sales, reducing royalty fees we realize from our Domestic and International franchisees.

Compensating menu price increases are subject to competitive pressure in the markets in which we operate.

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Generally, the use of words such as “expect,” “intend,” “estimate,” “believe,” “anticipate,” “will,” “forecast,” “outlook”, “plan,” “project,” or similar words identify forward-looking statements that we intend to be included within the safe harbor protections provided by the federal securities laws.

Such forward-looking statements include or may relate to projections or guidance concerning business performance, revenue, earnings, cash flow, earnings per share, share repurchases, depreciation and amortization, interest expenses, tax rates, system-wide sales, adjusted EBITDA, the current economic environment, industry trends, consumer behavior and preferences, commodity and labor costs, currency fluctuations, profit margins, supply chain operating margin, net unit growth, unit level performance, capital expenditures, restaurant and franchise development, restaurant acquisitions, restaurant closures, labor shortages, labor cost increases, changes in management, inflation, royalty relief, franchisee support and incentives, the effectiveness of our menu innovations and other business initiatives, investments in product, digital and technology innovation, marketing efforts and investments, liquidity, compliance with debt covenants, impairments, strategic decisions and actions, changes to our national marketing fund, changes to our commissary model, dividends, effective tax rates, regulatory changes and impacts, repositioning of the UK market, International restructuring plans, including timing of completion, expected benefits and costs, International consumer demand, adoption of new accounting standards, and other financial and operational measures.

Such forward-looking statements include or may relate to projections or guidance concerning business performance, revenue, earnings, cash flow, earnings per share, share repurchases, depreciation and amortization, interest expenses, tax rates, system-wide sales, adjusted EBITDA, the current economic environment, industry trends, consumer behavior and preferences, commodity and labor costs, currency fluctuations, profit margins, supply chain operating margin, net unit growth, unit level performance, capital expenditures, restaurant and franchise development, restaurant acquisitions, restaurant closures, labor shortages, labor cost increases, changes in management, inflation, royalty relief, franchisee support and incentives, the effectiveness of our menu innovations and other business initiatives, investments in product, digital and technology innovation and investments, marketing efforts and investments, liquidity, compliance with debt covenants, impairments, strategic decisions and actions, changes to our national marketing fund, changes to our commissary model, dividends, effective tax rates, regulatory changes and impacts, impacts of tariffs, insurance recoveries for damages related to natural disasters, repositioning of the UK market, International restructuring plans, including timing of completion, expected benefits and costs, International consumer demand, adoption of new accounting standards, and other financial and operational measures.

Such statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict and many of which are beyond our control.

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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