PAPA JOHNS INTERNATIONAL INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview Papa John’s International, Inc. (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 September 28, 2025, there were 5,994 Papa John’s restaurants in operation, consisting of 558 Company-owned and 5,436 franchised restaurants operating in 51 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. Additionally, we derive revenues from sales to franchisees of various items including food and paper products from our North America Quality Control Centers (“QC Centers”) and operation of our International QC Center in the United Kingdom (“UK”), contributions received by Papa John’s Marketing Fund (“PJMF”) which is our national marketing fund, and fees related to the use of information systems equipment as well as software and related services. We believe that in addition to supporting profitability and growth of both Company-owned and franchised restaurants, these activities contribute to product quality and consistency throughout the Papa Johns system. In discussions of our business, “Domestic” is defined as within the contiguous United States, “North America” includes Canada, and “International” includes the rest of the world other than North America. Recent Developments and Trends During the third quarter of 2025, we remained focused on executing our strategic priorities as we position the business for long-term success amidst a softening and challenging consumer environment in North America. We continue to steer our efforts and investments toward initiatives that improve our value perception and improve our digital and loyalty experience to increase conversion and reduce friction within the customer experience. Our key areas of focus are: • Marketing strategy: We continued investments in our messaging to showcase our BETTER INGREDIENTS. BETTER PIZZA ® platform by highlighting our six simple ingredients, fresh, never frozen original dough and the craftsmanship behind the products we serve, which we believe are key differentiators of our brand. We also sharpened our value perception with Buy One, Get One Free pizza offers during the quarter, and continued emphasizing our Papa Pairings mix and match platform. We plan to maintain a compelling value proposition while staying true to our premium positioning and layering in exciting menu innovation to further strengthen our barbell strategy. We anticipate spending up to an incremental $25 million in marketing investments throughout 2025 compared with 2024, inclusive of approximately $17 million spent during the first nine months of 2025, including investments in our customer relationship management platform and our loyalty program. 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 investing in our technology infrastructure to deliver a more seamless experience across our owned channels, better connect with customers, and support greater efficiency across our operations. During the third quarter, we completed the initial development of and began releasing our new app across the Android and iOS platforms. We expect to release a modernized website and enhanced mobile web experience by the end of 2025. While we are monitoring performance across these platforms, we are excited by the initial results, and we believe that the rollout of our new omnichannel platform will lead to a more streamlined ordering journey and simplify the overall experience for our customers. We anticipate completing the full rollout of our new omnichannel platform and retirement of legacy platforms by the end of 2026 and currently estimate that we will incur an additional $17 million to $22 million of accelerated depreciation expense during that period related to the expected retirement of certain technology assets currently in service. In the fourth quarter of 2024, we also enhanced 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. The lower redemption threshold has activated our members at higher rates to help drive transactions and order frequency. We will continue evolving our loyalty and digital experiences to build greater brand advocacy and activation amongst our most valuable customers. 29 • Evaluating our cost structure: As previously discussed, we have completed an internal review of our North American supply chain and have identified productivity 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. We expect to achieve at least $50 million in supply chain savings as a result of these efforts, and we currently believe that we will begin recognizing cost savings during 2026 which should benefit all of the restaurants in our system. We have also initiated a comprehensive review of our expense structure to streamline our organization, reduce non-customer facing spend, simplify our operating model, and better align our resources to support our transformation. We have identified at least $25 million of potential savings, exclusive of marketing spend, to be captured across fiscal years 2026 and 2027. The review of our cost structure is ongoing and is expected to be completed during the fourth quarter of 2025. • 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 third quarter, we opened 45 new restaurants systemwide, comprised of 18 restaurant openings in North America and 27 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. We also plan to accelerate our domestic refranchising program over the next two years, beginning with the sale of our majority ownership stake in a joint venture that currently operates 85 restaurants that we expect to close in the fourth quarter of 2025. Refranchising is a strategic action that we will continue to pursue across our Company-owned restaurants as it provides developing franchisees opportunities to expand their businesses and strengthens the long-term health of Papa Johns. 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 $35 million (inclusive of the $34.3 million incurred through the third quarter of 2025), the remainder of which we expect to be recognized in 2025. See “Note 9. Restructuring” of “Notes to Condensed Consolidated Financial Statements” for additional details. The Company is in the final stages of the International Transformation Plan, which is expected to be completed during 2025. Comparable sales for our International business have increased by 7.1% and 4.7% during the three and nine months ended September 28, 2025, which we believe is attributable to our transformation initiatives yielding operational improvement. Global Restaurant Sales and Unit Information “Comparable sales” represents sales for the same base of restaurants for the same fiscal periods. “Comparable sales growth (decline)” represents the change in year-over-year comparable sales. “Global system-wide restaurant sales” represents total restaurant sales for all Company-owned and franchised restaurants open during the comparable periods, and “Global system-wide restaurant sales growth (decline)” represents the change in global system-wide restaurant sales year-over-year. Comparable sales, Comparable sales growth (decline), Global system-wide restaurant sales and Global system-wide sales growth (decline) exclude franchisees for which we suspended corporate support. “Equivalent units” represents the number of restaurants open at the beginning of a given period, adjusted for restaurants opened, closed, acquired or sold during the period on a weighted average basis. We believe Domestic Company-owned, North America franchised, and International Comparable sales growth (decline) and Global system-wide restaurant sales information is useful in analyzing our results since our franchisees pay royalties and marketing fund contributions that are based on a percentage of franchise sales. Comparable sales and Global system-wide restaurant sales results for restaurants operating outside of the United States are reported on a constant dollar basis, which excludes the impact of foreign currency translation. Franchise sales also generate commissary revenue in the United States and in certain international markets. 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 30 impacted by swings in the external factor of foreign currency. Franchise restaurant sales are not included in the Company’s revenues. Three Months Ended Nine Months Ended Amounts below exclude the impact of foreign currency September 28, 2025 September 29, 2024 September 28, 2025 September 29, 2024 Comparable sales growth (decline): Domestic Company-owned restaurants (3.1)% (6.7)% (2.5)% (4.6)% North America franchised restaurants (2.6)% (5.3)% (1.3)% (3.4)% North America restaurants (2.7)% (5.6)% (1.5)% (3.6)% International restaurants 7.1% (2.8)% 4.7% (1.8)% Total comparable sales growth (decline) (0.2)% (4.9)% (0.0)% (3.2)% System-wide restaurant sales growth (decline): Domestic Company-owned restaurants (2.1)% (4.8)% (1.2)% (2.8)% North America franchised restaurants (0.8)% (3.8)% 1.1% (2.4)% North America restaurants (1.1)% (4.0)% 0.6% (2.5)% International restaurants 10.3% 0.0% 7.5% 2.2% Total global system-wide restaurant sales growth (decline) 1.8% (3.0)% 2.3% (1.4)% Restaurant Progression Three Months Ended Nine Months Ended September 28, 2025 September 29, 2024 September 28, 2025 September 29, 2024 North America Company-owned: Beginning of period 541 537 539 531 Opened 4 — 7 6 Closed — — (1) — End of period 545 537 545 537 North America franchised: Beginning of period 2,976 2,910 2,975 2,902 Opened 14 18 48 43 Closed (28) (11) (61) (28) End of period 2,962 2,917 2,962 2,917 International Company-owned: Beginning of period 13 33 13 117 Closed — — — (43) Refranchised — (20) — (61) End of period 13 13 13 13 International franchised: Beginning of period 2,459 2,403 2,503 2,356 Opened 27 36 82 115 Closed (12) (18) (111) (91) Refranchised — 20 — 61 End of period 2,474 2,441 2,474 2,441 Total restaurants – end of period 5,994 5,908 5,994 5,908 Trailing four quarters net restaurant growth 86 91 31 Results of Operations Financial Statement Updates 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 and nine months ended September 29, 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 prior-period comparative information has been recast. Revenues The following table sets forth the various components of Revenues from the Condensed Consolidated Statements of Operations: Three Months Ended Nine Months Ended Increase (Decrease) (In thousands) September 28, 2025 September 29, 2024 September 28, 2025 September 29, 2024 QTD YTD Revenues: Company-owned restaurant sales $ 168,421 $ 171,097 $ 521,291 $ 546,988 (1.6) % (4.7) % Franchise royalties and fees 47,051 45,830 143,409 139,535 2.7 % 2.8 % Commissary revenues 229,581 228,989 693,098 660,823 0.3 % 4.9 % Other revenues 21,424 19,521 68,317 60,866 9.7 % 12.2 % Advertising funds revenue 41,677 41,370 129,514 120,405 0.7 % 7.6 % Total revenues $ 508,154 $ 506,807 $ 1,555,629 $ 1,528,617 0.3 % 1.8 % The comparability of results between 2025 and 2024 is impacted by transactions that have changed the composition of restaurants in the UK during the periods presented. At the beginning of 2024, the Company operated 117 UK Company-owned restaurants. In the second and third quarters of 2024, the Company completed the closure of 43 Company-owned restaurants in the UK and refranchised 60 formerly Company-owned restaurants in the UK. After prior disposal of one mobile restaurant, the Company operated 13 UK Company-owned restaurants subsequent to July 1, 2024. These transactions impact the comparability of revenues and expenses from the International segment for the nine months ended September 28, 2025, as compared to the prior year comparable period. See “Note 9. Restructuring” for additional information on these transactions. Total revenues increased $1.3 million, or 0.3%, to $508.2 million for the three months ended September 28, 2025, and increased $27.0 million, or 1.8%, to $1.56 billion for the nine months ended September 28, 2025, as compared to the prior year comparable periods. Company-owned restaurant sales, which include sales from both Domestic and International Company-owned restaurants, decreased $2.7 million, or 1.6%, for the three months ended September 28, 2025, and decreased $25.7 million, or 4.7%, for the nine months ended September 28, 2025, as compared to the prior year comparable periods. The decrease for the three and nine months ended September 28, 2025, is partially due to a $3.5 million and $6.3 million decrease in revenue from our Domestic Company-owned restaurants, respectively, due primarily to lower comparable sales driven by lower transaction volumes, along with the refranchising of 15 restaurants in September 2024. Comparable sales for our Domestic Company-owned restaurants declined 3.1% and 2.5% for the three and nine months ended September 28, 2025, respectively. The decrease for the three months ended September 28, 2025 was partially offset by higher average ticket and an increase in International restaurants sales driven by improved performance at our Company-owned restaurants in the 32 UK. The decrease for the nine months ended September 28, 2025 was also due to a decline of $19.4 million in revenues from our Company-owned restaurants in the UK due to the transactions discussed above. Franchise royalties and fees, which include revenues generated from both North American and International franchisees, increased $1.2 million, or 2.7%, for the three months ended September 28, 2025 and increased $3.9 million, or 2.8%, for the nine months ended September 28, 2025, as compared to the prior year comparable periods. The increases were primarily due to a $1.3 million and $3.1 million increase from our International franchisees due to growth in International comparable sales of 7.1% and 4.7% for the three and nine months ended September 28, 2025, respectively. Royalties and fees from our North America franchisees grew by $0.1 million and $1.3 million or the three and nine months ended September 28, 2025, respectively, as an increase in franchise equivalent units of 2.6% and 2.8% for the three and nine months ended September 28, 2025, respectively were mostly offset by declines in comparable sales for our North America franchised restaurants of 2.6% and 1.3% for the three and nine months ended September 28, 2025, respectively. North America franchise restaurant sales are not included in Company revenues; however, our North America franchise royalties are derived from these sales. North America franchise restaurant sales decreased to $714.6 million, or 0.8% excluding the impact of foreign currency fluctuations, for the three months ended September 28, 2025. North America franchise restaurant sales increased to $2.23 billion, or 1.1% excluding the impact of foreign currency fluctuations, for the nine months ended September 28, 2025 as compared to the prior year comparable period. The primary drivers of the changes in franchise restaurant sales were the North America equivalent unit growth noted above and restaurant growth, offset by a decrease in comparable sales of 2.6% and 1.3% for the three and nine months ended September 28, 2025, respectively. International franchise restaurant sales are also not included in Company revenues; however, our international royalty revenue is derived from these sales. International franchise restaurant sales increased to $328.3 million, or 10.1% excluding the impact of foreign currency fluctuations, and increased to $950.4 million, or 10.0% excluding the impact of foreign currency fluctuations, for the three and nine months ended September 28, 2025, respectively. As mentioned above, the UK restaurant closures and refranchising transactions in the second and third quarters of 2024 impacted the comparability of International franchise restaurant sales earned as compared to the prior year comparable periods. Excluding the impact of the UK restaurant changes and foreign currency fluctuations, International franchise restaurant sales would have increased $28.6 million, or 9.6%, and increased $65.6 million, or 7.4%, for the three and nine months ended September 28, 2025, respectively. The increases were due to growth in International comparable sales of 7.1% and 4.7% for the three and nine months ended September 28, 2025, respectively, as well as restaurant growth. Commissary revenues, which includes sales from our North American and International QC Centers, increased $0.6 million or 0.3% for the three months ended September 28, 2025 and increased $32.3 million or 4.9% for the nine months ended September 28, 2025 as compared to the prior year comparable period. The increase for the three and nine months ended September 28, 2025 was primarily due to higher prices and higher transaction volumes. The increase for the three months ended September 28, 2025 was offset by commodity deflation and changes in product mix as compared to the prior year comparable period . Other revenues, which primarily includes revenues derived from our online and mobile ordering business, increased $1.9 million, or 9.7%, and increased $7.5 million, or 12.2%, for the three and nine months ended September 28, 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 $0.3 million, or 0.7%, and increased $9.1 million, or 7.6%, for the three and nine months ended September 28, 2025, respectively, as compared to the prior year comparable periods. The increases were primarily driven by global system-wide restaurant sales growth of 1.8% and 2.3% for the three and nine months ended September 28, 2025, respectively, as well as increases to contribution percentages in certain International markets. The increase for the nine months ended September 28, 2025 was also driven by increases in the PJMF contribution percentage, which took effect in the second quarter of 2024. 33 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 Nine Months Ended Increase (Decrease) September 28, 2025 September 29, 2024 September 28, 2025 September 29, 2024 QTD YTD Costs and expenses: Cost of sales $ 369,130 $ 370,079 $ 1,107,342 $ 1,100,783 (0.3) % 0.6 % General and administrative expenses 56,478 12,883 191,763 127,806 338.4 % 50.0 % Depreciation and amortization 24,914 17,260 62,076 52,528 44.3 % 18.2 % Advertising funds expense 41,461 41,356 129,822 120,327 0.3 % 7.9 % Total costs and expenses $ 491,983 $ 441,578 $ 1,491,003 $ 1,401,444 11.4 % 6.4 % Total costs and expenses were approximately $492.0 million, or 96.8% of total revenues, and $1.49 billion, or 95.8% of total revenues, for the three and nine months ended September 28, 2025, respectively, as compared to $441.6 million, or 87.1% of total revenues, and $1.40 billion, or 91.7% of total revenues in the prior year comparable periods. The increases in costs and expenses as a percentage of total revenues were primarily due to a pre-tax gain of $41.3 million associated with the sale of two QC Center properties in the prior year third quarter. 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, local advertising costs, and insurance expense. Cost of sales were $369.1 million and $1.11 billion, respectively, for the three and nine months ended September 28, 2025, a decrease of $0.9 million and an increase of $6.6 million, respectively, from the prior year comparable periods. Costs of sales by segment for the three and nine months ended September 28, 2025 and September 29, 2024 were as follows: Three Months Ended Nine Months Ended Increase (Decrease) (In thousands) September 28, 2025 September 29, 2024 September 28, 2025 September 29, 2024 QTD YTD Domestic Company-owned restaurants (a) $ 151,160 $ 155,332 $ 462,649 $ 457,270 $ (4,172) $ 5,379 North America commissaries (a) 234,448 237,293 707,367 688,092 (2,845) 19,275 International (a) 24,044 21,819 68,214 82,883 2,225 (14,669) Total cost of sales by segment (b) 409,652 414,444 1,238,230 1,228,245 (4,792) 9,985 All other (c) 14,928 12,076 40,109 37,503 2,852 2,606 Intersegment cost of sales (55,450) (56,441) (170,997) (164,965) 991 (6,032) Total cost of sales $ 369,130 $ 370,079 $ 1,107,342 $ 1,100,783 $ (949) $ 6,559 ___________________________________ (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 12. Segment Information”). (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. For the three months ended September 28, 2025, the decreases in cost of sales were due primarily to lower transaction volumes for our Domestic Company-owned restaurants and commodity deflation for our Domestic QC Centers. These 34 decreases were partially offset by higher sales for our Company-owned restaurants in the UK as discussed above and higher transaction volumes for our Domestic QC centers compared to the prior year comparable period. For the nine months ended September 28, 2025, the increases in cost of sales were due primarily to higher transaction volumes for our Domestic QC Centers, higher food costs for our Domestic Company-owned restaurants, and higher local advertising costs for our Domestic Company-owned restaurants. These increases were partially offset by 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. General and administrative expenses (“G&A”) expenses were $56.5 million, or 11.1% of revenues, and $191.8 million or 12.3% of revenues, for the three and nine months ended September 28, 2025, respectively, as compared to $12.9 million, or 2.5% of revenues, and $127.8 million, or 8.4% of revenues for the prior year comparable periods, respectively. G&A expenses consisted of the following: Three Months Ended Nine Months Ended (In thousands) September 28, 2025 September 29, 2024 September 28, 2025 September 29, 2024 Administrative and other general expenses, net (a) $ 54,443 $ 48,815 $ 180,620 $ 144,086 Gain on sale of QC Center properties (b) — (41,289) — (41,289) International restructuring costs (c) 231 3,862 4,841 19,514 Other costs (d) 1,804 1,495 6,302 5,495 General and administrative expenses $ 56,478 $ 12,883 $ 191,763 $ 127,806 ___________________________________ (a) Administrative and other general expenses, net increased by $5.6 million and $36.5 million, respectively, for the three and nine months ended September 28, 2025. The increases for the three and nine month periods were primarily due to incremental marketing investments of $4.4 million and $17.1 million and increases in management incentive compensation of $2.4 million and $12.0 million, respectively, due primarily to lower comparative-period equity compensation costs related to leadership changes during 2024. The nine months ended September 28, 2025 were also impacted by expenses resulting from our bi-annual franchise operating conference held in the first quarter of 2025. (b) Represents pre-tax gain on sale, net of transaction costs, realized upon the sale of our Texas and Florida QC Center properties during the third quarter of 2024. Refer to Note 22 of the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 29, 2024 for additional information. (c) Represents costs associated with the Company’s International Restructuring plan. See “Note 9. Restructuring”. (d) For the three and nine months ended September 28, 2025, other costs is comprised of the following: i. 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; ii. Costs associated with project-based strategic initiatives that are not related to our ongoing operations as well as transaction costs incurred in connection with the anticipated sale of our 70% interest in a joint venture operating 85 restaurants (refer to “Note 11. Divestitures” for further information), of which approximately $0.1 million was attributable to noncontrolling interests, and; iii. Costs incurred, net of anticipated insurance recoveries, arising from tornadoes that struck the Texas QC Center as well as the restaurant support center and QC Center in Louisville, Kentucky. For the three and nine months ended September 29, 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 $24.9 million, or 4.9% of total revenues, and $62.1 million, or 4.0% of total revenues for the three and nine months ended September 28, 2025, respectively, as compared to $17.3 million, or 3.4% of total revenues and $52.5 million or 3.4% of total revenues for the prior year comparable periods, respectively. During the third quarter of 2025, we completed initial development and began releasing our new omnichannel experience across the Android and iOS platforms. Our refreshed website is currently expected to be released by the end of 2025, and the retirement of certain technology assets currently in service is expected to begin shortly thereafter. As a result, we began accelerating depreciation of legacy omnichannel and other technology assets during the third quarter of 2025 to align with the shortened estimated useful lives of the legacy assets. We recognized $6.1 million in additional depreciation expense during the three months ended September 28, 2025 related to the accelerated depreciation of these assets. We currently estimate that we will incur an additional $17 million to $22 million of accelerated depreciation expense by the end of 2026 35 as we continue to monitor performance, finalize the roll out of our new omnichannel experience across digital channels, and retire existing legacy technology assets. Advertising funds expenses were $41.5 million or 99.5% of advertising revenues and $129.8 million or 100.2% of advertising revenues for the three and nine months ended September 28, 2025, respectively, as compared to $41.4 million or 100.0% of advertising revenues and $120.3 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. The increase for the nine months ended September 28, 2025 was primarily due to higher advertising spend resulting from the previously discussed increase in contributions to the national marketing fund. Advertising funds expense also contains expenses incurred through our international marketing funds to support our International business, which may lead to Advertising funds expense being less than or in excess of Advertising funds revenue due to timing differences. 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 adjustments, referred to as adjusted EBITDA. See “Note 12. Segment Information” for further information regarding the Company’s segments. Adjusted EBITDA for each of our reportable segments is summarized in the table below. Three Months Ended Nine Months Ended Increase (Decrease) (In thousands) September 28, 2025 September 29, 2024 September 28, 2025 September 29, 2024 QTD YTD Domestic Company-owned restaurants $ 3,942 $ 4,354 $ 18,838 $ 32,768 $ (412) $ (13,930) North America franchising 25,506 26,661 79,596 82,376 (1,155) (2,780) North America commissaries 19,202 16,686 58,205 48,904 2,516 9,301 International 5,300 4,051 16,320 11,958 1,249 4,362 Domestic Company-owned restaurants decreased $0.4 million for the three months ended September 28, 2025 primarily due to lower comparable sales. This decrease was partially offset by the impact of refranchising 15 restaurants during the third quarter of 2024. Domestic Company-owned restaurants decreased $13.9 million for the nine months ended September 28, 2025 primarily due to higher food costs, higher local advertising costs, and lower comparable sales. Comparable sales for the three and nine month periods declined by 3.1% and 2.5%, respectively. North America franchising decreased $1.2 million and $2.8 million for the three and nine months ended September 28, 2025, respectively, primarily due to higher incentive compensation allocated to the segment compared to the prior year periods. Decreases for the nine months ended September 28, 2025 were partially offset by higher royalty and franchise fee revenue as discussed above. North America commissaries increased $2.5 million and $9.3 million for the three and nine months ended September 28, 2025, respectively. For the three months ended September 28, 2025, the increases were due primarily to commodity deflation and higher transaction volumes for our Domestic QC Centers. For the nine months ended September 28, 2025, the increases were due primarily to higher prices and higher transaction volumes mentioned previously. International increased $1.2 million and $4.4 million for the three and nine months ended September 28, 2025, respectively. The increase was primarily due to operating losses attributable to the UK Company-owned restaurants during the prior year comparable periods, partially offset by increases in advertising spend in 2025. 36 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 Nine Months Ended Increase (Decrease) (In thousands, except per share amounts) September 28, 2025 September 29, 2024 September 28, 2025 September 29, 2024 QTD YTD Operating income $ 16,171 $ 65,229 $ 64,626 $ 127,173 $ (49,058) $ (62,547) Net interest expense (9,945) (10,629) (30,608) (32,588) (684) (1,980) Income before income taxes 6,226 54,600 34,018 94,585 (48,374) (60,567) Income tax expense (a) (1,753) (12,812) (10,531) (25,347) (11,059) (14,816) Net income 4,473 41,788 23,487 69,238 (37,315) (45,751) Net (income) loss attributable to noncontrolling interests 234 20 (27) (551) (214) (524) Net income attributable to the Company $ 4,707 $ 41,808 $ 23,460 $ 68,687 $ (37,101) $ (45,227) Basic earnings per common share $ 0.14 $ 1.28 $ 0.69 $ 2.10 $ (1.14) $ (1.41) Diluted earnings per common share $ 0.13 $ 1.27 $ 0.69 $ 2.09 $ (1.14) $ (1.40) (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 $0.7 million and $2.0 million for the three and nine months ended September 28, 2025, respectively. The decrease for the three and nine months ended September 28, 2025 was primarily due to lower average interest rates during the respective periods. Income Tax Expense Our effective income tax rates were 28.2% and 31.0% for the three and nine months ended September 28, 2025, respectively, as compared to an income tax rate of 23.5% and 26.8% for the prior year comparable periods, respectively. The higher effective tax rate for both periods was primarily due to lower pretax book income and larger tax shortfall generated by vesting of restricted shares through the third quarter of 2025. Three Months Ended Nine Months Ended (Dollars in thousands) September 28, 2025 September 29, 2024 September 28, 2025 September 29, 2024 Income before income taxes $ 6,226 $ 54,600 $ 34,018 $ 94,585 Income tax expense $ (1,753) $ (12,812) $ (10,531) $ (25,347) Effective tax rate 28.2 % 23.5 % 31.0 % 26.8 % Net Income Attributable to Noncontrolling Interests Net income included losses of $0.2 million and income of less than $0.1 million, respectively, attributable to noncontrolling interests for the three and nine months ended September 28, 2025 as compared to losses of less than $0.1 million and income of $0.6 million, respectively, for the prior year comparable periods. Diluted Earnings Per Common Share Diluted earnings per common share were $0.13 and $0.69 for the three and nine months ended September 28, 2025, respectively, as compared to $1.27 and $2.09 for the prior year comparable periods, respectively, representing a decrease of $1.14 and $1.40, respectively. Adjusted diluted earnings per common share, a non-GAAP measure, was $0.32 and $1.09 for the three and nine months ended September 28, 2025, respectively, as compared to adjusted diluted earnings per 37 common share of $0.43 and $1.71 for the prior year comparable periods, respectively, representing a decrease of $0.11 and $0.63, respectively. See “Non-GAAP Measures” for additional information. 38 Non-GAAP Measures In addition to the results provided in accordance with U.S. GAAP, we provide certain non-GAAP measures, which present results on an adjusted basis. These are supplemental measures of performance that are not required by or presented in accordance with U.S. GAAP and include the following: adjusted EBITDA, adjusted net income attributable to common shareholders and adjusted diluted earnings per common share. We believe that our non-GAAP financial measures enable investors to assess the operating performance of our business relative to our performance based on U.S. GAAP results and relative to other companies. We believe that the disclosure of these non-GAAP measures is useful to investors as they reflect metrics that our management team and Board utilize to evaluate our operating performance, allocate resources and administer employee incentive plans. The most directly comparable U.S. GAAP measures to adjusted EBITDA, adjusted net income attributable to common shareholders and adjusted diluted earnings per common share are net income, net income attributable to common shareholders and diluted earnings per common share, respectively. These non-GAAP measures should not be construed as a substitute for or a better indicator of the Company’s performance than the Company’s U.S. GAAP results. The table below reconciles our GAAP financial results to our non-GAAP financial measures. Three Months Ended Nine Months Ended (In thousands, except per share amounts) September 28, 2025 September 29, 2024 September 28, 2025 September 29, 2024 Net income $ 4,473 $ 41,788 $ 23,487 $ 69,238 Income tax expense 1,753 12,812 10,531 25,347 Net interest expense 9,945 10,629 30,608 32,588 Depreciation and amortization 24,914 17,260 62,076 52,528 Stock-based compensation expense 4,639 3,358 12,132 5,903 International restructuring costs (a) 231 3,876 4,862 19,604 Other costs (b) 1,804 1,495 6,302 5,495 Gain on sale of QC Center properties (c) — (41,289) — (41,289) Adjusted EBITDA $ 47,759 $ 49,929 $ 149,998 $ 169,414 Net income attributable to common shareholders $ 4,447 $ 41,808 $ 22,742 $ 68,687 International restructuring costs (a) 231 3,862 4,841 19,514 Accelerated software depreciation (d) 6,091 — 6,091 — Other costs (b) 1,659 1,495 6,157 5,495 Gain on sale of QC Center properties (c) — (41,289) — (41,289) Tax effect of adjustments (e) (1,812) 8,121 (3,879) 3,679 Adjusted net income attributable to common shareholders $ 10,616 $ 13,997 $ 35,952 $ 56,086 Diluted earnings per common share $ 0.13 $ 1.27 $ 0.69 $ 2.09 International restructuring costs (a) 0.01 0.12 0.15 0.59 Accelerated software depreciation (d) 0.18 — 0.18 — Other costs (b) 0.05 0.04 0.19 0.17 Gain on sale of QC Center properties (c) — (1.25) — (1.25) Tax effect of adjustments (e) (0.05) 0.25 (0.12) 0.11 Adjusted diluted earnings per common share $ 0.32 $ 0.43 $ 1.09 $ 1.71 ` 39 ___________________________________ (a) Represents costs associated with the Company’s International Transformation Plan. Refer to “Note 9. Restructuring” for additional details. (b) For the three and nine months ended September 28, 2025, other costs is comprised of the following: i. 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; ii. Costs associated with project-based strategic initiatives that are not related to our ongoing operations as well as transaction costs incurred in connection with the anticipated sale of our 70% interest in a joint venture operating 85 restaurants (refer to “Note 11. Divestitures” for further information), of which approximately $0.1 million was attributable to noncontrolling interests, and; iii. Costs incurred, net of anticipated insurance recoveries, arising from tornadoes that struck the Texas QC Center as well as the restaurant support center and QC Center in Louisville, Kentucky. For the three and nine months ended September 29, 2024, represents a non-cash impairment charge related to fixed and intangible assets related to certain Domestic restaurants. Refer to “Note 11. Divestitures” of the “Notes to Condensed Consolidated Financial Statements” for further details. (c) Represents pre-tax gain on sale, net of transaction costs, realized upon the August 2, 2024 completion of the sale of our Texas and Florida QC Center properties. Refer to “Note 11. Divestitures” for additional details. (d) Represents incremental depreciation expense related to the shortened useful life of legacy capitalized software assets due to the ongoing development and deployment of our new omnichannel platforms and other technology improvements. (e) The tax effect on non-GAAP adjustments was calculated by applying the marginal tax rates of 22.7% for the three and nine months ended September 28, 2025 and 22.6% for the three and nine months ended September 29, 2024. In addition, we present free cash flow in this report, which is a non-GAAP measure. Please see “Liquidity and Capital Resources – Free Cash Flow” for a discussion of why we believe free cash flow provides useful information regarding our financial condition and results of operations, and a reconciliation of free cash flow to the most directly comparable U.S. GAAP measure. 40 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 ( 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”). See “Note 8. Debt” for additional detail regarding the Second Amended and Restated Credit Agreement. Our principal uses of cash are operating expenses, capital expenditures, and returning value to our shareholders in the form of cash dividends and share repurchases. Our capital priorities are: • investing for growth • maintaining a strong balance sheet, and • returning capital to shareholders 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. Cash Flows The table below summarizes our cash flows for the nine months ended September 28, 2025 and September 29, 2024 (in thousands): Nine Months Ended September 28, 2025 September 29, 2024 Total cash provided by (used in): Operating activities $ 106,192 $ 55,884 Investing activities (37,618) 7,448 Financing activities (68,208) (86,584) Effect of exchange rate changes on cash and cash equivalents 651 215 Change in cash and cash equivalents $ 1,017 $ (23,037) Operating Activities Total cash provided by operating activities was $106.2 million for the nine months ended September 28, 2025 compared to $55.9 million for the corresponding period of 2024. The increase of $50.3 million primarily reflects a favorable impact from timing of collections and marketing spend within our advertising fund, a reduction in cash taxes paid, lower spending related to our International Transformation Plan, and favorable changes in working capital accounts compared to the prior period. Investing Activities Total cash used in investing activities was $37.6 million for the nine months ended September 28, 2025 compared to cash provided by investing activities of $7.4 million for the same period in 2024. Net cash used in investing activities during the nine months ended September 28, 2025 primarily reflects $52.1 million in capital expenditures, which includes $5.1 million of additional capital expenditures related to natural disasters, partially offset by $3.3 million of related insurance proceeds. Net cash provided by investing activities for the nine months ended September 29, 2024 includes net proceeds of $46.7 million from the sale of two Domestic QC Centers in the third quarter of 2024, offset by capital expenditures of $46.9 million. 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, 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 also includes an estimated $10 million to 41 $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 $68.2 million for the nine months ended September 28, 2025 compared to $86.6 million for the same period in 2024. During the first nine months of 2025, the principal financing outflows were related to dividend payments of $45.8 million and payments related to financing leases of $7.5 million. Cash used in financing activities also reflects the impact of net repayments of $13.3 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. This refinancing 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 nine months of 2024, the primary uses of cash for financing activities were $45.4 million in dividend payments, net repayments of $31.6 million from the PJI Revolving Facility and the PJMF revolving line of credit (the “PJMF Revolving Facility”), $3.5 million in tax payments on equity award issuances, and $6.8 million in payments related to financing leases. There were no share repurchases in the first nine months of 2025 or 2024. Debt Our outstanding debt as of September 28, 2025 was $736.7 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 $136.7 million outstanding under the PJI Revolving Facility. Remaining availability under the PJI Revolving Facility was approximately $463.3 million as of September 28, 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 “Previous Credit Agreement”). 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; (2) a minimum ratio of EBITDA plus consolidated rental expense to consolidated interest expense plus consolidated rental expense of 2.00 to 1.00; and (3) applicable only during the time period beginning 91 days prior to the maturity of the Company’s existing senior notes due 2029 (the “Senior Notes”) and until such Senior Notes are repaid in full or the maturity thereof is extended at least 91 days after the latest maturity date applicable to the Credit Facilities, liquidity of not less than $150.0 million. 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 September 28, 2025 Leverage ratio Not to exceed 5.25 to 1.0 3.4 to 1.0 Interest coverage ratio Not less than 2.00 to 1.0 3.1 to 1.0 Our leverage ratio is defined as outstanding debt divided by Consolidated EBITDA (as defined in the Second Amended and Restated Credit Agreement) for the most recent four fiscal quarters. 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 September 28, 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: incur additional indebtedness and guarantee indebtedness; pay dividends or make other distributions or repurchase or redeem our capital stock; prepay, redeem or repurchase certain debt; issue certain preferred stock or similar equity securities; make loans and investments; sell assets; 42 incur liens; enter into transactions with affiliates; enter into agreements restricting our subsidiaries’ ability to pay dividends; and consolidate, merge or sell all or substantially all of our assets. The PJMF Revolving Facility consists of a $30.0 million revolving line of credit pursuant to a Revolving Loan Agreement, dated September 30, 2015 and most recently amended on September 30, 2025. We did not have any borrowings under the PJMF Revolving Facility as of September 28, 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. Refer to Note 12 of the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 29, 2024 for additional information. Share Repurchases 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 and nine months ended September 28, 2025 or September 29, 2024. Approximately $90.2 million remained available under the Company’s share repurchase program as of September 28, 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. Dividends The Company paid aggregate cash dividends to common stockholders of $45.8 million ($1.38 per share) and $45.4 million ($1.38 per share) for the nine months ended September 28, 2025 and September 29, 2024, respectively. On October 29, 2025, our Board of Directors declared a fourth quarter dividend of $0.46 per common share (approximately $15.4 million in the aggregate), which will be paid on November 28, 2025 to stockholders of record as of the close of business on November 17, 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 which includes changes to the U.S. corporate tax system, was signed into U.S. law. 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, 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. Free cash flow is not a term defined by GAAP, and as a result, our measure of free cash flow might not be comparable to similarly titled measures used by other companies. 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 nine month periods of 2025 and 2024 (in thousands): Nine Months Ended September 28, 2025 September 29, 2024 Net cash provided by operating activities $ 106,192 $ 55,884 Purchases of property and equipment (47,002) (46,931) Free cash flow $ 59,190 $ 8,953 43 Cash Requirements There have been no material changes in our cash requirements other than in the ordinary course of business since the end of 2024. 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. 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. Expense control measures are also deployed to offset higher costs when possible. Food costs, in particular the cost of cheese, are managed to an extent by pricing agreements with suppliers and forward purchase contracts we enter into, as discussed in “Item 3. Quantitative and Qualitative Disclosures About Market Risk.” While we continue to monitor the impact of current and potential tariffs and assess our ability to manage any impacts, we currently do not believe that tariffs in the form currently proposed or enacted by the United States government would have a significant negative impact to our domestic business, as a substantial proportion of our ingredients and supply items are sourced domestically. However, the extent to which tariffs may increase the price of other goods and services and how they may alter discretionary spending patterns by our customers or impact our franchisees’ profitability is currently unknown and may adversely affect the Company’s results of operations and/or financial position. Forward-Looking Statements Certain matters discussed in this Quarterly Report on Form 10-Q and other Company communications that are not statements of historical fact constitute forward-looking statements within the meaning of the federal securities laws. 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, franchisee profitability, 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. Therefore, actual outcomes and results may differ materially from those matters expressed or implied in such forward-looking statements. The risks, uncertainties and assumptions that are involved in our forward-looking statements include, but are not limited to: • the ability of the Company to manage challenging macroeconomic conditions in the United States and internationally; • the ability of the Company to retain key management and manage staffing and labor shortages at Company and/or franchised restaurants and our Quality Control Centers; • increases in labor costs, food costs or sustained higher other operating costs, including as a result of supply chain disruption, inflation and related impacts, increased tariffs or other trade barriers, immigration policies, or climate change; • the potential for delayed new restaurant openings, both domestically and internationally; 44 • the increased risk of phishing, ransomware and other cyber-attacks; • risks to the global economy and our business related to geopolitical conflicts, including those in Ukraine and the Middle East; • increased costs for branding initiatives and launching new advertising and marketing campaigns and promotions to boost consumer sentiment and sales trends, and the risk that such initiatives will not be effective or that our franchisees will not execute them properly or be aligned with such initiatives; • risks related to a prolonged US government shutdown and/or possible economic slowdown that could, among other things, reduce consumer spending or demand and result in changing consumer practices; • risks related to social media, including publicity adversely and rapidly impacting our brand and reputation; • aggressive changes in pricing or other marketing or promotional strategies by competitors, which may adversely affect sales and profitability; and new product and concept developments by food industry competitors; • changes in consumer preferences or consumer buying habits, including the growing popularity of delivery aggregators, as well as changes in general economic conditions or other factors that may affect consumer confidence and discretionary spending, including higher unemployment; • the adverse impact on the Company or our results caused by global health concerns, product recalls, food quality or safety issues, incidences of foodborne illness, food contamination and other general public health concerns about our Company-owned or franchised restaurants or others in the restaurant industry; • the effectiveness of our technology investments and changes in unit-level operations; • the ability of the Company and its franchisees to meet planned growth targets and operate new and existing restaurants profitably, including difficulties finding qualified franchisees, restaurant level employees or suitable sites; • increases in insurance claims and related costs for programs funded by the Company up to certain retention limits, including medical, owned and non-owned vehicles, workers’ compensation, general liability and property; • disruption of our supply chain or commissary operations which could be caused by our sole source of supply of mozzarella cheese, desserts, garlic cups or limited source of suppliers for other key ingredients or more generally due to weather, natural disasters including drought, disease, or geopolitical or other disruptions beyond our control; • increased risks associated with our International operations, including economic and political conditions, instability or uncertainty in our international markets, especially emerging markets, fluctuations in currency exchange rates, difficulty in meeting planned sales targets, regulatory changes, increased tariffs and other trade barriers, and new restaurant growth; • the impact of current or future claims and litigation and our ability to comply with current, proposed or future legislation that could impact our business; • risks related to our indebtedness and borrowing costs, including prolonged higher interest rates, and the current state of the credit markets; • the Company’s ability to continue to pay dividends to stockholders based upon profitability, cash flows and capital adequacy if restaurant sales and operating results decline; • our ability to effectively operate and improve the performance of Company-owned restaurants; • disruption of critical business or information technology systems, or those of our suppliers, and risks associated with systems failures and data privacy and cybersecurity incidents, including theft of confidential Company, employee and customer information, including payment cards; and • changes in Federal or state income, general and other tax laws, rules and regulations and changes in generally accepted accounting principles. These and other risk factors are discussed in detail in “Part I. Item 1A. – Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 29, 2024. We undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise, except as required by law.