What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-02 compared with 2023-05-04 · 112 added, 207 removed, 168 unchanged (66% of the section changed)

4 unchanged sentences

“believe,” “expect,” “anticipate,” “estimate,” “intends,” “opinion,” “potential” and similar expressions identify forward-looking statements.

Forward-looking statements in this report include, without limitation, statements relating to our business

objectives, our customers and franchisees, our liquidity and capital resources, and the impact of our historical and potential business strategies on our business, financial condition, and operating results.

Our actual results could differ

materially from our expectations.

Further information concerning our business, including additional factors that could cause actual results to differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q,

are set forth in our Annual Report on Form 10-K for the year ended June 26, 2022.

Forward-looking statements in this report include, without limitation, statements relating to our

business objectives, our customers and franchisees, our liquidity and capital resources, and the impact of our historical and potential business strategies on our business, financial condition, and operating results.

Our actual results could

differ materially from our expectations.

10-Q, are set forth in our Annual Report on Form 10-K for the year ended June 25, 2023.

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

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24, 2023, franchised and licensed units consisted of the following:

Three Months Ended March 26, 2023

(in thousands, except unit data)

Domestic Franchised/Licensed

International Franchised

Nine Months Ended March 26, 2023

Three Months Ended September 24, 2023

(in thousands, except unit data)

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The international units were located in seven foreign countries.

Basic net income per share decreased $0.01 per share to $0.02 per share for the three months ended March 26, 2023, compared to the comparable period in the prior fiscal year.

Company had net income of $0.3 million for the three months ended March 26, 2023 compared to net income of $0.5 million in the comparable period in the prior fiscal year, on revenues of $3.0 million for the three months ended March 26, 2023

Basic net income per share increased $0.01 per share to $0.03 per share for the three months ended September 24, 2023, compared to the comparable period in the prior fiscal year.

The Company had net income of $0.4 million for the three months ended September 24, 2023 compared to net income of $0.3 million in the comparable period in the prior fiscal year, on revenues of $3.1 million for the three months ended September

24, 2023 compared to $3.0 million in the comparable period in the prior fiscal year.

The increase in revenue was primarily due to increases in franchise royalties and advertising fund contributions.

The $0.2 million decrease in net income for the three

months ended March 26, 2023, compared to the comparable period of the prior year was primarily the result of a $0.1 million increase in income tax expense.

Basic net income per share decreased $0.01 per share to $0.06 per share for the nine months ended March 26, 2023, compared to the comparable period in the prior fiscal year.

Company had net income of $1.0 million for the nine months ended March 26, 2023 compared to net income of $1.2 million in the comparable period in the prior fiscal year, on revenues of $8.8 million for the nine months ended March 26, 2023 compared

to $7.9 million in the comparable period in the prior fiscal year.

The increase in revenue was primarily due to increases in franchise royalties, supplier and distribution incentives, and advertising fund contributions.

The $0.2 million decrease in

net income for the nine months ended March 26, 2023 compared to the comparable period of the prior year was primarily the result of the $1.0 million increase in revenues partially offset by a $0.9 million increase in expenses and a $0.3 million

increase in income tax expense.

The increase in revenue was primarily due to increases in default and closed store revenues, franchise royalties, and supplier and distributor incentives.

COVID-19 Pandemic

On March 11, 2020, the World Health Organization declared the outbreak of novel coronavirus (COVID-19) as a pandemic, and the disease spread rapidly throughout the United States and

On March 11, 2020, the World Health Organization declared the outbreak of novel coronavirus (COVID-19) as a pandemic, and the disease spread rapidly throughout the United States and the world.

Federal, state, and local responses to the COVID-19 pandemic, as well as our internal efforts to protect customers, franchisees, and employees, severely disrupted our business operations.

Further, the COVID-19 pandemic precipitated

significant job losses and a national economic downturn that impacted the demand for restaurant food service.

Further, the COVID-19 pandemic precipitated significant

job losses and a national economic downturn that impacted the demand for restaurant food service.

Although most of our domestic restaurants continued to operate under these conditions, we have experienced temporary closures from time to time during the pandemic.

During much of

the COVID-19 pandemic, we experienced dramatically reduced aggregate in-store retail sales at Buffet Units and Pie Five Units, modestly offset by increased aggregate carry-out and delivery sales.

The decreased aggregate retail sales correspondingly

decreased supplier rebates and franchise royalties payable to the Company.

During much of the COVID-19

pandemic, we experienced dramatically reduced aggregate in-store retail sales at Buffet Units and Pie Five Units, modestly offset by increased aggregate carry-out and delivery sales.

The decreased aggregate retail sales correspondingly decreased

supplier rebates and franchise royalties payable to the Company.

In most cases, in-store dining has now resumed subject to seating capacity limitations, social distancing protocols, and/or enhanced cleaning and disinfecting practices.

result, the adverse impacts of the COVID-19 pandemic have diminished in recent periods.

Nonetheless, an outbreak or perceived outbreak of COVID-19 connected to restaurant dining could cause negative publicity directed at any of our brands and cause

customers to avoid our restaurants.

We cannot predict how long the pandemic will continue or whether it will recur, what additional restrictions may be enacted, if individuals will be comfortable frequenting our Buffet Units and Pie Five Units, or

to what extent off-premises will continue.

Any of these changes could materially adversely affect the Company’s future financial performance.

However, the ultimate impact of COVID-19 on our future results of operations and liquidity cannot

presently be predicted.

As a result, the adverse

impacts of the COVID-19 pandemic have diminished in recent periods.

Nonetheless, an outbreak or perceived outbreak of COVID-19 connected to restaurant dining could cause negative publicity directed at any of our brands and cause customers to

avoid our restaurants.

Therefore, despite the official end of the pandemic, the ultimate impact of COVID-19 on our future results of operations and liquidity cannot presently be predicted.

Non-GAAP Financial Measures and Other Terms

The Company’s financial statements are prepared in accordance with United States generally accepted accounting principles (“GAAP”).

However, the Company also presents and discusses

certain non-GAAP financial measures that it believes are useful to investors as measures of operating performance.

Management may also use such non-GAAP financial measures in evaluating the effectiveness of business strategies and for planning and

budgeting purposes.

However, the Company also presents and

discusses certain non-GAAP financial measures that it believes are useful to investors as measures of operating performance.

Management may also use such non-GAAP financial measures in evaluating the effectiveness of business strategies and for

planning and budgeting purposes.

However, these non-GAAP financial measures should not be viewed as an alternative or substitute for the results reflected in the Company’s GAAP financial statements.

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“Retail sales” represents the restaurant sales reported by our franchisees and Company-owned restaurants, which may be segmented by brand or domestic/international locations.

“System-wide retail sales” represents combined retail sales for franchisee and Company-owned restaurants for a specified brand.

“Comparable store retail sales” includes the retail sales for restaurants that have been open for at least 18 months as of the end of the reporting period.

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“Average weekly sales” for a specified period is calculated as total retail sales (excluding partial weeks) divided by store weeks in the period.

“Restaurant operating cash flow” represents the pre-tax income earned by Company-owned restaurants before (1) allocated marketing and advertising expenses, (2) depreciation and amortization, (3) impairment and

other lease charges, and (4) non-operating store costs.

“Non-operating store costs” represent gain or loss on asset disposal, store closure expenses, lease termination expenses and expenses related to abandoned store sites.

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EBITDA and Adjusted EBITDA

Adjusted EBITDA remained relatively stable at $0.6 million for the fiscal quarter ended March 26, 2023 compared to the same period of the prior fiscal year.

Year-to-date Adjusted

EBITDA increased $0.1 million compared to the same period of the prior fiscal year.

The following table sets forth a reconciliation of net income to EBITDA and Adjusted EBITDA for the periods shown (in thousands):

Adjusted EBITDA for the fiscal quarter ended September 24, 2023 increased $0.1 million compared to the same period of the prior fiscal year.

The following table sets forth a

reconciliation of net income to EBITDA and Adjusted EBITDA for the periods shown (in thousands):

RAVE RESTAURANT GROUP, INC.

2 unchanged sentences

Three Months Ended

Nine Months Ended

March 26, 2023

March 27, 2022

March 26, 2023

March 27, 2022

September 24, 2023

September 25, 2022

Interest expense

3 unchanged sentences

Franchisee default and closed store revenue

Closed and non-operating store costs

Adjusted EBITDA

2 unchanged sentences

Three Months Ended

Nine Months Ended

March 26, 2023

March 27, 2022

March 26, 2023

March 27, 2022

September 24, 2023

September 25, 2022

Pizza Inn Retail Sales - Total Domestic Units

(in thousands, except unit data)

Domestic Units

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Total Domestic Units

Pizza Inn total domestic retail sales increased by $3.5 million, or 15.6%, for the three months ended March 26, 2023 when compared to the same period of the prior year.

in domestic retail sales was primarily the result of the diminished impact of COVID-19 and increased customer engagement.

Pizza Inn domestic comparable store retail sales increased by $3.4 million, or 15.6%, for the same reason.

For the nine months

ended March 26, 2023, the improvements in domestic retail sales and comparable store retail sales were primarily due to the diminished impact of COVID-19 and increased customer engagement.

The following chart summarizes Pizza Inn restaurant activity for the three and nine months ended March 26, 2023:

Three Months Ended March 26, 2023

Domestic Units

Buffet Units - Franchised

Delco/Express Units - Franchised

PIE Units - Licensed

Total Domestic Units

International Units (all types)

Nine Months Ended March 26, 2023

Pizza Inn total domestic retail sales increased by $2.1 million, or 8.6%, for the three months ended September 24, 2023 when compared to the same period of the prior year.

increase in domestic retail sales was primarily the result of increased buffet units versus the year ago period and increased customer engagement.

Pizza Inn domestic comparable store retail sales increased by $1.6 million, or 6.8%, due to

increased customer engagement.

The following chart summarizes Pizza Inn restaurant activity for the three months ended September 24, 2023:

Three Months Ended September 24, 2023

Domestic Units:

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International Units (all types)

There was a net decrease of three and six units in the total domestic Pizza Inn unit count during the three and nine months ended March 26, 2023, respectively.

For the three and nine months ended

March 26, 2023, the number of international Pizza Inn units remained stable and increased by two units, respectively.

The domestic Pizza Inn units decreased by 12 units during the three months ended September 24, 2023.

For the three months ended September 24, 2023, the number of international Pizza Inn units

decreased by 12 units due to the termination of the Company’s master licensee in Saudi Arabia.

The Company believes the number of both domestic and international Pizza Inn units will increase modestly in future periods.

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Three Months Ended

Nine Months Ended

(in thousands, except unit data)

September 24,

September 25,

(in thousands, except unit data)

Pie Five Retail Sales - Total Units

Domestic Units - Franchised

Domestic Units - Company-owned

Total Domestic Retail Sales

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Pie Five Average Units Open in Period

Domestic Units - Franchised

Domestic Units - Company-owned

Total Domestic Units

Pie Five system-wide retail sales increased $0.1 million, or 2.6%, for the three months ended March 26, 2023 when compared to the same period of the prior year.

Compared to the same

fiscal quarter of the prior year, average units open in the period decreased from 34 to 31.

Comparable store retail sales increased $0.4 million, or 8.1%, during the third quarter of fiscal 2023 compared to the same period of the prior year.

the three months ended March 26, 2023, the increase in domestic retail sales were primarily the result of the increase in comparable store retail sales, primarily resulting from the diminished impact of COVID-19 and increased customer engagement,

offset by a decrease in store count.

For the nine months ended March 26, 2023, the improvements in domestic retail sales and comparable store retail sales were primarily due to the diminished impact of COVID-19 and increased customer engagement.

The following chart summarizes Pie Five restaurant activity for the three and nine months ended March 26, 2023:

Three Months Ended March 26, 2023

Domestic - Franchised

Domestic - Company-owned

Total Domestic Units

Nine Months Ended March 26, 2023

Domestic - Franchised

Domestic - Company-owned

Pie Five domestic total retail sales decreased $0.5 million, or 9.1%, for the three months ended September 24, 2023 when compared to the same period of the prior year.

the same fiscal quarter of the prior year, average units open in the period decreased from 31 to 27.

Comparable store retail sales increased $0.1 million, or 1.2%, during the first quarter of fiscal 2024 compared to the same period of the prior

For the three months ended September 24, 2023, the decline in domestic retail sales is due to decreased domestic units.

For the three months ended September 24, 2023, the increase in domestic comparable store retail sales is due to

increased customer engagement.

The following chart summarizes Pie Five restaurant activity for the three months ended September 24, 2023:

Three Months Ended September 24, 2023

Total Domestic Units

There was a net decrease of one unit in the total domestic Pie Five unit count during the three and nine months ended March 26, 2023.

We believe that Pie Five units will eventually

increase in future periods.

The Pie Five units decreased by one unit during the three months ended September 24, 2023.

We believe that Pie Five units will decrease modestly in future periods.

Financial Results

The Company defines its operating segments as Pizza Inn Franchising, Pie Five Franchising and Company-Owned Restaurants.

The following is additional business segment information for

the three and nine months ended March 26, 2023 and March 27, 2022 (in thousands):

Three Months Ended March 26, 2023 and March 27, 2022

The following is additional business segment information

for the three months ended September 24, 2023 and September 25, 2022 (in thousands):

Company-Owned

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COSTS AND EXPENSES:

Cost of sales

General and administrative expenses

Franchise expenses

Bad debt expense

Interest expense

Depreciation and amortization expense

Total costs and expenses

INCOME/(LOSS) BEFORE TAXES

Nine Months Ended March 26, 2023 and March 27, 2022

Company-Owned

Fiscal Year-to-Date

Franchise and license revenues

Rental Income

Interest income and other

Total revenues

COSTS AND EXPENSES:

Cost of sales

General and administrative expenses

Franchise expenses

Impairment of long-lived assets and other lease charges

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by changes in comparable store sales and restaurant count, as well as the products sold to franchisees through third-party food distributors.

Total revenues for the three month period ended March 26, 2023 and for the same period in the prior fiscal year were $3.0 million and $2.6 million, respectively.

The increase in

total revenues was driven by increases in Pizza Inn franchise and license fees.

Total revenues for the nine month period ended March 26, 2023 and for the same period in the prior fiscal year were $8.8 million and $7.9 million, respectively.

The increase in

total revenues was driven by increases in Pizza Inn franchise and license fees.

Total revenues for the three month period ended September 24, 2023 and for the same period in the prior

fiscal year were $3.1 million and $3.0 million, respectively.

Pizza Inn Franchise and License

Pizza Inn franchise revenues increased to $2.5 million for the three month period ended March 26, 2023 from $2.1 million for to the same period of the prior fiscal year.

franchise revenues increased to $7.3 million for the nine month period ended March 26, 2023 from $6.3 million for the same period of the prior fiscal year.

The increases were primarily driven by increases in supplier incentives, domestic royalties

and advertising fund revenues.

Pizza Inn franchise revenues increased by $0.1 million to $2.6 million for the three month period ended September 24, 2023 as compared to the same period in the prior fiscal year.

The 5.5% increase was driven by increases in supplier incentives, domestic royalties and advertising fund revenues.

Pie Five Franchise and License

Pie Five franchise revenues remained relatively stable at $0.5 million for the three month period ended March 26, 2023 as compared to the same period of the prior fiscal year.

Five franchise revenues remained relatively stable at $1.4 million for the nine month period ended March 26, 2023 as compared to the same period of the prior fiscal year.

Pie Five franchise revenues decreased by $0.1 million to $0.4 million for the three month period ended September 24, 2023 as compared to the same period in the prior fiscal year.

The 10.2% decrease was driven by decreases in supplier incentives, domestic royalties and advertising fund revenues.

General and Administrative Expenses

Total general and administrative expenses increased $0.1 million to $1.5 million for the three month period ended March 26, 2023 compared to $1.4 million for the same period of the

Total general and administrative expenses remained relatively stable at $1.3 million for the three month period ended September 24, 2023 as compared to the same period of the

prior fiscal year.

Total general and administrative expenses increased $0.3 million to $4.3 million for the nine month period ended March 26, 2023 compared to $4.0 million for the same period of the prior fiscal year.

The increases in total general

and administrative expenses during both the three and nine month periods were primarily the result of increased corporate expenses.

The 1.8% decrease in total general and administrative expenses during the three month period was primarily the result of decreased corporate expenses.

Franchise Expenses

Franchise expenses include general and administrative expenses directly related to the sale and continuing service of domestic and international franchises.

Total franchise expenses

increased to $1.0 million for the three month period ended March 26, 2023 compared to $0.7 million for the same period of the prior fiscal year.

Total franchise expenses increased to $3.0 million for the nine month period ended March 26, 2023

compared to $2.5 million for the same period of the prior fiscal year.

The increase was primarily due to an increase in payroll and related, advertising, and travel costs.

Total franchise

expenses remained relatively stable at $1.2 million for the three month period ended September 24, 2023 as compared to the same period of the prior fiscal year.

The 2.5% decrease was primarily due to a decrease in advertising and recruiting fees.

Impairment of Long-lived Assets and Other Lease Charges

Impairment of long-lived assets and other lease charges was zero for the three month period ended March 26, 2023 compared to zero for the same period of the prior fiscal year.

Impairment of long-lived assets and other lease charges was $5 thousand for the nine month period ended March 26, 2023 compared to zero for the same period of the prior fiscal year.

The increase was primarily due to impaired beverage equipment.

Impairment of long-lived assets and other lease charges were zero for the three months ended September 24, 2023 compared to $5 thousand for the same fiscal period of the prior

The decrease was primarily due to impaired beverage equipment in the prior period.

Bad Debt Expense

The Company monitors franchisee receivable balances and adjusts credit terms when necessary to minimize the Company’s exposure to high risk accounts receivable.

For the three month

period ended March 26, 2023, bad debt expense was $28 thousand compared to bad debt expense of $1 thousand for the same period in the prior fiscal year.

Bad debt expense for the nine month period ended March 26, 2023, increased $28 thousand to $37

thousand compared to the comparable period in the prior fiscal year.

For the three

month period ended September 24, 2023, bad debt expense was $25 thousand compared to the bad debt expense of $4 thousand for the same period in the prior fiscal year due to international receivables.

Interest Expense

Interest expense decreased $14 thousand to zero for the three month period ended March 26, 2023 compared to the same fiscal period of the prior year.

Interest expense decreased $60

thousand to $1 thousand for the nine month period ended March 26, 2023 compared to the same fiscal period of the prior year.

In both cases, the decrease was primarily the result of the payment of all outstanding convertible notes during the third

quarter of fiscal 2022.

Interest expense was zero for the three months ended September 24, 2023 compared to $1 thousand for the same fiscal period of the prior year.

Amortization and Depreciation Expense

Amortization and depreciation expense increased slightly for the three and nine months ended March 26, 2023, compared to the same periods of the prior year.

In both cases, the

increase was primarily the result of higher amortization of intangible assets.

Amortization and depreciation expense increased $4 thousand to $55 thousand for the three months ended September 24, 2023, compared to $51 thousand in the same periods of the

The increase was primarily the result of higher amortization of intangible assets.

Provision for Income Taxes

For the three and nine months ended March 26, 2023, the Company recorded an income tax expense of $115 thousand and $347 thousand, respectively.

For the three and nine months ended March 27, 2022, the Company

recorded an income tax expense of $3 thousand and $10 thousand, respectively.

The increase for both the three and nine months ended as of March 26, 2023 is due to the full recognition of the Company’s deferred tax asset which occurred

during the fourth quarter of 2022.

For the nine months ended March 26, 2023, the federal and state tax expense were $272 thousand and $75 thousand, respectively.

The Company continually reviews the realizability of its deferred tax assets, including an analysis of factors such as future taxable income, reversal of existing taxable temporary

differences, and tax planning strategies.

For the three months ended September 24, 2023 and September 25, 2022, the Company recorded an income tax expense of $132 thousand and $92 thousand, respectively, both of which are

mostly attributable to current federal taxes.

The change is due to increased income before taxes.

The Company continually reviews the realizability of its deferred tax assets, including an analysis of factors such as future taxable income, reversal of existing taxable

temporary differences, and tax planning strategies.

In assessing the need for the valuation allowance, the Company considers both positive and negative evidence related to the likelihood of realization of deferred tax assets.

Liquidity and Capital Resources

During the nine month period ended March 26, 2023, the Company's primary source of liquidity was proceeds from operating activities.

Cash flows from operating activities generally reflect net income adjusted for certain non-cash items including depreciation and amortization, changes in deferred taxes, share based

compensation, and changes in working capital.

Cash provided by operating activities was $1.2 million for the nine month period ended March 26, 2023 compared to cash provided by operating activities of $0.5

million for the nine month period ended March 27, 2022.

The primary driver of increased operating cash flow during the nine month period ended March 26, 2023 was increased collections of accounts receivable related to the employee retention credit.

Cash flows from investing activities reflect net proceeds from the sale of assets, capital expenditures for the purchase of Company assets and intangibles, and payments received on

notes receivable.

Cash used in investing activities during the nine month period ended March 26, 2023 was $0.1 million compared to cash provided by investing activities of $0.2 million for the nine months ended March 27, 2022.

During the three month period ended September 24, 2023, the Company’s primary source of liquidity was proceeds from operating activities.

Cash flows from operating activities generally reflect net income adjusted for certain non-cash items including depreciation and amortization, changes in deferred taxes, share

based compensation, and changes in working capital.

Cash provided by operating activities was $0.7 million for the three month period ended September 24, 2023 compared to cash provided by operating

activities of $1.1 million for the three month period ended September 25, 2022.

The primary driver of decreased operating cash flow during the three month period ended September 24, 2023 was decreased collections of accounts receivable related to

the employee retention credit.

Cash flows from investing activities reflect net proceeds from the sale of assets and capital expenditures for the purchase of Company assets.

Cash used in investing activities

during the three month period ended September 24, 2023 was $12 thousand compared to cash used in investing activities of $23 thousand for the three months ended September 25, 2022.

Cash flows used in financing activities generally reflect changes in the Company’s stock and debt activity during the period.

Net cash used in financing activities was $5.0 million

for the nine month period ended March 26, 2023 compared to net cash used in financing activities of $1.8 million for the nine month period ended March 27, 2022.

Net cash used by financing activities for the nine months ended March 26, 2023 was

primarily attributable to repurchases of the Company's stock.

Net cash used by financing activities was zero for

the three month period ended September 24, 2023 compared to net cash used by financing activities of $1.4 million for the three month period ended September 25, 2022.

Net cash used by financing activities for the three months ended September 25,

2022 was primarily attributable to repurchases of the Company’s common stock.

Management believes the cash on hand combined with net cash provided by operations will be sufficient to fund operations for the next 12 months and beyond.

Convertible Notes

On March 3, 2017, the Company completed a registered shareholder rights offering of its 4% Convertible Senior Notes Due 2022 (“Notes”).

Shareholders exercised subscription rights to

purchase all 30,000 of the Notes at the par value of $100 per Note, resulting in gross offering proceeds to the Company of $3.0 million.

The Notes bore interest at the rate of 4% per annum on the principal or par value of $100 per note, payable annually in arrears on February 15 of each year, commencing February 15,

Interest was payable in cash or, at the Company’s discretion, in shares of Company common stock.

The Notes were secured by a pledge of all outstanding equity securities of our two primary direct operating subsidiaries.

The Notes matured on

February 15, 2022, at which time all principal and unpaid interest was paid in cash.

Therefore, as of March 26, 2023, there were no Notes outstanding.

Employee Retention Credit

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tax credit against certain federal employment taxes.

For the fiscal year ended June 26, 2022, the Company recorded $0.7 million of other income for the employee retention credit, $0.6 million of which was collected in the first quarter of fiscal

For the fiscal year ended June 26, 2022, the Company recorded $0.7 million of other income for the employee retention credit, $0.6 million of which was collected in the first quarter of

Critical Accounting Policies and Estimates

5 unchanged sentences

Actual results could differ materially from estimates.

The Company believes the following critical accounting policies require estimates about the effect of matters that are inherently uncertain, are susceptible to change, and therefore

require subjective judgments.

The Company believes the following critical accounting policies require estimates about the effect of matters that are inherently uncertain, are susceptible to change, and

therefore require subjective judgments.

Changes in the estimates and judgments could significantly impact the Company’s results of operations and financial condition in future periods.

Accounts receivable consist primarily of receivables generated from franchise royalties and supplier concessions.

The Company records an allowance for bad debts to allow for any

amounts which may be unrecoverable based upon an analysis of the Company’s prior collection experience, customer creditworthiness and current economic trends.

Actual realization of accounts receivable could differ materially from the Company’s

The Company records an allowance for doubtful receivables to

allow for any amounts which may be unrecoverable based upon an analysis of the Company’s prior collection experience, customer creditworthiness and current economic trends.

Actual realization of accounts receivable could differ materially from

the Company’s estimates.

The Company reviews long-lived assets for impairment when events or circumstances indicate that the carrying value of such assets may not be fully recoverable.

Impairment is

evaluated based on the sum of undiscounted estimated future cash flows expected to result from use of the assets compared to their carrying value.

If impairment is indicated, the carrying value of an impaired asset is reduced to its fair value,

based on discounted estimated future cash flows.

evaluated based on the sum of undiscounted estimated future cash flows expected to result from use and eventual disposition of the assets compared to their carrying value.

If impairment is indicated, the carrying value of an impaired asset is

reduced to its fair value, based on discounted estimated future cash flows.

Franchise revenue consists of income from license fees, royalties, area development and foreign master license agreements, advertising fund revenues, supplier incentive and

4 unchanged sentences

Supplier incentive revenues are recognized as earned, typically as the underlying commodities are shipped.

The Company continually reviews the realizability of its deferred tax assets, including an analysis of factors such as future taxable income, reversal of existing taxable temporary

differences, and tax planning strategies.

The Company assesses whether a valuation allowance should be established against its deferred tax assets based on consideration of all available evidence, using a “more likely than not” standard.

assessing the need for a valuation allowance, the Company considers both positive and negative evidence related to the likelihood of realization of deferred tax assets.

In making such assessment, more weight is given to evidence that can be

objectively verified, including recent operating performance.

The Company continually reviews the realizability of its deferred tax assets, including an analysis of factors such as future taxable income, reversal of existing taxable

temporary differences, and tax planning strategies.

The Company assesses whether a valuation allowance should be established against its deferred tax assets based on consideration of all available evidence, using a “more likely than not”

In assessing the need for the valuation allowance, the Company considers both positive and negative evidence related to the likelihood of realization of deferred tax assets.

In making such assessment, more weight is given to evidence

that can be objectively verified, including recent operating performance.

The Company accounts for uncertain tax positions in accordance with ASC 740-10, which prescribes a comprehensive model for how a company should recognize, measure, present, and

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realized upon ultimate settlement.

As of March 26, 2023 and March 27, 2022, the Company had no uncertain tax positions.

As of September 24, 2023 and September 25, 2022, the Company had no uncertain tax positions.

The Company assesses its exposures to loss contingencies from legal matters based upon factors such as the current status of the cases and consultations with external counsel and

4 unchanged sentences

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