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Item 2. Management’s Discussion and Analysis

2025-02-06 compared with 2024-11-07 · 207 added, 140 removed, 145 unchanged (71% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes appearing elsewhere in this Quarterly

Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended June 30, 2024 and may contain certain forward-looking statements that are based on current management expectations.

Generally, verbs in the future tense and the words

“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 30, 2024.

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

forward-looking statements contained herein speak only as of the date of this Quarterly Report on Form 10-Q and, except as may be required by applicable law, we do not undertake, and specifically disclaim any obligation to, publicly update or

revise such statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes appearing elsewhere in this Quarterly Report

on Form 10-Q, our Annual Report on Form 10-K for the year ended June 30, 2024, together with our Quarterly Report on Form 10-Q for the period ended September 29, 2024, may contain certain forward-looking statements that are based on current management

expectations.

Generally, verbs in the future tense and the words “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 30, 2024, as well as our Quarterly Report on Form 10-Q for the period ended September 29, 2024.

These risks and uncertainties

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

The forward-looking statements contained herein speak only as of the date of this Quarterly Report on Form 10-Q and, except as may

be required by applicable law, we do not undertake, and specifically disclaim any obligation to, publicly update or revise such statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated

or unanticipated events.

Results of Operations

Rave Restaurant Group, Inc., through its subsidiaries (collectively, the “Company” or “we,” “us” or “our”), franchises pizza buffet (“Buffet Units”), delivery/carry-out (“Delco

Units”), express restaurants (“Express Units”) and ghost kitchens (“Pizza Inn Ghost Kitchen Units”) under the trademark “Pizza Inn” and franchises fast casual pizza restaurants (“Pie Five Units”) and ghost kitchens (“Pie Five Ghost Kitchen Units”)

under the trademarks “Pie Five Pizza Company” or “Pie Five”.

Rave Restaurant Group, Inc., through its subsidiaries (collectively, the “Company” or “we,” “us” or “our”), franchises pizza buffet (“Buffet Units”), delivery/carry-out (“Delco Units”),

express restaurants (“Express Units”) and ghost kitchens (“Pizza Inn Ghost Kitchen Units”) under the trademark “Pizza Inn” and franchises fast casual pizza restaurants (“Pie Five Units”) and ghost kitchens (“Pie Five Ghost Kitchen Units”) under the

trademarks “Pie Five Pizza Company” or “Pie Five”.

The Company also licenses Pizza Inn Express, or PIE, kiosks (“PIE Units”) under the trademark “Pizza Inn”.

We facilitate food, equipment and supply distribution to our domestic and

international system of restaurants through agreements with third-party distributors.

At September 29, 2024, franchised and licensed units consisted of the following:

Three Months Ended September 29, 2024

We facilitate food, equipment and supply distribution to our domestic and international system

of restaurants through agreements with third-party distributors.

At December 29, 2024, franchised and licensed units consisted of the following:

Three Months Ended December 29, 2024

(in thousands, except unit data)

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International Franchised

Six Months Ended December 29, 2024

(in thousands, except unit data)

Domestic Franchised/Licensed

International Franchised

The domestic units were located in 15 states predominantly situated in the southern half of the United States.

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We believe that EBITDA is helpful to investors in evaluating our results of operations without the impact of expenses affected by financing methods, accounting methods and the tax environment.

We believe that Adjusted

EBITDA provides additional useful information to investors by excluding non-operational or non-recurring expenses to provide a measure of operating performance that is more comparable from period to period.

Management also uses these non-GAAP

financial measures for evaluating operating performance, assessing the effectiveness of business strategies, projecting future capital needs, budgeting and other planning purposes.

We believe that Adjusted EBITDA

provides additional useful information to investors by excluding non-operational or non-recurring expenses to provide a measure of operating performance that is more comparable from period to period.

Management also uses these non-GAAP financial

measures for evaluating operating performance, assessing the effectiveness of business strategies, projecting future capital needs, budgeting and other planning purposes.

The following key performance indicators presented herein, some of which represent non-GAAP financial measures, have these meanings and are calculated as follows:

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EBITDA and Adjusted EBITDA

Adjusted EBITDA for the fiscal quarter ended September 29, 2024 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 December 29, 2024 increased $0.3 million compared to the same period of the prior fiscal year.

Year-to-date Adjusted EBITDA increased $0.4

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

September 29, 2024

September 24, 2023

Six Months Ended

Interest income

6 unchanged sentences

Three Months Ended

September 29, 2024

September 24, 2023

Six Months Ended

Pizza Inn Retail Sales - Total Domestic Units

(in thousands, except unit data)

Buffet Units - Franchised

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PIE Units - Licensed

Pizza Inn Ghost Kitchen

Pizza Inn Ghost Kitchen Units - Franchised

Total Domestic Units

Pizza Inn total domestic retail sales decreased by $0.7 million, or 2.5%, for the three months ended September 29, 2024 when compared to the same period of the prior year.

to the same fiscal quarter of the prior year, average Buffet Units open in the period increased from 75 to 78.

Comparable store retail sales decreased by $0.5 million, or 2.1%, for the three month period ended September 29, 2024 as compared to the

same period of the prior fiscal year.

For the three months ended September 29, 2024, the decrease in domestic retail sales were primarily the result of the decrease in comparable domestic store retail sales, offset by an increase in Buffet Units.

The following chart summarizes Pizza Inn restaurant activity for the three months ended September 29, 2024:

Three Months Ended September 29, 2024

Pizza Inn total domestic retail sales increased by $0.3 million, or 1.2%, for the three months ended December 29, 2024 when compared to the same period of the prior year.

the same fiscal quarter of the prior year, average Buffet Units open in the period increased from 75 to 78.

Comparable store retail sales increased by $0.2 million, or 0.8%, for the three month period ended December 29, 2024 as compared to the same

period of the prior fiscal year.

For the three months ended December 29, 2024, the increase in domestic retail sales were primarily the result of the increase in Buffet Units, supplemented by an increase in comparable domestic store retail sales.

Pizza Inn total domestic retail sales decreased by $0.3 million, or 0.7%, for the six months ended December 29, 2024 when compared to the same period of the prior year.

Compared to the

same fiscal period of the prior year, average Buffet Units open in the period increased from 77 to 78.

Comparable store retail sales decreased by $0.3 million, or 0.7%, for the six month period ended December 29, 2024 as compared to the same period of

the prior fiscal year.

For the six months ended December 29, 2024, the decrease in domestic retail sales were primarily the result of the decrease in comparable domestic store retail sales, offset by an increase in Buffet Units.

The following chart summarizes Pizza Inn restaurant activity for the three and six months ended December 29, 2024:

Three Months Ended December 29, 2024

Buffet Units - Franchised

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International Units (all types)

There was a net decrease of three units in the total domestic Pizza Inn unit count during the three months ended September 29, 2024.

There were zero transfers in the total domestic Pizza Inn unit

count during the three months ended September 29, 2024.

For the three months ended September 29, 2024, the number of international Pizza Inn units increased by two units.

There were zero transfers in the total international Pizza Inn unit count

during the three months ended September 29, 2024.

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

Six Months Ended December 29, 2024

Buffet Units - Franchised

Delco/Express Units - Franchised

PIE Units - Licensed

Pizza Inn Ghost Kitchen Units - Franchised

Total Domestic Units

International Units (all types)

There was a net decrease of zero and three units in the total domestic Pizza Inn unit count during the three and six months ended December 29, 2024, respectively.

There were three unit transfers

between franchisees in the total domestic Pizza Inn unit count during the three and six months ended December 29, 2024.

For the three and six months ended December 29, 2024, the number of international Pizza Inn units increased by one and three units,

respectively.

There were zero transfers in the total international Pizza Inn unit count during the three and six months ended December 29, 2024.

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

in future periods.

Pie Five Brand Summary

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Three Months Ended

September 29,

September 24,

Six Months Ended

Pie Five Retail Sales - Total Units

(in thousands, except unit data)

Pie Five Units - Franchised

6 unchanged sentences

Total Domestic Units

Pie Five total domestic retail sales decreased by $1.8 million, or 37.5%, for the three months ended September 29, 2024 when compared to the same period of the prior year.

to the same fiscal quarter of the prior year, average units open in the period decreased from 27 to 20.

Comparable store retail sales decreased by $0.3 million, or 8.7%, for the three month period ended September 29, 2024 as compared to the same

period of the prior fiscal year.

For the three months ended September 29, 2024, the decrease in domestic retail sales were primarily the result of the decrease in store count, supplemented by a decrease in comparable store retail sales.

The following chart summarizes Pie Five restaurant activity for the three months ended September 29, 2024:

Three Months Ended September 29, 2024

Concept Change

Pie Five total domestic retail sales decreased by $1.6 million, or 37.0%, for the three months ended December 29, 2024 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 25 to 20.

Comparable store retail sales decreased by $0.3 million, or 11.4%, for the three month period ended December 29, 2024 as compared to the same period of

the prior fiscal year.

For the three months ended December 29, 2024, the decrease in domestic retail sales were primarily the result of the decrease in store count, supplemented by a decrease in comparable store retail sales.

Pie Five total domestic retail sales decreased by $3.4 million, or 37.3%, for the six months ended December 29, 2024 when compared to the same period of the prior year.

Compared to the

same fiscal period of the prior year, average units open in the period decreased from 26 to 20.

Comparable store retail sales decreased by $0.6 million, or 10.0%, for the six month period ended December 29, 2024 as compared to the same period of the

prior fiscal year.

For the six months ended December 29, 2024, the decrease in domestic retail sales were primarily the result of the decrease in store count, supplemented by a decrease in comparable store retail sales.

The following chart summarizes Pie Five restaurant activity for the three and six months ended December 29, 2024:

Three Months Ended December 29, 2024

Pie Five Units - Franchised

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Total Domestic Units

The Pie Five units remained stable during the three months ended September 29, 2024.

Six Months Ended December 29, 2024

Pie Five Units - Franchised

Pie Five Ghost Kitchen Units - Franchised

Total Domestic Units

The Pie Five units remained stable during the three and six months ended December 29, 2024.

There were zero transfers in the total domestic Pie Five unit count during the three and six

months ended December 29, 2024.

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

Financial Results

The Company defines its operating segments as Pizza Inn Franchising and Pie Five Franchising.

The following is additional business segment information for the three months ended

September 29, 2024 and September 24, 2023 (in thousands):

In addition to Corporate overhead support, the Company defines its operating segments as Pizza Inn Franchising and Pie Five Franchising.

The following is additional business segment

information for the three and six months ended December 29, 2024 and December 24, 2023 (in thousands):

Three Months Ended December 29, 2024 and December 24, 2023

Fiscal Quarter Ended

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Fiscal Quarter Ended

September 29,

September 24,

September 29,

September 24,

September 29,

September 24,

September 29,

September 24,

Franchise and license revenues

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Franchise expenses

Provision for credit losses

Interest (income) expense

Depreciation and amortization expense

Total costs and expenses

INCOME/(LOSS) BEFORE TAXES

Six Months Ended December 29, 2024 and December 24, 2023

Fiscal Year-to-Date

Franchise and license revenues

Rental income

Total revenues

COSTS AND EXPENSES:

General and administrative expenses

Franchise expenses

Provision (recovery) for credit losses

3 unchanged sentences

INCOME/(LOSS) BEFORE TAXES

Revenues are derived from franchise royalties, supplier and distributor incentives, franchise license fees, area development exclusivity fees and foreign master license fees,

advertising funds, supplier convention funds, sublease rental income, and other income.

The volume of supplier incentive revenues is dependent on the level of chain-wide retail sales, which are impacted 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 September 29, 2024 and for the same period in the prior fiscal year were $3.1 million and $3.1 million, respectively.

Revenues are derived from franchise royalties, supplier and distributor incentive revenues, franchise license fees, area development exclusivity fees and foreign master license fees,

advertising fund contributions, supplier convention funds, rental income, and other income.

The volume of supplier and distributor incentive revenues is dependent on the level of total retail sales, which are impacted 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 December 29, 2024 and for the same period in the prior fiscal year were $2.9 million and $2.7 million, respectively.

Total revenues for the six month period ended December 29, 2024 and for the same period in the prior fiscal year were $5.9 million and $5.8 million, respectively.

Pizza Inn Franchise and License

Pizza Inn franchise revenues increased by $0.1 million to $2.7 million for the three month period ended September 29, 2024 as compared to the same period in the prior fiscal year.

Pizza Inn franchise revenues increased by $0.3 million to $2.5 million for the three month period ended December 29, 2024 as compared to the same period in the prior fiscal year.

11.9% increase was driven by increases in supplier and distributor incentives.

Pizza Inn franchise revenues increased by $0.4 million to $5.3 million for the six month period ended December 29, 2024 as compared to the same period in the prior fiscal

The 7.9% increase was driven by increases in supplier and distributor incentives.

Pie Five Franchise and License

Pie Five franchise revenues decreased by $0.1 million to $0.3 million for the three month period ended September 29, 2024 as compared to the same period in the prior fiscal year.

The 29.7% decrease was driven by decreases in domestic royalties.

Pie Five franchise revenues decreased by $0.1 million to $0.3 million for the three month period ended December 29, 2024 as compared to the same period in the prior fiscal year.

30.2% decrease was driven by decreases in domestic royalties.

Pie Five franchise revenues decreased by $0.3 million to $0.6 million for the six month period ended December 29, 2024 as compared to the same period in the prior fiscal year.

decrease was driven by decreases in domestic royalties.

Costs and Expenses:

General and Administrative Expenses

Total general and administrative expenses increased by $0.1 million to $1.4 million for the three month period ended September 29, 2024 as compared to the same period of the prior

The 7.4% increase was driven by increases in legal fees, primarily due to decreases in legal settlement recoveries.

Total general and administrative expenses remained relatively stable at $1.3 million for the three month period ended December 29, 2024 as compared to the same period of the prior

The 2.0% decrease was driven by decreases in legal fees, offset by increases in salaries.

Total general and administrative expenses increased by $0.1 million to $2.7 million for the six month period ended December 29, 2024 as compared to

the same period of the prior fiscal year.

The 2.6% increase was driven by increases in salaries.

Franchise Expenses

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Total franchise expenses

decreased by $0.2 million to $1.0 million for the three month period ended September 29, 2024 as compared to the same period of the prior fiscal year.

The 15.1% decrease was driven by decreases in advertising fees.

remained relatively stable at $0.8 million for the three month period ended December 29, 2024 as compared to the same period of the prior fiscal year.

The 1.8% decrease was driven by decreases in salaries, offset by increases in advertising fees.

franchise expenses decreased by $0.2 million to $1.8 million for the six month period ended December 29, 2024 as compared to the same period of the prior fiscal year.

The 9.5% decrease was driven by decreases in

salaries and advertising fees.

Provision (Recovery) for Credit Losses

1 unchanged sentence

For the three month

period ended September 29, 2024, recoveries for credit losses was $17 thousand compared to provision for credit losses of $25 thousand for the same period in the prior fiscal year.

During the three month period ended September 29, 2024, the Company

recorded a gain in provision for credit losses due to the recoveries of receivables that had been previously reserved.

period ended December 29, 2024, provision for credit losses was $9 thousand compared to $10 thousand for the same period in the prior fiscal year.

During the three month period ended December 29, 2024, the Company recorded a loss in provision for

credit losses due to the write off of receivables.

For the six month period ended December 29, 2024, recoveries for credit losses were $8 thousand compared to provision for credit losses of $35 thousand for the same period in the prior fiscal year.

During the six month period ended December 29, 2024, the Company recorded a loss in provision for credit losses due to the write off of receivables, offset by a gain in provision for credit losses due to the recoveries of receivables that had been

previously reserved.

Interest Expense and Income

Interest expense was zero for the three months ended September 29, 2024 compared to zero for the same fiscal period of the prior year.

Interest income increased by $80 thousand to

$82 thousand for the three month period ended September 29, 2024 as compared to the same period in the prior fiscal year.

The increase was primarily driven by interest received on U.S.

Interest income increased by $41 thousand to $87 thousand for the three month period ended December 29, 2024 as compared to the same period in the prior fiscal year.

The increase was

primarily driven by interest received on U.S.

Treasury bills.

Interest income increased by $121 thousand to $169 thousand for the six month period ended December 29, 2024 as compared to the same period in the prior fiscal year.

The increase was

primarily driven by interest received on U.S.

Treasury bills.

Amortization and Depreciation Expense

Amortization and depreciation expense decreased by $12 thousand to $43 thousand for the three month period ended September 29, 2024 as compared to the same period in the prior

The decrease was primarily the result of lower depreciation of equipment.

Amortization and depreciation expense decreased by $4 thousand to $53 thousand for the three month period ended December 29, 2024 as compared to the same period in the prior year.

decrease was primarily the result of lower depreciation of equipment.

Amortization and depreciation expense decreased by $16 thousand to $96 thousand for the six month period ended December 29, 2024 as compared to the same period in the prior year.

decrease was primarily the result of lower depreciation of equipment.

Provision for Income Taxes

1 unchanged sentence

Three Months Ended

September 29, 2024

September 24, 2023

Federal tax expense

Six Months Ended

Federal tax expense (benefit)

State tax expense

Total income tax expense

For the three months ended September 29, 2024 and September 24, 2023, the Company recorded an income tax expense of $169 thousand and $132 thousand, respectively.

The increase was

driven by increases in federal taxes, primarily due to higher taxable income.

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.

Basic net income per share increased $0.01 per share to $0.04 per share for the three months ended September 29, 2024, compared to the comparable period in the prior fiscal year.

The Company had net income of $0.5 million for the three months ended September 29, 2024 compared to net income of $0.4 million in the comparable period in the prior fiscal year, on revenues of $3.1 million for the three months ended September 29,

Total income tax expense (benefit)

For the three and six months ended December 29, 2024, the Company recorded an income tax expense of $144 thousand and $313 thousand, respectively.

For the three and six

months ended December 24, 2023, the Company recorded an income tax benefit of $13 thousand and a tax expense of $119 thousand, respectively.

The increase for the three months ended as of December 29, 2024 was driven by a decrease in the

number of RSUs vested compared to the comparable period of the prior fiscal year, which resulted in a lower tax benefit from stock-based compensation.

The increase for the six months ended as of December 29, 2024 was

primarily driven by a decrease in the number of RSUs vested compared to the comparable period of the prior fiscal year, which resulted in a lower tax benefit from stock-based compensation.

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

Basic net income per share remained relatively stable at $0.04 per share for the three months ended December 29, 2024, compared to the comparable period in the prior fiscal year.

Company had net income of $0.6 million for the three months ended December 29, 2024 compared to net income of $0.6 million in the comparable period in the prior fiscal year, on revenues of $2.9 million for the three months ended December 29, 2024

compared to $2.8 million in the comparable period in the prior fiscal year.

The stability in revenue was primarily due to increases in supplier and distributor incentives, offset by a decrease in domestic royalties.

Basic net income per share increased $0.01 per share to $0.08 per share for the six months ended December 29, 2024, compared to the comparable period in the prior fiscal year.

Company had net income of $1.1 million for the six months ended December 29, 2024 compared to net income of $0.9 million in the comparable period in the prior fiscal year, on revenues of $5.9 million for the six months ended December 29, 2024 compared

to $5.8 million in the comparable period in the prior fiscal year.

Liquidity and Capital Resources

During the three month period ended September 29, 2024, the Company's primary source of liquidity was proceeds from operating activities.

During the six month period ended December 29, 2024, 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, stock-based

compensation, and changes in working capital.

Cash provided by operating activities was $0.5 million for the three month period ended September 29, 2024 compared to cash provided by operating activities of

$0.6 million for the three month period ended September 24, 2023.

The primary driver of decreased operating cash flow during the three month period ended September 29, 2024 was decreased accrued expenses related to payroll and related costs.

Cash flows from investing activities reflect purchases and maturities of short-term investments as well as 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 29, 2024 was $2.0 million compared to cash used in investing activities of $12 thousand for the three months ended September 24, 2023.

cash used by investing activities during the three month period ended September 29, 2024 was primarily attributable to increased purchases of U.S.

Cash provided by operating activities was $1.2 million for the six month period ended December 29, 2024 compared to cash provided by operating activities of $0.3

million for the six month period ended December 24, 2023.

The primary driver of increased operating cash flow during the six month period ended December 29, 2024 was increased collections of accounts receivable related to the payment of franchise

Cash flows from investing activities reflect purchases and maturities of short-term investments as well as net proceeds from the sale of assets and capital expenditures for the purchase

of Company assets.

Cash used in investing activities during the six month period ended December 29, 2024 was $1.0 million compared to cash used in investing activities of $16 thousand for the six months ended December 24, 2023.

Net cash used by

investing activities during the six month period ended December 29, 2024 was primarily attributable to increased purchases of U.S.

Treasury bills.

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 zero for the

three month periods ended September 29, 2024 and September 24, 2023.

Net cash used in financing activities was $0.2 million

for the six month period ended December 29, 2024 compared to net cash used in financing activities of $0.3 million for the six month period ended December 24, 2023.

Net cash used by financing activities for the six months ended December 29, 2024 was

primarily attributable to taxes paid on vested RSUs.

Net cash used by financing activities for the six months ended December 24, 2023 was primarily attributable to taxes paid on vested RSUs.

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.

1 unchanged sentence

On December 27, 2020, the Consolidated Appropriations Act of 2021 (the “CAA”) was signed into law.

The CAA expanded eligibility for an employee retention credit for companies

impacted by the COVID-19 pandemic with fewer than five hundred employees and at least a twenty percent decline in gross receipts compared to the same quarter in 2019, to encourage retention of employees.

This payroll tax credit was a refundable

tax credit against certain federal employment taxes.

The CAA expanded eligibility for an employee retention credit for companies impacted

by the COVID-19 pandemic with fewer than five hundred employees and at least a twenty percent decline in gross receipts compared to the same quarter in 2019, to encourage retention of employees.

This payroll tax credit was a refundable 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.

As of September 29, 2024, $0.6 million has been received and $0.1

million is still outstanding and included within accounts receivable on the accompanying Condensed Consolidated Balance Sheets.

As of December 29, 2024, $0.6 million has been received and $0.1 million is still

outstanding and included within accounts receivable on the accompanying Condensed Consolidated Balance Sheets.

Critical Accounting Policies and Estimates

2 unchanged sentences

The Company bases its estimates on historical experience and various other assumptions that it believes are reasonable under the circumstances.

Estimates and

assumptions are reviewed periodically.

Estimates and assumptions

are reviewed periodically.

Actual results could differ materially from estimates.

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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 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

convention contribution revenues.

Impairment is 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 convention

contribution revenues.

Franchise fees, area development and foreign master license agreement fees are amortized into revenue on a straight-line basis over the term of the related contract agreement.

In the event of a closed franchise or

defaulted development agreement, the remaining balance of unamortized license fees will be recognized in entirety as of the date of the closure or default.

Royalties and advertising fund revenues, which are based on a percentage of franchise retail

sales, are recognized as income as retail sales occur.

In event of a closed franchise or defaulted

development agreement, the remaining balance of unamortized license fees will be recognized in entirety as of the date of the closure or default.

Royalties and advertising fund revenues, which are based on a percentage of franchise retail sales, are

recognized as income as retail sales occur.

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

2 unchanged sentences

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 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

disclose in its financial statements uncertain tax positions that it has taken or expects to take on a tax return.

ASC 740-10 requires that a company recognize in its financial statements the impact of tax positions that meet a “more likely than

not” threshold, based on the technical merits of the position.

The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being

realized upon ultimate settlement.

As of September 29, 2024 and June 30, 2024, the Company had no uncertain tax positions.

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 disclose

in its financial statements uncertain tax positions that it has taken or expects to take on a tax return.

ASC 740-10 requires that a company recognize in its financial statements the impact of tax positions that meet a “more likely than not” threshold,

based on the technical merits of the position.

The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate

As of December 29, 2024 and December 24, 2023, 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

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What changed 10-Q

Item 2. Management’s Discussion and Analysis