What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-25 compared with 2020-11-05 · 229 added, 231 removed, 142 unchanged (76% of the section changed)

1 unchanged sentence

Management's Discussion and Analysis of Financial Condition and Results of Operations provides a narrative of our financial performance and condition that should be read in conjunction with the accompanying Condensed Consolidated Financial Statements.

All comparisons under this heading between 2020 and 2019 refer to the twelve and forty weeks ended October 4, 2020 and October 6, 2019, unless otherwise indicated.

All comparisons under this heading between 2021 and 2020 refer to the sixteen weeks ended April 18, 2021 and April 19, 2020, unless otherwise indicated.

Description of Business

Red Robin Gourmet Burgers, Inc., a Delaware corporation, together with its subsidiaries ("Red Robin," "we," "us," "our," or the "Company"), primarily operates, franchises, and develops full-service restaurants with 543 locations in North America.

As of October 4, 2020, the Company owned 444 restaurants located in 38 states.

As of April 18, 2021, the Company owned 440 restaurants located in 38 states.

The Company also had 103 franchised full-service restaurants in 16 states and one Canadian province.

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Due to the novel coronavirus ("COVID-19") pandemic, we continue to navigate an unprecedented time for our business and industry.

During the third quarter of 2020, the Company continued to expand outdoor seating capacity at reopened Company-owned restaurants in accordance with local limits.

During first quarter 2021, the Company continued to expand dine-in seating capacity at Company-owned restaurants in accordance with local limits.

Reopening dining rooms and expanding seating capacity was executed with the health, safety, and well-being of Red Robin's Team Members, Guests, and communities in mind with strict adherence to US Centers for Disease Control and Prevention, state, and local guidelines as our top priority.

Our continued focus during the COVID-19 pandemic on delivering best-in-class hospitality has resulted in improved average weekly net sales per restaurant and record high Guest satisfaction scores since the onset of the pandemic in early March.

We remain focused on expanding indoor and outdoor seating capacity, retaining off-premise sales levels, and consistently delivering a great Guest experience to continue to drive our improving sales.

We expect to build further sales momentum from additional seating expansion, including use of outdoor all-weather tents and indoor booth partitions.

We also continue to require Guests to wear face coverings at all locations while entering, exiting, and walking around our restaurants, and face masks are provided for Guests who arrive without one to ensure we are enabling the mutual safety of our Guests and Team Members.

As our dining rooms have reopened, sales and the Guest experience have been positively impacted by the accelerated implementation of our new Total Guest Experience ("TGX") hospitality model, coupled with strong adherence to health and safety standards.

Notably, restaurants with reopened dining rooms are retaining meaningful off-premise sales, demonstrating the enduring and growing popularity of Red Robin for off-premise occasions.

We have secured the Company's long-term viability through increased liquidity from our at-the-market equity offering, reductions in overhead costs, receipt of a $49.4 million federal cash tax refund subsequent to the third quarter balance sheet date, including interest, provided under the provisions of the CARES Act, and $12 million to $15 million of additional federal cash tax refunds expected to be received in 2021.

This allows us to resume full implementation of the Company's previously disclosed strategic plan to transform the business and create long-term stockholder value through delivering best-in-class execution, including implementing our TGX hospitality model, rolling out Donatos® Pizza, optimizing the restaurant portfolio, and enhancing our technological and digital capabilities to drive increased Guest engagement and frequency with our brand.

The Company was required to re-close dining rooms during the second fiscal quarter at numerous Company-owned restaurants, including 53 indoor dining rooms in California due to a state mandate in early July, from the effects of increased COVID-19 cases in certain states and localities.

These indoor dining rooms have started to reopen during the third fiscal quarter, while maintaining improved off-premise performance.

Each of our franchisees' restaurants remained open as of the end of our third fiscal quarter, and we started charging and collecting full royalty payments and advertising contributions from our franchisees as of the end of our third fiscal quarter.

As of November 1, 2020, the Company has reopened 370 total (comparable and non-comparable) indoor dining rooms with limited capacity, representing approximately 89% of currently open Company-owned restaurants.

Notably, these restaurants have on average maintained off-premise sales that are approximately 35% of sales mix after reopening dining rooms.

As of the filing date of this Form 10-Q, 18 restaurants remain temporarily closed due to the COVID-19 pandemic.

We will continue to evaluate the potential timing of reopening these remaining temporarily closed restaurants.

Restaurant operating level expenses incurred for these restaurants during the temporary closures have been recorded in Restaurant closure and refranchising costs (gains) in Other charges (gains);

see Note 7, Other Charges (Gains) , in the Notes to the Condensed Consolidated Financial Statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

Net comparable restaurant revenue and average weekly net sales per Company-owned restaurant with reopened indoor dining rooms for the Company's 28 day accounting periods through November 1, 2020 is as follows:

The Company continues to maintain a disciplined focus on execution to provide our Guests a consistent quality experience each and every time they visit.

We are pleased to be able to demonstrate that we can sustain high Guest satisfaction scores as we continue to expand our operating capacity with the recovery and opening of dining rooms at higher capacities.

This is achieved through a combination of our Total Guest Experience hospitality model ("TGX"), off-premises enhancements, and our new management labor model.

As our dining rooms have continued to reopen, sales and the Guest experience have been positively impacted by our new TGX hospitality model.

We expect to build further sales momentum from additional seating expansion from increasing capacities at our restaurants, including use of outdoor seating to cater to our Guests that prefer a more distanced full service dining option, or prefer to dine outside.

As the implications of the COVID-19 pandemic have begun to ease with approved vaccines being distributed and administered, certain states in which we operate have lifted mandatory mask mandates.

In States with mask mandates still in place, we continue to require Guests to wear face coverings at all locations while entering, exiting, and walking around our restaurants, and face masks are provided for Guests who arrive without one to ensure we are enabling the mutual safety of our Guests and Team Members.

We remain focused on consistently delivering a great Guest experience, sustaining off-premises sales levels, and expanding seating capacity to continue to drive our improving sales.

Notably, restaurants with reopened dining rooms are sustaining off-premises sales mix of over two times pre-pandemic levels, demonstrating the enduring and growing popularity of Red Robin for off-premises occasions.

As of the end of our fiscal fifth period, all Company-owned restaurants have re-opened indoor dining rooms with varying levels of capacity.

Notably, these restaurants have sustained off-premises sales that are more than double pre-pandemic levels, even in comparable Company-owned restaurants that are able to operate at full indoor capacity.

As of April 18, 2021, total Company-owned restaurants included 12 restaurants that have remained closed since the onset of the COVID-19 pandemic;

of these restaurants, 10 will permanently close and two will re-open in 2021.

Restaurant operating level expenses incurred for these restaurants during the temporary closures have been recorded in Restaurant closure and refranchising costs in Other charges;

see Note 6, Other Charges, in the Notes to the Condensed Consolidated Financial Statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

Selected operating metrics are presented below for the Company's 28 day accounting periods through the fourth period of fiscal year 2021, and the four weeks that comprise our fiscal fifth period of 2021 are as follows:

Period Ended (2)

Reopened Company-owned Restaurant Indoor Dining Rooms 9-Aug 6-Sept 4-Oct 1-Nov (3)

Company-owned Restaurants 24-Jan 21-Feb (3)

21-Mar 18-Apr 16-May (6)

Net comparable (1) restaurant revenues

Average weekly net sales per restaurant $38,779 $41,272 $43,034 $42,778

# of comparable Company-owned restaurants (1)

(26.7)% (22.9)% 21.9% 165.9% 102.6%

Net comparable (1) restaurant revenues compared to Fiscal Year 2019

(8.5)% 0.0% (3.3)%

(1) Net sales performance for Company-owned restaurants with reopened indoor dining rooms for the full period presented.

Restaurant count is as of the end of the period presented.

(2) The period ended August 9, September 6, and October 4, 2020 comprise the Company's third fiscal quarter.

The period ended November 1, 2020 falls within our fourth fiscal quarter, and amounts presented for the period are preliminary.

(3) Sales performance at restaurants with reopened dining rooms during the period ended November 1, 2020 was negatively impacted by rising COVID-19 cases resulting in new restrictions lowering dining room capacity in certain states and localities.

The negative impact was partially offset by sales benefits from expanded outdoor seating and increased use of booth partitions, improved off-premise sales performance in California, and average check growth during the period.

Additionally, Halloween shifted from a Thursday to a Saturday in 2020, negatively impacting comparable restaurant revenues by approximately 1.0% to 2.0% for the period ended November 1, 2020.

Net comparable restaurant revenue and average weekly net sales per Company-owned restaurant for the Company's 28 day accounting periods through November 1, 2020 is as follows:

Period Ended (2)

Company-owned Restaurants 9-Aug 6-Sept 4-Oct 1-Nov (3)

Net comparable restaurant revenues (34.2)% (24.9)% (14.9)% (15.4)%

Average weekly net sales per restaurant $39,701 $41,384 $53,240 $55,600 $52,731

# of comparable Company-owned restaurants (1)

Number of comparable Company-owned restaurants (1)

413 411 410 410 410

Company-owned restaurants with closed dining rooms (1)

Average weekly off-premises net sales per restaurant $20,896 $18,696 $20,056 $19,894 $19,078

Open system capacity (5)

40.0% 41.0% 48.0% 61.0% 65.0%

(1) Comparable restaurants are those Company-owned restaurants that have operated five full quarters as of the period or week presented.

Restaurant count shown is as of the end of the period or week presented.

(2) The period ended August 9, September 6, and October 4, 2020 comprise the Company's third fiscal quarter.

The period ended November 1, 2020 falls within our fourth fiscal quarter, and amounts presented for the period are preliminary.

Additionally, Halloween shifted from a Thursday to a Saturday in 2020, negatively impacting comparable restaurant revenues by approximately 1.0% to 2.0% for the period ended November 1, 2020.

(1) Comparable restaurants are those Company-owned restaurants that have operated five full fiscal quarters as of the period presented.

Restaurant count shown is as of the end of the period presented.

(2) The periods ended January 24, February 21, March 21, and April 18, 2021 comprise the Company's first fiscal quarter.

The period ended May 16, 2021 falls within our second fiscal quarter of 2021, and amounts presented for the period are preliminary and subject to closing adjustments.

(3) Period includes the impact of reduced traffic due to winter weather in February of approximately 2% to 3%.

(4) This metric is presented to compare current year operating results to periods that are not impacted by the COVID-19 pandemic.

There was no meaningful COVID-19 impact in P1 or P2 of 2020.

(5) Represents the percentage of indoor seating of Company-owned restaurants with open dining rooms, as of the end of the period presented.

(6) Period includes the impact of limited operating hours, in part due to staffing shortages.

Financial and Operational Highlights

The following summarizes the operational and financial highlights during the twelve and forty weeks ended October 4, 2020:

• Restaurant revenue decreased $92.9 million, or 32.0%, to $197.0 million for the twelve weeks ended October 4, 2020, as compared to the twelve weeks ended October 6, 2019, due to a $65.7 million, or 25.1%, decrease in comparable restaurant revenue and a $27.2 million decrease primarily from closed restaurants.

• Restaurant revenue decreased $334.2 million, or 33.7%, to $658.6 million for the forty weeks ended October 4, 2020, as compared to the forty weeks ended October 6, 2019, due to a $252.1 million, or 28.3%, decrease in comparable restaurant revenue and a $82.1 million decrease primarily from closed restaurants.

• Restaurant operating costs, as a percentage of restaurant revenue, increased 750 basis points to 91.4% for the twelve weeks ended October 4, 2020, as compared to 83.9% for the twelve weeks ended October 6, 2019.

The increase was due to higher other operating costs, labor costs, and occupancy costs as a percentage of restaurant revenue, partially offset by lower cost of sales as a percentage of restaurant revenue.

• Restaurant operating costs, as a percentage of restaurant revenue, increased 1,050 basis points to 92.9% for the forty weeks ended October 4, 2020, as compared to 82.4% for the forty weeks ended October 6, 2019.

• Net loss was $6.2 million for the twelve weeks ended October 4, 2020 compared to net loss of $1.8 million for the twelve weeks ended October 6, 2019.

Diluted loss per share was $0.40 for the twelve weeks ended October 4, 2020, as compared to diluted loss per share of $0.14 for the twelve weeks ended October 6, 2019.

Excluding costs per diluted share included in Other charges (gains) of $0.19 for restaurant closure and refranchising costs and $0.02 for COVID-19 related costs, adjusted loss per diluted share for the twelve weeks ended October 4, 2020, was $0.19.

Excluding a gain per diluted share included in Other charges (gains) of $0.23 for lease terminations for previously closed restaurants, and costs per diluted share included in Other charges (gains) of $0.07 for board and stockholder matters costs, $0.04 for severance and executive transition, and $0.02 for executive retention, adjusted loss per diluted share for the twelve weeks ended October 6, 2019 was $0.24.

• Net loss was $236.7 million for the forty weeks ended October 4, 2020 compared to net loss of $0.2 million for the forty weeks ended October 6, 2019.

Diluted loss per share was $16.98 for the forty weeks ended October 4, 2020, as compared to diluted loss per share of $0.02 for the forty weeks ended October 6, 2019.

Excluding costs per diluted share included in Other charges (gains) of $5.07 for goodwill impairment, $1.10 for restaurant asset impairment, $0.69 for restaurant closure and refranchising costs, $0.24 for litigation contingencies, $0.13 for board and stockholder matters costs, $0.07 for COVID-19 related costs, and $0.04 for severance and executive transition, adjusted loss per diluted share for the forty weeks ended October 4, 2020 was $9.64.

Excluding costs per diluted share included in Other charges (gains) of $0.80 for restaurant asset impairment, $0.17 for severance and executive transition, $0.14 for board and stockholder matters costs, and $0.04 for executive retention, and a gain included in Other charges (gains) of $0.15 for lease terminations for previously closed restaurants, adjusted earnings per diluted share for the forty weeks ended October 6, 2019 was $0.98.

• We believe the non-GAAP measure of adjusted earnings (loss) per share gives the reader additional insight into the ongoing operational results of the Company, and it is intended to supplement the presentation of the Company's financial results in accordance with GAAP.

• Marketing - Our Red Robin Royalty™ loyalty program operates in all our U.S.

Company-owned Red Robin restaurants and has been rolled out to most of our franchised restaurants.

We engage our Guests through Red Robin Royalty with offers designed to increase frequency of visits as a key part of our overall marketing strategy.

Our media buying approach has pivoted to prioritize digital, social, and owned channels including our website and email to effectively target and reach our Guests.

The following summarizes the operational and financial highlights during the sixteen weeks ended April 18, 2021:

Restaurant Revenue, compared to the same period in the prior year, is presented in the table below:

Restaurant Revenue for the sixteen weeks ended April 19, 2020

Increase/(decrease) in comparable restaurant revenue 28.3

Increase/(decrease) from closed restaurants (11.0)

Total increase/(decrease) 17.3

Restaurant Revenue for the sixteen weeks ended April 18, 2021

Restaurant revenues and operating costs as a percentage of restaurant revenue for the period are detailed in the table below:

Sixteen Weeks

Ended 2021 compared to 2020 Sixteen Weeks Ended 2021 compared to 2019 (1)

April 18, 2021 April 19, 2020 Increase/(Decrease) 4/21/2019 (1)

Increase/(Decrease)

Restaurant revenue (millions) $ 318.7 $ 301.4 5.7 % $ 400.5 (20.4) %

Restaurant operating costs:

(Percentage of Restaurant Revenue) (Basis Points) (Percentage of Restaurant Revenue) (Basis Points)

Cost of sales 21.7 % 23.4 % (170) 23.4 % (170)

Labor 35.0 % 39.3 % (430) 35.7 % (70)

Other operating 18.1 % 17.3 % 80 13.9 % 420

Occupancy 9.4 % 11.2 % (180) 8.7 % 70

Total 84.3 % 91.2 % (690) 81.7 % 250

(1) Presented for improved comparability to pre COVID-19 operations.

Certain percentage and basis point amounts in the table above do not total due to rounding as well as restaurant operating costs being expressed as a percentage of restaurant revenue and not total revenues.

The following table summarizes Net Loss, loss per diluted share, and adjusted loss per diluted share for the sixteen weeks ended April 18, 2021 and April 19, 2020;

Sixteen Weeks Ended

April 18, 2021 April 19, 2020

Net loss as reported $ (8,713) $ (174,298)

Loss per share - diluted:

Net loss as reported $ (0.56) $ (13.51)

Restaurant closure and refranchising costs 0.16 0.11

Restaurant asset impairment 0.08 1.20

Litigation contingencies 0.07 0.35

COVID-19 related costs 0.03 0.02

Board and stockholder matter costs 0.01 0.11

Severance and executive transition — 0.07

Goodwill impairment — 7.40

Income tax effect (0.09) (2.41)

Adjusted loss per share - diluted $ (0.30) $ (6.66)

Weighted average shares outstanding

Basic 15,579 12,903

Diluted 15,579 12,903

We believe the non-GAAP measure of adjusted loss per diluted share gives the reader additional insight into the ongoing operational results of the Company, and it is intended to supplement the presentation of the Company's financial results in accordance with GAAP.

Restaurant Data

The following table details restaurant unit data for our Company-owned and franchised locations for the periods indicated:

Twelve Weeks Ended Forty Weeks Ended

October 4, 2020 October 6, 2019 October 4, 2020 October 6, 2019

Sixteen Weeks Ended

April 18, 2021 April 19, 2020

Company-owned:

Beginning of period 443 454

Opened during the period — 1 — —

Closed during the period (1)

(6) (2) (10) (13)

End of period 440 452

Beginning of period 103 102

Opened during the period 1 — 1 1

End of period 103 102

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________________________________________________________

(1) In addition to the permanent closures during the twelve and forty weeks ended October 4, 2020, 24 Company-owned restaurants remained temporarily closed due to the COVID-19 pandemic as of October 4, 2020.

Of the 35 temporarily closed Company-owned restaurants at the beginning of the third fiscal quarter, six restaurants have been reopened and five restaurants have been permanently closed during the twelve weeks ended October 4, 2020.

Additionally, six more temporarily closed Company-owned restaurants were reopened during the beginning of our fourth fiscal quarter.

(1) In addition to the permanent closures during the sixteen weeks ended April 18, 2021, total Company-owned restaurants included 12 restaurants that have remained closed since the onset of the COVID-19 pandemic;

of these restaurants, 10 will permanently close and two will re-open in 2021.

The following table presents total Company-owned and franchised restaurants by state or province as of April 18, 2021:

Company-Owned Restaurants (1)

Franchised Restaurants

California 64 —

Colorado 22 —

Connecticut — 3

Illinois 22 —

Louisiana 2 —

Massachusetts 4 3

Maryland 13 —

Michigan — 20

Minnesota 4 —

North Carolina 17 —

New Hampshire 3 —

New Jersey 12 1

New Mexico 3 —

New York 16 —

Pennsylvania 11 21

Rhode Island 1 —

South Carolina 4 —

South Dakota 1 —

Tennessee 11 —

Virginia 20 —

Washington 38 —

Wisconsin 11 —

British Columbia — 12

Total 440 103

———————————————————

(1) Includes 12 Company-owned restaurants that remained closed due to the COVID-19 pandemic as of April 18, 2021.

Results of Operations

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Our operating results may fluctuate significantly as a result of a variety of factors, and operating results for any period presented are not necessarily indicative of results for a full fiscal year.

Twelve Weeks Ended Forty Weeks Ended

October 4, 2020 October 6, 2019 October 4, 2020 October 6, 2019

Sixteen Weeks Ended

April 18, 2021 April 19, 2020 April 21, 2019 (1)

Restaurant revenue 97.7 % 98.5 % 97.7 %

11 unchanged sentences

Pre-opening and acquisition costs — % — % 0.1 %

Other charges (gains) 2.2 (0.6) 20.7 1.7

Other charges 1.7 % 39.0 % 0.6 %

Loss from operations (1.3) % (51.7) % 0.8 %

4 unchanged sentences

___________________________________

(1) Presented for improved comparability to pre COVID-19 operations.

Certain percentage amounts in the table above do not total due to rounding as well as restaurant operating costs being expressed as a percentage of restaurant revenue and not total revenues.

Twelve Weeks Ended Forty Weeks Ended

(Revenues in thousands) October 4, 2020 October 6, 2019 Percent Change October 4, 2020 October 6, 2019 Percent Change

Sixteen Weeks Ended

(Revenues in thousands) April 18, 2021 April 19, 2020 Percent Change

Restaurant revenue $ 318,677 $ 301,434 5.7 %

4 unchanged sentences

Net sales per square foot $ 119 $ 109 9.5 %

Restaurant revenue for the twelve weeks ended October 4, 2020, which comprises primarily food and beverage sales, decreased $92.9 million, or 32.0%, as compared to the third quarter of 2019.

The decrease was due to a $65.7 million, or 25.1%, decrease in comparable restaurant revenue and a $27.2 million decrease primarily from closed restaurants.

The comparable restaurant revenue decrease was driven by a 24.6% decrease in Guest count and a 0.5% decrease in average Guest check.

The decrease in average Guest check resulted from a 3.6% decrease in menu mix, partially offset by a 2.2% increase in pricing and a 0.9% increase from lower discounting.

The decrease in menu mix was primarily driven by limited dining room capacity at reopened restaurants and operating off-premise only at restaurants with temporarily closed dining rooms, resulting in lower sales of beverages and Finest burgers.

Off-premise sales increased 127.2% and comprised 40.7% of total food and beverage sales during the third quarter of 2020.

Restaurant revenue for the forty weeks ended October 4, 2020, decreased $334.2 million or 33.7%, as compared to the forty weeks ended October 6, 2019.

The decrease was due to a $252.1 million, or 28.3%, decrease in comparable restaurant revenue and a $82.1 million decrease primarily from closed restaurants.

The comparable restaurant revenue decrease was driven by a 27.4% decrease in Guest count and a 0.9% decrease in average Guest check.

The decrease in average Guest check resulted from a 3.5% decrease in menu mix, partially offset by a 2.0 % increase in pricing and a 0.6 % increase from lower discounting.

Off-premise sales increased 136.8% and comprised 40.0% of total food and beverage sales during the forty weeks ended October 4, 2020.

Restaurant revenue for the sixteen weeks ended April 18, 2021, which comprises primarily food and beverage sales, increased $17.3 million, or 5.7 %, as compared to the first quarter of 2020.

The increase was due to a $28.3 million, or 10.0%, increase in comparable restaurant revenue, partially offset by a $11.0 million decrease primarily from closed restaurants.

The comparable restaurant revenue increase was driven by a 4.4% increase in Guest count and a 5.6% increase in average Guest check.

The increase in average Guest check resulted from a 3.7% increase in pricing, a 1.3% increase in menu mix and a 0.6% increase from lower discounting.

The increase in menu mix was primarily driven by higher sales of appetizers and Gourmet burgers, partially offset by lower beverage mix.

Off-premises sales increased 75.5% and comprised 41.7% of total food and beverage sales during first quarter 2021.

Average weekly net sales volumes represent the total restaurant revenue for all Company-owned Red Robin restaurants for each time period presented, divided by the number of operating weeks in the period.

Comparable restaurant revenues include those restaurants that are in the comparable base at the end of each period presented.

The temporarily closed Company-owned restaurants due to the COVID-19 pandemic were not included in the comparable base for the twelve and forty weeks ended October 4, 2020.

Fluctuations in average weekly net sales volumes for Company-owned restaurants reflect the effect of comparable restaurant revenue changes as well as the performance of new and acquired restaurants during the period and the average square footage of our restaurants.

Net sales per square foot represents the total restaurant revenue for Company-owned restaurants included in the comparable base divided by the total adjusted square feet of Company-owned restaurants included in the comparable base.

Franchise and other revenue decreased $0.9 million for the twelve weeks ended October 4, 2020 compared to the twelve weeks ended October 6, 2019 due to charging and collecting partial royalty payments and advertising contributions from our franchisees for the majority of the third fiscal quarter of 2020.

As of the end of our third fiscal quarter of 2020, we were charging and collecting full royalty payments and advertising contributions from our franchisees.

Our franchisees reported a comparable restaurant revenue decrease of 17.0% for the twelve weeks ended October 4, 2020 compared to the same period in 2019.

Franchise and other revenue decreased $10.2 million for the forty weeks ended October 4, 2020 compared to the forty weeks ended October 6, 2019 due to the temporary abatement of franchisee royalty payments and advertising contributions in response to COVID-19's effect on our franchise operations through the latter half of the second fiscal quarter and only charging and collecting partial royalty payments and advertising contributions thereafter through the majority of the third fiscal quarter of 2020.

As of the end of the third quarter of 2020, the Company had resumed charging full royalty and advertising contributions to our franchisees.

Our franchisees reported a comparable restaurant revenue decrease of 27.1% for the forty weeks ended October 4, 2020 compared to the same period in 2019.

Comparable restaurant revenues are comprised of Company-owned restaurants that have operated five full quarters as of the end of the period presented.

The Company-owned restaurants that were temporarily closed due to the COVID-19 pandemic were not included in the comparable base for the sixteen weeks ended April 18, 2021 or April 19, 2020.

Fluctuations in average weekly net sales volumes for Company-owned restaurants reflect the effect of comparable restaurant revenue changes as well as the performance of new and acquired restaurants during the period, the average square footage of our restaurants, as well as the impact of changing capacity limitations in response to COVID-19 levels in a given locality.

Net sales per square foot represents the total restaurant revenue for Company-owned restaurants included in the comparable base divided by the total square feet of Company-owned restaurants included in the comparable base.

Franchise and other revenue increased $3.0 million for the sixteen weeks ended April 18, 2021 compared to the sixteen weeks ended April 19, 2020 due to charging and collecting royalty payments and advertising contributions from our franchisees for first fiscal quarter of 2021;

during the same period in 2020, the Company temporary abated all franchisee royalty and advertising contribution payments in response to COVID-19's effect on our franchisee's operations.

Our franchisees reported a comparable restaurant revenue increase of 15.1% for the sixteen weeks ended April 18, 2021 compared to the same period in 2020.

Cost of Sales

Twelve Weeks Ended Forty Weeks Ended

(In thousands, except percentages) October 4, 2020 October 6, 2019 Percent Change October 4, 2020 October 6, 2019 Percent Change

Sixteen Weeks Ended

(In thousands, except percentages) April 18, 2021 April 19, 2020 Percent Change

Cost of sales $ 69,166 $ 70,426 (1.8) %

1 unchanged sentence

Cost of sales, which comprises of food and beverage costs, is variable and generally fluctuates with sales volume.

Cost of sales as a percentage of restaurant revenue decreased 40 basis points for the twelve weeks ended October 4, 2020 as compared to the same period in 2019.

The decrease was primarily driven by lower promotional discounts and net favorable commodity prices.

Cost of sales as a percentage of restaurant revenue decreased 10 basis points for the forty weeks ended October 4, 2020 as compared to the same period in 2019.

The decrease was mainly driven by lower promotional discounts, partially offset by increased waste and lower beverage mix.

Twelve Weeks Ended Forty Weeks Ended

(In thousands, except percentages) October 4, 2020 October 6, 2019 Percent Change October 4, 2020 October 6, 2019 Percent Change

Cost of sales as a percentage of restaurant revenue decreased 170 basis points for the sixteen weeks ended April 18, 2021 as compared to the same period in 2020.

The decrease was primarily driven by favorable commodity costs and rebates.

Sixteen Weeks Ended

(In thousands, except percentages) April 18, 2021 April 19, 2020 Percent Change

Labor $ 111,659 $ 118,566 (5.8) %

1 unchanged sentence

Labor costs include restaurant-level hourly wages and management salaries as well as related taxes and benefits.

For the twelve weeks ended October 4, 2020, labor as a percentage of restaurant revenue increased 150 basis points compared to the same period in 2019.

The increase was primarily due to sales deleverage and higher hourly wage rates driven by shifting labor mix in support of our off-premise operating model, partially offset by lower restaurant manager incentive compensation.

For the forty weeks ended October 4, 2020, labor as a percentage of restaurant revenue increased 310 basis points compared to the same period in 2019.

The increase was primarily driven by sales deleverage and higher hourly wage and benefit rates driven by shifting labor mix in support of our off-premise operating model, partially offset by lower restaurant manager incentive compensation.

For the sixteen weeks ended April 18, 2021, labor as a percentage of restaurant revenue decreased 430 basis points compared to the same period in 2020.

The decrease was primarily driven by a more efficient management labor structure, staffing shortages, and simplifying our menu resulting in reduced kitchen labor hours, partially offset by higher wage rates.

Other Operating

Twelve Weeks Ended Forty Weeks Ended

(In thousands, except percentages) October 4, 2020 October 6, 2019 Percent Change October 4, 2020 October 6, 2019 Percent Change

Sixteen Weeks Ended

(In thousands, except percentages) April 18, 2021 April 19, 2020 Percent Change

Other operating $ 57,712 $ 52,291 10.4 %

1 unchanged sentence

Other operating costs include costs such as equipment repairs and maintenance costs, restaurant supplies, utilities, restaurant technology, and other miscellaneous costs.

For the twelve weeks ended October 4, 2020, other operating costs as a percentage of restaurant revenue increased 380 basis points as compared to the same period in 2019.

The increase was primarily due to higher third-party delivery fees and supply costs driven by higher off-premise sales volumes and sales deleverage impacts on restaurant utility costs, partially offset by a decrease in restaurant janitorial and maintenance costs.

For the forty weeks ended October 4, 2020, other operating costs as a percentage of restaurant revenue increased 450 basis points as compared to the same period in 2019.

The increase was primarily due to higher third-party delivery fees driven by higher off-premise sales volumes and sales deleverage impacts on restaurant supply, utility, and technology costs, partially offset by a decrease in restaurant maintenance costs.

Twelve Weeks Ended Forty Weeks Ended

(In thousands, except percentages) October 4, 2020 October 6, 2019 Percent Change October 4, 2020 October 6, 2019 Percent Change

For the sixteen weeks ended April 18, 2021, other operating costs as a percentage of restaurant revenue increased 80 basis points as compared to the same period in 2020.

The increase was primarily due to higher third party delivery commissions and supply costs driven by higher off-premises sales.

Sixteen Weeks Ended

(In thousands, except percentages) April 18, 2021 April 19, 2020 Percent Change

Occupancy $ 30,100 $ 33,657 (10.6) %

2 unchanged sentences

Occupancy costs incurred prior to opening our new restaurants are included in pre-opening costs.

For the twelve weeks ended October 4, 2020, occupancy costs as a percentage of restaurant revenue increased 260 basis points compared to the same period in 2019 primarily due to sales deleverage.

For the forty weeks ended October 4, 2020, occupancy costs as a percentage of restaurant revenue increased 300 basis points compared to the same period in 2019 primarily due to sales deleverage.

Our fixed rents for the twelve weeks ended October 4, 2020 and October 6, 2019 were $14.7 million and $16.9 million, a decrease of $2.2 million due to permanent restaurant closures.

Our fixed rents for the forty weeks ended October 4, 2020 and October 6, 2019 were $51.0 million and $57.1 million, a decrease of $6.1 million due to permanent restaurant closures.

For the sixteen weeks ended April 18, 2021, occupancy costs as a percentage of restaurant revenue decreased 180 basis points compared to the same period in 2020 primarily due to savings from permanently closed restaurants and restructuring of lease payments and rent concessions.

Our fixed rents for the sixteen weeks ended April 18, 2021 and April 19, 2020 were $21.1 million and $21.6 million, a decrease of $0.5 million due to savings from permanently closed restaurants and restructuring of lease payments and rent concessions.

Depreciation and Amortization

Twelve Weeks Ended Forty Weeks Ended

(In thousands, except percentages) October 4, 2020 October 6, 2019 Percent Change October 4, 2020 October 6, 2019 Percent Change

Sixteen Weeks Ended

(In thousands, except percentages) April 18, 2021 April 19, 2020 Percent Change

Depreciation and amortization $ 25,888 $ 28,320 (8.6) %

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Depreciation and amortization includes depreciation on capital expenditures for restaurants and corporate assets as well as amortization of acquired franchise rights, leasehold interests, and certain liquor licenses.

For the twelve week periods ended October 4, 2020, depreciation and amortization expense as a percentage of revenue increased 240 basis points over the same period in 2019 primarily due to sales deleverage.

For the forty weeks ended October 4, 2020, depreciation and amortization expense as a percentage of revenue increased 320 basis points over the same period in 2019 primarily due to sales deleverage.

For the sixteen weeks ended April 18, 2021, depreciation and amortization expense as a percentage of revenue decreased 140 basis points over the same period in 2020 primarily due to net closed Company-owned restaurants, and sales leverage.

Selling, General, and Administrative

Twelve Weeks Ended Forty Weeks Ended

(In thousands, except percentages) October 4, 2020 October 6, 2019 Percent Change October 4, 2020 October 6, 2019 Percent Change

Sixteen Weeks Ended

(In thousands, except percentages) April 18, 2021 April 19, 2020 Percent Change

Selling, general, and administrative $ 30,610 $ 41,502 (26.2) %

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and board of directors expenses.

Selling, general, and administrative costs in the twelve weeks ended October 4, 2020 decreased $15.5 million, or 42.1%, as compared to the same period in 2019.

The decrease was primarily due to decreased national and local media spend, decreased Team Member salaries and wages resulting from the reduction in force and temporary salary reductions, and decreased Team Member benefits, travel and entertainment, and gift card related costs.

For the forty weeks ended October 4, 2020, selling, general, and administrative costs decreased $37.6 million, or 31.3%, as compared to the same period in 2019.

The decrease was primarily related to a decrease in national and local media spend, decreased Team Member salaries and wages resulting from the reduction in force and temporary salary reductions, and decreased Team Member benefits, travel and entertainment, gift card related, professional services, and project related general and administrative costs.

Selling, general, and administrative costs in the sixteen weeks ended April 18, 2021 decreased $10.9 million, or 26.2%, as compared to the same period in 2020.

The decrease was primarily driven by reduced marketing due to capacity limitations and a shift to an all-digital marketing strategy, which has enabled us to communicate with our guests in a more compelling and cost effective way, as well as a decrease in travel and entertainment costs and a permanent reduction in force in 2020, partially offset by higher Team Member benefit costs.

Pre-opening Costs

Twelve Weeks Ended Forty Weeks Ended

(In thousands, except percentages) October 4, 2020 October 6, 2019 Percent Change October 4, 2020 October 6, 2019 Percent Change

Sixteen Weeks Ended

(In thousands, except percentages) April 18, 2021 April 19, 2020 Percent Change

Pre-opening costs $ — $ 153 (100.0) %

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Pre-opening costs for any given quarter will typically include expenses associated with restaurants opened during the quarter as well as expenses related to restaurants opening in subsequent quarters.

We incurred pre-opening costs during the twelve and forty weeks ended October 4, 2020 related to the rollout of Donatos®.

The limited rollout of Donatos® planned in the Seattle market during 2020 was completed on October 16, 2020.

The Company expects to resume its phased system-wide rollout of Donatos® in 2021.

We incurred pre-opening costs during the sixteen weeks ended April 19, 2020 related to the rollout of Donatos®.

The Company expects to continue its roll out of Donatos® in 2021 to approximately 120 restaurants, including approximately 40 restaurants in our second fiscal quarter, and approximately 80 restaurants in the second half of the fiscal year.

Interest Expense, Net and Other

Interest expense, net and other was $2.3 million for the twelve weeks ended October 4, 2020, an increase of $0.5 million, or 27.8%, compared to the same period in 2019.

The increase was primarily related to a higher average outstanding debt balance compared to the same period in 2019.

Our weighted average interest rate was 5.0% for the twelve weeks ended October 4, 2020 as compared to 5.1% for the same period in 2019.

Interest expense, net and other was $7.6 million for the forty weeks ended October 4, 2020, an increase of $0.4 million, or 5.6%, compared to the same period in 2019.

The increase was primarily related to a higher average outstanding debt balance partially offset by a lower weighted average interest rate compared to the same period in 2019.

Our weighted average interest rate was 4.5% for the forty weeks ended October 4, 2020 as compared to 5.0% for the same period in 2019.

Interest expense, net and other was $4.3 million for the sixteen weeks ended April 18, 2021, an increase of $0.9 million, or 26.5%, compared to the same period in 2020.

The increase was primarily related to a higher weighted average interest rate for the quarter as well as the partial write off of approximately $1.2 million of deferred financing charges related to the modification of our revolver in conjunction with the execution of the Second Amendment on February 25, 2021, partially offset by a lower average outstanding debt balance compared to the same period in 2020.

Our weighted average interest rate was 6.3% for the sixteen weeks ended April 18, 2021 as compared to 4.3% for the same period in 2020.

Provision for Income Taxes

The effective tax rate for the twelve weeks ended October 4, 2020 was a 77.0% benefit, compared to a 74.1% benefit for the twelve weeks ended October 6, 2019.

The effective tax rate for the forty weeks ended October 4, 2020 was a 1.8% benefit, compared to a 99.1% benefit for the same period in 2019.

The increase in tax benefit for the twelve weeks ended October 4, 2020 is primarily due to a decrease in income and the release of $12.7 million in a previously recognized valuation allowance.

The decrease in tax benefit for the forty weeks ended October 4, 2020 is primarily due to a $67.1 million net valuation allowance and decrease in current year tax credits, partially offset by a decrease in income and the favorable rate impact of net operating loss ("NOL") carrybacks allowed as part of the CARES Act.

Subsequent to its third quarter balance sheet date, the Company received $49.4 million in cash tax refunds, including interest, and expects to receive between $12 million to $15 million of additional cash tax refunds within the next 12 months.

The effective tax rate for the sixteen weeks ended April 18, 2021 was a 0.6% expense, compared to a 7.9% expense for the sixteen weeks ended April 19, 2020.

The decrease in tax expense for the sixteen weeks ended April 18, 2021 is primarily due to the recognition of a smaller valuation allowance during the first quarter of 2021.

The Company will be able to carry back federal and state net operating losses that are expected to generate approximately $16 million of cash tax refunds during 2021.

Liquidity and Capital Resources

Cash and cash equivalents decreased $2.7 million to $27.4 million at October 4, 2020, from $30.0 million at the beginning of the fiscal year.

As the Company has now stabilized its liquidity through its at-the-market equity offering, reduced overhead costs, and federal cash tax refunds provided under the provisions of the CARES Act, we expect to begin using available cash flow from operations to pay down debt, maintain existing restaurants and infrastructure, and execute on our long-term strategic initiatives.

As of October 4, 2020, the Company had approximately $97 million in liquidity, including cash on hand and available borrowing capacity under its credit facility.

Our liquidity as of October 4, 2020 does not include $49.4 million in cash tax refunds, including interest, which were received after the third quarter balance sheet date.

Cash and cash equivalents increased $6.2 million to $22.3 million as of April 18, 2021, from $16.1 million at the beginning of the fiscal year.

As the Company continues to recover from the COVID-19 pandemic and generates operating cash flow, we expect to begin using available cash flow from operations to pay down debt, maintain existing restaurants and infrastructure, and execute on our long-term strategic initiatives.

As of April 18, 2021, the Company had approximately $107 million in liquidity, including cash on hand and available borrowing capacity under its credit facility.

The table below summarizes our cash flows from operating, investing, and financing activities for each period presented (in thousands):

Forty Weeks Ended

October 4, 2020 October 6, 2019

Net cash (used in) provided by operating activities $ (22,401) $ 41,617

Sixteen Weeks Ended

April 18, 2021 April 19, 2020

Net cash provided by (used in) provided by operating activities $ 18,932 $ (13,320)

Net cash used in investing activities (5,400) (8,703)

Net cash provided by (used in) financing activities 34,020 (7,156)

Net cash (used in) provided by financing activities (7,393) 81,738

Effect of exchange rate changes on cash 29 (840)

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Operating Cash Flows

Net cash flows (used in) provided by operating activities decreased $64.0 million to $22.4 million for the forty weeks ended October 4, 2020.

The changes in net cash (used in) provided by operating activities are primarily attributable to a $110.4 million decrease in profit from operations, as well as changes in working capital as presented in the condensed consolidated statements of cash flows.

Net cash flows provided by (used in) operating activities increased $32.3 million to $18.9 million for the sixteen weeks ended April 18, 2021.

The changes in net cash provided by (used in) operating activities are primarily attributable to a $29.3 million increase in profit from operations, defined as the change in operating margins from comparable and non-comparable restaurants, lower accounts receivable and higher accounts payable balances due to the timing of operational receipts and payments, deferral of payroll tax payments under the CARES Act, as well as other changes in working capital as presented in the Condensed Consolidated Statements of Cash Flows.

Investing Cash Flows

Net cash flows used in investing activities decreased $18.8 million to $14.1 million for the forty weeks ended October 4, 2020, as compared to $32.9 million for the same period in 2019.

The decrease is primarily due to decreased investment in restaurant technology, restaurant maintenance, and new restaurants and restaurant refreshes due to the COVID-19 pandemic.

The following table lists the components of our capital expenditures, net of currency translation effect, for the forty weeks ended October 4, 2020 and October 6, 2019 (in thousands):

Forty Weeks Ended

October 4, 2020 October 6, 2019

Restaurant maintenance capital and other $ 8,433 $ 13,128

Net cash flows used in investing activities decreased $3.3 million to $5.4 million for the sixteen weeks ended April 18, 2021, as compared to $8.7 million for the same period in 2020.

The decrease is primarily due to targeted investment in restaurant technology and restaurant improvement capital in line with the Company's emphasis on strategic capital and cost management.

The following table lists the components of our capital expenditures, net of currency translation, for the sixteen weeks ended April 18, 2021 and April 19, 2020 (in thousands):

Sixteen Weeks Ended

April 18, 2021 April 19, 2020

Restaurant improvement capital and other $ 2,429 $ 6,656

Investment in technology infrastructure and other 2,269 2,090

Restaurant remodels — 3,118

Donatos ® expansion

Total capital expenditures $ 5,400 $ 8,746

Financing Cash Flows

Net cash flows provided by (used in) financing activities increased $41.2 million to $34.0 million for the forty weeks ended October 4, 2020, as compared to the same period in 2019.

The increase is due to cash proceeds received from the issuance of common stock, net of cash paid for stock issuance costs, of $28.9 million, a $14.4 million increase in net draws made on long-term debt, and a decrease in cash used to repurchase the Company's common stock due to temporary suspension of the share repurchase program.

The increase was partially offset by an increase of cash used for debt issuance costs.

The net cash proceeds from issuance of common stock of $28.9 million do not include unpaid stock issuance costs of approximately $0.2 million.

Net cash flows used in financing activities increased $89.1 million to $7.4 million for the sixteen weeks ended April 18, 2021, as compared to net cash flows provided by financing activities of $81.7 million in the same period in 2020.

The decrease is due to a $91.0 million decrease in net draws made on long-term debt, a decrease in cash used to repurchase the Company's common stock due to the temporary suspension of the Company's share repurchase program, and a decrease in cash used for debt issuance costs.

Credit Facility

As of October 4, 2020, the Company had outstanding borrowings under the credit facility of $215.2 million, of which $9.7 million was classified as current, in addition to amounts issued under letters of credit of $7.9 million.

As of April 18, 2021, the Company had outstanding borrowings under the credit facility of $163.3 million, of which $9.7 million was classified as current, in addition to amounts issued under letters of credit of $8.6 million.

Amounts issued under letters of credit reduce the amount available under the credit facility but are not recorded as debt.

As of October 4, 2020, the Company had $69.6 million of available borrowing capacity under its credit facility.

Net draws during the third quarter of 2020 totaled $8.6 million, and net draws during the forty weeks ended October 4, 2020 totaled $9.2 million.

As of April 18, 2021, the Company had $84.4 million of available borrowing capacity under its credit facility.

Net payments during the sixteen weeks ended April 18, 2021 totaled $6.4 million, and net draws during the first quarter of 2020 totaled $84.0 million.

We are subject to a number of customary covenants under our credit facility, including limitations on additional borrowings, acquisitions, stock repurchases, sales of assets, and dividend payments.

During the first quarter of 2020, we were not in compliance with our debt covenants due to the negative effects on our business from the COVID-19 pandemic.

As a result, we entered into the Amendment to our credit facility, which waives compliance with the lease adjusted leverage ratio financial covenant ("LALR ratio") and fixed charge coverage ratio financial covenant ("FCC ratio") for the remainder of fiscal 2020 and allows adjustments during the first three fiscal quarters of 2021 to the LALR ratio, including increasing the maximum LALR ratio permitted and allowing the use of a seasonally adjusted annualized consolidated EBITDA in the LALR ratio calculation, and to the FCC ratio, including only being calculated for applicable periods since the beginning of 2021.

As discussed in Note 7, Borrowings , in the Notes to the Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, we entered into the Second Amendment on February 25, 2021, which waives compliance with the lease adjusted leverage ratio financial covenant ("LALR ratio") and fixed charge coverage ratio financial covenant ("FCC ratio") for the first two fiscal quarters of 2021, and provides for adjustments during the third and fourth fiscal quarter of 2021 and the first and second fiscal quarters of 2022 for the LALR and FCC ratios and related calculations.

The Company is currently in compliance with applicable covenants, and forecasts compliance in the next twelve calendar months as the LALR ratio and FCC ratio become applicable.

Debt Outstanding

Total debt outstanding increased $9.2 million to $216.1 million at October 4, 2020 , from $206.9 million at December 29, 2019, due to net draws of $9.2 million on the credit facility during the forty weeks ended October 4, 2020 .

In conjunction with the receipt of $49.4 million in cash tax refunds subsequent to the third quarter balance sheet date, the Company made a $42 million repayment on its credit facility on October 30, 2020.

Total debt outstanding decreased $6.4 million to $164.2 million at April 18, 2021 , from $170.6 million at December 27, 2020, due to net payments of $6.4 million on the credit facility during the sixteen weeks ended April 18, 2021 .

Working Capital

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Pursuant to the repurchase program, purchases may be made from time to time at the Company's discretion and the Company is not obligated to acquire any particular amount of common stock.

From the date of the current program approval through October 4, 2020, we have repurchased a total of 226,500 shares at an average price of $29.14 per share for an aggregate amount of $6.6 million.

Accordingly, as of October 4, 2020, we had $68.4 million of availability under the current share repurchase program.

From the date of the current program approval through April 18, 2021, we have repurchased a total of 226,500 shares at an average price of $29.14 per share for an aggregate amount of $6.6 million.

Accordingly, as of April 18, 2021, we had $68.4 million of availability under the current share repurchase program.

Effective March 14, 2020, the Company temporarily suspended its share repurchase program to provide additional liquidity during the COVID-19 pandemic.

Our ability to repurchase shares is limited to conditions set forth by our lenders in the amendment to our credit facility prohibiting us from repurchasing additional shares until the later of (a) the Company's delivery of a compliance certificate for the fiscal quarter ending on or about July 11, 2021 demonstrating compliance with the financial covenants then in effect or (b) the Company satisfying an agreed ratio under its Leverage Ratio Covenant for the most recently ended fiscal quarter or fiscal year, as applicable.

Our ability to repurchase shares is limited to conditions set forth by our lenders in the Second Amendment to our credit facility prohibiting us from repurchasing additional shares until the first fiscal quarter of 2022 at the earliest and not until we deliver a covenant compliance certificate demonstrating a lease adjusted leverage ratio less than or equal to 5.00:1.00.

The primary inflationary factors affecting our operations are food, labor costs, energy costs, and materials used in the construction of new restaurants.

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Many of our leases require us to pay taxes, maintenance, repairs, insurance, and utilities, all of which are generally subject to inflationary increases.

Labor cost inflation had a negative impact on our financial condition and results of operations during the forty weeks ended October 4, 2020.

Uncertainties related to fluctuations in costs, including energy costs, commodity prices, annual indexed or potential minimum wage increases, and construction materials make it difficult to predict what impact, if any, inflation may continue to have on our business, but it is anticipated inflation will have a negative impact on labor costs for the remainder of 2020.

Labor cost inflation had a negative impact on our financial condition and results of operations during the sixteen weeks ended April 18, 2021.

Our business is subject to seasonal fluctuations.

Historically, sales in most of our restaurants have been higher during the summer months and winter holiday season and lower during the fall season.

Prior to the COVID-19 pandemic, sales in most of our restaurants have been higher during the summer months and winter holiday season and lower during the fall season.

As a result, our quarterly operating results and comparable restaurant revenue may fluctuate significantly as a result of seasonality.

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Contractual Obligations

There were no other material changes outside the ordinary course of business to our contractual obligations since the filing of Company's Quarterly Report on Form 10-Q for the fiscal quarter ended April 19, 2020, except for lease obligations as a result of contractual rent concessions negotiated by the Company during the fiscal quarters ended July 12, 2020 and October 4, 2020.

There were no other material changes outside the ordinary course of business to our contractual obligations since the filing of the Company's Annual Report on Form 10-K for the fiscal year ended December 27, 2020, except for lease obligations as a result of contractual rent concessions negotiated by the Company during the fiscal quarter ended April 18, 2021, and long-term debt obligations resulting from the changes to our Credit Facility in February 2021 as previously discussed in Note 7, Borrowings , of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, Contractual long-term debt payments as of April 19, 2020 are as follows (in thousands):

Payments Due by Period

Total 2021 2022-2023 2024-2025 2026 and Thereafter

Long-term debt obligations (1)

$ 179,833 $ 13,512 $ 165,348 $ 65 $ 908

(1) Long-term debt obligations primarily represent minimum required principal payments under our Credit Facility including estimated interest of $15.4 million based on a 5.50% average borrowing interest rate.

See the maturity of lease liabilities table in Note 4, Leases , in the Notes to the Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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Forward-Looking Statements

Certain information and statements contained in this report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "PSLRA") codified at Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

This statement is included for purposes of complying with the safe harbor provisions of the PSLRA.

Certain information and statements contained in this report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "PSLRA") codified at Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Exchange Act.

Forward-looking statements include statements regarding our expectations, beliefs, intentions, plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements which are other than statements of historical facts.

These statements may be identified, without limitation, by the use of forward-looking terminology such as "anticipate," "assume," "believe," "estimate," "could," "expect," "future," "intend," "may," "plan," "project," "will," "would," and similar expressions.

Certain forward-looking statements are included in this Quarterly Report on Form 10-Q, principally in the sections captioned "Financial Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Forward-looking statements in this report include, among other things statements regarding:

our financial performance, improved sales trajectory, Guest satisfaction scores, seating expansion and increased dining capacity and its effect on sales, strategic plan and turnaround, marketing strategy, expected uses for available cash flow;

beliefs about the ability of our lenders to fulfill their lending commitments under our credit facility and about the sufficiency of future cash flows to satisfy any working capital deficit and planned capital expenditures, liquidity, projected taxes and cash tax refunds;

the anticipated effects of inflation on labor and commodity costs;

future performance including sales and off premise sales;

preliminary results including net comparable restaurant revenues and average weekly net sales per restaurant;

expectations regarding dining room re-openings and closures;

anticipated additional rollout of Donato's® and the timing thereof;

statements under the heading "Company Response to COVID-19 Pandemic;" and the effect of the adoption of new accounting standards on our financial and accounting systems.

Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those we express in these forward-looking statements.

These risks and uncertainties include, but are not limited to, the following:

the rapidly evolving nature of the COVID-19 pandemic and related containment measures, including the potential for a complete shutdown of Company restaurants;

the extent of the impact of the COVID-19 pandemic or any other epidemic, disease outbreak, or public health emergency, including the duration, spread, severity, and any recurrence of the COVID-19 pandemic;

the duration and scope of COVID-19 related government orders and restrictions, including in California where a substantial number of our restaurants are located;

economic, public health, and political conditions that impact consumer confidence and spending, including the impact of COVID-19;

the effect of the COVID-19 pandemic on labor, staffing, and changes in unemployment rate;

the ability to achieve significant cost savings;

the Company's ability to defer lease or contract payments or otherwise obtain concessions from landlords, vendors, and other parties in light of the impact of the COVID-19 pandemic;

the economic health of the Company's landlords and other tenants in retail centers in which its restaurants are located, suppliers, licensees, vendors, and other third parties providing goods or services to the Company;

the Company's ability to continue to implement our seating expansion plans and the timing thereof, including factors that are under control of government agencies, landlords, and other third parties;

adverse weather conditions in regions in which the Company’s restaurants are located and the timing thereof;

the impact of political protests and curfews imposed by state and local governments;

the effect of COVID-19 on our supply chain and the cost, availability, and timing of obtaining key products, distribution, labor, and energy;

the effectiveness of the Company's marketing and menu strategies and promotions;

the effectiveness of the Company's strategic initiatives including service model, technology solutions, and sales building initiatives;

the amount and timing of cash tax refunds received as a result of the CARES Act;

the cost and availability of capital or credit facility borrowings;

the adequacy of cash flows or available debt resources to fund operations and growth opportunities;

uncertainty regarding general economic and industry conditions;

concentration of restaurants in certain markets;

changes in consumer disposable income, consumer spending trends and habits;

the effectiveness of our information technology and new technology systems, including cyber security with respect to those systems;

regional mall and lifestyle center traffic trends or other trends affecting traffic at our restaurants;

increased competition and discounting in the casual-dining restaurant market;

costs and availability of food and beverage inventory;

changes in commodity prices, particularly ground beef, and distribution costs;

changes in energy and labor costs, including due to changes in health care and market wage levels;

changes in federal, state, or local laws and regulations affecting the operation of our restaurants, including but not limited to, minimum wages, consumer health and safety, health insurance coverage, nutritional disclosures, and employment eligibility-related documentation requirements;

our franchising strategy;

our ability to attract and retain qualified managers and Team Members;

costs and other effects of legal claims by Team Members, franchisees, customers, vendors, stockholders, including relating to fluctuations in our stock price, and others, including settlement of those claims or negative publicity regarding food safety or cyber security;

changes in accounting standards policies and practices or related interpretations by auditors or regulatory entities;

and other risk factors described from time to time in the Company's Form 10-K, Form 10-Q, and Form 8-K reports (including all amendments to those reports) filed with the U.S.

Securities and Exchange Commission.

These statements may be identified, without limitation, by the use of forward-looking terminology such as "anticipate," "assume," "believe," "could," "estimate," "expect," "future," "intend," "may," "plan," "project," "will," "continue," and similar expressions.

Forward-looking statements may relate to, among other things:

(i) our business objectives and strategic plans, including projected growth in Guest traffic and revenue, planned improvements in operational efficiencies, gross margins, and expense management and enhancements to our restaurant environments and Guest engagement;

(ii) our expectations about pricing strategy and average check size;

(iii) our ability to hire, train, and retain Team Members;

(iv) investments in information technology systems and anticipated related benefits;

(v) our expectations about restaurant operating costs, including commodity and food prices and labor and energy costs;

(vi) anticipated legislation and other regulation of our business;

(vii) recent initiatives such as changes to our service model and our partnership with Donato's®;

(viii) our expectations about future cash flows, liquidity, future capital expenditures and other capital deployment opportunities, and taxes;

(ix) our expectations regarding competition;

and (x) our expectations regarding

demand and business recovery, consumer preferences, and consumer discretionary spending.

Although we believe the expectations reflected in our forward-looking statements are based on reasonable assumptions, such expectations may prove to be materially incorrect due to known and unknown risks and uncertainties.

In some cases, information regarding certain important factors that could cause actual results to differ materially from a forward-looking statement appears together with such statement.

In addition, the factors described under Risk Factors, as well as other possible factors not listed, could cause actual results to differ materially from those expressed in forward-looking statements, including, without limitation, the following:

• the impact of COVID-19 on our results of operations, supply chain, and liquidity;

• the effectiveness of the Company's strategic initiatives, including alternative labor models, service, and operational improvement initiatives;

• our ability to staff, train, and retain our workforce for service execution;

• the effectiveness of the Company's marketing strategies and promotions;

• menu changes, including the anticipated sales growth, costs, and timing of the Donatos® expansion;

• the implementation, rollout, and timing of technology solutions in our restaurants and at our restaurant support center, in addition to digital platforms that are accessed by our Guests;

• our ability to achieve revenue and cost savings from off-premise sales and other initiatives;

• competition in the casual dining market and discounting by competitors;

• changes in consumer spending trends and habits;

• changes in the cost and availability of key food products, distribution, labor, and energy;

• general economic conditions, including changes in consumer disposable income, weather conditions, and related events in regions where our restaurants are operated;

• the adequacy of cash flows and the cost and availability of capital or credit facility borrowings;

• the impact of federal, state, and local regulation of the Company's business;

• changes in federal, state, or local laws and regulations affecting the operation of our restaurants, including minimum wages, consumer health and safety, health insurance coverage, nutritional disclosures, and employment eligibility-related documentation requirements;

• costs and other effects of legal claims by Team Members, franchisees, customers, vendors, stockholders, and others, including negative publicity regarding food safety or cyber security.

All forward-looking statements speak only as of the date made.

All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements.

Except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances arising after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.

Except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.

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