RED ROBIN GOURMET BURGERS INC 10-K

ITEM 8. Financial Statements and Supplementary Data RED ROBIN GOURMET BURGERS, INC. INDEX Page Report of Independent Registered Public Accounting Firm, Deloitte & Touche LLP (PCAOB ID: 34 ) 40 Consolidated Balance Sheets 42 Consolidated Statements of Operations and Comprehensive Loss 43 Consolidated Statements of Stockholders' Equity (Deficit) 44 Consolidated Statements of Cash Flows 45 Notes to Consolidated Financial Statements 46 39 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Red Robin Gourmet Burgers, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Red Robin Gourmet Burgers, Inc. and subsidiaries (the "Company") as of December 29, 2024 and December 31, 2023, the related consolidated statements of operations and comprehensive loss, stockholders’ (deficit) equity, and cash flows, for the periods ended December 29, 2024, December 31, 2023 and December 25, 2022, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 29, 2024 and December 31, 2023, and the results of its operations and its cash flows for the periods ended December 29, 2024, December 31, 2023 and December 25, 2022, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 29, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2025, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Impairment of Long-Lived Assets – Refer to Notes 1, 4 and 9 in the Financial Statements Critical Audit Matter Description The Company assesses long-lived assets for impairment at the individual restaurant level whenever events and circumstances indicate the carrying amount of an asset group may not be recoverable. Expected cash flows associated with an asset are the key factor in determining the recoverability of the asset. Identifiable cash flows are measured at the restaurant level. The estimate of cash flows is based upon, among other things, certain assumptions about expected future operating performance, including assumptions of future revenue trends. If the sum of the cash flows is less than the carrying value of the asset, an impairment loss is recognized and measured as the amount by which the carrying value exceeds the fair value of the asset. We identified the evaluation of long-lived asset impairment as a critical audit matter because of the significant judgments made by management to estimate the cash flows, including assumptions about expected future operating performance, and the fair value of the lease assets. This required a significant degree of auditor judgment and an increased extent of effort, when performing audit procedures to evaluate whether management appropriately identified and evaluated potential impairment indicators, and when evaluating the reasonableness of management’s estimates and assumptions, particularly related to cash flows and market rent. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the impairment of long-lived assets included the following, among others: 40 Table of Contents • We tested the design and operating effectiveness of internal controls over the Company’s assessment and evaluation of potential impairment indicators for long-lived assets and over forecasted cash flows and market rent used in their recoverability and impairment analyses. • We evaluated the reasonableness of the Company’s evaluation of impairment indicators by: ◦ Evaluating the Company’s process for identifying qualitative and quantitative impairment indicators by location and whether the Company appropriately considered such indicators. ◦ Conducting a completeness assessment to determine whether additional impairment indicators were present during the period that were not identified by the Company. • We tested the mathematical accuracy of management’s calculations and the underlying source of information for a selection of restaurant sites. • We evaluated the reasonableness of the information in the Company’s forecasted cash flows used in their recoverability and impairment analyses, by comparing the forecasts to: ◦ Historical actual information, ◦ Internal communications between management and the Board of Directors, ◦ Forecasted information included in analyst and industry reports for the Company. • We evaluated the Company’s forecasted cash flows for consistency with evidence obtained in other areas of the audit. • With the assistance of our fair value specialists, we evaluated the market rent by developing a range of independent estimates and comparing those to the market rent used by management. /s/ Deloitte & Touche LLP Denver, Colorado February 26, 2025 We have served as the Company's auditor since 2021. 41 Table of Contents RED ROBIN GOURMET BURGERS, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts) December 29, 2024 December 31, 2023 Assets: Current assets: Cash and cash equivalents $ 30,651 $ 23,634 Accounts receivable, net 19,688 21,592 Inventories 26,737 26,839 Prepaid expenses and other current assets 13,608 11,785 Restricted cash 8,750 7,931 Total current assets 99,434 91,781 Property and equipment, net 181,224 261,258 Operating lease assets, net 331,617 361,609 Intangible assets, net 11,064 15,491 Assets held for sale 4,313 — Other assets, net 13,662 11,795 Total assets $ 641,314 $ 741,934 Liabilities and stockholders' equity: Current liabilities: Accounts payable $ 29,783 $ 27,726 Accrued payroll and payroll-related liabilities 39,672 32,524 Unearned revenue 27,083 36,067 Current portion of operating lease liabilities 50,083 43,819 Accrued liabilities and other 42,931 46,201 Total current liabilities 189,552 186,337 Long-term debt 181,641 182,594 Long-term portion of operating lease liabilities 345,635 383,439 Other non-current liabilities 8,755 10,006 Total liabilities 725,583 762,376 Commitments and contingencies (see Note 12. Commitments and Contingencies) Stockholders' equity (deficit): Common stock; $ 0.001 par value: 45,000 shares authorized; 22,050 shares issued; 17,403 and 15,528 shares outstanding as of December 29, 2024 and December 31, 2023 22 20 Preferred stock, $ 0.001 par value: 3,000 shares authorized; no shares issued and outstanding as of December 29, 2024 and December 31, 2023 — — Treasury stock 4,647 and 4,921 shares, at cost as of December 29, 2024 and December 31, 2023 ( 164,937 ) ( 174,702 ) Paid-in capital 233,667 229,680 Accumulated other comprehensive loss, net of tax ( 62 ) ( 22 ) Accumulated deficit ( 152,959 ) ( 75,418 ) Total stockholders' equity (deficit) ( 84,269 ) ( 20,442 ) Total liabilities and stockholders' equity (deficit) $ 641,314 $ 741,934 See Notes to Consolidated Financial Statements. 42 Table of Contents RED ROBIN GOURMET BURGERS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In thousands, except per share amounts) Year Ended December 29, 2024 December 31, 2023 December 25, 2022 Revenues: Restaurant revenue $ 1,224,254 $ 1,274,294 $ 1,230,189 Franchise revenue 14,941 15,867 19,306 Other revenue 9,365 12,885 16,039 Total revenues 1,248,560 1,303,046 1,265,534 Costs and expenses: Restaurant operating costs (excluding depreciation and amortization shown separately below): Cost of sales 292,392 308,962 306,509 Labor (includes $0, $ 475 , and $ 958 of stock-based compensation) 479,631 473,538 440,564 Other operating 216,242 224,999 224,704 Occupancy 103,359 102,761 98,868 Depreciation and amortization 57,729 66,190 76,245 Selling, general, and administrative expenses (includes $ 6,940 , $ 6,329 , and $ 8,635 of stock-based compensation) 118,440 124,130 136,612 Pre-opening costs — 587 568 Impairment and other charges (gains), net 33,848 ( 2,663 ) 38,961 Total costs and expenses 1,301,641 1,298,504 1,323,031 Income (loss) from operations ( 53,081 ) 4,542 ( 57,497 ) Other expense (income): Interest expense 25,277 26,560 20,643 Interest (income) and other, net ( 727 ) ( 1,100 ) ( 4 ) Total other expenses, net 24,550 25,460 20,639 Loss before income taxes ( 77,631 ) ( 20,918 ) ( 78,136 ) Income tax expense (benefit) ( 90 ) 310 747 Net loss $ ( 77,541 ) $ ( 21,228 ) $ ( 78,883 ) Loss per share: Basic $ ( 4.93 ) $ ( 1.34 ) $ ( 4.98 ) Diluted $ ( 4.93 ) $ ( 1.34 ) $ ( 4.98 ) Weighted average shares outstanding: Basic 15,736 15,835 15,840 Diluted 15,736 15,835 15,840 Other comprehensive (loss) income: Foreign currency translation adjustment $ ( 40 ) $ 12 $ ( 35 ) Other comprehensive (loss) income, net of tax ( 40 ) 12 ( 35 ) Total comprehensive loss $ ( 77,581 ) $ ( 21,216 ) $ ( 78,918 ) See Notes to Consolidated Financial Statements. 43 Table of Contents RED ROBIN GOURMET BURGERS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY (In thousands) Common Stock Treasury Stock Accumulated Other Comprehensive (Loss) Income, net of tax Retained Earnings (Deficit) Paid-in Capital Shares Amount Shares Amount Total Balance, December 26, 2021 20,449 $ 20 4,727 $ ( 192,803 ) $ 242,560 $ 1 $ 24,693 $ 74,471 Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan — — ( 212 ) 9,993 ( 10,080 ) — — ( 87 ) Non-cash stock compensation — — — — 6,323 — — 6,323 Net loss — — — — — — ( 78,883 ) ( 78,883 ) Other comprehensive loss — — — — — ( 35 ) — ( 35 ) Balance, December 25, 2022 20,449 20 4,515 ( 182,810 ) 238,803 ( 34 ) ( 54,190 ) 1,789 Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan — — ( 456 ) 18,068 ( 16,063 ) — — 2,005 Acquisition of treasury stock — — 862 ( 9,960 ) — — — ( 9,960 ) Non-cash stock compensation — — — — 6,940 — — 6,940 Net loss — — — — — — ( 21,228 ) ( 21,228 ) Other comprehensive income — — — — — 12 — 12 Balance, December 31, 2023 20,449 20 4,921 ( 174,702 ) 229,680 ( 22 ) ( 75,418 ) ( 20,442 ) Issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan — — ( 274 ) 9,765 ( 10,065 ) — — ( 300 ) Non-cash stock compensation — — — — 6,961 — — 6,961 Net loss — — — — — — ( 77,541 ) ( 77,541 ) Common stock issuance 1,601 2 — — 7,091 — — 7,093 Other comprehensive loss — — — — — ( 40 ) — ( 40 ) Balance, December 29, 2024 22,050 $ 22 4,647 $ ( 164,937 ) $ 233,667 $ ( 62 ) $ ( 152,959 ) $ ( 84,269 ) See Notes to Consolidated Financial Statements. 44 Table of Contents RED ROBIN GOURMET BURGERS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 29, 2024 December 31, 2023 December 25, 2022 Cash Flows From Operating Activities: Net loss $ ( 77,541 ) $ ( 21,228 ) $ ( 78,883 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 57,729 66,190 76,245 Asset impairment 32,838 9,130 38,534 Non-cash other charges (gains) ( 5 ) ( 1,404 ) ( 3,440 ) Stock-based compensation expense 6,961 6,933 6,294 Gain on sale of property ( 7,425 ) ( 30,137 ) ( 9,204 ) Other, net 2,353 1,238 3,817 Changes in operating assets and liabilities: Accounts receivable 1,706 364 ( 26 ) Inventories ( 220 ) ( 280 ) ( 1,813 ) Income tax receivable 197 33 15,263 Prepaid expenses and other current assets ( 597 ) 1,558 2,289 Operating lease assets, net of liabilities ( 1,455 ) ( 11,841 ) ( 7,036 ) Trade accounts payable and accrued liabilities 3,441 ( 9,843 ) 11,724 Unearned revenue ( 8,984 ) ( 10,971 ) ( 9,772 ) Other operating assets and liabilities, net ( 1,951 ) ( 899 ) ( 8,460 ) Net cash provided by (used in) operating activities 7,047 ( 1,157 ) 35,532 Cash Flows From Investing Activities: Purchases of property, equipment and intangible assets ( 26,034 ) ( 49,440 ) ( 38,159 ) Proceeds from sale-leaseback 23,271 58,801 — Proceeds from sales of property and equipment, and other 1,016 2,394 8,591 Acquisition of franchised restaurants — ( 3,529 ) — Net cash provided by (used in) investing activities ( 1,747 ) 8,226 ( 29,568 ) Cash Flows From Financing Activities: Proceeds from borrowings on revolving credit facilities 84,500 — 97,151 Repayments of borrowings on revolving credit facilities ( 64,500 ) ( 15,000 ) ( 264,227 ) Proceeds from borrowings on term loan — — 200,000 Repayments of borrowings on term loan ( 21,232 ) ( 9,857 ) ( 1,000 ) Repayments of finance lease obligations ( 923 ) ( 898 ) ( 1,292 ) Proceeds from borrowings for insurance premium financing 4,265 — — Repayments of borrowings for insurance premium financing ( 3,619 ) — — Purchase of treasury stock — ( 9,960 ) — Debt issuance costs ( 2,749 ) — ( 4,869 ) Proceeds related to real estate sale — — 3,856 Proceeds from issuance of common stock, net of stock issuance costs 7,093 — — (Uses) proceeds from other financing activities, net ( 299 ) 2,003 ( 86 ) Net cash provided by (used in) financing activities 2,536 ( 33,712 ) 29,533 Effect of exchange rate changes on cash — 2 ( 41 ) Net change in cash and cash equivalents, and restricted cash 7,836 ( 26,641 ) 35,456 Cash and cash equivalents, and restricted cash, beginning of period 31,565 58,206 22,750 Cash and cash equivalents, and restricted cash, end of period $ 39,401 $ 31,565 $ 58,206 Supplemental disclosure of cash flow information Income taxes paid (refunds received), net $ 83 $ 454 $ ( 14,642 ) Interest paid, net of amounts capitalized 22,737 24,084 16,054 Accrued purchases of property, equipment and intangible assets $ 2,707 $ 1,836 $ 9,688 See Notes to Consolidated Financial Statements. 45 Table of Contents RED ROBIN GOURMET BURGERS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Description of Business and Summary of Significant Accounting Policies (a) 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 casual dining restaurants in North America. As of December 29, 2024, the Company owned and operated 407 restaurants located in 39 states. The Company also had 91 casual dining restaurants operated by franchisees in 13 states and one Canadian province. The Company operates its business as one operating and one reportable segment. (b) Basis of Presentation and Principles of Consolidation The accompanying Consolidated Financial Statements include the accounts of Red Robin and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The Company's financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Fiscal Year Year End Date Number of Weeks in Fiscal Year Current and Prior Fiscal Years: 2024 December 29, 2024 52 2023 December 31, 2023 53 2022 December 25, 2022 52 Upcoming Fiscal Years: 2025 December 28, 2025 52 2026 December 27, 2026 52 (c) Reclassifications Certain amounts presented have been reclassified within the current period presentation. The reclassifications had no effect on the Company's consolidated results. We made adjustments to the Consolidated Statements of Cash Flows to disaggregate borrowing and repayment activity on long term debt and finance lease obligations, to reclassify gift card breakage within unearned revenue, and to reclassify amortization of debt issuance costs within other, net. (d) Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. (e) Summary of Significant Accounting Policies Revenue Recognition - Revenues consist of sales from restaurant operations (including third party delivery), franchise revenue, and other revenue including gift card breakage and miscellaneous revenue. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a restaurant Guest, franchisee, or other customer. The Company recognizes revenues from restaurant operations when payment is tendered at the point of sale, as the Company's performance obligation to provide food and beverage to the customer has been satisfied. The Company sells gift cards which do not have an expiration date, and it does not deduct dormancy fees from outstanding gift card balances. We recognize revenue from gift cards as either: (i) Restaurant revenue, when the Company's performance obligation to provide food and beverage to the customer is satisfied upon redemption of the gift card, or (ii) gift card breakage, as discussed below. 46 Table of Contents Gift card breakage is recognized when the likelihood of a gift card being redeemed by the customer is remote and the Company determines there is not a legal obligation to remit the unredeemed gift card balance to the relevant jurisdiction. The determination of the gift card breakage rate is based upon the Company's specific historical redemption patterns. The Company recognizes gift card breakage by applying its estimate of the rate of gift card breakage on a pro rata basis over the period of estimated redemption. During the second quarter of fiscal 2024, we re-launched our Red Robin Royalty TM program ("Royalty"). Under the re-launched program, Royalty members generally earn points for every dollar spent. We may also periodically offer promotions, which typically provide the customer with the opportunity to earn bonus points or other rewards. Upon reaching certain point thresholds, Royalty members earn rewards that may be redeemed for food and beverage items. Earned rewards generally expire 90 days after they are issued, and points generally expire if a qualifying purchase is not made within 365 days of the last purchase. We defer revenue based on the estimated stand-alone selling price of points or rewards earned by customers as each point or reward is earned, net of points or rewards we do not expect to be redeemed. Our estimate of points and rewards expected to be redeemed is based on historical Company-specific data. We evaluate Royalty redemption rates annually, or more frequently as circumstances warrant. Estimating future redemption rates requires judgment based on current and historical trends, and actual redemption rates may vary from our estimates. Revenues we receive from our franchise arrangements include sales-based royalties, advertising fund contributions, area development fees, and franchise fees. Red Robin franchisees are required t o remit 4.0 % to 5.0 % of their revenues as royalties to the Company and contribute up to 3.0 % of revenues to two national advertising funds. The Com pany recognizes these sales-based royalties and advertising fund contributions as the underlying franchisee sales occur. Contributions to these advertising funds from franchisees are recorded as revenue under Franchise revenue in the Consolidated Statements of Operations and Comprehensive Loss in accordance with ASC Topic 606, Revenue from Contracts with Customers . The Company typically grants franchise rights to franchisees for a term of 20 years, with the right to extend the term for an additional 10 years if various conditions are satisfied by the franchisee. Other revenue consists of gift card breakage, licensing income, and recycling income. Cash and Cash Equivalents, and Restricted Cash - The Company considers all highly liquid instruments with an original maturity of three months or less to be cash equivalents. Amounts receivable from credit card issuers are typically converted to cash within two to four days of the original sales transaction and are considered to be cash equivalents. Cash and cash equivalents are maintained with multiple financial institutions. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions with reputable credit and therefore bear minimal credit risk. The Company holds cash and cash equivalents at financial institutions in excess of amounts covered by the Federal Depository Insurance Corporation (the "FDIC") and sometimes invests excess cash in money market funds not insured by the FDIC. The Company periodically assesses the credit risk associated with these financial institutions and believes that the risk of loss is minimal. The Company is required to carry restricted cash balances that are reserved as collateral for existing letters of credit. The amounts issued under letters of credit, which are undrawn totaled $ 8.5 million. Accounts Receivable, Net - Accounts receivable, net consists primarily of third-party gift card receivables, third party delivery partner receivables, trade receivables due from franchisees for royalties and advertising fund contributions, and tenant improvement allowances. At the end of fiscal 2024, there was approximately $ 9.2 million of gift card receivables in accounts receivable related to gift cards that were sold by third party retailers compared to $ 9.7 million at the end of fiscal 2023. At the end of 2024, there was also approximately $ 2.2 million related to third party delivery partners in accounts receivable compared to approximately $ 2.6 million at the end of fiscal 2023. Inventories - Inventories consist of food, beverages, and supplies valued at the lower of cost (first-in, first-out method) or net realizable value. At the end of fiscal 2024 and 2023, food and beverage inventories were $ 9.2 million and $ 9.4 million, respectively, and supplies inventories were $ 17.5 million and $ 17.4 million, respectively. Property and Equipment, Net - Property and equipment are recorded at cost. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are expensed as incurred. Depreciation is computed on the straight-line method based on the shorter of the estimated useful lives or the terms of the underlying leases of the related assets. Interest incurred on funds used to construct Company-owned restaurants is capitalized and amortized over the estimated useful life of the related assets. 47 Table of Contents The estimated useful lives for property and equipment are: Buildings 5 years to 20 years Leasehold improvements Shorter of lease term or estimated useful life, not to exceed 20 years Furniture, fixtures, and equipment 5 years to 20 years Computer equipment 2 years to 5 years The Company capitalizes certain overhead related to the development and construction of its new restaurants as well as certain information technology capital investments. Costs incurred for the potential development of restaurants that are subsequently terminated are expensed. Cloud Computing Arrangements - The Company capitalizes cloud computing implementation costs and amortizes these costs on a straight-line basis over the term of the related service agreement, including renewal periods that are reasonably certain to be exercised. Capitalized cloud computing implementation costs were $ 1.2 million and $ 0.7 million, net of accumulated amortization, as of December 29, 2024 and December 31, 2023, respectively. These costs are included in prepaid expenses and other current assets and other assets in our consolidated balance sheets. Related amortization expense was $ 0.5 million, $ 0.4 million, and $ 0.1 million for the years ended December 29, 2024, December 31, 2023, and December 25, 2022, respectively, and is included in selling, general and administrative expenses in our consolidated statements of operations and comprehensive loss. Leases - The Company leases land, buildings, and equipment used in its operations under operating and finance leases. Our leases generally have remaining terms of 1 - 15 years, most of which include options to extend the leases for additional five -year periods. Generally, the lease term is the minimum of the non-cancelable period of the lease or the lease term inclusive of reasonably certain renewal periods up to a term of 20 years. We determine if a contract contains a lease at inception. Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets. To determine the present value of lease payments not yet paid, we estimate incremental secured borrowing rates corresponding to the maturities of the leases. We estimate this rate based on prevailing financial market conditions, comparable company and credit analysis, and management judgment. Our leases typically contain rent escalations over the lease term. We recognize expense for these leases on a straight-line basis over the lease term. Additionally, tenant incentives used to fund leasehold improvements are recognized when earned and reduce our right-of-use asset related to the lease. These are amortized through the right-of-use asset as reductions of expense over the lease term. Some of our leases include rent escalations based on inflation indexes and fair market value adjustments. Certain leases contain contingent rental provisions that include a fixed base rent plus an additional percentage of the restaurant's sales in excess of stipulated amounts. Operating lease liabilities are calculated using the prevailing index or rate at lease commencement. Subsequent escalations in the index or rate and contingent rental payments are recognized as variable lease expenses. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We have elected the short-term lease recognition exemption for all applicable classes of underlying assets. Short-term disclosures include only those leases with a term of 12 months or less, and expense is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less, that do not include an option to purchase the underlying asset that we are reasonably certain to exercise, are not recorded on the balance sheet. We elected the practical expedient that does not require us to separate lease and non-lease components for our population of real estate assets. Intangible Assets, net - Intangible assets comprise primarily leasehold interests, acquired franchise rights, and the costs of purchased liquor licenses. Leasehold interests primarily represent the fair values of acquired lease contracts having contractual rents lower than fair market rents and are amortized on a straight-line basis over the remaining initial lease term. Acquired franchise rights, which represent the acquired value of franchise contracts, are amortized over the term of the franchise agreements. The costs of obtaining non-transferable liquor licenses from local government agencies are capitalized and generally amortized over a period of up to 20 years. The costs of purchasing transferable liquor licenses through open markets in jurisdictions with a limited number of authorized liquor licenses are capitalized as indefinite-lived intangible assets. Impairment of Long-Lived Assets - The Company reviews its long-lived assets, including restaurant sites, leasehold improvements, information technology systems, right of use assets, and amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of 48 Table of Contents assets to be held and used is measured by a comparison of the carrying amount of the assets to the future undiscounted net cash flows expected to be generated by the assets. Identifiable cash flows are measured at the lowest level for which they are largely independent of the cash flows of other groups of assets and liabilities, generally at the restaurant-level. If the assets are determined to be impaired, the amount of impairment recognized is the amount by which the carrying amount of the assets exceeds their fair value. Fair value is generally determined using projected cash flows discounted using an estimated weighted average cost of capital. Management may also utilize other market information to determine fair value such as market rent and discount rates, to estimate the fair value of restaurant right of use lease assets. Restaurant sites and other assets to be disposed of are reported at the lower of their carrying amount or fair value, less estimated costs to sell. Information technology systems, such as internal-use computer software, are reviewed and tested for recoverability if the internal-use computer software is not expected to provide substantive service potential, a significant change occurs in the extent or manner in which the software is used or is expected to be used, a significant change is made or will be made to the software program, or costs of developing or modifying internal-use software significantly exceed the amount originally expected to develop or modify the software. Advertising - Under the Company's franchise agreements, both the Company and the franchisees must contribute up to 3.0 % of revenues to two national media advertising funds (the "Advertising Funds"). These Advertising Funds are used to drive initial Guest trial and repeat visits, and build the Company's brand equity and awareness. Primary advertising channels include television advertising, digital media, social media programs, email, loyalty, and public relations initiatives. Total advertising costs of $ 23.5 million, $ 21.6 million, and $ 35.7 million in fiscal 2024, 2023, and 2022 and were included in Selling, general, and administrative expenses. Advertising production costs are expensed in the period when the advertising first takes place. Other advertising costs are expensed as incurred. Self-Insurance Programs - The Company utilizes a self-insurance plan for health, general liability, and workers' compensation coverage. Predetermined loss limits have been arranged with insurance companies to limit the Company's per occurrence cash outlay. Accrued liabilities and other current liabilities and accrued payroll and payroll-related liabilities include the estimated cost to settle reported claims and incurred but unreported claims. Legal Contingencies - In the normal course of business, we are subject to various legal proceedings and claims, the outcomes of which are uncertain. We record an accrual for legal contingencies when we determine it is probable that we have incurred a liability and we can reasonably estimate the amount of the loss. In making such determinations we evaluate, among other things, the probability of an unfavorable outcome, and when we believe it probable that a liability has been incurred, our ability to make a reasonable estimate of the loss. Pre-opening Costs - Pre-opening costs are expensed as incurred. Pre-opening costs include rental expenses through the date of opening for each restaurant, travel expenses, wages, and benefits for the training and opening teams, as well as food, beverage, and other restaurant opening costs incurred prior to a restaurant opening for business. Costs related to preparing restaurants to introduce Donatos ® are expensed as incurred and included in pre-opening costs. Income Taxes - Deferred tax liabilities are recognized for the estimated effects of all taxable temporary differences, and deferred tax assets are recognized for the estimated effects of all deductible temporary differences, net operating losses, and tax credit carryforwards. Realization of net deferred tax assets is dependent upon profitable operations and future reversals of existing taxable temporary differences. However, the amount of the deferred tax assets considered realizable could be adjusted if estimates of future taxable income during the carry forward period are increased or reduced or if there are differences in the timing or amount of future reversals of existing taxable temporary differences. Pursuant to the guidance for uncertain tax positions, a taxpayer must be able to more likely than not sustain a position to recognize a tax benefit, and the measurement of the benefit is calculated as the largest amount that is more than 50 percent likely to be realized upon resolution of the benefit. The Company has analyzed filing positions in all of the federal, state, and foreign jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. The only periods subject to examination for the Company's federal and state returns are the 2020 through 2024 tax years. The Company records interest and penalties associated with audits as a component of income before taxes. The Company recorded immaterial penalty and interest expense on the identified tax liabilities in fiscal 2024, 2023, and 2022. Loss Per Share - Basic loss per share amounts are calculated by dividing net loss by the weighted average number of common shares outstanding during the year. Diluted loss per share amounts are calculated based upon the weighted average number of common and potentially dilutive common shares outstanding during the year. Potentially dilutive shares are excluded from the computation in periods in which they have an anti-dilutive effect. Diluted loss per share reflects the potential dilution that could occur if holders of options and awards exercised their holdings into common stock. As the Company was in a net loss position for each of the fiscal years ended December 29, 2024, December 31, 2023, and December 25, 2022, all potentially dilutive common shares are considered anti-dilutive. 49 Table of Contents The Company uses the treasury stock method to calculate the impact of outstanding stock options and awards. Basic weighted average shares outstanding is reconciled to diluted weighted average shares outstanding for the fiscal years ended December 29, 2024, December 31, 2023, and December 25, 2022 as follows (in thousands): 2024 2023 2022 Basic weighted average shares outstanding 15,736 15,835 15,840 Dilutive effect of stock options and awards — — — Diluted weighted average shares outstanding 15,736 15,835 15,840 Awards excluded due to anti-dilutive effect on diluted earnings per share 1,749 1,409 1,481 Comprehensive Loss - Total comprehensive loss consists of the net loss and other gains and losses affecting stockholders' equity that, under U.S. GAAP, are excluded from net income. Other comprehensive (loss) income as presented in the consolidated statements of operations and comprehensive loss for fiscal 2024, 2023, and 2022 consisted of the foreign currency translation adjustment resulting from the Company's Canadian franchise operations. Stock-Based Compensation - The Company maintains several equity incentive plans under which it may grant stock options, stock appreciation rights, restricted stock, stock variable compensation, or other forms of awards granted or denominated in the Company's common stock or units of the Company's common stock, as well as cash variable compensation awards to employees, non-employees, directors, and consultants. The Company also maintains an employee stock purchase plan. The Company issues shares relating to stock-based compensation plans and the employee stock purchase plan from treasury shares. We recognize compensation expenses for only the portion of share-based awards that are expected to vest. Therefore, we apply estimated forfeiture rates that are derived from our historical forfeitures of similar awards when a Team Member leaves the Company. Deferred Compensation - The Company has assets and liabilities related to a deferred compensation plan. The assets of the deferred compensation plan are held in a rabbi trust, where they are invested in certain mutual funds that cover an investment spectrum range from equities to money market instruments. Fluctuations in the market value of the investments held in the trust result in the recognition of deferred compensation expense or income reported in Selling, general, and administrative expenses and recognition of investment gain or loss reported in Interest income and other, net, in the consolidated statements of operations and comprehensive loss. 2. Recent Accounting Pronouncements In November 2024, the FASB issued Update 2024-03 which expands disclosures about specific expense categories presented on the face of the income statement. Update 2024-03 is effective for financial statements issued for annual periods beginning after December 15, 2026, with early adoption permitted. The Company is evaluating the impact of the adoption of Update 2024-03 to the consolidated financial statements. In December 2023, the FASB issued Update 2023-09 to improve income tax disclosure requirements, primarily related to rate reconciliations and income taxes paid. Update 2023-09 is effective for financial statements issued for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the impact of the adoption of Update 2023-09 to the consolidated financial statements. We reviewed all other recently issued accounting pronouncements and concluded they were either not applicable or not expected to have a significant impact on the Company's consolidated financial statements. 50 Table of Contents 3. Revenue Disaggregation of Revenue In the following table, revenue is disaggregated by type of good or service (in thousands): Year Ended December 29, 2024 December 31, 2023 December 25, 2022 Restaurant revenue $ 1,224,254 $ 1,274,294 $ 1,230,189 Franchise revenue 14,941 15,867 19,306 Gift card breakage 7,930 9,874 13,808 Other revenue 1,435 3,011 2,231 Total revenues $ 1,248,560 $ 1,303,046 $ 1,265,534 Contract Liabilities Components of Unearned revenue in the Consolidated Balance Sheets are as follows (in thousands): December 29, 2024 December 31, 2023 Unearned gift card revenue $ 24,333 $ 28,558 Deferred loyalty revenue 2,750 7,509 Unearned revenue $ 27,083 $ 36,067 Revenue recognized in the Consolidated Statements of Operations and Comprehensive Loss for the redemption of gift cards that were included in the liability balance at the beginning of the fiscal year was as follows (in thousands): Year Ended December 29, 2024 December 31, 2023 December 25, 2022 Gift card revenue $ 16,782 $ 19,224 $ 24,109 We recognize Royalty revenue within Restaurant revenue in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) when a customer redeems an earned reward. Unearned revenue associated with Royalty is included in Unearned revenue in our Condensed Consolidated Balance Sheets. Changes in our Unearned revenue balance related to our Royalty program (in thousands): Year Ended December 29, 2024 December 31, 2023 Unearned Royalty Revenue, beginning balance $ 7,509 $ 11,107 Revenue deferred 4,817 6,870 Revenue recognized (1) ( 9,576 ) ( 10,468 ) Unearned Royalty revenue, ending balance $ 2,750 $ 7,509 (1) Restaurant revenue includes an approximately $ 6.4 million credit related to the transition to the new Royalty program in the second quarter of fiscal 2024, primarily due to the cancellation of unused points that were earned more than 365 days prior to the launch of the new program. 4. Impairment and Other Charges (Gains), net Impairment and other charges consist of the following (in thousands): 51 Table of Contents Year Ended December 29, 2024 December 31, 2023 December 25, 2022 Asset impairment and restaurant closure costs, net $ 34,080 $ 12,192 $ 39,362 Gain on sale of restaurant property ( 7,425 ) ( 29,543 ) ( 9,204 ) Severance and executive transition 1,181 3,419 2,280 Other financing costs — — 1,462 Litigation contingencies 1,037 9,140 4,148 Asset disposal and other, net 4,975 2,129 913 Impairment and other charges (gains), net $ 33,848 $ ( 2,663 ) $ 38,961 Asset Impairment and Restaurant Closure Costs During fiscal 2024, the Company closed eight locations and is evaluating alternatives for approximately 70 underperforming restaurant locations, including closure upon expiration of the current lease term. The Company recognized non-cash impairment charges of $ 32.8 million, primarily associated with this review of underperforming locations as well as impairment of quota state liquor licenses at three locations. In addition, the Company recorded $ 1.2 million in charges associated with the eight store closures in fiscal 2024. During fiscal 2023, the Company recognized non-cash impairment charges of $ 9.1 million, primarily related to the impairment of long-lived assets at 19 underperforming locations and quota state liquor licenses at three locations. In addition, the Company recorded $ 3.1 million in charges associated with five closed locations. During fiscal 2022, the Company recognized non-cash impairment charges of $ 38.5 million, primarily related to impairments of long-lived assets at 46 underperforming locations and quota state liquor licenses at six locations. In addition, the Company recorded $ 0.8 million in costs associated with 16 closed locations during fiscal 2022. Severance and Executive Transition During fiscal 2024, 2023, and 2022, the Company incurred severance and executive transition costs primarily related to a reduction in force of Team Members and costs associated with changes in leadership positions. Gain on Sale of Restaurant Property During fiscal 2024, the Company sold ten restaurant properties for aggregate net proceeds of $ 23.3 million in a sale-leaseback transaction that resulted in a gain, net of expenses of $ 7.4 million. The net proceeds are included within cash flows from investing activities on the Consolidated Statements of Cash Flows for the year ended December 29, 2024. During fiscal 2023, the Company sold 18 restaurant properties for aggregate net proceeds of $ 58.8 million in sale-leaseback transactions that resulted in a gain, net of expenses of $ 29.4 million. In addition, during 2023, the Company sold one restaurant property for net proceeds of $ 1.5 million which resulted in a gain, net of expenses of $ 0.1 million. The net proceeds are included within cash flows from investing activities on the Consolidated Statements of Cash Flows for the year ended December 31, 2023. During fiscal 2022, the Company sold one restaurant property for aggregate net proceeds of $ 12.4 million in a short-term sale-leaseback transaction that resulted in a gain, net of expenses of $ 9.2 million. The net proceeds are included within cash flows from investing and financing activities on the Consolidated Statements of Cash Flows for the year ended December 25, 2022. Litigation Contingencies In fiscal 2024, 2023, and 2022, the Company recorded reserves associated with litigation contingencies. See Note 12. Commitments and Contingencies, for further discussion. Asset Disposal and Other Asset disposal and other primarily relates to lease terminations and closures of restaurants and corporate office locations, asset disposals, strategic projects and other non-recurring items. 52 Table of Contents 5. Property and Equipment, Net Property and equipment consist of the following at December 29, 2024 and December 31, 2023 (in thousands): December 29, 2024 December 31, 2023 Land $ 9,760 $ 19,703 Buildings 13,496 49,178 Leasehold improvements 574,256 627,805 Furniture, fixtures, and equipment 360,611 377,158 Construction in progress 13,307 19,300 Property and equipment, gross $ 971,430 $ 1,093,144 Accumulated depreciation and amortization ( 790,206 ) ( 831,886 ) Property and equipment, net $ 181,224 $ 261,258 Depreciation and amortization expense on property and equipment was $ 55.4 million in 2024, $ 63.8 million in fiscal 2023, and $ 73.7 million in fiscal 2022. 6. Intangible Assets The following table presents intangible assets as of December 29, 2024 and December 31, 2023 (in thousands): December 29, 2024 December 31, 2023 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Intangible assets subject to amortization: Franchise rights $ 46,091 $ ( 41,647 ) $ 4,444 $ 46,863 $ ( 39,777 ) $ 7,087 Leasehold interests 12,867 ( 10,906 ) 1,961 13,001 ( 10,503 ) 2,498 Liquor licenses and other 9,596 ( 9,419 ) 177 9,632 ( 9,393 ) 239 $ 68,554 $ ( 61,972 ) $ 6,582 $ 69,496 $ ( 59,673 ) $ 9,824 Indefinite-lived intangible assets: Liquor licenses and other $ 4,482 $ — $ 4,482 $ 5,667 $ — $ 5,667 Intangible assets, net $ 73,036 $ ( 61,972 ) $ 11,064 $ 75,163 $ ( 59,673 ) $ 15,491 The aggregate amortization expense related to intangible assets subject to amortization for fiscal 2024, 2023, and 2022 was $ 2.3 million, $ 2.4 million, and $ 2.5 million. The estimated aggregate future amortization expense as of December 29, 2024 is as follows (in thousands): 2025 $ 1,816 2026 1,456 2027 1,092 2028 665 2029 346 Thereafter 1,207 $ 6,582 53 Table of Contents 7. Accrued Payroll and Payroll-Related Liabilities, and Accrued Liabilities and Other Current Liabilities Accrued payroll and payroll-related liabilities consist of the following at December 29, 2024 and December 31, 2023 (in thousands): December 29, 2024 December 31, 2023 Payroll and payroll-related taxes $ 18,438 $ 9,484 Workers compensation insurance 6,459 4,363 Corporate and restaurant incentive compensation 4,168 9,617 Accrued vacation 6,583 6,528 Other 4,024 2,532 Accrued payroll and payroll-related liabilities $ 39,672 $ 32,524 Accrued liabilities and other current liabilities consist of the following at December 29, 2024 and December 31, 2023 (in thousands): December 29, 2024 December 31, 2023 State and city sales tax payable $ 6,224 $ 7,830 Real estate, personal property, state income, and other taxes payable 6,933 7,067 Insurance 10,201 6,204 Utilities 3,016 2,929 Legal 4,935 8,740 Accrued interest 1,536 1,657 Accrued marketing 2,830 3,650 Current portion of finance lease liabilities 1,019 939 Accrued termination benefits — 184 Other 6,237 7,001 Accrued liabilities and other current liabilities $ 42,931 $ 46,201 Accrued termination benefits represents one-time termination benefits primarily related to changes in leadership positions as a result of our strategic pivot under the North Star plan and a related reduction in force and are accounted for in accordance with ASC Topic 420, Exit or Disposal Cost Obligations . The Company incurred a cumulative total of $ 5.1 million in one-time termination benefits, which is comprised of $ 0 , $ 2.1 million, and $ 3.0 million recognized during fiscal 2024, 2023, and 2022, respectively, and included in Impairment and other charges (gains) in the Consolidated Statements of Operations and Comprehensive Loss. One-time termination benefits activity for the years ended December 31, 2023 and December 29, 2024, respectively is as follows: Termination Benefits Balance as of December 25, 2022 $ 2,505 Charges 2,077 Cash Payments ( 4,398 ) Balance as of December 31, 2023 $ 184 Charges — Cash Payments ( 184 ) Balance as of December 29, 2024 $ — 8. Borrowings Borrowings as of December 29, 2024 and December 31, 2023 are summarized below: 54 Table of Contents December 29, 2024 December 31, 2023 (Dollars in thousands) Borrowings Variable Interest Rates Borrowings Variable Interest Rates Revolving line of credit $ 20,000 12.03 % $ — — % Term loan 169,470 12.21 % 189,143 11.62 % Total borrowings 189,470 189,143 Less: unamortized debt issuance costs and discounts (1) 7,829 6,549 Long-term debt $ 181,641 $ 182,594 Revolving line of credit unamortized deferred financing charges (1) : $ 1,298 $ 752 (1) Loan origination costs associated with the Company's Credit Facility are included as deferred costs in Other assets, net for financing charges allocated to the revolving line of credit, and Long-term debt for financing charges associated with the term loan in the accompanying Consolidated Balance Sheets. Maturities of long-term debt as of December 29, 2024 are as follows (in thousands): 2025 $ — 2026 — 2027 189,470 2028 — Thereafter — $ 189,470 Credit Facility On March 4, 2022, the Company replaced its prior amended and restated Credit Agreement (the "Prior Credit Agreement") with a new Credit Agreement (the "Credit Agreement") by and among the Company, Red Robin International, Inc., as the borrower, the lenders from time to time party thereto, the issuing banks from time to time party thereto, Fortress Credit Corp., as Administrative Agent and as Collateral Agent and JPMorgan Chase Bank, N.A., as Sole Lead Arranger and Sole Bookrunner. The five-year $ 240.0 million Credit Agreement provides for a $ 40.0 million revolving line of credit and a $ 200.0 million term loan (collectively, the "Credit Facility"). The borrower maintains the option to increase the Credit Facility in the future, subject to lenders’ participation, by up to an additional $ 40.0 million in the aggregate on the terms and conditions set forth in the Credit Agreement. The Credit Facility will mature on March 4, 2027. No amortization is required with respect to the revolving Credit Facility. The term loans require quarterly principal payments in an aggregate annual amount equal to 1.0 % of the original principal amount of the term loan. The Credit Agreement's interest rate references the Secured Overnight Financing Rate ("SOFR"), a new index calculated by short-term repurchase agreements and backed by U.S. Treasury securities, or the Alternate Base Rate ("ABR"), which represents the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.5 % per annum, or (c) one-month term SOFR plus 1.0 % per annum. As of December 29, 2024, the Company had outstanding borrowings under the Credit Facility of $ 181.6 million, including $ 20.0 million drawn on its revolving line of credit. As of December 31, 2023, the Company had outstanding borrowings under the Credit Facility of $ 182.6 million, with no amounts drawn on its revolving line of credit. In addition, the Company had amounts issued under letters of credit of $ 8.5 million and $ 7.7 million as of December 29, 2024 and December 31, 2023, respectively. Red Robin International, Inc., is the borrower under the Credit Agreement, and certain of its subsidiaries and the Company are guarantors of borrower’s obligations under the Credit Agreement. Borrowings under the Credit Agreement are secured by substantially all of the assets of the borrower and the guarantors, including the Company, and are available to: (i) refinance certain existing indebtedness of the borrower and its subsidiaries, (ii) pay any fees and expenses in connection with the Credit Agreement, and (iii) provide for the working capital and general corporate requirements of the Company, the borrower and its subsidiaries, including permitted acquisitions and capital expenditures, but excluding restricted payments. On March 4, 2022, Red Robin International, Inc., the Company, and the guarantors also entered into a Pledge and Security Agreement (the “Security Agreement”) granting to the Administrative Agent a first priority security interest in substantially all of the assets of the borrower and the guarantors to secure the obligations under the Credit Agreement. Red Robin International, Inc., as the borrower is obligated to pay customary fees to the agents, lenders and issuing banks under the Credit Agreement with respect to providing, maintaining, or administering, as applicable, the credit facilities. 55 Table of Contents On July 17, 2023, the Company amended the Credit Agreement (the “First Amendment”) to, among other things, remove the previously included $ 50.0 million aggregate cap on sale-leasebacks of Company-owned real property that are permitted under the Credit Agreement, subject to certain conditions set forth in the Credit Agreement. On August 21, 2024, the Company entered into the second amendment to the Credit Agreement (the “Second Amendment”). The Second Amendment, among other things, provides certain relief from the financial covenant by increasing the required maximum net total leverage ratio beginning in the third quarter of 2024 through the end of the third quarter of 2025; increases the aggregate revolving commitments by $ 15.0 million to $ 40.0 million through the end of the third quarter of 2025; removes the variable pricing grid and increases the applicable margin on all term loans and revolving loans that are SOFR-based loans to 7.50 % per annum and that are ABR-based loans to 6.50 % per annum; and adds certain additional reporting requirements. On November 4, 2024, the Company entered into the third amendment to the Credit Agreement (the "Third Amendment"). The Third Amendment extended the provisions of the Second Amendment through the end of the first fiscal quarter of 2026. In conjunction with the execution of the Second Amendment and Third Amendment (collectively the "2024 Amendments"), the Company paid certain customary amendment fees to the lenders under the Credit Facility totaling approximately $ 4.5 million. The Company performed an analysis of the 2024 Amendments under ASC Topic 470, Debt, and determined that debt modification accounting was appropriate for our term loan and revolving line of credit due to the change in total capacity and the increase in applicable margin interest rates under the new amendments. As a result, the Company capitalized $ 4.3 million of the amendment fees as deferred loan fees which will be amortized over the remaining term of the Credit Facility and expensed the remaining $ 0.2 million of fees. The summary descriptions of the Credit Agreement, the Security Agreement, the First Amendment, the Second Amendment and the Third Amendment do not purport to be complete and are qualified in their entirety by reference to the full text of each agreement, which are listed as exhibits to this Annual Report on Form 10-K. During fiscal 2022, the Company expensed approximately $ 1.7 million of deferred financing charges related to the extinguishment of the Prior Credit Agreement on March 4, 2022. These charges were recorded to interest expense, net and other on the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 25, 2022. 9. Fair Value Measurements Fair value measurements are made under a three-tier fair value hierarchy, which prioritizes the inputs used in the measuring of fair value: Level 1: Observable inputs that reflect unadjusted quote prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: Inputs that are generally unobservable. These inputs may be used with internally developed methodologies that result in management's best estimate of fair value. Assets and Liabilities Measured at Fair Value on a Recurring Basis The carrying amounts of the Company's cash and cash equivalents, accounts receivable, accounts payable, and current accrued expenses and other current liabilities approximate fair value due to the short-term nature or maturity of the instruments. The Company maintains a rabbi trust to fund obligations under a deferred compensation plan. See Note 15. Employee Benefit Programs. Amounts in the rabbi trust are invested in mutual funds, which are designated as trading securities and carried at fair value and are included in other assets, net in the accompanying consolidated balance sheets. Fair market value of mutual funds is measured using Level 1 inputs (quoted prices for identical assets in active markets). 56 Table of Contents The following tables present the Company's assets measured at fair value on a recurring basis as of December 29, 2024 and December 31, 2023 (in thousands): December 29, 2024 Level 1 Level 2 Level 3 Assets: Investments in rabbi trust $ 1,821 $ 1,821 $ — $ — Total assets measured at fair value $ 1,821 $ 1,821 $ — $ — December 31, 2023 Level 1 Level 2 Level 3 Assets: Investments in rabbi trust $ 2,079 $ 2,079 $ — $ — Total assets measured at fair value $ 2,079 $ 2,079 $ — $ — Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Assets and liabilities recognized or disclosed at fair value on the consolidated financial statements on a nonrecurring basis include items such as property, plant and equipment, right of use assets, and intangible assets. These assets are measured at fair value if determined to be impaired. During fiscal 2024, 2023, and 2022, the Company measured non-financial assets for impairment using continuing and projected future cash flows, as discussed in Note 4. Impairment and Other Charges (Gains), net, which were based on significant inputs not observable in the market and thus represented a Level 3 fair value measurement. Based on our fiscal 2024, 2023, and 2022 impairment analyses, we impaired long-lived assets at 58 , 19 and 46 locations with carrying values of $ 71.3 million, $ 36.5 million, and $ 80.4 million, respectively. We determined the fair value of these long-lived assets in fiscal 2024, 2023, and 2022 to be $ 39.4 million, $ 27.4 million and $ 42.4 million, respectively, based on Level 3 fair value measurements. Liquor licenses with indefinite lives are reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying amount may not be recoverable. If the carrying amount is not recoverable, we record an impairment charge for the excess of the carrying amount over the fair value. We determine fair value based on quoted prices in the active market for the license in the same or similar jurisdictions, representing a Level 1 fair value measurement. During the fourth quarter of fiscal 2024, the Company performed its annual review of its indefinite lived liquor licenses that had a carrying value of $ 5.2 million, and recorded impairment charges of $ 1.1 million to indefinite-lived intangibles in fiscal 2024. Impairment charges of $ 0.2 million were recorded to liquor licenses with indefinite lives in fiscal 2023 and $ 0.5 million impairment charges were recorded in fiscal 2022. Disclosures of Fair Value of Other Assets and Liabilities The Company's liability under its Credit Facility is carried at historical cost in the accompanying consolidated balance sheets. As of December 29, 2024, the fair value of the Credit Facility was approximately $ 186.6 million and the principal amount carrying value was $ 189.5 million. The Credit Facility term loan is reported net of $ 7.8 million in unamortized discount and debt issuance costs in the consolidated balance sheet as of December 29, 2024. The carrying value approximated the fair value of the Credit Facility as of December 31, 2023, as the interest rate on the instrument approximated current market rates. The interest rate on the Credit Facility represents a Level 2 fair value input. 57 Table of Contents 10. Leases The Company's finance and operating lease assets and liabilities as of December 29, 2024 and December 31, 2023 as follows (in thousands): December 29, 2024 Finance (1) Operating (2) Lease assets, net $ 5,328 $ 331,617 Current portion of lease obligations 1,019 50,083 Long-term portion of lease obligations 6,746 345,635 Total $ 7,765 $ 395,718 December 31, 2023 Finance (1) Operating (2) Lease assets, net $ 6,264 $ 361,609 Current portion of lease obligations 939 43,819 Long-term portion of lease obligations 7,745 383,439 Total $ 8,684 $ 427,258 (1) Finance lease assets and obligations are included in Other assets, net, Accrued liabilities and other current liabilities, and Other non-current liabilities on our December 29, 2024 and December 31, 2023 Consolidated Balance Sheets. (2) Operating lease assets and obligations are included in Operating lease assets, net, Current portion of operating lease liabilities, and Long-term portion of operating lease liabilities on our December 29, 2024 and December 31, 2023 Consolidated Balance Sheets. The components of lease expense, including variable lease costs primarily consisting of common area maintenance charges and real estate taxes, are included in Occupancy on our consolidated statements of operations and comprehensive loss as follows (in thousands): Year Ended December 29, 2024 December 31, 2023 December 25, 2022 Operating lease cost $ 75,059 $ 72,346 $ 69,879 Finance lease cost: Amortization of right of use assets (1) 936 985 1,121 Interest on lease liabilities (2) 438 520 583 Total finance lease cost $ 1,374 $ 1,505 $ 1,704 Variable lease cost 19,077 19,806 18,965 Total lease costs $ 95,510 $ 93,657 $ 90,548 (1) Amortization of finance lease right of use assets is recorded to depreciation and amortization in our Consolidated Statements of Operations and Comprehensive Loss. (2) Interest on finance lease liabilities is recorded to interest expense in our Consolidated Statements of Operations and Comprehensive Loss. Maturities of our lease liabilities as of December 29, 2024 were as follows (in thousands): Finance Leases Operating Leases 2025 $ 1,432 $ 82,159 2026 1,410 77,652 2027 1,340 70,464 2028 1,111 62,740 2029 957 53,390 Thereafter 3,175 224,303 Total future lease liability $ 9,425 $ 570,708 Less imputed interest 1,660 174,990 Present value of lease liability $ 7,765 $ 395,718 58 Table of Contents Supplemental cash flow information in thousands (except other information) related to leases is as follows: Year Ended December 29, 2024 December 31, 2023 December 25, 2022 Cash flows from operating activities Cash paid related to lease liabilities Operating leases $ 83,043 $ 80,469 $ 85,400 Finance leases 438 520 583 Cash flows from financing activities Cash paid related to lease liabilities Finance leases 923 898 1,292 Cash paid for amounts included in the measurement of lease liabilities $ 84,404 $ 81,887 $ 87,275 Right of use assets obtained in exchange for operating lease obligations $ 26,089 $ 53,915 $ 13,848 Right of use assets obtained in exchange for finance lease obligations $ — $ 81 $ 1,139 Other information related to operating leases as follows: Weighted average remaining lease term 8.25 8.68 9.04 Weighted average discount rate 8.62 % 8.15 % 7.25 % Other information related to financing leases as follows: Weighted average remaining lease term 8.47 9.34 10.27 Weighted average discount rate 4.85 % 4.87 % 4.88 % 11. Income Taxes Loss before income taxes includes the following components for the fiscal years ended December 29, 2024, December 31, 2023, and December 25, 2022 (in thousands): 2024 2023 2022 U.S. $ ( 77,641 ) $ ( 20,894 ) $ ( 77,976 ) Foreign 10 ( 24 ) ( 160 ) Loss before income taxes $ ( 77,631 ) $ ( 20,918 ) $ ( 78,136 ) Income tax expense (benefit) for the fiscal years ended December 29, 2024, December 31, 2023, and December 25, 2022 consist of the following (in thousands): 2024 2023 2022 Current: Federal $ ( 37 ) $ 37 $ 374 State ( 53 ) 273 373 Foreign — — — Total current income tax expense (benefit) $ ( 90 ) $ 310 $ 747 Deferred: Federal $ — $ — $ — State — — — Foreign — — — Total deferred income tax expense (benefit) — — — Income tax expense (benefit), net $ ( 90 ) $ 310 $ 747 59 Table of Contents The reconciliation between the income tax expense (benefit) and the amount of income tax computed by applying the U.S. federal statutory rate to loss before income taxes as shown in the accompanying Consolidated Statements of Operations and Comprehensive Loss for fiscal years ended December 29, 2024, December 31, 2023, and December 25, 2022 is as follows: 2024 2023 2022 Tax provision at U.S. federal statutory rate 21.0 % 21.0 % 21.0 % State income taxes 3.8 4.2 4.0 Valuation allowance on deferred income tax assets ( 25.6 ) ( 22.3 ) ( 24.2 ) Excess stock options ( 0.8 ) ( 3.3 ) ( 1.1 ) Other 1.7 ( 1.1 ) ( 0.7 ) Effective tax rate 0.1 % ( 1.5 ) % ( 1.0 ) % The Company's federal and state deferred taxes at December 29, 2024 and December 31, 2023 are as follows (in thousands): 2024 2023 Deferred tax assets: Leasing transactions $ 104,831 $ 113,963 General business and other tax credits 41,009 40,441 Net operating loss carryover 50,688 44,131 Accrued compensation and related costs 4,810 5,361 Goodwill 7,250 7,244 Stock-based compensation 6,423 6,333 Advanced payments — 628 Interest expense 15,938 11,345 Property & Equipment 8,318 — Other non-current deferred tax assets 1,594 2,478 Subtotal 240,861 231,924 Valuation allowance ( 136,595 ) ( 119,861 ) Total $ 104,266 $ 112,063 Deferred tax liabilities: Leasing transactions $ ( 89,804 ) $ ( 97,386 ) Property and equipment — ( 1,242 ) Supplies inventory ( 4,349 ) ( 4,415 ) Prepaid expenses ( 1,862 ) ( 1,472 ) Advanced Payments ( 364 ) — Other non-current deferred tax liabilities ( 7,887 ) ( 7,548 ) Total $ ( 104,266 ) $ ( 112,063 ) Net deferred tax asset $ — $ — The Company had net operating loss carryforwards for tax purposes of $ 50.7 million as of December 29, 2024. This is comprised of approximately $ 22.7 million of federal net operating loss carryovers, approximately $ 19.3 million of state net operating loss carryovers, and approximately $ 8.7 million of foreign net operating loss carryovers. The federal net operating loss has an indefinite carryforward period, the state net operating loss carryovers expire at various dates between 2025 and 2044, and the foreign net operating loss carryovers expire at various dates between 2035 and 2042. As of December 29, 2024, the Company had a deferred tax asset of $ 39.8 million related to federal tax credits, which expire at various dates between 2037 and 2041. The Company also had a deferred tax asset of $ 1.2 million related to state tax credits which expire in 2025. The Company establishes a valuation allowance to reduce the carrying amount of deferred income tax assets when it is more likely than not that it will not realize some portion or all the tax benefit of its deferred income tax assets. The realization of deferred tax assets depends on the generation of future taxable income during the periods in which the temporary differences become deductible. In making this determination, the Company considers all available positive and negative evidence including 60 Table of Contents historical operating losses, the reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies. In 2020, management determined that a full valuation allowance was required and has recorded a full valuation allowance as of December 29, 2024 and at December 31, 2023. Based on the Company's evaluation of its deferred tax assets, a valuation allowance of approximately $ 136.6 million has been recorded against the deferred tax asset for federal and state tax credits, federal and state deferred tax assets, all net operating loss carry forwards and the deferred taxes of our foreign subsidiary. The following table summarizes the Company's unrecognized tax benefits at December 29, 2024, December 31, 2023, and December 25, 2022 (in thousands): 2024 2023 2022 Beginning of year $ 185 $ 185 $ 32 Increase due to current year tax positions — — 177 Due to decrease to a position taken in a prior year — — — Settlements — — — Reductions related to lapses in the statute of limitations ( 134 ) — ( 24 ) End of year $ 51 $ 185 $ 185 The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is approximately $ 0.1 million. The Company does not anticipate significant changes in the aggregate amount of unrecognized tax benefits within the next 12 months, other than nominal tax settlements. The Company expects the unrecognized tax benefits to reduce to zero during 2025. 12. Commitments and Contingencies Because litigation is inherently unpredictable, assessing contingencies related to litigation is a complex process involving highly subjective judgment about potential outcomes of future events. When evaluating litigation contingencies, we may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the availability of appellate remedies, insurance coverage related to the claim or claims in question, the presence of complex or novel legal theories, and the ongoing discovery and development of information important to the matter. In addition, damage amounts claimed in litigation against us may be unsupported, exaggerated, or unrelated to possible outcomes, and as such are not meaningful indicators of our potential liability or financial exposure. Accordingly, we review the adequacy of accruals and disclosures each quarter in consultation with legal counsel, and we assess the probability and range of possible losses associated with contingencies for potential accrual in the consolidated financial statements. However, the ultimate resolution of litigated claims may differ from our current estimates. In the normal course of business, there are various claims in process, matters in litigation, administrative proceedings, and other contingencies, certain of which are covered by insurance policies. These include employment related claims and class action lawsuits, claims from Guests or Team Members alleging illness, injury, food quality, health, or operational concerns, and lease and other commercial disputes. While it is not possible to predict the outcome of these suits, legal proceedings, and claims with certainty, management is of the opinion that adequate provision for potential losses associated with these matters has been made in the financial statements and that the ultimate resolution of pending or threatened matters will not have a material adverse effect on our financial position and results of operations. However, a significant increase in the number of these claims, or one or more successful claims resulting in greater liabilities than we currently anticipate, could materially and adversely affect our business, financial condition, results of operations, and cash flows. As of December 29, 2024, we had reserves of $ 4.4 million for loss contingencies included within Accrued liabilities and other on our Consolidated Balance Sheet. In the normal course of business, there are various claims in process, matters in litigation, administrative proceedings, and other contingencies. These include employment related claims and class action lawsuits, claims from Guests or Team Members alleging illness, injury, food quality, health, or operational concerns, and lease and other commercial disputes. We recorded estimated loss contingency reserves of approximately $ 1.0 million for the year ended December 29, 2024 related to ongoing litigation matters. We ultimately may be subject to greater or less than the accrued amount for this and other matters. As of December 29, 2024, we had non-cancellable purchase commitments primarily related to certain vendors who provide food and beverages and other supplies to our restaurants, for an aggregate of $ 142.1 million. We expect to fulfill our commitments under these agreements in the normal course of business, and as such, no liability has been recorded. 61 Table of Contents 13. Stockholders' Deficit On December 3, 2024 the Company entered into an Equity Purchase Agreement with JCP Investment Management, LLC and certain of its affiliates (collectively, “JCP”) and Jumana Capital, LLC and certain of its affiliates (collectively, “Jumana,” and together with the JCP Parties, the “Investor Parties”), pursuant to which the Investor Parties purchased an aggregate of 1,600,909 shares of Common Stock, at a purchase price of $ 5.19 per share, resulting in $ 8.3 million in gross proceeds. On August 9, 2018, the Company's Board of Directors authorized an increase to the Company's share repurchase program of approximately $ 21 million to a total of $ 75 million of the Company's common stock. The increased share repurchase authorization became effective on August 9, 2018 and will terminate upon completing repurchases of $ 75 million of common stock unless otherwise terminated by the board. Purchases under the repurchase program may be made in open market or privately negotiated transactions. Purchases may be made from time to time at the Company's discretion, and the timing and amount of any share repurchases will be determined based on share price, market conditions, legal requirements, and other factors. The repurchase program does not obligate the Company to acquire any particular amount of common stock, and the Company may suspend or discontinue the repurchase program at any time. In fiscal 2024, the Company did no t repurchase any shares under its share repurchase program. From the date of the current program approval through December 29, 2024, we have repurchased a total of 1,088,588 shares at an average price of $ 15.18 per share for an aggregate amount of $ 16.5 million. Accordingly, as of December 29, 2024, we had $ 58.5 million of availability under the current share repurchase program. 14. Stock Incentive Plans In May 2024, the Company's stockholders approved the 2024 Performance Incentive Plan (the "2024 Stock Plan"). Following the date of approval, all grants are made under the 2024 Stock Plan and no new awards may be granted under the Second Amended and Restated 2017 Performance Incentive Plan (the "2017 Stock Plan"). The 2024 Stock Plan authorizes the issuance of stock options, stock appreciation rights (SARs), and other forms of awards granted or denominated in the Company common stock or unit of the Company's common stock, as well as cash performance awards pursuant to the plan. Persons eligible to receive awards under the 2024 Stock Plan include officers, employees, directors, consultants, and other service providers or any affiliate of the Company. The maximum number of shares of the Company's common stock that may be issued or transferred pursuant to awards granted under the 2024 Stock Plan is 2,072,163 shares. Vesting of the awards under the 2024 Stock Plan is determined at the date of grant by the plan administrator. Each award granted under the 2024 Stock Plan and the 2017 Stock Plan may become exercisable and/or payable, as applicable, upon a change in control event described in the applicable Stock Plan. Each award expires on such date as shall be determined at the date of grant; however, the maximum term of options, SARs, and other rights to acquire common stock under the plan is ten years after the initial date of the award, subject to provisions for further deferred payment in certain circumstances. Vesting of awards under these plans were generally time based over a period of one year to four years . As of December 29, 2024, 70,235 and 1,162,500 options and awards to acquire the Company's common stock remained outstanding under the 2007 Stock Plan and the 2017 Stock Plan, respectively; all remaining options and awards are outstanding under the 2024 Stock Plan. Stock-based compensation costs recognized in fiscal 2024, 2023, and 2022 were $ 6.9 million, $ 6.8 million, and $ 6.3 million with related income tax benefits of $ 0.5 million, $ 0.8 million, and $ 0.6 million. The fiscal 2022 costs were comprised of $ 9.6 million stock-based compensation, partially offset by a $ 3.3 million reduction due to Executive Team forfeitures recorded in Impairment and other charges in the Consolidated Statements of Operations and Comprehensive Loss. As of December 29, 2024, there was $ 9.3 million of unrecognized compensation cost, excluding estimated forfeitures. Unrecognized compensation costs are expected to be recognized over the weighted average remaining vesting period of approximately one year for the restricted stock units ("RSU") and 1.62 years for the performance stock units ("PSU"). There is no unrecognized compensation cost for stock options in the year ended December 29, 2024. 62 Table of Contents Stock Options The tables below summarize the status of the Company's stock option plans (in thousands, except exercise price): Stock Options Shares Weighted Average Exercise Price Outstanding, December 31, 2023 117 $ 62.32 Granted — — Forfeited/expired ( 36 ) 63.63 Exercised — — Outstanding, December 29, 2024 81 $ 61.75 Shares Weighted Average Exercise Price Weighted Average Remaining Years of Contractual Life Aggregate Intrinsic Value Outstanding as of December 29, 2024 81 $ 61.75 1.26 $ — Vested and expected to vest as of December 29, 2024 (1) 81 $ 61.75 1.26 $ — Exercisable as of December 29, 2024 81 $ 61.75 1.26 $ — ——————————————————— (1) The expected to vest options are the result of applying the pre-vesting forfeiture rate assumption to total outstanding options. The Company applies estimated forfeiture rates that are derived from our historical forfeitures of similar awards. The estimated fair value of each option granted is calculated using the Black-Scholes multiple option-pricing model, and expense is recognized straight line over the vesting period. No options were granted during fiscal 2024, 2023, or 2022. Total intrinsic value of options exercised was $ 0 , $ 213 thousand, and $ 4 thousand in fiscal 2024, 2023, and 2022, respectively. Time-Based RSUs During fiscal 2024, 2023, and 2022, the Company issued time-based restricted stock units ("RSUs") to certain participants as permitted under the 2017 Stock Plan and the 2024 Stock Plan. The RSUs granted to employees typically vest in equal installments over three to four years . For the Company's non-employee directors, under the 2024 Stock Plan, RSUs vest in full on the later of fifty weeks following the date of grant and the Company's next annual meeting of stockholders. Upon vesting, one share of the Company's common stock is issued for each RSU. The fair value of each RSU granted is equal to the market price of the Company's stock at the date of grant, and expense is recognized straight line over the vesting period. The table below summarizes the status of the Company's time-based RSUs under the 2017 Stock Plan and 2024 Stock Plan (shares in thousands): Restricted Stock Units Shares Weighted Average Grant-Date Fair Value (per share) Outstanding, December 31, 2023 599 $ 12.75 Awarded 761 6.57 Forfeited ( 63 ) 11.04 Vested ( 260 ) 13.80 Outstanding, December 29, 2024 (1) 1,037 $ 8.05 (1) Awards expected to vest are the result of applying the pre-vesting forfeiture rate assumption to total outstanding awards. The Company applies estimated forfeiture rates that are derived from our historical forfeitures of similar awards. 63 Table of Contents Performance Stock Units During fiscal 2024, 2023, and 2022, the Company granted performance stock unit awards ("PSUs") to certain employees as permitted under the 2017 Stock Plan and the 2024 Stock Plan. Each PSU represents the right to receive one share of the Company's common stock on the payment date. The PSU awards use a performance metric based on relative total stockholder return defined as increases in the Company's stock price during a performance period of three years as compared to the total stockholder return of a group of peer companies. Fair value of each PSU granted is determined by a Monte Carlo valuation model, and expense is recognized straight line over the performance period. PSUs remain unvested until the last day of the three-year performance period and are generally forfeited in the event of termination of employment of a grantee prior to the last day of the three-year performance period. If the relative total stockholder return target is not met, compensation cost for these PSUs is not reversed. The table below summarizes the status of the Company's performance stock units under the 2017 Stock Plan and the 2024 Stock Plan (shares in thousands): Performance Stock Units Shares Weighted Average Grant-Date Fair Value (per share) Outstanding, December 31, 2023 427 $ 23.38 Awarded 552 9.11 Forfeited ( 43 ) 14.23 Vested — — Outstanding, December 29, 2024 (1) 936 $ 13.62 (1) Awards expected to vest are the result of applying the pre-vesting forfeiture rate assumption to total outstanding awards. The Company applies estimated forfeiture rates that are derived from our historical forfeitures of similar awards. Inducement Grants In prior years, the Company granted stock-based awards to certain of the Company’s new executive officers as inducements material to their commencement of employment and entry into an employment agreement with the Company. The inducement grants were made in accordance with Nasdaq Listing Rule 5635(c)(4) and were not made under the 2017 Plan. The inducement grants, which include PSU and RSU awards, are generally subject to substantially the same terms and conditions as grants that are made under the 2017 Plan and fair value is determined in the same manner as described for each grant type above. The table below summarizes the status of the Company' inducement grants (shares in thousands): Restricted Stock Units Performance Stock Units Shares Weighted Average Grant-Date Fair Value (per share) Shares Weighted Average Grant-Date Fair Value (per share) Outstanding, December 31, 2023 125 $ 7.57 124 $ 6.13 Awarded — — — — Forfeited — — — — Vested ( 63 ) 7.57 — — Outstanding, December 29, 2024 (1) 62 $ 7.57 124 $ 6.13 (1) Awards expected to vest are the result of applying the pre-vesting forfeiture rate assumption to total outstanding awards. The Company applies estimated forfeiture rates that are derived from our historical forfeitures of similar awards. Long-Term Cash Incentive Plan Beginning in 2020, the long-term cash incentive plan is based on relative total stockholder return defined as increases in the Company's stock price during a performance period of 3 years as compared to the total stockholder return of a group of peer companies. Compensation is recognized variably over the 3 -year performance period based on a Monte Carlo valuation model. Beginning in 2017, the long-term cash incentive plan was based on operational metrics with three-year performance periods. Compensation expense for awards granted before 2020 is recognized variably over the performance period based on the plan-to-date performance achievement. All long-term cash incentive awards cliff vest after three years at the end of each performance cycle. In fiscal years 2024, 2023, and 2022, the Company recorded $( 0.1 ) million, $( 0.1 ) million, and $( 0.4 ) million, respectively in compensation expense (benefit) to Selling, general, and administrative expenses in the consolidated 64 Table of Contents statements of operations and comprehensive loss related to the 2017 long-term cash incentive plan. The amounts recorded in fiscal 2024 and fiscal 2023 include the reversal of the expense related to 2021 and 2020 grants for which performance targets were not met. During fiscal 2024 and 2023, there were no long-term cash incentive plan payouts. At December 29, 2024 and December 31, 2023, a $ 0.3 million and $ 0.4 million long-term cash incentive plan liability was included in Accrued payroll and payroll-related liabilities on the consolidated balance sheets. 15. Employee Benefit Programs Employee Deferred Compensation Plan The Company offers a deferred compensation plan that permits key employees and other members of management defined as highly compensated employees under the IRS code to defer portions of their compensation in a pre-tax savings vehicle that allows for retirement savings above 401(k) limits. Under this plan, eligible Team Members may elect to defer up to 75 % of their base salary and up to 100 % of variable compensation and commissions each plan year. The assets of the deferred compensation plan are held in a rabbi trust, where they are invested in certain mutual funds that cover an investment spectrum ranging from equities to money market instruments and are available to satisfy the claims of the Company's creditors in the event of bankruptcy or insolvency. These mutual funds have published market prices and are reported at fair value. See Note 9. Fair Value Measurements. Changes in the market value of the investments held in the trust result in the recognition of a corresponding gain or loss reported in Interest income and other, net in the Consolidated Statements of Operations and Comprehensive Loss. A corresponding change in the liability associated with the deferred compensation plan results in an offsetting deferred compensation expense, or reduction of expense, reported in Selling, general, and administrative expenses in the Consolidated Statements of Operations and Comprehensive Loss. The Company recognized $ 0.3 million, $ 0.4 million, and $ 0.8 million in deferred compensation expense in fiscal 2024, fiscal 2023 and fiscal 2022, respectively. As of December 29, 2024 and December 31, 2023, $ 1.7 million and $2.1 million of deferred compensation assets are included in Other assets, net, in the accompanying Consolidated Balance Sheets. As of December 29, 2024 and December 31, 2023, $ 0.1 million and $ 0.4 million of this deferred compensation is included in Prepaid expenses and other current assets in the accompanying Consolidated Balance Sheets. As of December 29, 2024 and December 31, 2023, $ 1.7 million and $ 1.7 million of deferred compensation plan liabilities are included in Other non-current liabilities in the accompanying Consolidated Balance Sheets. As of December 29, 2024, and December 31, 2023, $ 0.1 million and $ 0.4 million of this deferred compensation is included in Accrued liabilities and other in the accompanying Consolidated Balance Sheets. Employee Stock Purchase Plan In July 2017, the Company adopted the Amended and Restated Employee Stock Purchase Plan (the "ESPP Plan"). The ESPP Plan authorized 100,000 shares of the Company's common stock for issuance. In May 2020, our Board of Directors authorized the issuance of an additional 150,000 shares of the Company's common stock under the ESPP Plan. In December 2022, our Board of Directors authorized, and at our 2023 Annual Meeting of Stockholders, our stockholders approved, the issuance of an additional 350,000 shares of the Company's common stock under the ESPP Plan increasing the shares authorized to be granted under the ESPP Plan to a total of 600,000 shares. Under the ESPP Plan, eligible Team Members may voluntarily contribute up to 15 % of their salary, subject to limitations, to purchase common stock at a price equal to 85 % of the fair market value of a share of the Company's common stock on the first day of each offering period or 85 % of the fair market value of a share of the Company's common stock on the last day of each offering period, whichever amount is less. In general, all of the Company's officers and Team Members who have been employed by the Company for at least one year and who are regularly scheduled to work more than 20 hours per week are eligible to participate in this plan, which operates in the successive six months commencing on January 1 and July 1 of each fiscal year. During fiscal 2024, the Company issued a total of 42,592 shares under the ESPP Plan with 226,803 shares available for future issuance. During fiscal 2023, the Company issued a total of 136,190 shares under the ESPP Plan. For fiscal 2024, in accordance with the guidance for accounting for stock compensation, the Company estimated the fair value of the awards granted pursuant to the stock purchase plan using the Black-Scholes multiple-option pricing model. The assumptions used in the model included risk-free interest rates from 5.03 % to 3.98 %, 0.5 year expected life, expected volatilities from 55.25 % to 55.76 %, and 0 % dividend yield. The weighted average fair value per share at grant date was $ 0.93 . For fiscal 2023, the assumptions used in the model included 5.46 % risk-free interest rate, 0.5 year expected life, expected volatility of 55.25 %, and 0 % dividend yield. The weighted average fair value per share at grant date was $ 1.72 . For fiscal 2022, the assumptions used in the model included 4.05 % risk-free interest rate, 0.5 year expected life, expected volatility of 55.00 %, 65 Table of Contents and 0 % dividend yield. The weighted average fair value per share at grant date was $ 0.99 . The Company recognized $ 0.1 million of compensation expense related to this plan in fiscal 2024, $ 0.1 million in fiscal 2023, and $ 0.1 million in fiscal 2022. Employee Defined Contribution Plan The Company maintains a 401(k) Savings Plan ("401k Plan") which covers eligible Team Members who have satisfied the service requirements and reached 21 years of age. The 401k Plan, which qualifies under Section 401(k) of the Internal Revenue Code, allows Team Members to defer specified percentages of their compensation on a pre-tax basis. The Company may make matching contributions in an amount determined by the Board of Directors. In addition, the Company may contribute each period, at its discretion, an additional amount from profits. Employer matching contributions equal to 100 % of the first 3 % of compensation and 50 % on the next 2 % of compensation. The Company matches contributions when the employee contribution is made, and the employer matching contributions are not subject to a vesting schedule. The Company recognized matching contribution expense of $ 3.3 million in fiscal 2024, $ 3.0 million in fiscal 2023, and $ 2.9 million in fiscal 2022. 16. Acquisitions and Dispositions As of December 29, 2024, the land and building assets at three owned restaurant locations were classified as held for sale. These long-lived assets have a total carrying amount of $ 4.3 million as of December 29, 2024, and are included in Assets held for sale in our consolidated balance sheets. We expect to close on the sale of these assets during the first quarter of fiscal 2025. As the fair value of these assets is greater than their carrying amounts as of December 29, 2024, there is no gain or loss to record in our consolidated statements of operations and comprehensive loss until the transaction is closed. During fiscal 2023, the Company acquired certain assets and liabilities of five restaurants from one of its U.S. franchisees for cash consideration of $ 3.5 million. The Company acquired $ 2.6 million of property and equipment, net, $ 0.8 million of operating lease liabilities, net of operating lease assets, $ 0.3 million of other assets, net of liabilities, and $ 1.4 million of intangible assets, net. 17. Segment Reporting In accordance with Segment Reporting, the Company uses the management approach for determining its reportable segments. The management approach is based upon the way that management reviews performance and allocates resources. The Company has one operating and one reportable segment: restaurants. We manage our business activities on a consolidated basis, as Red Robin restaurants all have similar customers, sell similar products, and have a similar process to sell those products. We primarily derive our revenue in the United States through the sale of food and beverage through its Company-owned locations as well as earn franchise fees from franchise restaurants. The accounting policies of the restaurant segment are the same as those described in Note 1. Description of Business and Summary of Significant Accounting Policies. Our Chief Operating Decision Maker ("CODM") is our Chief Executive Officer. The Company measures segment profit using consolidated Net income (loss). The CODM uses consolidated Net income (loss), as reported on our Consolidated Statements of Operations and Comprehensive Loss, in deciding whether to reinvest excess cash flow into the restaurant segment or into other parts of the Company. The CODM does not review assets in evaluating the results of the restaurant segment, and therefore, such information is not presented. Financial information for the Company's reportable segment is as follows (in thousands): 66 Table of Contents Year Ended December 29, 2024 December 31, 2023 December 25, 2022 Revenues: Restaurant revenue $ 1,224,254 $ 1,274,294 $ 1,230,189 Franchise revenue 14,941 15,867 19,306 Other revenue 9,365 12,885 16,039 Total revenues 1,248,560 1,303,046 1,265,534 Costs and expenses: Cost of sales 292,392 308,962 306,509 Labor 479,631 473,538 440,564 Other operating 216,242 224,999 224,704 Occupancy 103,359 102,761 98,868 General and administrative expenses 81,721 89,360 84,912 Selling 36,719 34,770 51,700 Other segment items (1) 33,848 ( 2,076 ) 39,529 Depreciation and amortization 57,729 66,190 76,245 Interest expense, net and other 24,550 25,460 20,639 Income tax expense (benefit) ( 90 ) 310 747 Segment net income (loss) $ ( 77,541 ) $ ( 21,228 ) $ ( 78,883 ) (1) Other segment items consists primarily of impairment and other charges (gains) and pre-opening costs. 67 Table of Contents ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.