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Item 7. Management’s Discussion and Analysis

2026-02-25 compared with 2025-02-26 · 202 added, 215 removed, 196 unchanged (68% of the section changed)

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

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

Management's discussion and analysis of financial condition and results of operations provides a narrative of our financial performance and condition that should be read in conjunction with the accompanying Consolidated Financial Statements and Notes to Consolidated Financial Statements included in Part II, Item 8 - Financial Statements and Supplementary Data of this report.

The Company's fiscal year ends on the last Sunday of each calendar year.

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however, we experience a 53rd week once every five to six years.

Our discussion for fiscal 2024, which ended on December 29, 2024, refers to a 52-week period.

Our discussion for fiscal 2023, which ended December 31, 2023, refers to a 53-week period, with the fifty-third week occurring in the fourth quarter.

Our discussion for fiscal 2022, which ended on December 25, 2022, refers to a 52-week period.

The following discussion comparing our results in fiscal 2024 and fiscal 2023 refers to the fifty-two weeks ended, and fifty-three weeks ended, December 29, 2024 and December 31, 2023, respectively.

For a discussion comparing our results from fiscal 2023 to fiscal 2022, refer to “Management’s Discussion and Analysis of Financial Condition

and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 28, 2024.

Our discussion for fiscal 2025, which ended on December 28, 2025, referred to a 52-week period.

Our discussion for fiscal 2024, which ended December 29, 2024, also referred to a 52-week period.

The following discussion comparing our results in fiscal years 2025 and 2024 referred to the fifty-two weeks ended December 28, 2025 and December 29, 2024, respectively.

For a discussion comparing our results from fiscal 2024 to fiscal

2023, refer to "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 29, 2024, filed with the SEC on February 26, 2025.

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 with 498 locations in North America.

Red Robin Gourmet Burgers, Inc., a Delaware corporation, is the parent company for Red Robin International, Inc., a Nevada corporation that, together with its subsidiaries ("Red Robin," "we," "us," "our" or the "Company"), primarily operates, franchises, and develops casual dining restaurants with 475 locations in North America.

As of December 28, 2025, the Company operated 385 Company-owned restaurants located in 39 states.

The Company also had 90 franchised restaurants in 13 states and one Canadian province as of December 28, 2025.

The Company operates its business as one (1) operating and one (1) reportable segment.

The Company operated its business as one operating and one reportable segment.

Our primary source of revenue is from the sale of food and beverages at Company-owned restaurants.

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Highlights for Fiscal 2025 Compared to Fiscal 2024

• Total revenues are $1.25 billion, a decrease of $54.5 million due in part to the 53rd week in fiscal 2023.

• Comparable restaurant revenue (1) decreased 1.2%

• Net loss is $77.5 million, as compared to a net loss of $21.2 million during 2023.

• Adjusted EBITDA (2) is $38.8 million, a 43.7% decrease.

• Total revenues were $1.21 billion, a decrease of $38.3 million from fiscal 2024.

• Comparable restaurant revenue (1) decreased 0.3% from fiscal 2024, excluding a 0.4% unfavorable impact of deferred loyalty revenue.

• Net loss was $23.3 million, as compared to a net loss of $77.5 million in fiscal 2024.

• Adjusted EBITDA (2) was $69.7 million, a 52.8% increase from fiscal 2024.

(1) Comparable restaurant revenue represents revenue from Company-owned restaurants that have operated for at least 18 months as of the beginning of the period presented.

(2) See below for a reconciliation of adjusted EBITDA, a non-GAAP measure, to Net loss.

(2) See below for a reconciliation of adjusted EBITDA, a non-GAAP measure, to net income (loss).

Key Performance Indicators

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

Restaurant revenue for the fifty-three weeks ended December 31, 2023

Change in revenue due to fifty-third week of fiscal 2023

Restaurant revenue for the fifty-two weeks ended December 29, 2024

Change in comparable restaurant revenue

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

Fifty-Two Weeks Ended Fifty-Three Weeks Ended

Fifty-Two Weeks Ended Fifty-Two Weeks Ended

December 28, 2025 December 29, 2024

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Beginning of period 407 415

Acquired from franchisees — 5

End of period 385 407

Beginning of period 91 92

Sold to Company

End of period 90 91

Total number of restaurants 498 507

Total number of restaurants, end of period

The following table presents total Company-owned and franchised restaurants by state or province as of December 28, 2025:

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Depreciation and amortization 4.3 4.6

Selling, general, and administrative expenses 9.5 9.5

Pre-opening costs — —

Impairment and other charges (gains), net 2.7 (0.2)

General and administrative

Other (gains) charges, net

Income (loss) from operations 0.2 % (4.3) %

Other expense (income):

Other (income) expense:

Interest expense 2.2 % 2.0 %

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Total other expenses, net 2.2 % 2.0 %

Loss before income taxes (6.2) (1.6)

Income tax expense (benefit) — —

Net loss (6.2) % (1.6) %

Income (loss) before income taxes

(1.9) % (6.2) %

Income tax (benefit) expense

Net income (loss)

(1.9) % (6.2) %

(1) Expressed as a percentage of restaurant revenue.

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Average weekly net sales volumes in Company-owned restaurants (1)

$ 57,605 $ 57,403 0.4 %

Total operating weeks 20,654 21,344 (3.2) %

Restaurant revenue, which comprises primarily food and beverage sales, decreased $50.0 million in fiscal 2024, or 3.9%, as compared to fiscal 2023.

The fifty-third week in fiscal 2023 contributed approximately $24.5 million in restaurant revenue.

Of the remaining $25.5 million decrease, $14.7 million, or 1.2%, was due to a decrease in comparable restaurant revenue and the remaining $10.8 million decrease was due to non-comparable restaurants, primarily attributed to the closure of eight

locations during fiscal 2024.

The comparable restaurant revenue decrease was driven by a 5.9% decrease in Guest count, partially offset by a 4.6% increase in average Guest check.

The increase in average Guest check resulted from a 7.3% increase in menu pricing, partially offset by a 0.9% decrease in discounts and a 1.8% decrease in menu mix.

The decrease in menu mix was primarily driven by Guests shifting visits from third party delivery platforms with elevated menu prices, to dine in visits at standard menu prices, and greater incidence of promotional menu items offered at reduced prices.

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

Restaurant revenue, which was comprised primarily of food and beverage sales, decreased $34.5 million in fiscal 2025, or 2.8%, as compared to fiscal 2024.

Of the $34.5 million decrease, $8.3 million, or 0.7% including the change in recognition of

deferred loyalty revenue, was due to a decrease in comparable restaurant revenue and the remaining $26.2 million decrease was due to non-comparable restaurants, primarily attributed to the closure of 22 locations during fiscal 2025.

Excluding the change in deferred loyalty revenue, comparable restaurant revenue decreased by 0.3%, driven by a 3.8% decrease in guest count, partially offset by a 3.5% increase in average guest check.

The increase in average guest check was driven by a 4.2% net price increase, offset partially by a 0.7% decrease in menu mix.

The decrease in menu mix was primarily driven by guests' adoption of our new value offering and growth in our catering business that contributes to a lower average guest check when compared to our other channels.

Dine-in sales comprised 75.6% of total food and beverage sales in fiscal 2025, as compared to 77.0% in fiscal 2024.

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

Franchise revenue primarily includes royalty income and advertising fund contributions.

Franchise revenue decreased $0.9 million, or 5.8%, in fiscal 2024 compared to fiscal 2023.

Franchise revenue declined primarily due to a reduction in the percentage of sales each franchisee is required to contribute to support selling activities in the second half of fiscal 2024 in line with the reduction in overall selling expense.

Franchise revenue primarily included royalty income and advertising fund contributions.

Franchise revenue decreased $0.9 million, or 5.8%, in fiscal 2025 compared to fiscal 2024, driven by a decrease in the franchisee contribution rate for marketing programs and lower franchise royalties, offset partially by transfer fee revenue earned in conjunction with a franchisee to franchisee sale.

The percentage of sales each franchisee is required to contribute could change in the future, as we expect to align contributions with spending levels, subject to compliance with the respective franchise agreement.

Franchise restaurants reported an increase of 2.6% in comparable restaurant revenue in fiscal 2024 compared to a decrease of 2.3% in fiscal 2023.

Other revenue primarily comprises gift card breakage, which represents the value associated with the portion of gift cards sold that are unlikely to be redeemed, licensing income, and recycling income.

The reduction in other revenue in fiscal 2024 compared to fiscal 2023 primarily relates to a reduction in gift card breakage revenue and recycling income.

Franchise restaurants reported a decrease of 2.4% in comparable restaurant revenue in fiscal 2025 compared to an increase of 2.6% in fiscal 2024.

Other revenue decreased by $3.0 million, or 32.0% in fiscal 2025 compared to fiscal 2024.

The reduction in other revenue in fiscal 2025 compared to fiscal 2024 was primarily related to lower gift card breakage in the current year.

Cost of Sales

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As a percent of restaurant revenue 23.9 % 23.9 % — %

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

Cost of sales as a percentage of restaurant revenue decreased 30 basis points in fiscal 2024 as compared to fiscal 2023.

The decrease was primarily driven by menu price increases and implementation of various cost savings initiatives, partially offset by commodity inflation.

Cost of sales, which was comprised of food and beverage costs, was variable and generally fluctuated with sales volume.

Cost of sales as a percentage of restaurant revenue was unchanged compared to the same period in fiscal 2024, primarily due to benefits from pricing and cost saving implementations that were offset by inflation.

(In thousands, except percentages) 2025 2024 Percent Change

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As a percent of restaurant revenue 36.7 % 39.2 % (2.5) %

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

Labor as a percentage of restaurant revenue increased 200 basis points in fiscal 2024 as compared to fiscal 2023.

The increase was primarily driven by additional costs in hourly and management labor, increased incentive compensation related to the new Managing Partner bonus plan and higher workers compensation and group health insurance expense.

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

Labor as a percentage of restaurant revenue decreased 250 basis points in fiscal 2025 as compared to fiscal 2024.

The decrease was primarily driven by ongoing efforts to increase hourly and management labor efficiency, reduced turnover, and benefit from menu price increases, partially offset by wage inflation and deleverage from reduced guest counts.

Other Operating

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As a percent of restaurant revenue 17.9 % 17.7 % 0.2 %

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

Other operating costs as a percentage of restaurant revenue is unchanged compared to the same period in fiscal 2023.

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

Other operating costs as a percentage of restaurant revenue increased 20 basis points in fiscal 2025 as compared to fiscal 2024.

The increase was primarily driven by higher third party commission expenses associated with the increase in third party delivery sales and deleverage from reduced guest counts, partially offset by the benefit of menu price increases.

(In thousands, except percentages) 2025 2024 Percent Change

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As a percent of restaurant revenue 8.7 % 8.4 % 0.3 %

Occupancy costs include fixed rents, property taxes, common area maintenance charges, general liability insurance, contingent rents, and other property costs.

In fiscal 2024, occupancy costs as a percentage of restaurant revenue increased 30 basis points compared to fiscal 2023.

The increase is due primarily to the impact of fixed rents associated with the sale-leaseback of 18 locations and the acquisition of five restaurants from a franchisee in the second quarter of fiscal 2023, offset in part by reduced general liability insurance expense.

Occupancy costs included fixed rents, property taxes, common area maintenance charges, general liability insurance, contingent rents, and other property costs.

Occupancy costs as a percentage of restaurant revenues increased 30 basis points in fiscal 2025 compared to fiscal 2024, primarily due to increased general liability insurance reserves.

The increase also reflected deleverage resulting from lower restaurant sales driven by reduced guest counts, partially offset in part by menu price increases and reduced costs associated with the closure of 22 locations in fiscal 2025.

Depreciation and Amortization

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As a percent of total revenues 4.3 % 4.6 % (0.3) %

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

In fiscal 2024, depreciation and amortization expense as a percentage of revenue decreased 50 basis points as compared to fiscal 2023.

The decrease is primarily due to asset impairments, restaurant closures and sale-leaseback transactions reducing the depreciable asset base.

Selling, General, and Administrative expenses

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

Depreciation and amortization expense as a percentage of revenue decreased 30 basis points in fiscal 2025 compared to fiscal 2024.

The decrease was primarily due to asset impairments and restaurant closures, both of which reduced the depreciable asset base.

General and Administrative Expenses

(In thousands, except percentages) 2025 2024 Percent Change

Selling, general, and administrative expenses $ 118,440 $ 124,130 (4.6) %

General and administrative

$ 76,254 $ 81,721 (6.7) %

As a percent of total revenues 6.4 % 6.6 % (0.2) %

Selling, general, and administrative costs include all corporate and administrative functions.

Components of this category include marketing and advertising costs, our Restaurant Support Center, regional, and franchise support salaries and benefits;

professional and consulting fees;

corporate information systems;

legal expenses;

and Board of Directors' expenses.

Selling, general, and administrative expense decreased $5.7 million, or 4.6% in fiscal 2024 as compared to fiscal 2023.

General and administrative costs include all corporate and administrative functions.

Components of this category included our restaurant support center, regional, and franchise support salaries and benefits, travel and meetings, professional and consulting fees, corporate information systems, legal expenses, and office rent.

General and administrative expenses decreased $5.5 million or 6.7% in fiscal 2025 as compared to fiscal 2024.

The decrease in fiscal 2024 as compared to fiscal 2023 was primarily driven by a reduction in compensation costs due to reduced incentive compensation accruals and headcount reductions and lower legal fees, partially offset by costs associated with the 2024 Managing Partner conference.

Selling expenses increased $1.9 million or 5.6% in fiscal 2024 as compared to fiscal 2023.

The increase resulted from higher menu, marketing and related production costs in fiscal 2024.

Pre-opening Costs

The decrease in fiscal 2025 as compared to fiscal 2024 was primarily related to a reduction in team member costs associated with lower headcount and cost incurred for annual partner recognition events in the prior year.

This decrease was partially offset by higher accrued incentive compensation expense due to the Company's improved financial performance.

Selling Expenses

(In thousands, except percentages) 2025 2024 Percent Change

Pre-opening costs $ — $ 587 (100.0) %

$ 31,328 $ 36,719 (14.7) %

As a percent of total revenues 2.6 % 2.9 % (0.3) %

Pre-opening costs, which are expensed as incurred, comprise the costs related to preparing restaurants to introduce Donatos ® and other initiatives, as well as direct costs, including labor, occupancy, training, and marketing, incurred related to opening new restaurants and hiring the initial work force.

Our pre-opening costs fluctuate from period to period, depending upon, but not limited to, the number of restaurants where Donatos ® has been introduced, the number of restaurant openings, the size of the restaurants being opened, and the location of the restaurants.

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

We did not open any new restaurants or roll out any Donatos® locations during fiscal 2024.

We opened one restaurant and completed the rollout of 25 Donatos® locations during fiscal 2023.

Impairment and Other Charges (Gains), net

(In thousands, except percentages) 2024 2023

Selling costs were comprised of all marketing and advertising costs and decreased $5.4 million or 14.7% in fiscal 2025 as compared to fiscal 2024.

The decrease was primarily driven by intentionally reducing paid media spend in the first half of the current fiscal year as we developed our new marketing strategy that launched in the third quarter of fiscal 2025.

Other (Gains) Charges, net

(In thousands)

Asset impairment and restaurant closure costs, net $ 2,785 $ 34,080

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Asset disposal and other, net

Impairment and other charges (gains), net $ 33,848 $ (2,663)

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.

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.

For further information on Impairment and other charges (gains) line items, refer to Note 4.

Impairment and Other Charges (Gains), net, of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

Interest Expense and Interest Income

Interest expense in fiscal 2024 and 2023 was $25.3 million and $26.6 million, respectively.

The $1.3 million decrease was primarily due to the net paydown of debt with the proceeds from the sale-leaseback transactions, partially offset by an increase in the weighted average interest rate to 13.6% in fiscal 2024 compared to 12.7% in fiscal 2023.

Average outstanding debt in fiscal 2024 and 2023 was $187.8 million and $205.6 million, respectively.

Other (gains) charges, net $ 10,463 $ 33,848

During fiscal 2025, the Company closed 22 locations and is continuing to evaluate alternatives for our remaining underperforming restaurant locations, including closure upon expiration of the current lease term.

The Company recognized non-cash impairment charges of $2.7 million, which were primarily associated with this review of underperforming locations.

During fiscal 2024, the Company closed eight underperforming locations.

The Company recognized non-cash impairment charges of $32.8 million, primarily associated with the review of underperforming locations.

For further information on other (gains) charges line items, refer to Note 4.

Other (Gains) Charges, net and Note 9.

Fair Value Measurements of the Notes to the Consolidated Financial Statements in Part II, Item 8 Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

Interest Expense

Interest expense in fiscal years 2025 and 2024 were $26.0 million and $25.3 million, respectively.

The $0.7 million increase was primarily due to an increase in the weighted average interest rate to 14.2% in fiscal 2025 compared to 13.6% in fiscal 2024.

Average outstanding debt in fiscal years 2025 and 2024 was $180.9 million and $187.8 million, respectively.

Interest Income and Other

Interest income and other decreased by $0.6 million in fiscal 2025 primarily due to lower interest income earned on cash investments.

Income tax benefit was $0.1 million in fiscal 2024, compared to an income tax provision of $0.3 million in fiscal 2023.

Our effective tax rate was a 0.1% benefit in fiscal 2024 and a 1.5% provision in fiscal 2023, reflecting minimum state income taxes and state franchise taxes despite a pretax net loss position.

Income Tax (Benefit) Provision

Income tax provision was $0.3 million in fiscal 2025, compared to an income tax benefit of $0.1 million in fiscal 2024.

Our effective tax rate was 1.1% in fiscal 2025 as compared to a 0.1% benefit in fiscal 2024.

The taxes recognized are immaterial as the Company has net operating losses and tax credits to reduce current taxes and a full valuation allowance against all deferred taxes, which collectively minimize the taxes paid and recognized.

Non-GAAP Financial Measures

A reconciliation of Restaurant revenue to restaurant level operating profit is detailed in the table below:

Fifty-Two Weeks Ended Fifty-Three Weeks Ended 2024 compared to 2023

In addition to the results provided in accordance with accounting principles generally accepted in the United States of America ("GAAP"), we provide certain non-GAAP measures, which present operating results on an adjusted basis.

These are supplemental measures of performance that are not required by or presented in accordance with GAAP and include the following:

(i) Restaurant level operating profit, (ii) net income (loss) before interest expense, income taxes, and depreciation and amortization ("EBITDA"), (iii) adjusted EBITDA, and (iv) adjusted net income (loss) per diluted share.

We believe that our use of non-GAAP financial measures permits investors to assess the operating performance of our business relative to our performance based on GAAP results and relative to other companies within the restaurant industry by isolating the effects of certain items that may vary from period to period without correlation to core operating performance or that vary widely among similar companies.

We believe that the disclosure of these non-GAAP measures is useful to investors as they form part of the basis for how our management team and our Board of Directors evaluate our operating performance, allocate resources and establish employee incentive plans.

Determination of these adjustments involves the application of judgment, therefore these non-GAAP financial measures are not intended to replace GAAP financial measures, and they are not necessarily standardized or comparable to similarly titled measures used by other companies.

Refer to the reconciliations of non-GAAP measures for descriptions of the actual adjustments made in the current period and the corresponding prior period.

Restaurant Level Operating Profit

The Company believes restaurant level operating profit is an important measure for management and investors because it is widely regarded in the restaurant industry as a useful metric by which to evaluate restaurant level operating efficiency and performance.

The Company defines restaurant level operating profit to be income from operations less franchise revenue and other revenue, plus other (gains) charges, net, selling, general and administrative, and depreciation and amortization.

The measure includes restaurant level occupancy costs that include fixed rents, percentage rents, common area maintenance charges, real estate and personal property taxes, general liability insurance, and other property costs, but excludes depreciation and amortization expense, substantially all of which is related to restaurant level assets, because such expenses represent historical sunk costs which do not reflect current cash outlay for the restaurants.

The measure also excludes costs associated with selling, general and administrative functions, as well as other (gains) charges, net because these costs are non-operating and therefore not related to the ongoing operations of its restaurants.

Restaurant level operating profit is not a measurement determined in accordance with GAAP and should not be considered in isolation, or as an alternative, to income (loss) from operations as an indicator of financial performance.

Restaurant level operating profit as presented may not be comparable to other similarly titled measures of other companies in the Company's industry.

The following table reconciles income (loss) from operations to restaurant level operating profit in thousands and in percent of total revenue for the period presented:

Fifty-Two Weeks Ended Fifty-Two Weeks Ended

December 28, 2025 December 29, 2024

Income (loss) from operations $ 2,790 0.2% $ (53,081) (4.3)%

Franchise revenue and other revenue

$ 20,445 1.7% $ 24,306 2.0%

Other (gains) charges, net

$ 10,463 0.9% $ 33,848 2.7%

General and administrative

76,254 6.4 81,721 6.6

Selling 31,328 2.6 36,719 2.9

Depreciation and amortization 51,120 4.3 57,729 4.6

Restaurant level operating profit $ 151,510 $ 132,630

Income (loss) from operations as a percentage of total revenues 0.2% (4.3)%

Restaurant level operating profit margin (as a percentage of restaurant revenue) 12.7% 10.8%

A summary view of restaurant level operating profit by financial statement line item and related restaurant level expenses operating expenses as a percent of restaurant revenues are presented in the tables below:

Fifty-Two Weeks Ended Fifty-Two Weeks Ended 2025 compared to 2024

(Dollars in millions) December 28, 2025 December 29, 2024 Increase/(Decrease)

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Total restaurant operating costs

$ 1,038.3 $ 1,091.6 (4.9) %

Restaurant level operating profit

$ 151.5 $ 132.6 14.2 %

(1) Restaurant Level Operating Profit is a non-GAAP measure.

See below for a reconciliation of Restaurant Level Operating Profit to Income from Operations and Income from Operations as a percentage of total revenues.

Fifty-Two Weeks Ended Fifty-Three Weeks Ended 2024 compared to 2023

Fifty-Two Weeks Ended Fifty-Two Weeks Ended 2025 compared to 2024

(Dollars in millions) December 28, 2025 December 29, 2024 Increase/(Decrease)

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Total restaurant operating costs

Restaurant Level Operating Profit 10.8 % 12.9 % (210)

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

The following table summarizes net loss and loss per diluted share, and adjusted loss per diluted share for the periods presented:

Fifty-Two Weeks Ended Fifty-Three Weeks Ended

(Dollars and shares in thousands, except per share amounts) December 29, 2024 December 31, 2023

Net loss as reported $ (77,541) $ (21,228)

Loss per share - diluted:

Net loss as reported $ (4.93) $ (1.34)

Gift card breakage

Impairment and other charges (gains), net:

Asset impairment and restaurant closure costs, net 2.17 0.77

Gain on sale of restaurant property

87.3 % 89.2 % (190)

Severance and executive transition

Litigation contingencies 0.07 0.58

Asset disposal and other, net

Income tax effect (0.58) 0.04

Adjusted loss per share - diluted

$ (3.34) $ (1.44)

Stock-based compensation expense

Adjusted loss per share excluding Stock-based compensation expense (1)

$ (2.90) $ (1.01)

Weighted average shares outstanding

Basic 15,736 15,835

Restaurant level operating profit

12.7 % 10.8 % 190

(1) Beginning in the first quarter of fiscal 2025, the Company intends to revise its definition of Adjusted Net income (loss) to exclude noncash stock-based compensation expense.

The Company believes this change will provide investors with a better understanding of our financial performance from period to period.

Previously reported results will be revised to reflect the new presentation.

The following table summarizes net loss, and EBITDA and adjusted EBITDA for the periods presented:

Fifty-Two Weeks Ended Fifty-Three Weeks Ended

EBITDA and Adjusted EBITDA

We define EBITDA as net income (loss) before interest expense, income taxes, and depreciation and amortization.

Adjusted EBITDA is EBITDA, further adjusted to exclude the impact of non-operating items including changes in estimates, asset impairments, litigation contingencies, gains (losses) on debt extinguishment, restaurant and office closure costs, gains (losses) on restaurant sales, severance and executive transition costs, stock-based compensation expense and other non-cash or discrete items.

EBITDA and adjusted EBITDA are supplemental measures of our performance that we believe gives the reader additional insight into the ongoing operational results of the Company.

The following table reconciles net income (loss) to adjusted EBITDA in thousands for the period presented:

Fifty-Two Weeks Ended Fifty-Two Weeks Ended

December 28, 2025 December 29, 2024

Net loss as reported $ (77,541) $ (21,228)

Net income (loss) as reported

$ (23,284) $ (77,541)

Interest expense, net (1)

Income tax provision (benefit) (90) 310

25,607 24,805

Income tax (benefit) provision

Depreciation and amortization 51,120 57,729

EBITDA $ 53,701 $ 4,903

Gift card breakage

Impairment and other charges (gains), net:

Stock-based compensation expense (2)

$ 5,573 $ 6,889

Other (gains) charges, net:

Asset impairment and restaurant closure costs, net

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$ 69,737 $ 45,640

(1) Interest expense, net was comprised of interest expense and interest income, the latter of which was included in interest (income) and other, net on the Consolidated Statements of Operations and Comprehensive Income (Loss).

(2) Consisted of compensation expense associated with stock-based awards including phantom performance awards that may be settled in stock or cash at the Company's option.

Adjusted Net Income (loss) Per Diluted Share

We define adjusted net income (loss) per diluted share as net income (loss) excluding the impact of non-operating items including changes in estimates, asset impairments, litigation contingencies, gains (losses) on debt extinguishment, restaurant and office closure costs, gains (losses) on restaurant sales, severance and executive transition costs, stock-based compensation expense and other non-cash or discrete items;

net of income tax impacts.

Adjusted net income (loss) per share - diluted is a supplemental measure of our performance that we believe gives the reader additional insight into the ongoing operational results of the Company.

The following table reconciles net income (loss) per share - diluted to adjusted net income (loss) per share - diluted:

Fifty-Two Weeks Ended Fifty-Two Weeks Ended

(Dollars and shares in thousands, except per share amounts) December 28, 2025 December 29, 2024

Net income (loss) as reported

$ (23,284) $ (77,541)

Income (loss) per share - diluted:

Net income (loss) as reported $ (1.31) $ (4.93)

Stock-based compensation expense (1)

Adjusted EBITDA excluding Stock-based compensation expense (1)

Other (gains) charges, net:

Asset impairment and restaurant closure costs, net 0.16 2.17

Gain on sale of restaurant property

(0.06) (0.47)

(1) Beginning in the first quarter of fiscal 2025, the Company intends to revise its definition of Adjusted EBITDA to exclude noncash stock-based compensation expense.

The Company believes this change will provide investors with a better understanding of our financial performance from period to period.

Previously reported results will be revised to reflect the new presentation.

We define EBITDA as net income (loss) before interest expense, income taxes, and depreciation and amortization.

Adjusted EBITDA and Adjusted income (loss) per share-diluted are supplemental measures of our performance that are not required by or presented in accordance with GAAP.

We believe these non-GAAP measures give the reader additional insight into the ongoing operational results of the Company, and are intended to supplement the presentation of the Company's financial results in accordance with GAAP.

Adjusted EBITDA and adjusted income (loss) per share-diluted exclude the impact of non-operating or nonrecurring items including changes in estimate, asset impairments, litigation contingencies, gains (losses) on debt extinguishment, restaurant and office closure costs, gains on sale leaseback transactions, severance and executive transition costs, and other non-recurring, non-cash or discrete items;

net of income tax impacts.

Adjusted EBITDA excluding stock-based compensation expense and adjusted income (loss) per share-diluted excluding stock-based compensation expense are calculated as Adjusted EBITDA and adjusted income (loss) per share-diluted, respectively, further adjusted to exclude stock-based compensation expense.

Other companies may define these non-GAAP measures differently, and as a result may not be directly comparable to those of other companies.

Adjusted income (loss) per share-diluted, Adjusted income (loss) per share-diluted excluding stock-based compensation expense, Adjusted EBITDA and Adjusted EBITDA excluding stock-based compensation expense should be considered in addition to, and not as a substitute for, net income (loss) as reported in accordance with U.S.

GAAP as a measure of performance.

The following table summarizes Income from Operations, and Restaurant Level Operating Profit for the period presented:

Fifty-Two Weeks Ended Fifty-Three Weeks Ended

December 29, 2024 December 31, 2023

Income (loss) from operations $ (53,081) (4.3)% $ 4,542 0.3%

Franchise royalties, fees and other revenue 24,306 2.0% 28,752 2.2%

Impairment and other charges (gains), net 33,848 2.7 (2,663) (0.2)

Pre-opening costs — — 587 —

General and administrative expenses

Severance and executive transition

Litigation contingencies 0.12 0.07

Asset disposal and other, net

Income tax effect (2)

(0.23) (0.69)

Selling 36,719 2.9 34,770 2.7

Depreciation and amortization 57,729 4.6 66,190 5.1

Restaurant level operating profit $ 132,630 $ 164,034

Income (loss) from operations as a percentage of total revenues (4.3)% 0.3%

Restaurant level operating profit margin (as a percentage of restaurant revenue) 10.8% 12.9%

The Company defines restaurant level operating profit to be income from operations less franchise royalties, fees and other revenue, plus impairment and other charges (gains), net, pre-opening costs, selling costs, general and administrative expenses, and depreciation and amortization.

The measure also excludes costs associated with selling, general, and administrative functions, pre-opening costs, as well as, impairment and other charges (gains), net because these costs are non-operating or nonrecurring and therefore not related to the ongoing operations of its restaurants.

Restaurant level operating profit as presented may not be comparable to other similarly titled measures of other companies in the Company's industry.

Adjusted net income (loss) per share - diluted

$ (0.64) $ (3.01)

Weighted average shares outstanding

Basic 17,789 15,736

17,789 15,736

(1) Consisted of compensation expense associated with stock-based awards including phantom performance awards that may be settled in stock or cash at the Company's option.

(2) Assumed a 26% income tax rate, representing a blended average of federal and state statutory rates.

(3) Antidilutive securities were excluded from the computation of diluted earnings per share because the Company reported a net loss for the period.

Liquidity and Capital Resources

Our primary sources of liquidity are cash from operations, cash and cash equivalents and availability under our revolving credit facility.

Cash and cash equivalents, and restricted cash increased $7.8 million to $39.4 million at December 29, 2024, from $31.6 million at the beginning of the fiscal year.

Cash and cash equivalents, and restricted cash decreased $9.9 million to $29.5 million on December 28, 2025, from $39.4 million at the beginning of the fiscal year.

As of December 28, 2025, the Company had approximately $56.9 million in liquidity, including cash and cash equivalents and available borrowing capacity under its credit facility.

Our primary sources of liquidity were cash flows generated from operating activities and availability under our revolving credit facility, as discussed further below.

Our main requirements for liquidity included operating expenses, capital expenditures for restaurant investment, investments in technology, and interest payments on our debt.

We have, and in the future may continue to have, negative working capital balances, which is common for many restaurant companies.

We can operate with a working capital deficit because cash from restaurant sales is usually received before the related payables for food inventory, supplies, and labor become due.

From time to time, the Company considers and evaluates financial and capital raising transactions related to its portfolio, including debt refinancing or new debt issuances, equity issuances, sales of owned properties and potential for tactical refranchising, and other transactions.

If capital were obtained through the issuance of Company equity, the issuance of Company securities would dilute the ownership of the Company’s existing stockholders.

We believe that our current cash and cash equivalents, our future cash flows generated from restaurant operations and gift card sales, and our borrowing capacity under the credit facility, will be sufficient to meet our anticipated working capital and capital expenditure needs for the next 12 months.

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

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Operating Cash Flows

Net cash flows provided by operating activities increased $8.2 million to $7.0 million in fiscal 2024 as compared to net cash used in operating activities of $1.2 million in fiscal 2023.

The increase in operating cash flow is primarily related to the timing of rent and payroll payments in the prior fiscal year as a result of the 53rd week, partially offset by lower restaurant profitability in fiscal 2024.

Net cash flows provided by operating activities increased $30.0 million to $37.0 million in fiscal 2025 as compared to net cash provided by operating activities of $7.0 million in fiscal 2024.

The increase in operating cash flow was primarily attributable to the increase in restaurant level profitability, lower selling expenses, and an increase in cash received related to higher gift card sales.

Investing Cash Flows

Net cash flows used in investing activities was $1.7 million in fiscal 2024 as compared to net cash provided by investing activities of $8.2 million in fiscal 2023.

The decrease in investing cash flows is primarily due to reduced proceeds from sale-leaseback transactions and real estate sales in fiscal 2024 as compared to fiscal 2023, partially offset by a reduction in capital expenditures in the current fiscal year.

In addition, cash provided by investing activities in the prior year included a $3.5 million cash outflow for the acquisition of five franchised restaurants.

Net cash flows used in investing activities were $24.6 million in fiscal 2025 as compared to net cash used in investing activities of $1.7 million in fiscal 2024.

The $22.9 million decrease in investing cash flows was primarily due to an increase in capital expenditures and lower proceeds from the sale of restaurant locations in the current year.

The following table lists the components of our capital expenditures for each fiscal year presented (in thousands):

Restaurant improvement capital and other (1)

$ 17,097 $ 16,219

Investment in technology, infrastructure, and other (2)

Donatos ® expansion

New restaurants and restaurant refreshes — 1,882

Total capital expenditures $ 30,784 $ 26,034

Restaurant improvement capital and other consists of capital equipment for our restaurants.

Investment in technology, infrastructure and other consists of capital costs related to restaurant technology assets, capital overhead, and other centrally developed assets.

Expenditures for Donatos ® expansion include expenditures for kitchen equipment, other equipment and other capital costs associated with adding Donatos ® to our restaurants.

(1) Restaurant improvement capital and other consisted of capital equipment for our restaurants.

(2) Investment in technology, infrastructure and other consisted of capital costs related to restaurant technology assets, capital overhead, and other centrally developed assets.

Financing Cash Flows

Net cash flows provided by financing activities increased to $2.5 million in fiscal 2024 as compared to net cash used in financing activities of $33.7 million in fiscal 2023.

Cash flows provided by financing activities in fiscal 2024 primarily relate to the paydown of debt with proceeds from the sale-leaseback transaction and debt issuance costs associated with amendments to the credit facility.

These paydowns were partially offset by net borrowings on the revolving credit facility and $7.1 million in net proceeds from the sale of common stock as discussed below.

Cash flows used in financing activities in fiscal 2023 primarily relate to the net paydown of debt with sale-leaseback proceeds and $10.0 million in share repurchases.

Net cash flows used in financing activities was $22.3 million in fiscal 2025 as compared to net cash provided by financing activities of $2.5 million in fiscal 2024.

Cash flows used in financing activities in fiscal 2025 primarily related to the repayment of debt.

Cash flows provided by financing activities in the comparable period in fiscal 2024 primarily related to cash received from stock issuances, partially offset by net repayment of debt.

Credit Facility

On March 4, 2022, the Company entered into a credit agreement (as amended, the "Credit Agreement"), which provides for a Senior Secured Term Loan and Revolving Credit Facility (the "Credit Facility").

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, 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.

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 our 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 third quarter of 2025;

increases the aggregate revolving commitments by $15.0 million to $40.0 million through 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 additional reporting requirements.

On November 4, 2024, the Company entered into the third amendment to our Credit Agreement (the "Third Amendment") which extends the provisions of the Second Amendment through the end of the first fiscal quarter of 2026.

As of December 29, 2024, the Company had outstanding borrowings under the Credit Facility of $181.6 million net of $7.8 million of unamortized deferred financing charges and discounts, none of which was classified as current.

As of December 29, 2024, the Company had $20.0 million of available borrowing capacity under its Credit Facility, and $8.5 million letters of

credit issued against cash collateral.

The Company's cash collateral is recorded in Restricted cash on our Consolidated Balance Sheets.

As of December 28, 2025, the Company's credit facility allowed for up to $240.0 million of borrowings and was comprised of a $40.0 million revolving line of credit and a $200.0 million term loan (collectively, the "Credit Facility").

As of December 28, 2025 and December 29, 2024, the Company had outstanding borrowings of $170.2 million and $189.5 million, respectively, inclusive of $3.0 million and $20.0 million drawn on its revolving line of credit, respectively, under its Credit Facility.

In addition, the Company had amounts issued under letters of credit of $9.3 million and $8.5 million as of December 28, 2025 and December 29, 2024, respectively.

The Credit Facility will mature on September 3, 2027.

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.

As of December 28, 2025, the Company fulfilled this obligation for the duration of the Credit Facility via previous principal payments.

The Credit Facility's interest rate references the Secured Overnight Financing Rate ("SOFR"), which is an 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.

For additional information regarding our Credit Facility, see Note 8.

Borrowings included within the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

Borrowings included within the Notes to the Consolidated Financial Statements in Part II, Item 8 Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

Debt Covenants

We are subject to a number of customary covenants under our Credit Facility, including limitations on additional borrowings, acquisitions, stock repurchases, sales of assets, and dividend payments, as well as a total net leverage ratio covenant.

As of December 28, 2025, we were in compliance with all debt covenants.

Working Capital

We typically maintain current liabilities in excess of our current assets which results in a working capital deficit.

We are able to operate with a working capital deficit because restaurant sales are primarily conducted on a cash or credit card basis.

Rapid turnover of inventory results in limited investment in inventories, and cash from sales is usually received before related payables for food, supplies, and payroll become due.

In addition, receipts from the sale of gift cards are received well in advance of related redemptions.

Rather than maintain higher cash balances that would result from this pattern of operating cash flows, we typically utilize operating cash flows in excess of those required for currently maturing liabilities to pay for capital expenditures, debt repayment, or to repurchase stock.

When necessary, we utilize our Credit Facility to satisfy short-term liquidity requirements.

We believe our future cash flows generated from restaurant operations combined with our borrowing capacity under the Credit Facility, and cash on hand, will be sufficient to meet our anticipated cash requirements and fund capital expenditures over the next 12 months.

Sales and Purchases of Equity Securities

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 and aggregate of 1,600,909 shares of our common stock, at a purchase price of $5.19 per share, resulting in $8.3 million in gross proceeds.

On November 10, 2025, The Company entered into the Distribution Agreement with Evercore, to establish an at-the-market equity offering program.

The Company voluntarily terminated the program on February 23, 2026, without any issuances or sales.

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 our common stock, at a purchase price of $5.19 per share, resulting in $8.3 million in gross proceeds.

The proceeds were used to repay indebtedness and general corporate expenses.

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From the date of the current program approval through December 28, 2025, 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.

The Company completed no share repurchases in fiscal 2024 and $10.0 million of share repurchases during fiscal 2023.

Accordingly, as of December 29, 2024, we had $58.5 million of availability under the current share repurchase program.

The Company completed no share repurchases in fiscal 2025 or fiscal 2024.

As of December 28, 2025, we had $58.5 million of availability under the current share repurchase program.

Our Credit Agreement limits our ability to repurchase shares to certain conditions set forth by the lenders in the Credit Facility.

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Payments Due by Period

Total 2025 2026 - 2027

Total 2026 2027 2028 2029 2030 Thereafter

Long-term debt obligations (1)

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214,490 71,411 65,258 26,085 24,156 21,621 5,959

Other non-current liabilities (5)

1,742 102 128 55 1,457

Total contractual obligations $ 924,237 $ 170,927 $ 322,866 $ 92,121 $ 81,170 $ 70,711 $ 186,442

———————————————————

(1) Long-term debt obligations primarily represent minimum required principal payments under our existing Credit Agreement as of December 29, 2024, including estimated interest of $52.7 million based on a 12.21% average borrowing interest rate.

(2) Finance lease obligations include interest of $1.7 million.

(3) Operating lease obligations exclude variable lease costs, such as sales based contingent rent, and include interest of $175.0 million.

(4) Purchase obligations primarily include the Company's share of expected system-wide fixed price commitments for food, beverage, and restaurant supply items.

(1) Long-term debt obligations primarily represented minimum required principal payments under our existing Credit Agreement as of December 28, 2025, including estimated interest of $33.5 million based on a 11.50% average borrowing interest rate.

(2) Finance lease obligations included interest of $1.3 million.

(3) Operating lease obligations excluded variable lease costs, such as sales-based contingent rent, and included interest of $148.9 million.

(4) Purchase obligations primarily included the Company's share of expected system-wide fixed price commitments for food, beverage, and restaurant supply items.

The timing of amounts presented is estimated based on anticipated inventory needed for the Company’s restaurants and could vary due to changes in anticipated traffic counts, consumer preferences, or other factors.

(5) Other non-current liabilities primarily represent the employee deferred compensation plan liability.

Critical Accounting Estimates

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We have identified the following as the Company's most critical accounting estimates, which are most important to the portrayal of the Company's financial condition and results and require management's most subjective and complex judgment.

Information regarding the Company's other significant accounting policies is disclosed in Note 1, Description of Business and Summary of Significant Accounting Policies , of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

Impairment of Long-Lived Assets - Long-lived assets, including restaurant sites, leasehold improvements, other fixed assets, right of use assets, and amortizable intangible assets are reviewed when indicators of impairment are present.

Information regarding the Company's other significant accounting policies is disclosed in Note 1.

Description of Business and Summary of Significant Accounting Policies, of the Notes to the Consolidated Financial Statements in Part II, Item 8 Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

Impairment of Long-Lived Assets - Long-lived assets, including restaurant sites, leasehold improvements, other fixed assets, right of use assets, and intangible assets are reviewed when indicators of impairment are present.

Expected cash flows associated with an asset are the key factor in determining the recoverability of the asset.

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For those restaurants for which undiscounted cash flows did not exceed their carrying value, we compared the carrying amount of each restaurant to its fair value as estimated by management.

Determining the fair value of the long-lived assets requires the use of estimates and assumptions and is typically determined using a discounted cash flow projection model.

The weighted average cost of capital discount factor is determined using external information such as the risk-free rate of return, industry beta factors, and premium adjustments.

Determining the fair value of the long-lived assets requires the use of estimates and assumptions and is typically determined by using a discounted cash flow projection model.

The weighted average cost of capital discount factor is determined by using external information such as the risk-free rate of return, industry beta factors, and premium adjustments.

Management uses other market information such as market rent and discount rates, which are subject to judgment, to estimate the fair value of restaurant right of use lease assets.

During fiscal 2024, the Company recognized non-cash impairment charges of $32.8 million, primarily related to the impairment of the long-lived assets at 58 underperforming locations and quota state liquor licenses at three locations.

During fiscal 2025, the Company recognized non-cash impairment charges of $2.7 million, primarily related to the impairment of the long-lived assets at four underperforming locations.

During fiscal 2024, the Company recognized non-cash impairment charges of $32.8 million, primarily related to impairments of long-lived assets at 58 underperforming locations and quota state liquor licenses at three locations.

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Recently Issued Accounting Standards

Recent Accounting Pronouncements, of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for our discussion of recently issued accounting standards.

Recent Accounting Pronouncements, of the Notes to the Consolidated Financial Statements in Part II, Item 8 Financial Statements and Supplementary Data of this Annual Report on Form 10-K for our discussion of recently issued accounting standards.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis