Wingstop Inc. 10-Q

Item 1. Financial Statements WINGSTOP INC. AND SUBSIDIARIES Consolidated Balance Sheets (amounts in thousands, except share and par value amounts) September 28, 2024 December 30, 2023 (Unaudited) Assets Current assets Cash and cash equivalents $ 83,958 $ 90,216 Restricted cash 11,444 11,444 Accounts receivable, net 16,939 12,408 Prepaid expenses and other current assets 7,225 4,948 Advertising fund assets, restricted 46,671 25,328 Total current assets 166,237 144,344 Property and equipment, net 119,119 91,292 Operating lease assets 57,753 19,092 Goodwill 74,749 67,708 Trademarks 32,700 32,700 Customer relationships, net 6,792 7,740 Other non-current assets 27,412 14,949 Total assets $ 484,762 $ 377,825 Liabilities and stockholders' deficit Current liabilities Accounts payable $ 10,301 $ 4,725 Current portion of operating lease liabilities 3,533 2,380 Other current liabilities 58,386 38,571 Advertising fund liabilities 46,671 25,328 Total current liabilities 118,891 71,004 Long-term debt, net 713,729 712,327 Operating lease liabilities 60,414 17,807 Deferred revenues, net of current 37,007 30,145 Deferred income tax liabilities, net 2,097 3,721 Other non-current liabilities 90 187 Total liabilities 932,228 835,191 Commitments and contingencies (see Note 7) Stockholders' deficit Common stock, $ 0.01 par value; 100,000,000 shares authorized; 29,212,082 and 29,337,920 shares issued and outstanding as of September 28, 2024 and December 30, 2023, respectively 292 293 Additional paid-in-capital 1,515 2,676 Retained deficit ( 449,336 ) ( 459,994 ) Accumulated other comprehensive loss 63 ( 341 ) Total stockholders' deficit ( 447,466 ) ( 457,366 ) Total liabilities and stockholders' deficit $ 484,762 $ 377,825 See accompanying notes to consolidated financial statements. 4 WINGSTOP INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income (amounts in thousands, except per share data) (Unaudited) Thirteen Weeks Ended Thirty-Nine Weeks Ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Revenue: Royalty revenue, franchise fees and other $ 74,395 $ 53,200 $ 212,652 $ 149,372 Advertising fees 56,764 39,951 161,567 114,010 Company-owned restaurant sales 31,339 23,953 89,767 69,616 Total revenue 162,498 117,104 463,986 332,998 Costs and expenses: Cost of sales (1) 24,367 17,622 68,311 50,959 Advertising expenses 60,965 42,381 172,705 120,753 Selling, general and administrative 32,294 23,047 85,569 68,820 Depreciation and amortization 5,054 3,384 13,625 9,591 Loss on disposal of assets — 18 — 95 Total costs and expenses 122,680 86,452 340,210 250,218 Operating income 39,818 30,652 123,776 82,780 Interest expense, net 5,130 4,520 14,874 13,337 Other (income) expense ( 800 ) ( 19 ) ( 1,574 ) 123 Income before income tax expense 35,488 26,151 110,476 69,320 Income tax expense 9,756 6,640 28,512 17,959 Net income $ 25,732 $ 19,511 $ 81,964 $ 51,361 Earnings per share Basic $ 0.88 $ 0.66 $ 2.80 $ 1.72 Diluted $ 0.88 $ 0.65 $ 2.78 $ 1.71 Weighted average shares outstanding Basic 29,265 29,750 29,319 29,889 Diluted 29,383 29,818 29,441 29,969 Dividends per share $ 0.27 $ 0.22 $ 0.71 $ 0.60 Other comprehensive income (loss) Currency translation adjustment $ 440 $ ( 199 ) $ 404 $ 76 Other comprehensive income (loss) 440 ( 199 ) 404 76 Comprehensive income $ 26,172 $ 19,312 $ 82,368 $ 51,437 (1) Cost of sales includes all operating expenses of company-owned restaurants, including advertising expenses, and excludes depreciation and amortization, which are presented separately. See accompanying notes to consolidated financial statements. 5 WINGSTOP INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Deficit For the Thirty-Nine Weeks Ended September 30, 2023 (amounts in thousands, except share data) (Unaudited) Common Stock Shares Amount Additional Paid-In Capital Retained Deficit Accumulated Other Comprehensive Loss Total Stockholders’ Deficit Balance at December 31, 2022 29,932,668 $ 300 $ 2,797 $ ( 393,321 ) $ ( 637 ) $ ( 390,861 ) Net income — — — 15,669 — 15,669 Shares issued under stock plans 49,817 — 111 — — 111 Tax payments for restricted stock upon vesting ( 13,613 ) — — ( 2,292 ) — ( 2,292 ) Stock-based compensation expense, net of forfeitures — — 3,345 — — 3,345 Dividends declared on common stock and equivalents — — ( 5,444 ) ( 465 ) — ( 5,909 ) Currency translation adjustment — — — — 147 147 Balance at April 1, 2023 29,968,872 300 809 ( 380,409 ) ( 490 ) ( 379,790 ) Net income — — — 16,181 — 16,181 Shares issued under stock plans 9,084 — 362 — — 362 Tax payments for restricted stock upon vesting ( 342 ) — — ( 69 ) — ( 69 ) Stock-based compensation expense, net of forfeitures — — 3,546 — — 3,546 Dividends declared on common stock and equivalents — — ( 2,679 ) ( 3,030 ) — ( 5,709 ) Currency translation adjustment — — — — 128 128 Balance at July 1, 2023 29,977,614 $ 300 $ 2,038 $ ( 367,327 ) $ ( 362 ) $ ( 365,351 ) Net income — — — 19,511 — 19,511 Shares issued under stock plans 4,857 — 270 — — 270 Purchases of common stock ( 567,151 ) ( 6 ) ( 241 ) ( 125,878 ) — ( 126,125 ) Tax payments for restricted stock upon vesting ( 400 ) — — ( 66 ) — ( 66 ) Stock-based compensation expense, net of forfeitures — — 3,128 — — 3,128 Dividends declared on common stock and equivalents — — ( 3,957 ) ( 2,653 ) — ( 6,610 ) Currency translation adjustment — $ — $ — $ — $ ( 199 ) $ ( 199 ) Balance at September 30, 2023 29,414,920 $ 294 $ 1,238 $ ( 476,413 ) $ ( 561 ) $ ( 475,442 ) See accompanying notes to consolidated financial statements. 6 WINGSTOP INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Deficit For the Thirty-Nine Weeks Ended September 28, 2024 (amounts in thousands, except share data) (Unaudited) Common Stock Shares Amount Additional Paid-In Capital Retained Deficit Accumulated Other Comprehensive Loss Total Stockholders’ Deficit Balance at December 30, 2023 29,337,920 $ 293 $ 2,676 $ ( 459,994 ) $ ( 341 ) $ ( 457,366 ) Net income — — — 28,747 — 28,747 Shares issued under stock plans 42,918 1 707 — — 708 Tax payments for restricted stock upon vesting ( 10,860 ) — — ( 3,717 ) — ( 3,717 ) Stock-based compensation expense, net of forfeitures — — 3,812 — — 3,812 Dividends declared on common stock and equivalents — — ( 6,277 ) ( 262 ) — ( 6,539 ) Currency translation adjustment — — — — ( 24 ) ( 24 ) Balance at March 30, 2024 29,369,978 294 918 ( 435,226 ) ( 365 ) ( 434,379 ) Net income — — — 27,485 — 27,485 Shares issued under stock plans 11,323 — 546 — — 546 Purchases of common stock ( 75,862 ) ( 1 ) ( 4,304 ) ( 24,915 ) — ( 29,220 ) Tax payments for restricted stock upon vesting ( 1,038 ) — — ( 401 ) — ( 401 ) Stock-based compensation expense, net of forfeitures — — 4,926 — — 4,926 Dividends declared on common stock and equivalents — — ( 217 ) ( 6,269 ) — ( 6,486 ) Currency translation adjustment — — — — ( 12 ) ( 12 ) Balance at June 29, 2024 29,304,401 $ 293 $ 1,869 $ ( 439,326 ) $ ( 377 ) $ ( 437,541 ) Net income — — — 25,732 — 25,732 Shares issued under stock plans 1,850 — — — — — Purchases of common stock ( 93,617 ) ( 1 ) ( 7,307 ) ( 27,887 ) — ( 35,195 ) Tax payments for restricted stock upon vesting ( 552 ) — — ( 230 ) — ( 230 ) Stock-based compensation expense, net of forfeitures — — 7,273 — — 7,273 Dividends declared on common stock and equivalents — — ( 320 ) ( 7,625 ) — ( 7,945 ) Currency translation adjustment — — — — 440 440 Balance at September 28, 2024 29,212,082 $ 292 $ 1,515 $ ( 449,336 ) $ 63 $ ( 447,466 ) See accompanying notes to consolidated financial statements. 7 WINGSTOP INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (amounts in thousands) (Unaudited) Thirty-Nine Weeks Ended September 28, 2024 September 30, 2023 Operating activities Net income $ 81,964 $ 51,361 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 13,625 9,591 Deferred income taxes ( 1,624 ) ( 1,200 ) Stock-based compensation expense 16,011 10,019 Loss on disposal of assets — 95 Amortization of debt issuance costs 1,561 1,530 Changes in operating assets and liabilities: Accounts receivable ( 4,531 ) ( 2,490 ) Prepaid expenses and other assets ( 9,159 ) ( 20 ) Advertising fund assets and liabilities, net 17,718 9,596 Accounts payable and other current liabilities 22,097 2,992 Deferred revenue 7,227 2,054 Other non-current liabilities 4,979 219 Cash provided by operating activities 149,868 83,747 Investing activities Purchases of property and equipment ( 35,575 ) ( 28,295 ) Acquisition of restaurants from franchisee ( 14,048 ) ( 4,396 ) Payments for investments ( 500 ) ( 808 ) Cash used in investing activities ( 50,123 ) ( 33,499 ) Financing activities Proceeds from exercise of stock options 1,254 743 Repayments of long-term debt — ( 3,650 ) Purchases of common stock ( 64,210 ) ( 125,250 ) Tax payments for restricted stock upon vesting ( 4,348 ) ( 2,427 ) Dividends paid ( 20,981 ) ( 18,433 ) Cash used in financing activities ( 88,285 ) ( 149,017 ) Net increase in cash, cash equivalents, and restricted cash 11,460 ( 98,769 ) Cash, cash equivalents, and restricted cash at beginning of period 119,676 205,715 Cash, cash equivalents, and restricted cash at end of period $ 131,136 $ 106,946 Supplemental information: Accrued capital expenditures $ 5,196 $ 4,622 See accompanying notes to consolidated financial statements. 8 WINGSTOP INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (1) Basis of Presentation and Update to Significant Accounting Policies Nature of operations. Wingstop Inc., together with its consolidated subsidiaries (collectively, “Wingstop” or the “Company”), is in the business of franchising and operating Wingstop restaurants. As of September 28, 2024, the Company had a total of 2,458 restaurants system-wide. The Company’s restaurant base is approximately 98 % franchised, with 2,402 franchised locations (including 338 restaurants in international locations and U.S. territories) and 56 company-owned restaurants as of September 28, 2024. Basis of presentation. The accompanying unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Consequently, financial information and disclosures normally included in financial statements prepared annually in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted. Balance sheet amounts are as of September 28, 2024 and December 30, 2023, and operating results are for the thirteen and thirty-nine weeks ended September 28, 2024 and September 30, 2023. Certain prior period information on the Consolidated Balance Sheets have been reclassified to conform to the current presentation. In the Company’s opinion, all necessary adjustments have been made for the fair presentation of the results of the interim periods presented. The results of operations for such interim periods are not necessarily indicative of the results to be expected for the full year. The accompanying interim unaudited consolidated financial statements should be read in conjunction with the audited financial statements and the related notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023 (the “Annual Report”). Fiscal year. The Company uses a 52- or 53-week fiscal year that ends on the last Saturday of the calendar year. Fiscal years 2024 and 2023 each have 52 weeks. Cash, Cash Equivalents, and Restricted Cash. Cash, cash equivalents, and restricted cash within the Consolidated Balance Sheets and the Consolidated Statements of Cash Flows as of September 28, 2024 and December 30, 2023 were as follows (in thousands): September 28, 2024 December 30, 2023 Cash and cash equivalents $ 83,958 $ 90,216 Restricted cash 11,444 11,444 Restricted cash, included in Advertising fund assets, restricted 35,734 18,016 Total cash, cash equivalents, and restricted cash $ 131,136 $ 119,676 Recently issued accounting pronouncements. We reviewed all recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact on our consolidated financial statements. There have been no changes to the recently issued accounting pronouncements not yet adopted disclosed in the Annual Report. (2) Earnings per Share Basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of shares of common stock outstanding for the reporting period. Diluted earnings per share reflects the potential dilution that could occur if securities convertible into, or other contracts to issue, common stock were exercised or converted into common stock. For the calculation of diluted earnings per share, the basic weighted average number of shares is increased by the dilutive effect of the exercise and vesting of stock options and service-based and performance-based restricted stock units, respectively, as determined using the treasury stock method. 9 WINGSTOP INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) Basic weighted average shares outstanding is reconciled to diluted weighted average shares outstanding as follows (in thousands): Thirteen Weeks Ended Thirty-Nine Weeks Ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Basic weighted average shares outstanding 29,265 29,750 29,319 29,889 Dilutive shares 118 68 122 80 Diluted weighted average shares outstanding 29,383 29,818 29,441 29,969 No equity awards were excluded from the dilutive earnings per share calculation for the thirteen and thirty-nine weeks ended September 28, 2024. For the thirteen and thirty-nine weeks ended September 30, 2023, equity awards representing approximately 9,000 and 5,000 shares, respectively, were excluded from the dilutive earnings per share calculation because the effect would have been anti-dilutive. (3) Stockholders’ Deficit Dividends In connection with the Company’s regular dividend program, our Board of Directors declared a quarterly dividend of $ 0.22 per share of common stock in each of the first two quarters of 2024, and a quarterly dividend of $ 0.27 per share of common stock in the third quarter of 2024, resulting in aggregate declared dividends of $ 20.8 million, or $ 0.71 per share of common stock, during the thirty-nine weeks ended September 28, 2024. Subsequent to the third quarter, on October 29, 2024, our Board of Directors declared a regular quarterly dividend of $ 0.27 per share of common stock for stockholders of record as of November 15, 2024. The regular quarterly dividend is to be paid on December 6, 2024, totaling approximately $ 7.9 million. Share Repurchase Program On August 17, 2023, the Company announced a share repurchase program with authorization to purchase up to $ 250.0 million of its outstanding shares of common stock (the “Share Repurchase Program”). During the thirty-nine weeks ended September 28, 2024, the Company repurchased and retired 169,479 shares of its common stock at an average price of $ 377.09 per share. As of September 28, 2024, $ 61.1 million remained available under the Share Repurchase Program. (4) Fair Value Measurements Fair value is the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. Assets and liabilities are classified using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value as follows: Level 1 — Unadjusted quoted prices for identical instruments traded in active markets. Level 2 — Observable market-based inputs or unobservable inputs corroborated by market data. Level 3 — Unobservable inputs reflecting management’s estimates and assumptions. 10 WINGSTOP INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) The carrying values of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value due to their short-term nature. Fair value of debt and the investment in bonds issued by the Company’s United Kingdom master franchisee, Lemon Pepper Holdings Ltd. (“LPH”), are determined on a non-recurring basis, which results are summarized as follows (in thousands): Fair Value Hierarchy September 28, 2024 December 30, 2023 Carrying Value Fair Value Carrying Value Fair Value Securitized Financing Facility: 2020-1 Class A-2 Senior Secured Notes (1) Level 2 $ 472,800 $ 445,945 $ 472,800 $ 423,823 2022-1 Class A-2 Senior Secured Notes (1) Level 2 $ 248,125 $ 235,421 $ 248,125 $ 222,370 Investments in bonds of LPH (2) Level 3 $ 3,884 $ 4,669 $ 3,557 $ 4,306 (1) The fair value of the 2020-1 and 2022-1 Class A-2 Senior Secured Notes was estimated using available market information. (2) The fair value approximates discounted cash flows using current market rates for debt investments with similar maturities and credit risk. The Company also measures certain non-financial assets (primarily long-lived assets, intangible assets, and goodwill) at fair value on a non-recurring basis in connection with its periodic evaluations of such assets for potential impairment. (5) Income Taxes Income tax expense and the effective tax rate were $ 9.8 million and 27.5 %, respectively, for the thirteen weeks ended September 28, 2024, and $ 6.6 million and 25.4 %, respectively, for the thirteen weeks ended September 30, 2023. The increase in the effective tax rate is primarily related to the impact of nondeductible expenses for executive compensation in the current fiscal year period. Income tax expense and the effective tax rate were $ 28.5 million and 25.8 %, respectively, for the thirty-nine weeks ended September 28, 2024, and $ 18.0 million and 25.9 %, respectively, for the thirty-nine weeks ended September 30, 2023. (6) Debt Obligations Long-term debt consisted of the following components (in thousands): September 28, 2024 December 30, 2023 2020-1 Class A-2 Senior Secured Notes $ 472,800 $ 472,800 2022-1 Class A-2 Senior Secured Notes 248,125 248,125 Debt issuance costs, net of amortization ( 7,196 ) ( 8,598 ) Total debt 713,729 712,327 The Company’s outstanding debt was issued by Wingstop Funding LLC, a limited-purpose, bankruptcy-remote, wholly-owned indirect subsidiary of Wingstop Inc. and consists of (i) Series 2020-1 2.84 % Fixed Rate Senior Secured Notes, Class A-2 (the “2020 Class A-2 Notes”), (ii) Series 2022-1 3.734 % Fixed Rate Senior Secured Notes, Class A-2 (the “2022 Class A-2 Notes”), and (iii) a revolving financing facility of Series 2022-1 Variable Funding Senior Notes, Class A-1 (the “2022 Variable Funding Notes,” and together with the 2022 Class A-2 Notes, the “2022 Notes”), which permits borrowings of up to a maximum principal amount of $ 200 million, subject to certain borrowing conditions, a portion of which may be used to issue letters of credit. No borrowings were outstanding under the 2022 Variable Funding Notes as of September 28, 2024 and December 30, 2023. As of September 28, 2024, the Company’s leverage ratio under the 2020 Class A-2 Notes and the 2022 Class A-2 Notes was less than 5.0 x. Per the terms of the Company’s debt agreements, principal payments can be suspended at the borrower’s election until the repayment date, as long as the Company maintains a leverage ratio of less than 5.0 x. Accordingly, the Company elected to suspend payments following the principal payment made in the second quarter of 2023, and the entire outstanding balance of $ 720.9 million of the 2020 Class A-2 Notes and the 2022 Class A-2 Notes has been classified as long-term debt due after fiscal year 2026. 11 WINGSTOP INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) The 2020 Class A-2 Notes and 2022 Notes were issued in securitization transactions, and are guaranteed by certain limited-purpose, bankruptcy-remote, wholly-owned indirect subsidiaries of the Company and secured by a security interest in substantially all of their assets, including certain domestic and foreign revenue-generating assets, consisting principally of franchise-related agreements, intellectual property, and vendor rebate contracts. (7) Commitments and Contingencies The Company is subject to legal proceedings, claims, and liabilities, including claims and actions resulting from employment-related and franchise-related matters, which arise in the ordinary course of business and are generally covered by insurance. In the opinion of management, the amount of ultimate liability with respect to such actions is not likely to have a material adverse impact on the Company’s financial position, results of operations, or cash flows. (8) Leases The Company has operating leases for retail store locations, office space, and equipment. The Company determines whether an arrangement is a lease at inception. The Company's leases have remaining terms of 0.2 years to 13.3 years, some of which include options to extend the lease term for up to ten years . The years remaining on the Company’s lease terms may include years that may be added to the lease terms by the exercise of options to renew when it is reasonably certain that the Company will exercise such options. During the first fiscal quarter 2024, the Company executed a lease for an office building, which commenced in May 2024. The operating lease has an initial lease term of 13.8 years with undiscounted fixed payments of $ 66.9 million over the initial term. Components of lease expense were as follows (in thousands): Thirty-Nine Weeks Ended September 28, 2024 September 30, 2023 Operating lease cost (1) 4,728 2,623 Variable lease cost (2) 570 447 Total lease cost 5,298 3,070 (1) Includes short-term leases, which are immaterial. (2) Primarily related to adjustments for inflation, common area maintenance, and property tax. Supplemental cash flow information related to leases is as follows (in thousands): Thirty-Nine Weeks Ended September 28, 2024 September 30, 2023 Cash paid (received) for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases (1) $ ( 4,849 ) $ 2,518 Right-of-use assets obtained in exchange for new operating lease liabilities $ 41,260 $ 3,947 (1) Includes tenant improvement reimbursements received. (9) Stock-Based Compensation During the thirty-nine weeks ended September 28, 2024, the Company granted 25,257 restricted stock units (“RSUs”) to certain employees. The RSUs granted to certain employees generally vest ratably over a three-year period subsequent to the grant date and had a weighted-average grant-date fair value of $ 372.52 per unit. In addition, the Company granted 24,015 performance stock units (“PSUs”) to certain employees during the thirty-nine weeks ended September 28, 2024. Of the total PSUs granted, 20,593 PSUs are subject to a service condition and a performance vesting condition based on return on incremental invested capital (“ROI PSUs”). The ROI PSUs are generally eligible to cliff-vest approximately three years from the grant date, and the maximum vesting percentage that could be realized for each of the ROI PSUs is 250 % based on the level of performance achieved for the awards. The remaining 3,422 PSUs granted are subject to a service condition and a performance vesting condition based on the number of net new restaurants opened over the 12 WINGSTOP INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) performance period (“NNR PSUs”). The NNR PSUs vest ratably over a three-year period, and the maximum vesting percentage that could be realized for each of the NNR PSUs is 100 % based on the level of performance achieved for the awards. The PSUs had a weighted-average grant-date fair value of $ 371.03 per unit. Total compensation cost for the PSUs is determined based on the most likely outcome of the performance condition and the number of awards expected to vest based on the outcome. Total compensation expense related to all share-based awards, net of forfeitures recognized, was $ 16.0 million and $ 10.0 million for the thirty-nine weeks ended September 28, 2024 and September 30, 2023, respectively, and was included in Selling, general and administrative (“SG&A”) expense in the Consolidated Statements of Comprehensive Income. (10) Revenue from Contracts with Customers The following table represents a disaggregation of revenue from contracts with customers for the thirteen and thirty-nine weeks ended September 28, 2024 and September 30, 2023 (in thousands): Thirteen Weeks Ended Thirty-Nine Weeks Ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Royalty revenue $ 66,952 $ 47,546 $ 192,344 $ 134,330 Advertising fees and related income 56,764 39,951 161,567 114,010 Franchise fees 1,419 1,660 4,101 3,828 Franchise fee, development fee, and international territory fee payments received by the Company are recorded as deferred revenue on the Consolidated Balance Sheets, which represents a contract liability. Deferred revenue is reduced as fees are recognized in revenue over the term of the franchise license for the respective restaurant. As the term of the franchise license is typically ten years , substantially all of the franchise fee revenue recognized in the thirteen and thirty-nine weeks ended September 28, 2024 was included in the deferred revenue balance as of December 30, 2023. Approximately $ 12.5 million and $ 9.3 million of deferred revenue as of September 28, 2024 and December 30, 2023, respectively, relates to restaurants that have not yet opened, so the fees are not yet being amortized. The weighted average remaining amortization period for deferred franchise and renewal fees related to open restaurants is 7.3 years. The Company did not have any material contract assets as of September 28, 2024. (11) Acquisitions of Company-owned Restaurants The Company acquired four existing restaurants from franchisees during the thirty-nine weeks ended September 28, 2024. The aggregate purchase price was $ 14.0 million and was funded by cash flow from operations. The following table summarizes the allocations of the purchase price to the estimated fair value of assets acquired and liabilities assumed at the date of the acquisition (in thousands): Purchase Price Allocation Working capital $ 44 Property and equipment 253 Reacquired franchise rights 6,710 Goodwill 7,041 Total purchase price $ 14,048 The excess of the purchase price over the aggregate fair value of assets acquired was allocated to goodwill and is attributable to the benefits expected as a result of the acquisition, including sales and unit growth opportunities. All of the goodwill from the acquisition is expected to be deductible for federal income tax purposes. Pro-forma financial information of the combined entities is not presented due to the immaterial impact of the financial results of the acquisition on our consolidated financial statements. 13