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Item 7. Management’s Discussion and Analysis

2026-02-18 compared with 2025-02-19 · 88 added, 65 removed, 201 unchanged (43% of the section changed)

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Our fiscal quarters are comprised of 13 weeks, with the exception of the fourth quarter of a 53-week year, which contains 14 weeks.

Fiscal years 2024 and 2023 each contain 52 weeks, while fiscal year 2022 contains 53 weeks.

Fiscal years 2025, 2024 and 2023 each contain 52 weeks.

Wingstop is the largest fast casual chicken wings-focused restaurant chain in the world and has demonstrated strong, consistent growth.

As of December 27, 2025, we had a total of 3,056 restaurants in our system.

Our restaurant base is 98% franchised, with 2,513 franchised locations (including 359 international locations) and 50 company-owned restaurants as of December 28, 2024.

Our restaurant base is approximately 98% franchised, with 2,999 franchised locations (including 470 international locations) and 57 company-owned restaurants as of December 27, 2025.

We generate revenues by charging royalties, advertising fees and franchise fees to our franchisees and by operating a number of our own restaurants.

We plan to grow our business by opening new franchised restaurants and increasing our same store sales, while leveraging our franchise model to create shareholder value.

Domestic same store sales have increased for 21 consecutive years beginning in 2004, which includes 3-year cumulative domestic same stores sales growth of 41.6% since the beginning of fiscal year 2022.

We have added over 1,000 net new units, representing a 56.0% increase in our system-wide footprint, and achieved system-wide sales growth of 95.1% since the beginning of fiscal year 2023.

We believe our asset-light, highly-franchised business model generates strong operating margins and requires low capital expenditures, creating shareholder value through strong and consistent operating cash flow and capital-efficient growth.

Highlights for Fiscal Year 2024 Compared to Fiscal Year 2023

• System-wide sales increased 36.8% over the prior fiscal year to $4.8 billion;

Highlights for Fiscal Year 2025

• System-wide sales increased 12.1% over the prior fiscal year to approximately $5.3 billion;

• System-wide restaurant count increased 19.2% over the prior fiscal year to a total of 3,056 worldwide locations, driven by 493 net unit openings;

• Domestic same store sales increased 19.9% over the prior fiscal year;

• Domestic same store sales decreased 3.3% over the prior fiscal year;

• Company-owned domestic same store sales increased 2.6% over the prior fiscal year;

• Digital sales increased to 73.2% of system-wide sales;

• Domestic AUV increased to $2.1 million;

• Domestic AUV of $2.0 million;

• Total revenue increased 11.4% over the prior fiscal year to $696.9 million;

• Net income increased 60.3% over the prior fiscal year to $174.3 million, or $6.21 per diluted share, compared to $108.7 million, or $3.70 per diluted share in the prior fiscal year;

• Adjusted EBITDA, a non-GAAP measure, increased 44.8% to $212.1 million, compared to adjusted EBITDA of $146.5 million in the prior fiscal year.

• Adjusted net income and adjusted earnings per diluted share, both non-GAAP measures, were $114.5 million, or $4.08 per diluted share, compared to $110.3 million, or $3.75 per diluted share, in the prior fiscal year;

• Adjusted EBITDA, a non-GAAP measure, increased 15.2% to $244.2 million, compared to $212.1 million in the prior fiscal year.

Key Performance Indicators

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We compensate for these limitations by relying primarily on our GAAP results and using these non-GAAP measures only as performance measures and only supplementally.

As noted in the table below, Adjusted EBITDA includes adjustments for losses on debt extinguishment and financing transactions, transaction costs, costs and fees associated with investments in our strategic initiatives, system implementation costs, and stock-based compensation expense.

As noted in the table below, Adjusted EBITDA includes adjustments for losses on debt extinguishment and financing transactions, transaction costs, costs and fees associated with investments in our strategic initiatives, certain system implementation costs, gains and losses on non-recurring transactions, and stock-based compensation expense.

We believe these adjustments are appropriate because the amounts recognized can vary significantly from period to period, do not directly relate to the ongoing operations of our restaurants, and complicate comparisons of our internal operating results and operating results of other restaurant companies over time.

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Transaction costs (a)

Consulting fees (b)

System implementation costs (c)

Stock-based compensation expense (d)

Loss on disposal of building (b)

Gain on sale of investment (c)

System implementation costs (d)

Amortization of system implementation costs (e)

Stock-based compensation expense (f)

24,878 22,060

Adjusted EBITDA $ 244,238 $ 212,061

(a) Represents costs and expenses related to our 2024 securitized financing facility;

(a) Represents non-recurring transaction costs that are not part of our ongoing operations and were incurred to facilitate the sale and subsequent reinvestment of the Company’s unconsolidated equity method investment in LPH, the Company’s United Kingdom master franchisee, during the fiscal first quarter 2025;

all transaction costs are included in Selling, general and administrative on the Consolidated Statements of Comprehensive Income.

(b) Represents non-recurring consulting fees that are not part of our ongoing operations and are incurred to execute discrete, project-based strategic initiatives, which are included in Selling, general and administrative on the Consolidated Statements of Comprehensive Income.

Fiscal year 2023 includes approximately $5.2 million in consulting fees relating to a comprehensive review of our long-term growth strategy for our domestic business to explore potential future initiatives, and which review was completed in fiscal year 2023.

Given the magnitude and scope of this strategic review initiative that is not expected to recur in the foreseeable future, the Company considers the incremental consulting fees incurred with respect to the initiative not reflective of the ongoing costs to operate its business.

(c) System implementation costs represent non-recurring expenses incurred related to the development and implementation of new enterprise resource planning and human capital management technology, which are included in Selling, general and administrative on the Consolidated Statements of Comprehensive Income.

(d) Includes non-cash, stock-based compensation, net of forfeitures.

(b) Represents a non-recurring loss on the sale of an office building during the fiscal first quarter 2025, which was included in Loss on disposal of assets on the Consolidated Statements of Comprehensive Income.

(c) Represents a non-recurring gain related to the sale of the Company’s unconsolidated equity method investment in LPH during the fiscal first quarter 2025, which was included in Investment (income) expense on the Consolidated Statements of Comprehensive Income.

Refer to Note 10 in the Consolidated Financial Statements for additional information.

(d) System implementation costs represent non-recurring expenses incurred related to the development and implementation of new enterprise resource planning, human capital management, and global development technology, which are included in Selling, general and administrative on the Consolidated Statements of Comprehensive Income.

(e) Represents amortization associated with capitalized cloud computing costs related to our system implementation, which are included in Selling, general and administrative on the Consolidated Statements of Comprehensive Income.

(f) Includes non-cash, stock-based compensation, net of forfeitures.

(3) Adjusted net income and adjusted earnings per diluted share are supplemental measures of operating performance that do not represent and should not be considered alternatives to net income and earnings per share, as determined by GAAP.

These measures have not been prepared in accordance with Article 11 of Regulation S-X promulgated under the Securities Act of 1933, as amended (the “Securities Act”).

The Company believes the use of adjusted net income allows investors and analysts to better understand the results of the operations of the Company, by excluding certain items that have a disproportionate impact on the Company’s results for a particular period.

Additionally, management believes adjusted net income and adjusted earnings per diluted share supplement GAAP measures and enable management to more effectively evaluate the Company’s performance period-over-period and relative to competitors.

The following table reconciles net income to Adjusted net income and calculates adjusted earnings per diluted share for the year ended December 27, 2025 and December 28, 2024 (in thousands):

2025 December 28,

Net income $ 174,267 $ 108,717

Transaction costs (a)

Loss on disposal of building (b)

Gain on sale of investment (c)

System implementation costs (d)

Amortization of capitalized system implementation costs (e)

Tax effect of adjustments (f)

Adjusted net income $ 114,469 $ 110,259

Weighted-average shares outstanding - diluted 28,074 29,384

Adjusted earnings per diluted share $ 4.08 $ 3.75

(a) Represents non-recurring transaction costs that are not part of our ongoing operations and were incurred to execute the sale and subsequent reinvestment of the Company’s unconsolidated equity method investment in LPH, the Company’s United Kingdom master franchisee, during the fiscal first quarter 2025;

all transaction costs are included in Selling, general and administrative on the Consolidated Statements of Comprehensive Income.

Refer to Note 10 in the Consolidated Financial Statements for additional information.

(f) Represents the tax effect of the aforementioned adjustments to reflect corporate income taxes at an assumed effective tax rate of 24% for the year ended December 27, 2025, which includes provisions for U.S.

federal income taxes, and assumes the respective statutory rates for applicable state and local jurisdictions.

Results of Operations

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Interest expense, net 35,784 21,292 14,492 68.1 %

Other (income) expense (2,866) 57 (2,923) NM*

Investment (income) expense (93,682) (2,866) (90,816) NM*

Income before income tax expense 237,189 147,190 89,999 61.1 %

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During fiscal year 2025, total revenue was $696.9 million, an increase of $71.0 million, or 11.4%, compared to $625.8 million in the prior fiscal year.

Royalty revenue, franchise fees and other increased $81.3 million, of which $36.1 million was due to domestic same store sales growth of 19.9%, and $29.9 million was due to net new franchise development since December 30, 2023.

Other revenue increased by $7.2 million primarily due to an increase in vendor rebates.

Advertising fees increased $60.5 million, of which $51.0 million was due to a 36.8% increase in system-wide sales during fiscal year 2024, and $9.5 million was due to an increase in the national advertising fund contribution rate to 5.3% from 5.0% effective the first day of the fiscal second quarter 2024.

Company-owned restaurant sales increased $24.0 million, of which $16.0 million was related to company-owned same store sales growth of 7.7%, driven primarily by an increase in transactions, and $8.0 million was primarily related to company-owned restaurants opened and acquired during fiscal year 2024.

Royalty revenue, franchise fees and other increased $33.4 million, of which $22.6 million was due to net new franchise development and $19.1 million related to an increase in royalty fees since December 28, 2024, partially offset by a decrease of $8.3 million contributed by the 3.3% decline in domestic same store sales growth.

Advertising fees increased $30.0 million, of which $19.5 million was due to a 12.1% increase in system-wide sales during fiscal year 2025, and $10.5 million was due to an increase in the national advertising fund contribution rate to 5.5% effective the first day of fiscal year 2025.

Company-owned restaurant sales increased $7.6 million, of which $6.4 million was primarily related to company-owned restaurants opened and acquired during fiscal year 2025, and $1.2 million was related to company-owned same store sales growth of 2.6%, driven primarily by an increase in transactions.

Cost of sales

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Food, beverage and packaging costs as a percentage of company-owned restaurant sales were 36.8% in fiscal year 2025 compared to 36.2% in the prior fiscal year.

The increase is primarily due to a 43.0% increase in the cost of bone-in chicken wings as compared to the prior year period.

Our purchases in the prior fiscal year period were tied primarily to the spot market, which benefited from significant deflation in the cost of bone-in chicken wings.

During fiscal year 2024, we were able to move the majority of our purchases of bone-in chicken wings away from the spot market to provide more predictable food cost.

The increase as a percentage of company-owned restaurant sales was primarily due to an increase in other food costs during the year, partially offset by a decrease in the cost of bone-in chicken wings as compared to the prior fiscal period.

Labor costs as a percentage of company-owned restaurant sales were 23.2% in fiscal year 2025 compared to 23.6% in the prior fiscal year.

The decrease is primarily due to sales leverage related to the company-owned domestic same store sales increase of 7.7%, offset by an increase in company-owned restaurant wages.

The decrease is primarily due to the sales leverage from the sale of corporate restaurants in the New York market to an existing franchisee during the fourth quarter 2024.

Other restaurant operating expenses as a percentage of company-owned restaurant sales were 17.9% in fiscal year 2025 compared to 19.2% in the prior fiscal year.

The increase as a percentage of company-owned restaurant sales was primarily due to an increase in the national advertising fund contribution rate to 5.3% from 5.0% effective the first day of the fiscal second quarter 2024, partially offset by sales leverage related to the company-owned domestic same store sales increase of 7.7%.

The decrease as a percentage of company-owned restaurant sales was primarily due to sales leverage from the sale of corporate restaurants in the New York market to an existing franchisee during the fourth quarter 2024.

Advertising expenses

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SG&A was $128.4 million in fiscal year 2025, an increase of $11.6 million, or 9.9%, compared to $116.8 million in the prior fiscal year.

The increase in SG&A expense was driven by an increase in headcount-related expenses of $10.2 million to support the growth in our business, an increase in performance-based stock compensation and incentive compensation expense of $7.6 million related primarily to the Company’s performance, and an increase in professional and consulting fees of $1.2 million associated with the Company’s strategic initiatives, including system implementation costs.

The increase in SG&A expense was driven by an increase in headcount-related expenses of $8.8 million to support the growth in our business and an increase of $2.2 million associated with the Company’s strategic initiatives, including system implementation costs and amortization of cloud computing arrangements.

Depreciation and amortization

Depreciation and amortization was $25.1 million in fiscal year 2025, an increase of $5.6 million, or 28.6%, compared to $19.5 million in the prior fiscal year.

The increase in depreciation and amortization was primarily due to software assets placed into service during fiscal year 2024 that relate to the launch of our proprietary technology platform:

The increase in depreciation and amortization was primarily due to capital expenditures related to our technology investments.

(Gain) loss on disposal of assets

(Gain) loss on disposal of assets was $6.5 million related to a loss on sale of an office building during the fiscal first quarter 2025.

Interest expense, net

Interest expense, net was $35.8 million in fiscal year 2025, an increase of $14.5 million, or 68.1%, compared to $21.3 million in the prior fiscal year.

The increase was primarily driven by less interest income earned during fiscal year 2024 due to higher cash balances during fiscal year 2023.

The increase was primarily driven by the securitized financing transaction completed on December 3, 2024, which increased our outstanding debt by $500.0 million, partially offset by additional interest income earned on our cash balances and interest earned on our investments as compared to the year ended December 28, 2024.

Investment (income) expense

Investment income was $93.7 million, an increase of $90.8 million compared to $2.9 million in the prior fiscal year.

The increase was driven almost entirely by a gain recorded on the sale of the Company’s unconsolidated equity method investment

in its United Kingdom franchisee during the fiscal first quarter 2025.

See Note 10 of the Consolidated Financial Statements for further discussion.

Income tax expense

The effective tax rate in fiscal year 2025 was 26.5%, compared to an effective tax rate of 26.1% in the prior fiscal year.

The increase in the effective tax rate was primarily due to an increase in non-deductible expenses.

The increase in the effective tax rate was primarily due to an increase in state income taxes.

Liquidity and Capital Resources

Our primary sources of liquidity and capital resources are cash provided from operating activities, cash and cash equivalents on hand, and borrowings available under our securitized financing facility.

Our primary requirements for liquidity and capital are working capital, general corporate needs, capital expenditures, income tax payments, debt service requirements,

and dividend payments.

Historically, we have operated with minimal positive working capital or with negative working capital.

We generally utilize available cash flows from operations to invest in our business, service our debt obligations, and pay dividends.

As of December 28, 2024, the Company had $359.6 million of cash and cash equivalents on its balance sheet, including advertising fund cash and cash equivalents.

Based upon current levels of operations and anticipated growth, we expect that cash flows from operations, combined with our securitized financing facility including our Variable Funding Notes, will be sufficient to meet our capital expenditure, working capital and debt service requirements for at least the next twelve months and the foreseeable future.

Our primary requirements for liquidity and capital are working capital, general corporate needs, capital expenditures, income tax payments, debt service requirements, and dividend payments.

We generally utilize available cash flows from operations to invest in our business, service our debt obligations, pay dividends, and execute our share repurchase program.

As of December 27, 2025, the Company had $228.5 million of cash, cash equivalents, and restricted cash on its balance sheet, including Ad Fund cash and cash equivalents.

Based upon current levels of operations and anticipated growth, we expect that cash flows from operations, combined with our securitized financing facility including our Variable Funding Notes (as defined below), will be sufficient to meet our capital expenditure, working capital and debt service requirements for at least the next twelve months and the foreseeable future.

The following table shows summary cash flows information for fiscal years 2025 and 2024 (in thousands):

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Restaurant-level operating costs at our company-owned restaurants, unearned franchise fees, and corporate overhead costs also impact our cash flows from operating activities.

Net cash provided by operating activities was $157.6 million in fiscal year 2024, an increase of $36.0 million from cash provided by operating activities of $121.6 million in the prior fiscal year.

The increase is primarily due to an increase in operating income, as well as changes in Ad Fund cash and cash equivalents, directly related to the timing of payments for expenses incurred for national advertising.

Net cash provided by operating activities was $153.1 million in fiscal year 2025, a decrease of $4.5 million from cash provided by operating activities of $157.6 million in the prior fiscal year.

The decrease is primarily due to changes in Ad Fund cash and cash equivalents, directly related to the timing of payments for expenses incurred for national advertising, partially offset by higher operating income.

Investing activities .

Our net cash used in investing activities was $62.5 million in fiscal year 2024, an increase of $10.3 million, from $52.2 million in fiscal year 2023.

The increase in cash used in investing activities was primarily due to an increase in capital expenditures related to our technology investments, as well as the impact of additional restaurants acquired from franchisees as compared to the prior fiscal year period, partially offset by the sale of seven company-owned restaurants to a franchisee in fiscal year 2024.

Our net cash used in investing activities was $17.5 million in fiscal year 2025, a decrease of $45.0 million, from $62.5 million in fiscal year 2024.

The decrease in cash used in investing activities was primarily due to the net investments proceeds of $31.2 million from the sale of non-controlling interest in our equity investment in LPH, and $17.3 million of proceeds from the sale of an office building.

Financing activities .

Our net cash provided by financing activities was $144.8 million in fiscal year 2024, a change of $300.3 million, from net cash used in financing activities of $155.5 million in fiscal year 2023.

The change is primarily related to the net cash provided by additional borrowings under our 2024 Class A-2 Notes (as defined below) of $500 million in fiscal year 2024, partially offset by an increase of $189.3 million in common stock repurchased under our share repurchase program as compared to the prior fiscal year.

Our net cash used in financing activities was $266.7 million in fiscal year 2025, primarily related to the repurchase of $221.9 million in common stock under our share repurchase program, dividend payments of $32.4 million, and tax payments of $13.9 million.

Cash provided by financing activities of $144.8 million in fiscal year 2024 was primarily attributable to the additional borrowings under our 2024 Class A-2 Notes (as defined below) of $500.0 million, partially offset by share repurchases of $314.7 million, dividend payments of $28.9 million, and tax payments of $4.4 million.

Securitized financing facility .

On December 3, 2024, the Company completed a securitized financing transaction, in which Wingstop Funding LLC, a limited purpose, bankruptcy-remote, indirect wholly owned subsidiary of the Company (the “Issuer”), issued $500 million of its Series 2024-1 5.858% Fixed Rate Senior Secured Notes, Class A-2 (the “2024 Class A-2 Notes”).

On December 3, 2024, we completed a securitized financing transaction, in which Wingstop Funding LLC, a limited purpose, bankruptcy-remote, indirect wholly owned subsidiary of the Company (the “Issuer”), issued $500.0 million of its Series 2024-1 5.858% Fixed Rate Senior Secured Notes, Class A-2 (the “2024 Class A-2 Notes”).

The Issuer also increased the capacity of its revolving financing facility of Series 2022-1 Variable Funding Senior Notes, Class A-1 (the “Variable Funding Notes”) from $200.0 million to $300.0 million.

Following the increase, borrowing capacity under the Variable Funding Notes permits borrowings of up to a maximum principal amount of $300 million, a portion of which may be used to issue letters of credit.

The 2024 Class A-2 Notes and the Variable Funding Notes are referred to collectively as the “2024 Notes.” The proceeds from the securitized financing transaction were used to pay related transaction fees and expenses, strengthen the Company's liquidity position and for general corporate purposes, including the repurchase of shares of the Company’s common stock.

In addition to the 2024 Notes, the Company’s outstanding debt consists of its existing Series 2022-1 3.734% Fixed Rate Senior Secured Notes, Class A-2 (the “2022 Notes”) and Series 2020-1 2.84% Fixed Rate Senior Secured Notes, Class A-2 (the “2020 Notes”).

No borrowings were outstanding under the Variable Funding Notes as of December 28, 2024.

Following the increase, borrowing capacity under the

Variable Funding Notes permits borrowings of up to a maximum principal amount of $300.0 million, of which a portion may be used to issue letters of credit.

The 2024 Class A-2 Notes and the Variable Funding Notes are referred to collectively as the “2024 Notes.” The proceeds from the securitized financing transaction were used to pay related transaction fees and expenses, strengthen our liquidity position and for general corporate purposes, including the repurchase of shares of the Company’s common stock.

As of December 27, 2025, no borrowings were outstanding under the Variable Funding Notes.

In addition to the 2024 Notes, our outstanding debt consists of its existing Series 2022-1 3.734% Fixed Rate Senior Secured Notes, Class A-2 (the “2022 Notes”) and Series 2020-1 2.84% Fixed Rate Senior Secured Notes, Class A-2 (the “2020 Notes”).

We paid quarterly cash dividends of $0.27 per share of common stock in each of the first two quarters of 2025, and quarterly cash dividends of $0.30 per share of common stock in both the third and fourth quarters of 2025, resulting in aggregate quarterly dividend payments of $31.8 million in fiscal year 2025.

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Share Repurchase Program.

On August 17, 2023, the Company’s board of directors approved a new share repurchase program with authorization to repurchase up to $250.0 million of its outstanding shares of common stock (the “August 2023 Authorization”).

On August 23, 2023, the Company entered into an accelerated share repurchase agreement (the “2023 ASR Agreement”) with a third-party financial institution to repurchase $125.0 million of the Company’s common stock as part of the August 2023 Authorization.

Under the 2023 ASR Agreement, the Company paid the financial institution $125.0 million in cash and received and retired a total of 645,952 shares of common stock at an average share price of $193.51.

Final settlement of the ASR Agreement occurred on December 21, 2023.

On December 5, 2024, the Company’s board of directors authorized the purchase of up to an additional $500.0 million of its outstanding shares of common stock under its existing share repurchase program (the “December 2024 Authorization” and together with the August 2023 Authorization, the “Share Repurchase Program”), following the substantial completion of purchases of common stock under the August 2023 Authorization.

On December 9, 2024, the Company entered into an accelerated share repurchase agreement (the “2024 ASR Agreement”) with a third-party financial institution to repurchase $250.0 million of the Company’s common stock under its Share Repurchase Program.

Pursuant to the ASR Agreement, during the fiscal fourth quarter of 2024 the Company made an initial payment to the financial institution of $250.0 million in cash and received and retired an initial delivery of 551,325 shares of common stock, representing an estimated 75% of the total shares expected to be delivered under the ASR Agreement, based on the closing price on the date of initial delivery of $328.54.

The delivery of any remaining shares will occur at the final settlement of the transactions under the ASR Agreement, which is scheduled to occur in the fiscal first quarter of 2025.

The number of shares to be delivered upon final settlement is based on the daily volume-weighted average share prices during the valuation period specified in the ASR Agreement, less a discount and subject to adjustments.

During fiscal year 2024, the Company repurchased and retired 720,804 shares at an average share price of $339.95, inclusive of the shares repurchased under the 2024 ASR Agreement.

During fiscal year 2023, the Company repurchased and retired 645,952 shares at an average share price of $193.51 under the 2023 ASR Agreement.

As of December 28, 2024, $311.1 million remained available under the Share Repurchase Program.

Since the inception of the Company’s share repurchase program in August 2023, the Company has repurchased and retired 1,366,756 shares of its common stock at an average price of $272.89 per share.

We have returned capital to shareholders through share repurchases, which historically have been primarily funded with cash generated from our operations and the 2024 Class A-2 Notes described above.

During fiscal years 2025, 2024, and 2023, we used approximately $221.9 million, $314.7 million, and $125.4 million, respectively, to repurchase and retire shares of our common stock.

Since inception of our share repurchase program in August 2023, we have repurchased and retired an aggregate of 2,585,149 shares of common stock at an average price of $258.64 per share.

As of December 27, 2025, approximately $91.3 million remained available for repurchase under our share repurchase program.

Contractual Obligations

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The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses.

These estimates may require application of management’s most

difficult, subjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods.

These estimates may require application of management’s most difficult, subjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods.

While we apply our judgment based on assumptions believed to be reasonable under the circumstances, actual results could vary from these assumptions.

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Revenues consist primarily of royalties, national advertising fund contributions, initial and renewal franchise fees, and upfront fees from development agreements and international territory agreements.

The Company's performance obligations under its franchise agreements consist of (a) a franchise license, (b) pre-opening services, such as training, and (c) ongoing services, such as management of Ad Fund contributions, development of training materials and menu items, and restaurant monitoring.

The Company's performance obligations under its

franchise agreements consist of (a) a franchise license, (b) pre-opening services, such as training, and (c) ongoing services, such as management of Ad Fund contributions, development of training materials and menu items, and restaurant monitoring.

These performance obligations are highly interrelated, so they are not considered to be individually distinct and therefore are accounted for as a single performance obligation, which is satisfied by providing a right to use the Company's intellectual property over the term of each franchise agreement.

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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