El Pollo Loco Holdings, Inc. (LOCO)

CIK: 0001606366. SIC: 5812 Retail-Eating Places. Latest 10-K as of: 2026-03-13.

SIC breadcrumb: Retail Trade > Eating And Drinking Places > SIC 5812 Retail-Eating Places

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1606366. Latest filing source: 0001606366-26-000017.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-03-13. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001606366.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Free cash flow = operating cash flow - capital expenditures. Missing metrics are omitted rather than fabricated.

Ratios

ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-08. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001606366.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0001606366-26-000038.

Extracted structurally from real Item 2 body heading to real Item 3/4 boundary. Confidence: high. Filing date: 2026-05-08. Report date: 2026-04-01.

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Cautionary Statement Concerning Forward-Looking Statements

This report contains forward-looking statements within the meaning of federal securities laws that are subject to risks and uncertainties. All statements other than statements of historical fact included in this report are forward-looking statements. Examples of forward-looking statements in this report include, but are not limited to, discussions of our current expectations, projections, intentions, or beliefs relating to our financial condition, results of operations, liquidity, prospects, growth, trends, strategies, and the industry in which we operate. You can identify forward-looking statements because they do not relate strictly to historical or current facts. These statements may include words such as “aim,” “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “outlook,” “potential,” “project,” “projection,” “plan,” “intend,” “seek,” “may,” “could,” “would,” “will,” “should,” “can,” “can have,” “likely,” the negatives thereof and other words and terms of similar meaning used in connection with any discussion of the timing or nature of future operating or financial performance or other events. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those that we expected.While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. You should evaluate all forward-looking statements made in this report in the context of the factors that could cause outcomes to differ materially from our expectations. These factors include, but are not limited to: our ability to open new restaurants in new and existing markets; our ability to compete successfully; global economic or other business conditions, including trade policies, tariff and import regulations by the United States, as well as consumer preferences; our ability to attract, develop, assimilate, and retain employees; our vulnerability to regional geographic conditions; our ability to maintain business continuity in the event of a disaster or disruption; impairment of our assets; changes in food and supply costs, especially for chicken, labor, construction and utilities; the impacts public health crises; potential negative publicity; our ability to continue to expand our digital business, delivery orders and catering; concerns about food safety and quality and about food-borne illness; dependence on frequent and timely deliveries of food and supplies; our ability to service our level of indebtedness; the success of our marketing programs, new menu items, advertising campaigns and restaurant designs and remodels; risks related to our dependence on our franchisees, including their vulnerability to economic changes; exposure from our self-insurance programs; obligations under long-term and non-cancelable leases, and our ability to renew leases at the end of their terms; our ability to achieve our corporate responsibility goals; information technology system failures, cybersecurity breaches, or failure to protect our customers’ data or personal information; our ability to enforce and maintain our intellectual property; the impact of federal, state and local laws, including those governing our relationships with our employees fluctuations in our quarterly operating results due to seasonality and other factors; any future offerings of debt or equity securities that may impact the market price of our common stock or dilute existing shareholders’ ownership; the possibility that Delaware law, our organizational documents, our shareholder rights agreement, and our existing and future debt agreements may impede or discourage a takeover; the impact of shareholder activism on our expenses, business and stock price; and the risks set forth in our filings with the SEC from time to time, including under Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 25, 2025, which filings are available online at www.sec.gov. We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences we anticipate or affect us or our operations in the ways that we expect. The forward-looking statements included in this report are made only as of the date hereof, and we caution you to not place undue reliance on any forward-looking statement made in this report. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.

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Table of Contents

Overview

El Pollo Loco is a differentiated and growing restaurant concept that specializes in fire-grilling citrus-marinated chicken and operates in the limited service restaurant segment. We strive to offer quality chicken served fast and easy. Our distinctive menu features our signature product--citrus-marinated fire-grilled chicken--and a variety of Mexican and LA-inspired entrees that we create from our chicken. We serve individual and family-sized chicken meals, including a variety of entrees like our Double Chicken Tostada, Guacamole Chicken Burrito, and Salsa Verde Chicken Quesadilla. Our famous Creamy Cilantro dressings and salsas are prepared fresh daily, allowing our customers to create their favorite flavor profiles to enhance their culinary experience. We believe that our distinctive menu that features quality chicken is a flavorful and affordable option that appeals to consumers across a wide variety of socio-economic backgrounds and drives our balanced composition of sales throughout the day, including at lunch and dinner. In 2025, El Pollo Loco launched a brand refresh, inclusive of a new advertising campaign, restaurant design, new products, and an emphasis on hospitality in our restaurants. All these elements reinforce our position in the market of “Quality Chicken, Fast & Easy.”

Market Trends and Uncertainties

As a result of California legislation increasing wages of fast food workers, we experienced an increase in our labor and regulatory compliance costs in recent periods. Although we have been able to substantially offset these cost pressures through various actions, such as increasing menu prices, managing menu mix, and productivity improvements, we expect these cost pressures to continue in 2026.

Additionally, we are impacted by macroeconomic challenges, such as inflationary pressures and changes in trade policies, that have in the past affected, and may continue in the future, to affect our operations in certain areas such as food cost, labor costs, construction costs and other restaurant operating costs. We have been able to substantially offset these inflationary and other cost pressures through various actions, such as increasing menu prices, managing menu mix, and productivity improvements. However, we expect these inflationary and other cost pressures to continue in 2026 and we may not be able to offset cost increases in the future. Global events, such as the recent outbreak of war in Iran, may also impact our business costs, including the costs of transportation and energy.

There is ongoing uncertainty regarding increased tariff duties on goods imported into the United States, which has caused substantial market uncertainty and in certain cases, retaliatory measures by trading partners. Such changes include the imposition of tariffs under the authority of the International Emergency Economic Powers Act, which the U.S. Supreme Court found unlawful in February 2026, the creation of a refund process for such tariff duties, and the imposition of new tariffs under other statutory authorities. Certain of the produce, packaging materials, and other items procured by our Company are sourced from outside the United States, including from Canada, Mexico and Asia. Current and proposed tariff rates range widely, depending on the country of origin. Certain goods from Canada and Mexico that are compliant with the United States-Mexico-Canada Agreement (USMCA) are, and may continue to be, exempt from new tariffs. While we continue to evaluate the potential impacts of increased tariff rates, as well as our ability to mitigate any such related impacts, we anticipate that the imposition of tariffs on goods we import into the United States will adversely impact our revenue and cost of goods sold in the United States. Any new or increased import duties, tariffs, or taxes, or other changes in U.S. trade or tax policy could result in further increases to our food and supplies costs that would adversely impact our financial results. For additional information, see “Item 1A. Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2025, including the risk factor titled “We are vulnerable to changes in political and economic conditions, such as trade policies, tariff and import regulations by the United States, as well as consumer preferences.”

Seasonality

Seasonal factors, including weather and the timing of holidays, cause our revenue to fluctuate from quarter to quarter. Our revenue per restaurant is typically lower in the first and fourth quarters due to reduced January and December transactions and higher in the second and third quarters. As a result of seasonality, our quarterly and annual results of operations and key performance indicators, such as company-operated restaurant revenue and comparable restaurant sales, may fluctuate.

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Table of Contents

Growth Strategies and Outlook

As of April 1, 2026, we had 505 locations in nine states. In fiscal 2025, we opened one new company-operated restaurants in California, and our franchisees opened eight new restaurants, two in California, two in Arizona, and one in each of the following states: Colorado, Texas, New Mexico and Washington. For the thirteen weeks ended April 1, 2026, our franchisees opened one new restaurant in California and the Company opened one new restaurant in Texas.

We plan to continue to expand our business, drive restaurant sales growth, and enhance our competitive positioning by executing the following five key strategies:

●

Brand That Wins;

●

Hospitality Mindset;

●

Digital First;

●

Winning Unit Economics; and

●

Drive Unit Growth Again with National Expansion.

To increase comparable restaurant sales, we plan to increase customer frequency, attract new customers, and improve per-person spend. The success of these growth plans is not guaranteed.

Highlights and Trends

Revenue Overview

For the thirteen weeks ended April 1, 2026, our total revenue was $126.2 million. For the thirteen weeks ended April 1, 2026, our company-operated restaurant revenue was $105.9 million, and our franchise revenue and franchise advertising fee revenue was $20.3 million.

Comparable Restaurant Sales

For the thirteen weeks ended April 1, 2026, system-wide comparable restaurant sales increased by 5.8% from the comparable period in the prior year. For company-operated restaurants, comparable restaurant sales for the thirteen weeks ended April 1, 2026 increased by 5.4%. For franchise-operated restaurants, comparable restaurant sales increased by 6.1% for the thirteen weeks ended April 1, 2026.

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high. Filing date: 2026-03-13. Report date: 2025-12-31.

ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our “Audited Consolidated Financial Statements” and accompanying “Notes to Consolidated Financial Statements” included elsewhere in this Annual Report. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties, and assumptions that could cause actual results to differ materially from management’s expectations. See “Forward-

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Looking Statements” and “Item 1A. Risk Factors” included elsewhere in this Annual Report. We assume no obligation to update any of these forward-looking statements.

Basis of Presentation

We use a 52- or 53-week fiscal year ending on the last Wednesday of each calendar year. Fiscal 2025, 2024, and 2023 ended on December 31, 2025, December 25, 2024 and December 27, 2023, respectively. In a 52-week fiscal year, each quarter includes 13 weeks of operations. In a 53-week fiscal year, the first, second and third quarters each include 13 weeks of operations, and the fourth quarter includes 14 weeks of operations. Approximately every five or six years a 53-week fiscal year occurs. Fiscal 2025 was a 53-week fiscal year, and fiscal 2024 and 2023 were 52-week fiscal years. 53-week years may cause revenues, expenses, and other results of operations to be higher due to the additional week of operations. Fiscal years are identified in this Annual Report according to the calendar years in which they ended. For example, references to fiscal 2025 refer to the fiscal year ended December 31, 2025.

Overview

El Pollo Loco is a differentiated and growing restaurant concept that specializes in fire-grilling citrus-marinated chicken and operates in the limited-service restaurant segment. We strive to offer quality chicken served fast and easy. Our distinctive menu features our signature product--citrus-marinated fire-grilled chicken--and a variety of Mexican and LA-inspired entrees that we create from our chicken. We serve individual and family-sized chicken meals, including a variety of entrees like our Double Chicken Tostada, Guacamole Chicken Burrito, and Salsa Verde Chicken Quesadilla. Our famous Creamy Cilantro dressings and salsas are prepared fresh daily, allowing our customers to create their favorite flavor profiles to enhance their culinary experience. We believe that our distinctive menu that features quality chicken is a flavorful and affordable option that appeals to consumers across a wide variety of socio-economic backgrounds and drives our balanced composition of sales throughout the day, including at lunch and dinner.

Market Trends and Uncertainties

As a result of recent California legislation increasing wages of fast food workers, we experienced an increase in our labor and regulatory compliance costs in fiscal 2024 and fiscal 2025. Although we have been able to substantially offset these cost pressures through various actions, such as increasing menu prices, managing menu mix, and productivity improvements, we expect these cost pressures to continue in 2026.

Additionally, we are impacted by macroeconomic challenges, such as inflationary pressures and changes in trade policies, that have in the past affected, and may continue in the future, to affect our operations in certain areas such as food cost, labor costs, construction costs and other restaurant operating costs. We have been able to substantially offset these inflationary and other cost pressures through various actions, such as increasing menu prices, managing menu mix, and productivity improvements. However, we expect these inflationary and other cost pressures to continue in 2026 and we may not be able to offset cost increases in the future. Global events, such as the recent outbreak of war in Iran, may also impact our business costs, including the costs of transportation and energy.

There is ongoing uncertainty regarding increased tariff duties on goods imported into the United States, which if imposed, may have an adverse effect on our Company. On February 20, 2026, the U.S. Supreme Court struck down the international tariffs imposed by President Trump that relied on the IEEPA as the basis. President Trump has subsequently expressed his intent to reinstate the tariffs through other means, and he has imposed temporary 15% tariffs on all countries under Section 122 of the Trade Act of 1974. Certain of the produce, packaging materials, and other items procured by our Company are sourced from outside the United States, including from Canada, Mexico and Asia. Current and proposed tariff rates range widely, depending on the country of origin. Certain goods from Canada and Mexico that are compliant with the United States-Mexico-Canada Agreement (USMCA) are, and may continue to be, exempt from new tariffs. While we continue to evaluate the potential impacts of increased tariff rates, as well as our ability to mitigate any such related impacts, we anticipate that the imposition of tariffs on goods we import into the United States will adversely impact our revenue and cost of goods sold in the United States. Any new or increased import duties, tariffs, or taxes, or other changes in U.S. trade or tax policy could result in further increases to our food and supplies costs that would adversely impact our financial results. For additional information, see “Item 1A. Risk Factors,” including the risk factor titled “We are vulnerable to changes in political and economic conditions, such as trade policies, tariff and import regulations by the United States, as well as consumer preferences.”

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Growth Strategies and Outlook

We plan to continue to expand our business, drive restaurant sales growth, and enhance our competitive positioning, by executing the following five key strategies:

●

Brand That Wins;

●

Hospitality Mindset;

●

Digital First;

●

Winning Unit Economics; and

●

Drive Unit Growth Again with National Expansion.

See subsection titled “Our Growth Strategy” in Item 1. Business in this Annual Report for a detailed description of the five key pillars of our growth strategy.

As of December 31, 2025, we had 503 locations in nine states. In fiscal 2025, we opened one new company-operated restaurant in California and our franchisees opened 8 new restaurants, two in California, two in Arizona, and one in each of the following states: Colorado, Texas, New Mexico and Washington. In fiscal 2024, we opened two new company-operated restaurants in California and our franchisees opened two new restaurants, one in California, and one in Texas.

In 2026, we intend to open three to four new company-operated restaurants in California and Texas, and our franchisees intend to open 15 to 16 new restaurants. To increase comparable restaurant sales, we plan to increase customer frequency, attract new customers, and improve per-person spend.

Highlights and Trends

Comparable Restaurant Sales

A restaurant enters our comparable restaurant base the first full week after its 15-month anniversary. System-wide comparable restaurant sales include restaurant sales at all comparable company-operated restaurants and at all comparable franchised restaurants, as reported by franchisees. Refer to “Comparable Restaurant Sales” definition in the subsection titled “Key Performance Indicators” below for further information.

The change in year-over-year sales for our comparable restaurant base are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

53 Weeks Ended

​

52 Weeks Ended

​

52 Weeks Ended

​

  ​ ​ ​

December 31, 2025

  ​ ​ ​

December 25, 2024

  ​ ​ ​

December 27, 2023

Company-operated same store sales

0.3

%  

​

2.8

%  

​

0.3

%

Franchise-operated same store sales

​

—

%  

​

3.5

%  

​

(0.7)

%  

System-wide same store sales

0.1

%  

​

3.2

%  

​

(0.3)

%

​

In fiscal 2025, comparable restaurant sales at system-wide comparable restaurants increased 0.1% which consisted of a 0.7% increase in average check size due to increase in menu prices partially offset by a 0.6% decrease in transactions.

For company-operated restaurants in 2025, the change in comparable restaurant sales consisted of a 2.1% increase in average check size due to increases in menu prices partially offset by a 1.8% decrease in transactions.

In fiscal 2025, comparable restaurant sales at franchised restaurants was flat as compared to the prior year driven by an increase in transactions of 0.1% offset by a decrease in average check size of 0.1%.

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Restaurant Development

In fiscal 2025, we opened one company-operated restaurant, and our franchisees opened eight new restaurants. From time to time, we and our franchisees close restaurants. In fiscal 2025, we did not close any company-operated restaurants, and our franchisees closed four restaurants. In fiscal 2025, the Company acquired one franchise-operated restaurant. Our restaurant counts at the beginning and end of each of the last three years were as follows:

​

​

​

​

​

​

​

​

​

  ​ ​ ​

Fiscal Year Ended

​

  ​ ​ ​

2025

  ​ ​ ​

2024

  ​ ​ ​

2023

Company-operated restaurant activity(1):

​

  ​

​

  ​

​

  ​

Beginning of period

​

173

​

172

​

188

Openings

​

1

​

2

​

2

Restaurant sale to Company

​

1

​

—

​

—

Restaurant sale to franchisee

​

—

​

(1)

​

(18)

Closures

​

—

​

—

​

—

Restaurants at end of period

​

175

​

173

​

172

Franchised restaurant activity:

​

  ​

​

  ​

​

  ​

Beginning of period

​

325

​

323

​

302

Openings

​

8

​

2

​

3

Restaurant sale to Company

​

(1)

​

—

​

—

Restaurant sale to franchisee

​

—

​

1

​

18

Closures

​

(4)

​

(1)

​

—

Restaurants at end of period

​

328

​

325

​

323

System-wide restaurant activity:

​

  ​

​

  ​

​

  ​

Beginning of period

​

498

​

495

​

490

Openings

​

9

​

4

​

5

Closures

​

(4)

​

(1)

​

—

Restaurants at end of period

​

503

​

498

​

495

(1)

Our restaurant count above includes 503 domestic restaurants and excludes 8 licensed restaurants in the Philippines.​

​

Restaurant Remodeling

​

During the year ended December 31, 2025, we completed 17 company-operated restaurant remodels and 52 franchise remodels. In fiscal 2026, we plan to continue our standard practices for remodels, which includes completing a total of 25 to 35 company and 30 to 40 franchise remodels. Remodeling is a use of cash and has implications for our net property and depreciation line items on our consolidated balance sheets and statements of income, among others. The cost of our restaurant remodels varies depending on the scope of work required, but on average the investment is approximately $0.4 million per restaurant.

Loco Rewards™

Our Loco Rewards™ loyalty program offers rewards that incentivize customers to visit our restaurants more often each month. Customers earn points for each dollar spent and points can be redeemed for multiple redemption options. Points expire 365 days after a customer completes an eligible transaction to earn them.

When a customer is part of the rewards program, the obligation to provide future discounts related to points earned is considered a separate performance obligation, to which a portion of the transaction price is allocated. The performance obligation related to loyalty points is deemed to have been satisfied, and the amount deferred in the balance sheet is recognized as revenue, when the points are transferred to a reward and redeemed, the reward or points have expired, or the likelihood of redemption is remote. A portion of the transaction price is allocated to loyalty points on a pro-rata basis, based on stand-alone selling price, as determined by menu pricing and loyalty point’s terms.

In addition, customers can earn additional points and free entrées for a variety of engagement activities. As points are available for redemption past the quarter earned, a portion of the revenue associated with the earned points will be deferred until redemption or expiration. As of December 31, 2025, the revenue allocated to loyalty points that had not been redeemed was $1.1 million. We had over 5.3 million loyalty program members as of December 31, 2025.

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Key Financial Definitions

Revenue

Our revenue is derived from three primary sources: company-operated restaurant revenue, franchise revenue, which is comprised primarily of franchise royalties and, to a lesser extent, franchise fees and sublease rental income, and franchise advertising fee revenue. See Note 15 “Revenue from Contracts with Customers” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report for further details regarding our revenue recognition policy.

Food and Paper Costs

Food and paper costs include the direct costs associated with food, beverage and packaging of our menu items. The components of food and paper costs are variable in nature, change with sales volume, are impacted by menu mix, and are subject to increases or decreases in commodity costs.

Labor and Related Expenses

Labor and related expenses include wages, payroll taxes, workers’ compensation expense, benefits, and bonuses paid to our restaurant management teams. Like other expense items, we expect labor costs to grow proportionately as our restaurant revenue grows. Factors that influence labor costs include minimum wage and payroll tax legislation, state labor laws (which, in California, includes AB 1228), overtime, wage inflation, the frequency and severity of workers’ compensation claims, health care costs, and the performance of our restaurants.

Occupancy Costs and Other Operating Expenses

Occupancy costs include rent, common area maintenance (“CAM”), and real estate taxes. Other restaurant operating expenses include the costs of utilities, advertising, credit card processing fees, delivery service provider fees, restaurant supplies, repairs and maintenance, and other restaurant operating costs.

Gain on Recovery of Insurance Proceeds, Net

Gain on recovery of insurance proceeds includes insurance reimbursements related to the property and equipment damage, expenses incurred, and lost profits.

General and Administrative Expenses

General and administrative expenses are comprised of expenses associated with corporate and administrative functions that support the development and operations of our restaurants, including compensation and benefits, travel expenses, stock compensation costs, legal and professional fees, and other related corporate costs. Also included are pre-opening costs, and expenses above the restaurant level, including salaries for field management, such as area and regional managers, and franchise field operational support.

Franchise Expenses

Franchise expenses are primarily comprised of rent expenses incurred on properties leased by us and then sublet to franchisees, expenses incurred in support of franchisee information technology systems, and the franchisee’s portion of advertising expenses.

Depreciation and Amortization

Depreciation and amortization primarily consists of the depreciation of property and equipment, including leasehold improvements and equipment.

Loss on Disposal of Assets

Loss on disposal of assets includes the loss on disposal of assets related to retirements and replacement or write-off of leasehold improvements or equipment.

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Impairment and Closed-Store Reserves

We review long-lived assets such as property, equipment, and intangibles on a unit-by-unit basis for impairment when events or circumstances indicate the carrying value of the assets may not be recoverable. We determine if there is impairment at the restaurant level by comparing undiscounted future cash flows from the related long-lived assets to their respective carrying values and record an impairment charge when appropriate. In determining future cash flows, significant estimates are made by us with respect to future operating results of each restaurant over its remaining lease term, including sales trends, labor rates, commodity costs and other operating cost assumptions. If assets are determined to be impaired, the impairment charge is measured by calculating the amount by which the asset’s carrying amount exceeds its fair value. This process of assessing fair values requires the use of estimates and assumptions, including our ability to sell or reuse the related assets and market conditions, which are subject to a high degree of judgment. If these assumptions change in the future, we may be required to record impairment charges for these assets and these charges could be material.

When we close a restaurant, we will evaluate the right-of-use (“ROU”) asset for impairment, based on anticipated sublease recoveries. The remaining value of the ROU asset is amortized on a straight-line basis, with the expense recognized in closed-store reserve expense, in addition to property tax and CAM charges for closed restaurants.

Loss (gain) on Disposition of Restaurants

Loss (gain) on disposition of restaurants includes the loss (gain) on the sale of restaurants to franchisees, or other third parties, and includes the difference between carrying value and sales price of leasehold improvements, equipment and other assets included in the sale.

Interest Expense, Net

Interest expense, net, consists primarily of interest on our outstanding debt. Debt issuance costs are amortized at cost over the life of the related debt.

Provision for Income Taxes

Provision for income taxes consists of federal and state taxes on our income.

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Results of Operations

Fiscal Year 2025 Compared to Fiscal Year 2024

Our operating results for the fiscal years ended December 31, 2025 and December 25, 2024, are in absolute terms and expressed as a percentage of total revenue, with the exception of cost of operations and company restaurant expenses, which are expressed as a percentage of company-operated restaurant revenue, are compared in the table below:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

  ​ ​ ​

Fiscal Year

​

​

2025

​

2024

​

​

​

​

​

​

​

 (53-Weeks)

​

 (52-Weeks)

​

Increase / (Decrease)

​

  ​ ​ ​

($,000)

  ​ ​ ​

(%)

  ​ ​ ​

($,000)

  ​ ​ ​

(%)

  ​ ​ ​

($,000)

  ​ ​ ​

(%)

Statements of Income Data:

​

  ​

  ​

​

  ​

  ​

​

  ​

  ​

​

​

​

  ​

  ​

​

  ​

  ​

​

  ​

  ​

​

Company-operated restaurant revenue

​

$

405,817

82.8

​

$

396,260

83.8

​

$

9,557

2.4

​

Franchise revenue

​

52,389

10.7

​

45,561

9.6

​

6,828

15.0

​

Franchise advertising fee revenue

​

31,840

6.5

​

31,187

6.6

​

653

2.1

​

Total revenue

​

490,046

100.0

​

473,008

100.0

​

17,038

3.6

​

Cost of operations

​

  ​

  ​

​

  ​

  ​

​

  ​

  ​

​

Food and paper costs(1)

​

100,083

24.7

​

100,725

25.4

​

(642)

(0.6)

​

Labor and related expenses(1)

​

127,258

31.4

​

127,179

32.1

​

79

0.1

​

Occupancy and other operating expenses(1)

​

106,386

26.2

​

99,280

25.1

​

7,106

7.2

​

Company restaurant expenses(1)

​

333,727

82.2

​

327,184

82.6

​

6,543

2.0

​

General and administrative expenses

​

50,258

10.3

​

46,270

9.8

​

3,988

8.6

​

Franchise expenses

​

47,762

9.7

​

42,307

8.9

​

5,455

12.9

​

Depreciation and amortization

​

15,966

3.3

​

15,717

3.3

​

249

1.6

​

Loss on disposal of assets

​

277

0.1

​

221

0.0

​

56

25.3

​

Gain on recovery of insurance proceeds, property, equipment and expenses

​

—

—

​

(41)

(0.0)

​

41

(100.0)

​

Loss (gain) on disposition of restaurants

​

—

—

​

7

0.0

​

(7)

100.0

​

Impairment and closed-store reserves

​

​

11

​

0.0

​

​

175

​

0.0

​

​

(164)

​

(93.7)

​

Total expenses

​

448,001

91.4

​

431,840

91.3

​

16,161

3.7

​

Income from operations

​

42,045

8.6

​

41,168

8.7

​

877

2.1

​

Interest expense, net

​

4,470

0.9

​

5,899

1.2

​

(1,429)

(24.2)

​

Income tax receivable agreement (income) expenses

​

—

—

​

(20)

(0.0)

​

20

(100.0)

​

Income before provision for income taxes

​

37,575

7.7

​

35,289

7.5

​

2,286

6.5

​

Provision for income taxes

​

11,089

2.3

​

9,605

2.1

​

1,484

15.5

​

Net income

​

$

26,486

5.4

​

$

25,684

5.4

​

$

802

3.1

​

(1)

Percentages for line items relating to cost of operations and company restaurant expenses are calculated with company-operated restaurant revenue as the denominator. All other percentages use total revenue.

Company-Operated Restaurant Revenue

In fiscal 2025, company-operated restaurant revenue increased $9.6 million, or 2.4%, from the prior year. The increase in company-operated restaurant sales was mainly due to a $5.3 million increase for the additional week of operations in a 53-week fiscal year, a $2.9 million increase from additional sales related to the opening of two restaurants during or after the first quarter of 2024, as well as an increase in company-operated comparable revenue. For the full year company-operated comparable sales increased 0.3% consisting of an approximately 2.1% increase in average check size due to increases in menu prices, partially offset by a 1.8% decrease in transactions.

Franchise Revenue

In fiscal 2025, franchise revenue increased $6.8 million, or 15.0% from the prior year. This increase was primarily due to $4.1 million in franchisee IT pass-through revenue related to the franchisee rollout of the new POS system, which was offset by a corresponding increase in franchise expenses. In addition, the increase in franchise revenue includes $0.5 in revenue recognized for the additional week of operations in a 53 week fiscal year. In addition, the increase in franchise

40

Table of Contents

revenue was also driven by a royalty rate true up, increased franchisee fees related to terminated franchise development agreements, and the nine franchise-operated locations opened during or subsequent to the fourth quarter of 2024.

Franchise Advertising Fee Revenue

Franchise advertising fee revenue increased $0.7 million, or 2.1% from the prior year. $0.4 million of the increase was due from an additional week of operations in a 53-week fiscal year, combined with higher franchise revenue. As advertising fee revenue is a percentage of franchisees’ revenue, the year-to-date fluctuation was due to the increases noted in franchise revenue above.

Food and Paper Costs

Food and paper costs decreased $0.6 million, or 0.6%, in fiscal 2025 from the prior year. The decrease in food and paper costs was primarily due to a decrease in transactions, as well as cost management initiatives and slight commodity deflation. This decrease was partially offset by increased discounts and $1.3 million in expenses from the additional week of operations in a 53-week fiscal year. Food and paper costs as a percentage of company-operated restaurant revenue were 24.7% in fiscal 2025, down from 25.4% in fiscal 2024, primarily due to an increase in menu pricing, cost management initiatives, and slight commodity deflation, partially offset by increased discounting.

Labor and Related Expenses

Labor and related expenses increased $0.1 million, or 0.1%, in fiscal 2025 as compared to 2024. The increase was mainly due to $3.4 million in higher wage rates during fiscal 2025 as a result of legislative increases in the California minimum wage, which became effective April 1, 2024, as well as $1.7 million from the additional week of operations in a 53-week fiscal year. This increase was partially offset by a $5.0 million reduction in costs related to improved labor efficiencies as part of our cost management initiatives.

Labor and related expenses as a percentage of Company-operated restaurant revenue were 31.4% in fiscal 2025, down from 32.1% in fiscal 2024 primarily due to an increase in menu pricing and improved labor efficiencies being greater than the increase in wage rates.

Occupancy and Other Operating Expenses

Occupancy and other operating expenses increased $7.1 million, or 7.2%, in fiscal 2025. The increase was primarily due to a $1.4 million increase in occupancy and other operating expenses for the additional week of operations in a 53-week fiscal year, a $1.4 million increase in utilities, a $1.3 million increase in occupancy expenses, a $1.0 million increase in marketplace delivery fees, a $0.9 million increase in software maintenance, and a $1.1 million increase in other operating expenses.

Gain on Recovery of Insurance Proceeds Property, Equipment and Expenses

During fiscal 2023 and fiscal 2022, two of our restaurants incurred damage resulting from a fire. In fiscal 2024, we recognized gains of less than $0.1 million related to the reimbursement of property and equipment and expenses. We had no gain or loss on recovery of insurance proceeds in 2025.

General and Administrative Expenses

General and administrative expenses increased $4.0 million, or 8.6%, in fiscal 2025. The increase was due primarily to a $1.7 million increase in legal and professional fees related to shareholder activism and related matters, a $1.5 million increase in stock-based compensation expense, a $1.0 million increase in salaries and wages largely related to the impact of an additional week of operations in a 53-week fiscal year, and a $0.5 million increase in restructuring and executive transition cost. These increases were partially offset by a $0.6 million decrease in incentive compensation.

General and administrative expenses as a percentage of total revenue were 10.3% in fiscal 2025, up from 9.8% in fiscal 2024. This increase is primarily due to the cost increases described above.

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Table of Contents

Franchise Expenses

Franchise expenses increased $5.5 million, or 12.9%, in fiscal 2025 from the prior year. The increase was primarily due to $4.1 million in one-time IT pass-through expense related primarily to the new POS system rollout and $0.4 million related to the additional week of operations in a 53- week fiscal year, as well as higher franchise services expense and higher occupancy expense for locations sub-leased to franchisees and higher franchise advertising expenses.

Impairment and Closed-Store Reserves

During fiscal 2025, we did not record any non-cash impairment charges. During fiscal 2024, we recorded a $0.1 million non-cash impairment charge primarily related to the property and equipment assets of two restaurants in Nevada.

During fiscal 2025, we recognized less than $0.1 million of closed-store reserve expense related to the amortization of ROU assets, property taxes and CAM payments for our closed locations compared to $0.1 million during fiscal 2024.

Interest Expense, Net

For fiscal 2025, net interest expense decreased by $1.4 million or 24.2%, primarily related to lower outstanding balances on our 2022 Revolver (as defined below) as well as the lower interest rates during fiscal 2025 versus the comparable period during the prior year.

Income Tax Receivable Agreement

On July 30, 2014, we entered into the income tax receivable agreement (the “TRA”). The TRA calls for us to pay to our pre-IPO stockholders 85% of the savings in cash that we realize in our taxes as a result of utilizing our net operating losses and other tax attributes attributable to preceding periods. In fiscal 2025 we did not record any income tax receivable agreement income. In fiscal 2024, we recorded less than $0.1 million in income tax receivable agreement income. On May 29, 2024, we terminated most of the obligations under the TRA, with respect to any payments or obligations owed to the FS Equity Partners V, L.P. and FS Affiliates V, L.P. (together, the “Sellers”) thereunder in exchange for a payment to the Sellers of $0.4 million. As of December 31, 2025 and December 25, 2024, there were no remaining obligations owed on our consolidated balance sheets.

Provision for Income Taxes

In fiscal 2025, we recorded an income tax expense of $11.1 million, compared to income tax expense of $9.6 million in fiscal 2024, reflecting an estimated effective tax rate of 29.5% and 27.2%, respectively. The difference between the 21.0% statutory rate and our effective tax rate of 29.5% for the year ended December 31, 2025 is primarily a result of state taxes, the impact of non-tax deductible executive compensation expense, a tax shortfall related to equity compensation deductible for tax as compared to the cumulative amount recorded as stock-based compensation expense, and $0.1 million related to the additional week of operations in a 53-week fiscal year, partially offset by a Work Opportunity Tax Credit benefit.

The difference between the 21.0% statutory rate and our effective tax rate of 27.2% for the year ended December 25, 2024 is primarily a result of state taxes, the impact of non-tax deductible executive compensation expense, a tax shortfall related to equity compensation deductible for tax as compared to the cumulative amount recorded as stock-based compensation expense, partially offset by a Work Opportunity Tax Credit benefit.

Fiscal Year 2024 Compared to Fiscal Year 2023

Year-to-year comparisons of fiscal 2024 and fiscal 2023 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 on our Annual Report on Form 10-K for the year ended December 25, 2024, which was filed with the SEC on March 7, 2025.

​

Key Performance Indicators

To evaluate the performance of our business, we utilize a variety of financial and performance measures. These key measures include company-operated restaurant revenue, system-wide sales, comparable restaurant sales, company-

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Table of Contents

operated average unit volumes (“AUV”), restaurant contribution, restaurant contribution margin, new restaurant openings, EBITDA, and Adjusted EBITDA. In fiscal 2025, our restaurants generated company-operated restaurant revenue of $405.8 million and system-wide sales of $1,125.4 million, and system-wide comparable restaurant sales growth of 0.1%, consisting of company-operated restaurant comparable restaurant sales growth of 0.3% and franchised comparable restaurant sales growth stayed flat. The company-operated comparable restaurant sales increase consisted of a 2.1% increase in average check size due to increases in menu prices and partially offset by a 1.8% decrease in the number of transactions. In fiscal 2025, for company-operated restaurants, our annual AUV was $2.3 million, restaurant contribution margin was 17.8%, and Adjusted EBITDA was $66.7 million.

Company-Operated Restaurant Revenue

Company-operated restaurant revenue consists of sales of food and beverages in company-operated restaurants net of promotional allowances, employee meals, and other discounts. Company-operated restaurant revenue in any period is directly influenced by the number of operating weeks in such period, the number of open restaurants, and comparable restaurant sales.

Seasonal factors and the timing of holidays cause our revenue to fluctuate from period to period. Our revenue per restaurant is typically lower in the first and fourth quarters due to reduced January and December transactions and higher in the second and third quarters. As a result of seasonality, our quarterly and annual results of operations and key performance indicators such as company-operated restaurant revenue and comparable restaurant sales, may fluctuate.

System-Wide Sales

System-wide sales are neither required by, nor presented in accordance with, accounting principles generally accepted in the United States of America (“GAAP”). System-wide sales are the sum of company-operated restaurant revenue and sales from franchised restaurants. Our total revenue in our consolidated statements of income is limited to company-operated restaurant revenue and franchise revenue from our franchisees. Accordingly, system-wide sales should not be considered in isolation or as a substitute for our results as reported under GAAP. Management believes that system-wide sales is an important figure for investors, because it is widely used in the restaurant industry, including by our management, to evaluate brand scale and market penetration.

System-wide sales does not include the 8 licensed stores in the Philippines.

The following table reconciles system-wide sales to company-operated restaurant revenue and total revenue (in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Fiscal Year

​

  ​ ​ ​

2025

  ​ ​ ​

2024

  ​ ​ ​

2023

  ​ ​ ​

​

​

(53-Weeks)

​

(52-Weeks)

​

(52-Weeks)

​

Company-operated restaurant revenue

​

$

405,817

​

$

396,260

​

$

398,437

​

Franchise revenue

​

​

52,389

​

​

45,561

​

41,002

​

Franchise advertising fee revenue

​

​

31,840

​

​

31,187

​

29,225

​

Total Revenue

​

​

490,046

​

​

473,008

​

468,664

​

Franchise revenue

​

​

(52,389)

​

​

(45,561)

​

(41,002)

​

Franchise advertising fee revenue

​

​

(31,840)

​

​

(31,187)

​

​

(29,225)

​

Sales from franchised restaurants

​

​

719,588

​

​

699,456

​

651,777

​

System-wide sales

​

$

1,125,405

​

$

1,095,716

​

$

1,050,214

​

​

Comparable Restaurant Sales

Comparable restaurant sales reflect year-over-year sales changes for comparable company-operated, franchised, and system-wide restaurants. A restaurant enters our comparable restaurant base the first full week after it has operated for fifteen months. Comparable restaurant sales exclude restaurants closed during the applicable period. At December 31, 2025, December 25, 2024 and December 27, 2023, there were 482, 479 and 470 comparable restaurants, 170, 168 and 178 company-operated and 312, 311 and 292 franchised, respectively. Comparable restaurant sales indicate the performance of existing restaurants, since new restaurants are excluded. Comparable restaurant sales growth can be generated by an increase in the number of meals sold and/or by increases in the average check size, resulting from a shift

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Table of Contents

in menu mix and/or higher prices resulting from new products or price increases. Because other companies may calculate this measure differently than we do, comparable restaurant sales as presented herein may not be comparable to similarly titled measures reported by other companies. Management believes that comparable restaurant sales is a valuable metric for investors to evaluate the performance of our store base, excluding the impact of new stores and closed stores.

Company-Operated Average Unit Volumes

We measure company-operated AUVs on both a weekly and an annual basis. Weekly AUVs consist of comparable restaurant sales over a seven-day period from Thursday to Wednesday. Annual AUVs are calculated using a two-step process. First, we divide our total net sales for all company-operated restaurants for the fiscal year by the total number of restaurant operating weeks during the same period. Second, we annualize that average weekly per-restaurant sales figure by multiplying it by 53 for a 53-week year or 52 for a 52-week year. An operating week is defined as a restaurant open for business over a seven-day period from Thursday to Wednesday. This measurement allows management to assess changes in consumer spending patterns at our restaurants and the overall performance of our restaurant base.

Restaurant Contribution and Restaurant Contribution Margin

Restaurant contribution and restaurant contribution margin are neither required by, nor presented in accordance with, GAAP. Restaurant contribution is defined as company-operated restaurant revenue less company restaurant expenses which includes food and paper cost, labor and related expenses and occupancy and other operating expenses, where applicable. Restaurant contribution therefore excludes franchise revenue, franchise advertising fee revenue and franchise expenses as well as certain other costs, such as general and administrative expenses, franchise expenses, depreciation and amortization, impairment and closed-store reserves, loss on disposal of assets and other costs that are considered corporate-level expenses and are not considered normal operating costs of our restaurants. Accordingly, restaurant contribution is not indicative of overall Company results and does not accrue directly to the benefit of stockholders because of the exclusion of certain corporate-level expenses. Restaurant contribution margin is defined as restaurant contribution as a percentage of net company-operated restaurant revenue.

Restaurant contribution and restaurant contribution margin are supplemental measures of operating performance of our restaurants, and our calculations thereof may not be comparable to those reported by other companies. Restaurant contribution and restaurant contribution margin have limitations as analytical tools, and you should not consider them in isolation, or superior to, or as substitutes for the analysis of our results as reported under GAAP. Management uses restaurant contribution and restaurant contribution margin as key metrics to evaluate the profitability of incremental sales at our restaurants, to evaluate our restaurant performance across periods, and to evaluate our restaurant financial performance compared with our competitors. Management believes that restaurant contribution and restaurant contribution margin are important tools for investors, because they are widely-used metrics within the restaurant industry to evaluate restaurant-level productivity, efficiency, and performance. Management further believes restaurant level operating margin is useful to investors to highlight trends in our core business that may not otherwise be apparent to investors when relying solely on GAAP financial measures.

A reconciliation of restaurant contribution and restaurant contribution margin to company-operated restaurant revenue is provided below:

​

​

​

​

​

​

​

​

​

​

​

​

​

  ​ ​ ​

Fiscal Year

(Dollar amounts in thousands)

  ​ ​ ​

2025

(53-Weeks)

  ​ ​ ​

2024

(52-Weeks)

  ​ ​ ​

2023

(52-Weeks)

Restaurant contribution:

​

​

​

​

​

​

​

​

​

​

Income from operations

​

$

42,045

​

$

41,168

​

$

39,792

​

Add (less):

​

  ​

​

  ​

​

  ​

​

General and administrative expenses

​

50,258

​

46,270

​

42,025

​

Franchise expenses

​

47,762

​

42,307

​

38,404

​

Depreciation and amortization

​

15,966

​

15,717

​

15,235

​

Loss on disposal of assets

​

277

​

221

​

192

​

Gain on recovery of insurance proceeds, property, equipment and expenses

​

​

—

​

​

(41)

​

​

(247)

​

Franchise revenue

​

(52,389)

​

(45,561)

​

(41,002)

​

Franchise advertising fee revenue

​

(31,840)

​

(31,187)

​

(29,225)

​

Impairment and closed-store reserves

​

11

​

175

​

1,732

​

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Loss (gain) on disposition of restaurants

​

—

​

7

​

(5,034)

​

Restaurant contribution

​

$

72,090

​

$

69,076

​

$

61,872

​

​

​

​

​

​

​

​

​

​

​

​

Company-operated restaurant revenue:

​

  ​

​

  ​

​

  ​

​

Total revenue

​

$

490,046

​

$

473,008

​

$

468,664

​

Less:

​

  ​

​

  ​

​

  ​

​

Franchise revenue

​

(52,389)

​

(45,561)

​

(41,002)

​

Franchise advertising fee revenue

​

(31,840)

​

(31,187)

​

(29,225)

​

Company-operated restaurant revenue

​

$

405,817

​

$

396,260

​

$

398,437

​

​

​

​

​

​

​

​

​

​

​

​

Restaurant contribution margin (%)

​

17.8

%  

17.4

%  

15.5

%

​

New Restaurant Openings

The number of restaurant openings reflects the number of new restaurants opened by us and our franchisees during a particular reporting period. Before a new restaurant opens, we and our franchisees incur pre-opening costs, as described below. New restaurants often open with an initial start-up period of higher than normal sales volumes, which subsequently decrease to stabilized levels. New restaurants typically experience normal inefficiencies in the form of higher food and paper, labor, and other direct operating expenses and, as a result, restaurant contribution margins are generally lower during the start-up period of operation. The average start-up period after which our new restaurants’ revenue and expenses normalize is approximately fourteen weeks. When we enter new markets, we may be exposed to start-up times and restaurant contribution margins that are longer and lower than reflected in our average historical experience.

EBITDA and Adjusted EBITDA

EBITDA represents net income (loss) before interest expense, provision (benefit) for income taxes, depreciation, and amortization. Adjusted EBITDA represents net income (loss) before interest expense, provision (benefit) for income taxes, depreciation, amortization, and other items that we do not consider representative of on-going operating performance, as identified in the reconciliation table below.

EBITDA and Adjusted EBITDA as presented in this Annual Report are supplemental measures of our performance that are neither required by, nor presented in accordance with, GAAP. EBITDA and Adjusted EBITDA are not measurements of our financial performance under GAAP and should not be considered as alternatives to net income, operating income, or any other performance measures derived in accordance with GAAP, or as alternatives to cash flow from operating activities as a measure of our liquidity. In addition, in evaluating EBITDA and Adjusted EBITDA, you should be aware that in the future we will incur expenses or charges such as those added back to calculate EBITDA and Adjusted EBITDA. Our presentation of EBITDA and Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.

EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis of our results as reported under GAAP. Some of these limitations are (i) they do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments, (ii) they do not reflect changes in, or cash requirements for, our working capital needs, (iii) they do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt, (iv) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements, (v) they do not adjust for all non-cash income or expense items that are reflected in our statements of cash flows, (vi) they do not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our on-going operations, and (vii) other companies in our industry may calculate these measures differently than we do, limiting their usefulness as comparative measures.

We compensate for these limitations by providing specific information regarding the GAAP amounts excluded from such non-GAAP financial measures. We further compensate for the limitations in our use of non-GAAP financial measures by presenting comparable GAAP measures more prominently.

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We believe that EBITDA and Adjusted EBITDA facilitate operating performance comparisons from period to period by isolating the effects of some items that vary from period to period without any correlation to core operating performance or that vary widely among similar companies. These potential differences may be caused by variations in capital structures (affecting interest expense), tax positions (such as the impact on periods or companies of changes in effective tax rates or net operating losses) and the age and book depreciation of facilities and equipment (affecting relative depreciation expense). We also present EBITDA and Adjusted EBITDA because (i) we believe that these measures are frequently used by securities analysts, investors and other interested parties to evaluate companies in our industry, (ii) management believes that investors will find these measures useful in assessing our ability to service or incur indebtedness, and (iii) we use EBITDA and Adjusted EBITDA internally for a number of benchmarks, including to compare our performance to that of our competitors.

The following table sets forth reconciliations of our net income to EBITDA and Adjusted EBITDA:

​

​

​

​

​

​

​

​

​

​

​

​

  ​ ​ ​

Fiscal Year

(Amounts in thousands)

  ​ ​ ​

2025

(53-Weeks)

  ​ ​ ​

2024

(52-Weeks)

  ​ ​ ​

2023

(52-Weeks)

Net income

​

$

26,486

​

$

25,684

​

$

25,554

Non-GAAP adjustments:

​

​

​

​

​

​

Provision for income taxes

​

11,089

​

9,605

​

9,324

Interest expense, net of interest income

​

4,470

​

5,899

​

4,811

Depreciation and amortization

​

15,966

​

15,717

​

15,235

EBITDA

​

$

58,011

​

$

56,905

​

$

54,924

Stock-based compensation expense (a)

​

5,396

​

3,931

​

3,337

Loss on disposal of assets (b)

​

277

​

221

​

192

Impairment and closed-store reserves (c)

​

11

​

175

​

1,732

Loss (gain) on disposition of restaurants (d)

​

—

​

7

​

(5,034)

Legal settlements (e)

​

(882)

​

—

​

—

Income tax receivable agreement (income) expenses (f)

​

—

​

(20)

​

103

Special legal and professional fees expense (g)

​

​

1,696

​

​

—

​

​

—

Special other expenses (h)

​

​

—

​

​

—

​

​

266

Shareholder advisory fees (i)

​

​

—

​

​

—

​

​

293

Duplicate rent expense for corporate office relocation (j)

​

​

239

​

​

—

​

​

—

ERP software implementation costs (k)

​

​

179

​

​

—

​

​

—

Gain on recovery of insurance proceeds (l)

​

​

—

​

​

(41)

​

​

(399)

Restructuring and executive transition costs (m)

​

​

1,660

​

​

1,194

​

​

1,673

Pre-opening costs (n)

​

​

126

​

​

336

​

​

269

Adjusted EBITDA

​

$

66,713

​

$

62,708

​

$

57,356

(a)

Includes non-cash stock-based compensation.

(b)

Loss on disposal of assets includes the loss on disposal of assets related to retirements and replacement or write-off of leasehold improvements or equipment.

(c)

Includes costs related to impairment of property and equipment and ROU assets and closed restaurants. During fiscal 2025, we did not record any non-cash impairment charges. During fiscal 2025, we recognized less than $0.1 million of closed-store reserve expense, primarily related to the amortization of ROU assets, property taxes and CAM payments for our closed locations.

In fiscal 2024, we recorded non-cash impairment charges of $0.1 million, primarily related to the property and equipment assets of two restaurants in Nevada. During fiscal 2024, we recognized $0.1 million of closed-store reserve expense, primarily related to the amortization of ROU assets, property taxes and CAM payments for our closed locations.

In fiscal 2023, we recorded non-cash impairment charges of $1.5 million, primarily related to the property and equipment assets of one restaurant in Nevada and the carrying value of the ROU assets of one restaurant in California. During fiscal 2023, we recognized $0.2 million of closed-store reserve expense, primarily related to the amortization of ROU assets, property taxes and CAM payments for our closed locations.

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(d)

During fiscal 2024, we completed the sale of one restaurant within California to an existing franchisee due to an expiring lease term on April 30, 2024. This sale resulted in cash proceeds of $0.1 million and a net loss on sale of restaurant of less than $0.1 million for the year-ended December 25, 2024. During fiscal 2023, we completed the sale of 18 company-operated restaurants within California, Utah and Texas to existing franchisees. These sales during 2023 resulted in cash proceeds of $7.7 million and a net gain on sale of restaurants of $5.0 million for the year ended December 27, 2023.

(e)

Includes $0.9 million received from legal settlements, net of legal expenses.

(f)

On July 30, 2014, we entered into the income tax receivable agreement (“TRA”). This agreement calls for us to pay to our pre-IPO stockholders 85% of the savings in cash that we realize in our taxes as a result of utilizing our net operating losses and other tax attributes attributable to preceding periods. For the years ended December 25, 2024, and December 27, 2023, income tax receivable agreement (income) expense consisted of the amortization of interest expense and changes in estimates for actual tax returns filed, related to our total expected TRA payments. On May 29, 2024, we terminated most of the obligations under the TRA, with respect to any payments or obligations owed to the Sellers thereunder in exchange for a payment to the Sellers of $0.4 million. As of December 31, 2025 and December 25, 2024, there was no remaining obligations owed on our consolidated balance sheets.

(g)

Consists of legal and professional costs related to shareholder activism and related matters.

(h)

Consists of $0.3 million in legal costs related to the share distribution by Trimaran Group of substantially all shares of our common stock held by Trimaran Group to its investors, members and limited partners, which occurred on March 28, 2023.

(i)

Consists of advisory fees pertaining to a shareholder rights agreement adopted in connection with a shareholder’s accumulation of a significant amount of shares of our common stock. Refer to Note 16, “Shareholder Rights Agreement” for further details on the Shareholder Rights Agreement.

(j)

Consists of duplicate rent expense for the corporate headquarter relocation. The Company moved headquarter locations during Q4 of fiscal year 2025. During the transition period the Company was still contractually obligated to pay rent expense for both the new location and old location at the same time.

(k)

Represents costs incurred in connection with the implementation of a new “ERP” system which are included in general and administrative expenses.

(l)

During fiscal 2022, one of our restaurants incurred damage resulting from a fire. In fiscal 2023, we incurred costs directly related to the fire of less than $0.1 million. We received $0.5 million in cash, net of the insurance deductible, from the insurance company during fiscal 2023, for which we recognized gains of $0.2 million, related to the reimbursement of property and equipment and expenses incurred and $0.3 million related to the reimbursement of lost profits. In fiscal 2024, the Company recognized gains of less than $0.1 million related to the reimbursement of property and equipment and expenses. The gain on recovery of insurance proceeds for the reimbursement of property and equipment and expenses and the reimbursement of lost profits, net of the related costs is included in the accompanying consolidated statements of income, for the year ended December 27, 2023, as a reduction of company restaurant expenses.

(m)

Consists of costs associated with the transition of certain executive officers, such as severance and stock-based compensations costs and costs associated with restructuring certain positions in the organization. 

(n)

Pre-opening costs are a component of general and administrative expenses, and consist of costs directly associated with the opening of new restaurants and incurred prior to opening, including management labor costs, staff labor costs during training, food and supplies used during training, marketing costs, and other related pre-opening costs. These are generally incurred over the three to five months prior to opening. Pre-opening costs also include occupancy costs incurred between the date of possession and the opening date for a restaurant.

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Liquidity and Capital Resources

Our primary sources of liquidity and capital resources have been cash provided from operations, cash and cash equivalents, and the 2022 Revolver (as defined below). Our primary requirements for liquidity and capital are new restaurants, existing restaurant capital investments (remodels and maintenance),lease obligations, interest payments on our debt, working capital and general corporate needs. Our working capital requirements are not significant, since our customers pay for their purchases in cash or by payment card (credit or debit) at the time of sale. Thus, we are able to sell many of our inventory items before we have to pay our suppliers. Our restaurants do not require significant inventories or receivables. We believe that these sources of liquidity and capital are sufficient to finance our continued operations, including planned capital expenditures, for at least the next 12 months and beyond from the issuance of the consolidated financial statements.

However, depending on macroeconomic conditions, our financial performance and liquidity could be further impacted and could impact our ability to meet certain financial covenants required in our 2022 Credit Agreement (as defined in Note 7 “Long-Term Debt”), specifically the lease-adjusted coverage ratio and fixed-charge coverage ratio.

Cash Flows

The following table presents summary cash flow information for the years indicated:

​

​

​

​

​

​

​

​

​

​

​

​

  ​ ​ ​

Fiscal Year

(Amounts in thousands)

  ​ ​ ​

2025

(53-Weeks)

  ​ ​ ​

2024

(52-Weeks)

  ​ ​ ​

2023

(52-Weeks)

Net cash provided by (used in)

​

​

  ​

​

​

  ​

​

​

  ​

Operating activities

​

$

48,076

​

$

46,781

​

$

40,688

Investing activities

​

(22,635)

​

(18,940)

​

(13,447)

Financing activities

​

(21,697)

​

(32,645)

​

(40,446)

Net increase/(decrease) in cash

​

$

3,744

​

$

(4,804)

​

$

(13,205)

​

Operating Activities

In fiscal 2025, net cash provided by operating activities increased by $1.3 million compared to fiscal 2024. This increase was primarily due to a $6.8 million increase in net income excluding non-cash and reconciling items disclosed within our consolidated statement of cash flows, partially offset by a $5.5 million unfavorable change in operating assets and liabilities. The $6.8 million increase in net income excluding non-cash and reconciling items was primarily driven by favorable changes in non-cash and reconciling items including deferred income taxes and stock-based compensation expense. The $5.5 million of unfavorable changes in operating assets and liabilities was primarily driven by unfavorable changes in accrued salaries and vacation, accounts and other receivables, and income taxes receivable (payable), partially offset by favorable changes in accounts payable.

In fiscal 2024, net cash provided by operating activities increased by $6.1 million compared to fiscal 2023. This increase was due primarily to an increase in profitability and favorable working capital fluctuations during fiscal 2024.

Investing Activities

In fiscal 2025, net cash used in investing activities increased by $3.7 million compared to fiscal 2024. This change was primarily due to the increase purchases of property and equipment.

In fiscal 2024, net cash used in investing activities increased by $5.5 million compared to fiscal 2023. This increase was primarily due to cash proceeds of $7.7 million received during fiscal 2023 related to the sale of 18 company-operated restaurants to existing franchisees.

Financing Activities

In fiscal 2025, net cash used in financing activities decreased by $10.9 million compared to fiscal 2024. The decrease was primarily due to repurchases of shares of our common stock of $20.6 million during the year ended December 25, 2024 compared to repurchases of shares of our common stock of $1.8 million during the year ended December 31, 2025.

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The change was partially offset by $20.0 million in net paydowns on the 2022 Revolver during the year ended December 31, 2025 compared to $13.0 million in net paydowns during the year ended December 25, 2024.

In fiscal 2024, net cash used in financing activities decreased by $7.8 million compared to fiscal 2023. The decrease was primarily due to repurchases of shares of our common stock of $20.6 million during the year ended December 25, 2024 compared to repurchases of shares of our common stock of $59.2 million during the year ended December 27, 2023. The change was offset by $13.0 million in net pay downs on the 2022 Revolver during the year ended December 25, 2024 compared to $18.0 million in net borrowings during the year ended December 27, 2023.

​

Debt and Other Obligations

We, as a guarantor, are a party to a credit agreement (the “2022 Credit Agreement”) among our wholly-owned subsidiary, El Pollo Loco, Inc. (“EPL”), as borrower, and our direct subsidiary. EPL Intermediate, Inc. (“Intermediate”), as a guarantor, Bank of America, N.A., as administrative agent, swingline lender, and letter of credit issuer, the lenders party thereto, and the other parties thereto, which provides for a $150.0 million five-year senior secured revolving credit facility (the “2022 Revolver”). The 2022 Revolver, which is available pursuant to the 2022 Credit Agreement, includes a sub limit of $15.0 million for letters of credit and a sub limit of $15.0 million for swingline loans. The 2022 Revolver and 2022 Credit Agreement will mature on July 27, 2027. The obligations under the 2022 Credit Agreement and related loan documents are guaranteed by us. The obligations of our company, EPL and Intermediate under the 2022 Credit Agreement and related loan documents are secured by a first priority lien on substantially all of their respective assets.

Under the 2022 Revolver, we are restricted from making certain payments such as cash dividends or share repurchases, except that we may, inter alia, (i) pay up to $1.0 million per year to repurchase or redeem our qualified equity interests held by our past or present officers, directors, or employees (or their estates) upon death, disability, or termination of employment, (ii) pay under the TRA, and (iii) so long as no default or event of default has occurred and is continuing, (a) make non-cash repurchases of equity interests in connection with the exercise of stock options by directors, officers and management, provided that those equity interests represent a portion of the consideration of the exercise price of those stock options, (b) pay up to $0.5 million in any 12-month consecutive period to redeem, repurchase or otherwise acquire equity interests of any subsidiary that is not a wholly-owned subsidiary from any holder of equity interest in such subsidiary, (c) pay up to $2.5 million per year pursuant to stock option plans, employment agreements, or incentive plans, (d) make up to $5.0 million in other restricted payments per year, and (e) make other restricted payments, subject to our compliance, on a pro forma basis, with (x) a lease-adjusted consolidated leverage ratio not to exceed 4.25 times and (y) the financial covenants applicable to the 2022 Revolver.

​

Borrowings under the 2022 Credit Agreement (other than any swingline loans) bear interest, at the borrower’s option, at rates based upon either the secured overnight financing rate (“SOFR”) or a base rate, plus, for each rate, a margin determined in accordance with a lease-adjusted consolidated leverage ratio-based pricing grid. The base rate is calculated as the highest of (a) the federal funds rate plus 0.50%, (b) the published Bank of America prime rate, or (c) Term SOFR with a term of one-month SOFR plus 1.00%. For Term SOFR loans, the margin is in the range of 1.25% to 2.25%, and for base rate loans the margin is in a range of 0.25% to 1.25%. Borrowings under the 2022 Revolver may be repaid and reborrowed. For borrowings under the 2022 Revolver during fiscal 2025, the interest rate range was 5.3% to 7.75%. For borrowings under the 2022 Revolver during fiscal 2024, the interest rate range was 5.7% to 7.0%. The interest rate under the 2022 Revolver was 5.3% at December 31, 2025 and 5.7% under the 2022 Revolver at December 25, 2024.

​

The 2022 Credit Agreement contains certain financial covenants. We were in compliance with the financial covenants as of December 31, 2025.

​

At December 31, 2025, $10.3 million of letters of credit and $51.0 million of the revolving line of credit were outstanding. The amount available under the revolving line of credit was $88.7 million at December 31, 2025.

See Note 7, “Long-Term Debt” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report for additional information.

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Material Cash Requirements

Our total capital expenditures for 2025 were $26.9 million. In 2025, we spent approximately $3.1 million on the development and construction of our new restaurants, $10.4 million on remodels of existing restaurants, and $3.5 million on our new corporate office location. The remaining $9.9 million of capital expenditures during 2025 were related to investments in existing restaurants, including new equipment and hardware, technology to optimize efficiencies, and similar improvements. In 2026, we expect to incur between $37 million and $40 million in total capital expenditures, of which we expect approximately $8 million to $9 million will be related to our construction of new restaurants, $14 million to $15 million will be related to remodeling of existing restaurants, including new equipment and hardware, technology to optimize efficiencies, minor remodeling and similar improvements, and $6 million to $7 million related to sales driving and cost savings initiatives. Finally, we expect a portion of our incurred capital expenditures in 2026 to be for additional corporate initiatives, including investments in technology for support centers to boost innovation, enhancing the customer experience, and improving operations. We expect to fund these capital expenditures primarily with operating cash flows.

The following table summarizes our other current and long-term material cash requirements as of December 31, 2025, which we expect to fund primarily with operating cash flows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

  ​ ​ ​

Payments Due by Period

​

  ​ ​ ​

​

​

  ​ ​ ​

​

​

  ​ ​ ​

2027 -

  ​ ​ ​

2029 -

  ​ ​ ​

2031 and

(Amounts in thousands)

​

Total

​

2026

​

2028

​

2030

​

 thereafter

Operating leases (1)

​

$

225,488

​

$

28,905

​

$

52,962

​

$

41,051

​

$

102,570

Finance leases (1)

​

1,592

​

169

​

274

​

192

​

957

Long-term debt (2)

​

55,460

​

2,893

​

52,567

​

—

​

—

Purchasing commitments—chicken(3)

​

26,232

​

26,232

​

—

​

—

​

—

Total

​

$

308,772

​

$

58,199

​

$

105,803

​

$

41,243

​

$

103,527

​

(1)

Operating and Finance Leases — Represents future minimum lease payments for our restaurants and the principal payments during the lease terms, respectively. Refer to Note 6 “Leases” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report for further details regarding our obligations and the timing of expected payments.

(2)

Long-Term Debt — Represents our contractual debt obligations. Includes expected interest expenses, calculated based on applicable interest rates at December 31, 2025. Refer to Note 7 “Long-Term Debt” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report for further details regarding our obligations and the timing of expected payments.

(3)

Purchasing Commitments (Chicken) — Reflects contractual purchase commitments for goods related to restaurant operations. Refer to Note 14 “Commitments and Contingencies” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report for further details regarding our obligations.

Share Repurchases

Share Repurchase Program

On November 2, 2023, we announced that the Board approved a share repurchase program (“Share Repurchase Program”) under which we were authorized to repurchase up to $20,000,000 of shares of our common stock. Under the Share Repurchase Program, we were permitted to repurchase our common stock from time to time, in amounts and at prices that we deemed appropriate, subject to market conditions and other considerations. Pursuant to the Share Repurchase Program, we were authorized to effect repurchases using open market purchases, including pursuant to Rule 10b5-1 trading plans, and/or through privately negotiated transactions. The repurchase program did not obligate us to acquire any particular number of shares.

​

On December 4, 2023, we repurchased 1.5 million shares of our common stock for a total purchase price of $12.6 million under the Stock Repurchase Program. Following completion of this repurchase, approximately $7.4 million of

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our common stock remained available for repurchase under the Share Repurchase Program at December 27, 2023. For the year ended December 25, 2024, we repurchased 535,628 shares of common stock under the Share Repurchase Program, using open market purchases, for total consideration of approximately $5.6 million. Following completion of these repurchases, approximately $1.8 million of our common stock remained available for repurchase under the Share Repurchase Program at December 25, 2024.

For the year ended December 31, 2025, we repurchased 163,229 shares of our common stock for a total purchase price of $1.8 million under the Stock Repurchase Program. The repurchase program was terminated on March 31, 2025.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements in accordance with GAAP requires us to make estimates and judgments that affect our reported amounts of assets, liabilities, revenue, and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under current circumstances in making judgments about the carrying value of assets and liabilities that are not readily available from other sources. We evaluate our estimates on an on-going basis. Actual results may differ from these estimates under different assumptions or conditions.

Accounting policies are an integral part of our financial statements. A thorough understanding of these accounting policies is essential when reviewing our reported results of operations and our financial position. Management believes that the critical accounting policies and estimates discussed below involve the most difficult management judgments, due to the sensitivity of the methods and assumptions used. Our significant accounting policies are described in Note 2 “Summary of Significant Accounting Policies” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report.

Revenue Recognition

We record revenue from company-operated restaurants as food and beverage products are delivered to customers and payment is tendered at the time of sale. We present sales net of sales-related taxes and promotional allowances. In the case of gift card sales, we record revenue when the gift card is redeemed by the customer. We record royalties from franchised restaurant sales based on a percentage of restaurant revenues in the period that the related franchised restaurants’ revenues are earned. The initial franchise services, or exclusivity of the development agreements, are not distinct from the continuing rights or services offered during the term of the franchise agreement and are, therefore, treated as a single performance obligation. As such, initial franchise and development fees received, and subsequent renewal fees, are recognized over the franchise, or renewal, term, which is typically 20 years.

The Company offers a loyalty rewards program, which awards a customer points for dollars spent. Customers earn points for each dollar spent and points can be redeemed for multiple redemption options. If a customer does not earn or use points within a one-year period, their account is deactivated and all points expire. When a customer is part of the rewards program, the obligation to provide future discounts related to points earned is considered a separate performance obligation, to which a portion of the transaction price is allocated. The performance obligation related to loyalty points is deemed to have been satisfied, and the amount deferred in the balance sheet is recognized as revenue, when the points are transferred to a reward and redeemed, the reward or points have expired, or the likelihood of redemption is remote. A portion of the transaction price is allocated to loyalty points, if necessary, on a pro-rata basis, based on stand-alone selling price, as determined by menu pricing and loyalty points terms.

Goodwill and Indefinite-Lived Intangible Assets, Net

Intangible assets consist primarily of goodwill and trademarks.

We do not amortize our goodwill and indefinite-lived intangible assets. We perform an annual impairment test for goodwill during the fourth fiscal quarter of each year, or more frequently if impairment indicators arise.

We perform an annual impairment test for indefinite-lived intangible assets during the fourth fiscal quarter of each year, or more frequently if impairment indicators arise. An impairment test consists of either a qualitative assessment or a comparison of the fair value of an intangible asset with its carrying amount. The excess of the carrying amount of an intangible asset over its fair value is its impairment loss.

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These assumptions used in our estimates of fair value are generally consistent with past performance and are also consistent with the projections and assumptions that we use in our forward-looking operating plans. These assumptions are subject to change as a result of changing economic and competitive conditions. Changes in these estimates and assumptions could materially affect our determinations of fair value and impairment.

Upon the sale or refranchising of a restaurant, we evaluate whether there is a decrement of goodwill. The amount of goodwill included in the cost basis of the asset sold is determined based on the relative fair value of the portion of the reporting unit disposed of compared to the fair value of the reporting unit retained. The fair value of the portion of the reporting unit disposed of in a refranchising is determined by reference to the discounted value of the future cash flows expected to be generated by the restaurant and retained by the franchisee, which includes a deduction for the anticipated, future royalties the franchisee will pay us associated with the franchise agreement entered into simultaneously with the refranchising transition. The fair value of the reporting unit retained is based on the price a willing buyer would pay for the reporting unit and includes the value of franchise agreements. As such, the fair value of the reporting unit retained can include expected cash flows from future royalties from those restaurants currently being refranchised, future royalties from existing franchise businesses and company restaurant operations. During fiscal 2025 and fiscal 2024, we determined that there were no indicators of potential impairment of our goodwill and indefinite-lived intangible assets. Accordingly, we did not record any impairment to our goodwill or indefinite-lived intangible assets in fiscal 2025 and fiscal 2024. During fiscal 2023, we determined that, in connection with the sale of 18 units, there were indicators of potential impairment of our goodwill and indefinite lived intangible assets. After completing the impairment analysis, we did not record any decrement to goodwill related to the disposition of restaurants in fiscal 2023.

Property and Equipment and ROU Assets

We state the value of our property and equipment, including primarily leasehold improvements and restaurant equipment, furniture, and fixtures, at cost, minus accumulated depreciation and amortization.

We review our property and equipment and ROU assets for impairment on a restaurant-by-restaurant basis whenever events or changes in circumstances indicate that the carrying value of certain assets may not be recoverable. We consider a triggering event to have occurred related to a specific restaurant if the restaurant’s AUV for the last twelve months are less than a minimum threshold or if consistent levels of undiscounted cash flows for the remaining lease period are less than the carrying value of the restaurant’s assets. If we conclude that the carrying value of certain assets will not be recovered based on expected undiscounted future cash flows, an impairment write-down is recorded to reduce the assets to their estimated fair value. The fair value is measured on a nonrecurring basis using unobservable (Level 3) inputs. There is uncertainty in the projected undiscounted future cash flows used in our impairment review analysis. Further, the projected undiscounted future cash flows require management to develop estimates and assumptions about future revenue transaction growth rates, menu pricing changes, and restaurant operating margins, which are made more uncertain by the impact of the current inflationary pressures on our business. If actual performance does not achieve the projections, we may recognize impairment charges in future periods, and such charges could be material.

Insurance Reserves

We are responsible for workers’ compensation, general, and health insurance claims up to a specified amount. We maintain a reserve for estimated claims both reported and incurred but not reported, based on historical claims experience and other assumptions. In estimating our insurance accruals, we utilize independent actuarial estimates of expected losses, which are based on statistical analyses of historical data. The Company utilizes an actuary to estimate its workers’ compensation reserves and significant assumptions in the estimate included loss development factors, expected loss rates, and weighting of methods. Our actuarial assumptions are closely monitored and adjusted when warranted by changing circumstances. Should claims occur or medical costs increase in greater amounts than we have expected, accruals may not be sufficient, and we may record additional expenses.

Accounting for Lease Obligations

We lease a substantial number of our restaurant properties. At the inception of each lease, we evaluate the property and the lease to determine whether the lease is an operating lease or a finance lease. This lease accounting evaluation may require significant judgment in determining the fair value and useful life of the leased property and the appropriate lease term. The lease term used for the evaluation includes renewal option periods only in instances in which the exercise of the renewal option can be reasonably assured because failure to exercise such an option would result in an economic

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penalty. Such an economic penalty would typically result from our having to abandon a building or fixture with remaining economic value upon vacating a property.

We make significant assumptions and judgments related to determination of whether a contract contains a lease and the discount rate used for the lease. In determining if any of our contracts contain a lease, we make assumptions and judgments related to our ability to direct the use of any assets stated in the contract and the likelihood of renewing any short-term contracts for a period extending past twelve months. We also make significant assumptions and judgments in determining an appropriate discount rate for property leases. These include using a consistent discount rate for a portfolio of leases entered into at varying dates, using the full 20-year term of the lease, excluding any options, and using the total minimum lease payments. We utilize a third-party valuation firm to assist in determining the discount rate, based on the above assumptions. For all other leases, we use the discount rate implicit in the lease, or the Company’s incremental borrowing rate.

Income Taxes

We use the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are determined based on temporary differences between the financial carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the temporary differences are expected to reverse. As of December 31, 2025, we had no federal and less than $0.1 million state net operating loss (“NOL”) carryforwards. These State NOLs expire beginning 2029.

​

A valuation allowance is required when there is significant uncertainty as to whether certain deferred tax assets can be realized. The ability to realize deferred tax assets is dependent upon our ability to generate sufficient taxable income within the carryforward periods provided for in the tax law for each tax jurisdiction. We have considered the following possible sources of taxable income when assessing the realization of our deferred tax assets:

●

future reversals of existing taxable temporary differences;

●

future taxable income or loss, exclusive of reversing temporary differences and carryforwards;

●

tax-planning strategies; and

●

taxable income in prior carryback years.

We will continue to reevaluate the continued need for a valuation allowance. Relevant factors include:

●

current financial performance;

●

our ability to meet short-term and long-term financial and taxable income projections;

●

the overall market environment; and

●

the volatility and trends in the industry in which we operate.

All of the factors that we consider in evaluating treatment of a deferred tax asset valuation allowance involve significant judgment. For example, there are many different interpretations of “cumulative losses in recent years” that can be used. Also, significant judgment is involved in making projections of future financial and taxable income, especially because our financial results are significantly dependent upon industry trends. Any change in our valuation allowance will significantly impact our financial results in the period of that change.

When there are uncertainties related to potential income tax benefits, in order to qualify for recognition, the position we take has to have at least a “more likely than not” chance of being sustained (based on the position’s technical merits) upon challenge by the responsible authorities. The term “more likely than not” means a likelihood of more than 50%. Otherwise, we may not recognize any of the potential tax benefits associated with that position. We recognize a benefit for a tax position that meets the “more likely than not” criterion as the largest amount of tax benefit that is greater than 50% likely to be realized upon its effective resolution. Unrecognized tax benefits involve our judgment regarding the likelihood of a benefit being sustained. The final resolutions of uncertain tax positions could result in adjustments to recorded amounts and affect our results of operations, financial position, and cash flows. However, we anticipate that any such adjustments would not materially impact our financial statements.

​

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​

​

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