Jack in the Box Inc: Form 10-Q for the period ended Apr 13, 2025

GENERAL

The Company’s fiscal year is 52 or 53 weeks ending the Sunday closest to September 30. Fiscal years 2025 and 2024 each include 52 weeks. Our first quarter includes 16 weeks and all other quarters include 12 weeks. All comparisons between 2025 and 2024 refer to the 12 weeks (“quarter”) ended April 13, 2025 and April 14, 2024, respectively, unless otherwise indicated.

For an understanding of the significant factors that influenced our performance during 2025 and 2024, our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the condensed consolidated financial statements and related notes included in this Quarterly Report and our Annual Report on Form 10-K for the fiscal year ended September 29, 2024.

Our MD&A consists of the following sections:

• Overview — a general description of our business.
• Results of operations — an analysis of our condensed consolidated statements of earnings (loss) for the periods presented in our condensed consolidated financial statements.
• Liquidity and capital resources — an analysis of our cash flows, including capital expenditures, share repurchase activity, dividends, and known trends that may impact liquidity.
• Discussion of critical accounting estimates — a discussion of accounting policies that require critical judgments and estimates.
• New accounting pronouncements — a discussion of new accounting pronouncements, dates of implementation and the impact on our consolidated financial position or results of operations, if any.
• Cautionary statements regarding forward-looking statements — a discussion of the risks and uncertainties that may cause our actual results to differ materially from any forward-looking statements made by management.

We have included in our MD&A certain performance metrics that management uses to assess company performance and which we believe will be useful in analyzing and understanding our results of operations. These metrics include:

• Changes in sales at restaurants open more than 18 months (“same-store sales”), systemwide sales, franchised restaurant sales, and average unit volumes (“AUVs”). Same-store sales, restaurant sales, and AUVs are presented for franchised restaurants and on a system-wide basis, which includes company and franchise restaurants. Franchise sales represent sales at franchise restaurants and are revenues of our franchisees. We do not record franchise sales as revenues; however, our royalty revenues, marketing fees and percentage rent revenues are calculated based on a percentage of franchise sales. We believe franchise and system same-store sales, franchised and system restaurant sales, and AUV information are useful to investors as they have a direct effect on the Company’s profitability.

Same-store sales, systemwide sales, franchised restaurant sales, and AUVs are not measurements determined in accordance with GAAP and should not be considered in isolation, or as an alternative to earnings from operations, or other similarly titled measures of other companies.

OVERVIEW

Our Business

Founded in 1951, Jack in the Box Inc. (the “Company”) operates and franchises Jack in the Box® and Del Taco® quick-service restaurants. As of April 13, 2025, we operated and franchised 2,183 Jack in the Box quick-service restaurants, primarily in the western and southern United States, including two in Guam and two in Mexico, and 591 Del Taco quick-service restaurants across 17 states.

We derive revenue from retail sales at company-operated restaurants and rental revenue, royalties (based upon a percent of sales), franchise fees and contributions for advertising and other services from franchisees.

On April 23, 2025, the Company announced a multi-faceted plan, which included exploring strategic alternatives for the Del Taco brand and the possible divestiture of that business. The plan also included selling a select number of owned real estate holdings, as well as discontinuing its dividend, and directing a majority of those funds toward paying down debt. Additionally, the plan discussed a closure program, which is projected to result in the closure of approximately 150-200 underperforming Jack in the Box restaurants.

RESULTS OF OPERATIONS

The following tables summarize changes in same-store sales for Jack in the Box and Del Taco company-operated, franchised, and system restaurants:

The following tables summarize year-to-date changes in the number and mix of company and franchise restaurants for our two brands:

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The following tables summarize restaurant sales for company-operated, franchised, and systemwide sales for our two brands (in thousands):

(1) Franchised restaurant sales represent sales at franchised restaurants and are revenues of our franchisees. System sales include company and franchised restaurant sales. We do not record franchised sales as revenues; however, our royalty revenues, marketing fees and percentage rent revenues are calculated based on a percentage of franchised sales. We believe franchised and system restaurant sales information is useful to investors as they have a direct effect on the Company's profitability.

Jack in the Box Brand

Company Restaurant Operations

The following table presents company restaurant sales and costs as a percentage of the related sales (dollars in thousands):

Company restaurant sales decreased $3.8 million, or 3.9% for the quarter, and $2.1 million, or 0.9% year-to-date, compared to the prior year. The following table presents the approximate impact of changes in AUVs and the number of restaurants on company restaurant sales (in millions):

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Same-store sales at company-operated restaurants decreased 4.0% in the quarter and by 1.9% year-to-date compared to a year ago. The following table summarizes the change versus a year ago:

(1) Includes price increases of approximately 3.6% in the quarter and 4.5% year-to-date.

Food and packaging costs, as a percentage of company restaurant sales, decreased 1.0% in the quarter, and 2.6% year-to-date compared to the prior year, due mainly to a 1.0% and 2.4% benefit, respectively, from a new beverage contract with funding retroactive to January 1, 2024, the majority of which is non-recurring, as well as menu price increases, partially offset by commodity inflation and unfavorable menu item mix. Commodity inflation was 3.4% in the quarter, and 3.1% year-to-date, with the greatest impacts for the quarter in beef and poultry, and the greatest impacts for the year-to-date period in beef, beverages and cheese.

Payroll and employee benefit costs, as a percentage of company restaurant sales, increased 3.2% in the quarter, and 2.8% year-to-date compared to the prior year. During the quarter and on a year-to-date basis, increases in wage inflation were partially offset by a decrease in incentive compensation due to lower achievement levels compared to the prior year. Labor inflation was approximately 10.6% in the quarter and 12.9% year-to-date, primarily due to the wage increases required in California effective April 1, 2024 under AB 1228.

Occupancy and other costs, as a percentage of company restaurant sales, increased 1.7% in the quarter, and 1.4% year-to-date compared to the prior year primarily due to higher rent, utilities, and other operating costs including delivery fees.

Jack in the Box Franchise Operations

The following table presents franchise revenues and costs in each period and other information we believe is useful in analyzing the change in franchise operating results (dollars in thousands):

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Franchise rental revenues decreased $1.7 million, or 2.1% in the quarter, and $1.5 million, or 0.8% year-to-date, compared to the prior year. For the quarter, the decrease was primarily due to lower percentage rent of $4.3 million, partially offset by lease termination fees of $3.4 million. The decrease year-to-date was primarily due to lower percentage rent of $6.0 million, partially offset by lease termination fees of $3.4 million and higher pass through property tax revenue of $1.2 million.

Franchise royalties and other decreased $1.8 million, or 3.8% in the quarter, and $1.5 million, or 1.4% year-to-date compared to the prior year primarily due to lower royalty income driven by lower sales.

Franchise contributions for advertising and other services revenues decreased $3.2 million, or 6.4% in the quarter and $2.7 million, or 2.3% year-to-date, as compared to the prior year. The decrease in the quarter is primarily due to lower marketing contributions of $2.3 million in connection with lower sales, and a decrease in digital fees of $0.9 million. On a year-to-date basis, the decrease is primarily due to lower marketing contributions of $2.0 million in connection with lower sales, as well as a decrease in digital fees of $0.7 million.

Franchise occupancy expenses, primarily rent, increased $0.3 million, or 0.6% in the quarter and $3.0 million, or 2.6% year-to-date compared to the prior year. On a year-to-date basis, this was primarily due to higher pass through property tax expense and common area maintenance costs of $1.8 million and higher operating lease costs of $1.4 million.

Franchise support and other costs increased $0.4 million, or 16.0% and was essentially flat year-to-date compared to the prior year.

Franchise advertising and other service expenses decreased $4.0 million, or 7.6% in the quarter, and $4.9 million or 4.0% year-to-date compared to the prior year. The decrease is primarily due to lower sales driving lower marketing expenses, as well as lower franchise IT support costs and digital processing fees.

Del Taco Brand

Company Restaurant Operations

The following table presents company restaurant sales and costs as a percentage of the related sales (dollars in thousands):

Company restaurant sales decreased $20.8 million or 30.5% in the quarter and $45.1 million or 28.2% year-to-date compared to the prior year primarily due to the refranchising of 47 company-operated restaurants since the second quarter of 2024 and decreases in same-store sales compared to the prior year. The following table presents the approximate impact of changes in AUVs and the number of restaurants on company restaurant sales for each respective period on company restaurant sales (in millions):

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Same-store sales at company-operated restaurants decreased 1.7% in the quarter and 2.2% year-to-date compared to a year ago. The following table summarizes the change versus a year ago:

(1) Includes price increases of approximately 6.6% in the quarter and 7.2% year-to-date.

Food and packaging costs, as a percentage of company restaurant sales, decreased 1.0% in the quarter and 1.5% year-to-date. The decrease for the quarter compared to the prior year was primarily due to menu price increases and favorable beverage funding, partially offset by commodity inflation. For the year-to date period, the decrease was primarily due to menu price increases and favorable beverage funding, partially offset by commodity inflation and unfavorable menu item mix. Commodity inflation was 5.7% in the quarter and 3.6% year-to-date. The greatest impacts on both the quarter and year-to-date inflation was seen in beef, poultry and cheese.

Payroll and employee benefit costs, as a percentage of company restaurant sales, increased 3.3% in the quarter and 3.1% year-to-date, compared to the prior year due to labor inflation, which was 11.7% in the quarter and 13.8% year-to-date.

Occupancy and other costs, as a percentage of company restaurant sales, increased 1.6% in the quarter and 1.2% year-to-date compared to the prior year primarily due to higher utilities as well as higher maintenance and repair costs.

Del Taco Franchise Operations

The following table presents franchise revenues and costs in each period and other information we believe is useful in analyzing the change in franchise operating results (dollars in thousands):

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Franchise rental revenues increased $2.2 million, or 34.9%, in the quarter and $5.3 million, or 38.4% year-to-date compared to the prior year primarily due to higher rental income and property tax revenue resulting from new subleases related to the 47 restaurants refranchised since the second quarter of 2024.

Franchise royalties and other increased $0.6 million, or 8.5%, in the quarter and $1.1 million, or 6.1% year-to-date, compared to the prior year primarily due to higher franchise restaurant sales resulting from the 47 restaurants refranchised since the second quarter of 2024.

Franchise contributions for advertising and other services revenues decreased $0.1 million, or 2.1%, in the quarter and $0.2 million, or 1.1% year-to-date compared to the prior year primarily due to lower IT support revenue, partially offset by increased franchise marketing contributions resulting from the 47 restaurants refranchised since the second quarter of 2024.

Franchise occupancy expenses, primarily rent, increased $2.2 million, or 34.7%, in the quarter and $5.6 million, or 41.3% year-to-date, compared to the prior year primarily due to higher operating lease costs in the current year from refranchising.

Franchise support and other costs increased $0.6 million, or 54.6%, in the quarter and $1.1 million, or 41.3% year-to-date compared to the prior year primarily due to higher bad debt expense and franchise support costs resulting from the 47 restaurants refranchised since the second quarter of 2024.

Franchise advertising and other service expenses increased $0.2 million, or 2.6%, in the quarter and decreased $0.1 million, or 0.8% year-to-date, compared to the prior year. For both the quarter and year-to-date periods, there were increases in marketing expense resulting from the 47 restaurants refranchised since the second quarter of 2024. For the year-to-date period, these were offset by lower expenses from equipment sales.

Company-Wide Results

Depreciation and Amortization

Depreciation and amortization for the quarter ended April 13, 2025 decreased $1.7 million in the quarter and $1.9 million year-to-date compared to the prior year period primarily due to the 47 Del Taco restaurants refranchised since a year ago, as well as certain Jack in the Box franchise assets becoming fully depreciated. These decreases were partially offset by increases for new technology assets and new company operated restaurants.

Selling, General and Administrative (“SG&A”) Expenses

The following table presents the amounts for SG&A expenses in each period (in thousands):

Advertising costs mainly represent company contributions to our marketing funds and are generally determined as a percentage of company-operated restaurant sales. Advertising costs increased $0.1 million in the quarter and $0.3 million on a year-to-date basis as compared to the prior year, primarily due to an increase in expenses related to new markets and third party digital sponsorships, partially offset by a decrease in company-operated restaurant sales in the current year.

Incentive compensation decreased by $1.0 million in the quarter and $1.0 million on a year-to-date basis as compared to the prior year, primarily due to lower achievement levels compared to the prior year for the Company’s annual incentive plan.

Share-based compensation decreased by $2.8 million in the quarter and $4.0 million on a year-to-date basis as compared to the prior year, primarily due to current year forfeitures and lower achievement levels for performance-based equity awards.

The cash surrender value of our company-owned life insurance (“COLI”) policies, net of changes in our non-qualified deferred compensation obligation supported by these policies, are subject to market fluctuations. The changes in market values had an unfavorable impact of $2.6 million in the quarter and $8.9 million on a year-to-date basis, compared to the prior year.

Litigation matters increased $0.3 million in the quarter and $0.5 million on a year-to-date basis as compared to the prior year, primarily due to the timing of litigation developments. Refer to Note 14, Commitments and Contingencies, in the condensed consolidated financial statements for additional information related to the legal matters.

Impairment of Goodwill and Intangible Assets

As of the March 16, 2025 testing date, the balance of the Del Taco reporting unit goodwill was $25.3 million. During the second quarter of 2025, the Company identified triggering events that indicated the goodwill allocated to the Del Taco reporting unit might be impaired. The triggering events related to i) continued negative trend in Del Taco same store sales, ii) unfavorable changes in the economic environment specifically impacting our industry, including inflation and interest rates, iii) the potential for a divestment of Del Taco, and iv) a sustained lower share price. As a result, the Company performed a quantitative test over the Del Taco reporting unit, noting that the fair value of the reporting unit was less than the carrying value, which resulted in an impairment of goodwill of $25.3 million.

Additionally, as a result of the quantitative test over the Del Taco reporting unit, the Company also impaired the trademark asset associated with the Del Taco reporting unit in the amount of $177.9 million.

Other Operating Expenses, Net

Other operating expenses, net is comprised of the following (in thousands):

Other operating expenses, net decreased $1.1 million in the quarter and $2.7 million on a year-to-date basis. For the quarter, the decrease was primarily due to the decrease of integration and strategic initiatives of $4.0 million, partially offset by $1.1 million of restaurant impairment charges. For the year-to-date period, the decrease was primarily due to the decrease of integration and strategic initiatives of $8.2 million, partially offset by a $2.4 million acquisition gain in the prior year and $1.9 million of restaurant impairment charges in the current year.

Gains and Losses on the Sale of Company-Operated Restaurants

For the year-to-date period in 2025, the Company sold 13 Del Taco company-operated restaurants, for which the Company recognized a net gain on the sale of company-operated restaurants of $2.8 million. For the year-to-date period in 2024, the net loss on the sale of company-operated restaurants of $1.3 million, was comprised of a $2.2 million impairment of assets held for sale related to a Del Taco refranchising transaction, partially offset by additional proceeds received in connection with the extension of franchise agreements and the resolution of certain contingencies related to the sale of restaurants in prior years.

Refer to Note 3, Summary of Refranchisings and Assets Held for Sale, of the notes to the condensed consolidated financial statements for additional information regarding these transactions.

Interest Expense, Net

Interest expense, net is comprised of the following (in thousands):

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Interest expense, net, decreased $0.2 million in the quarter and $0.3 million year-to-date as compared to the prior year. This decrease was primarily due to lower average borrowings, resulting in a decrease of $0.3 million and $0.7 million, respectively, in interest expense compared to the prior year. Partially offsetting this was a decrease in interest income of $0.4 million year-to-date due to lower investment balances compared to the prior year.

Income Taxes

For the second quarter and year-to-date fiscal year 2025, the Company recorded income tax benefits of $34.6 million and $20.2 million, respectively, resulting in effective tax rates of 19.5% and 15.7%, respectively. The effective tax rates for such periods differed from the U.S. statutory tax rate primarily due to non-deductible goodwill impairment and non-deductible losses from the market performance of insurance products used to fund certain non-qualified retirement plans.

For the second quarter and year-to-date fiscal year 2024, the Company recorded income tax expenses of $9.0 million and $23.2 million, respectively, resulting in effective tax rates of 26.5% and 26.7%, respectively. The effective tax rates for such periods differed from the U.S. statutory tax rate primarily due to non-deductible goodwill attributable to refranchising transactions and non-deductible officers’ compensation substantially offset by non-taxable gains from the market performance of insurance products used to fund certain non-qualified retirement plans.

LIQUIDITY AND CAPITAL RESOURCES

General

Our primary sources of short-term and long-term liquidity and capital resources are cash flows from operations and borrowings available under our credit facility. Our cash requirements consist principally of working capital, general corporate needs, capital expenditures, income tax payments, debt service requirements, franchise tenant improvement allowance and incentive distributions, and obligations related to our benefit plans. We generally use available cash flows from operations to invest in our business, service our debt obligations and repurchase shares of our common stock.

As of April 13, 2025, the Company had $45.6 million of cash and restricted cash on its consolidated balance sheet and available borrowings of $96.5 million under our $150.0 million Variable Funding Notes. The Company continually assesses the optimal sources and uses of cash for our business. We review our balance sheet for any undervalued assets and pursue opportunities for capital sources, including the sale of our owned Jack in the Box properties and refranchising, primarily for Del Taco in the near term.

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

Cash Flows

The table below summarizes our cash flows from continuing operations (in thousands):

Operating Activities. Operating cash flows increased $74.9 million compared with a year ago. This is primarily due to a favorable change in working capital of $92.1 million, partially offset by lower net income, when adjusted for non-cash items, of $17.2 million. The favorable change in working capital is primarily a result of $50.3 million paid in 2024 for fiscal 2023 income tax payments deferred in connection with the Southern California winter storm disaster declaration, $35.0 million received in the current year in connection with the a new supply chain contract, and $25.5 million paid in 2024 in connection with the Torrez settlement.

Investing Activities. Cash flows used in investing activities decreased by $23.4 million compared with a year ago primarily due to higher proceeds from the sale of property of $13.6 million, higher proceeds from the sale of Del Taco restaurants to franchisees of $3.7 million in the current year, death benefit proceeds received of $3.3 million in the current year, lower purchases of assets intended for sale or leaseback of $3.2 million in the current year, and lower purchases of property and equipment of $1.3 million in the current year.

Capital Expenditures — The composition of capital expenditures in each period follows (in thousands):

Capital expenditures decreased $1.3 million primarily due to a decrease in corporate technology spending due to the completion of our new enterprise resource planning software implementation last year as well as a decrease in restaurant facility expenditures. These decreases were partially offset by an increase in restaurant information technology related to the rollout of a new POS system for Jack in the Box company restaurants and investments in digital and other restaurant technology enhancements.

Sale of Company-Operated Restaurants — The following table details proceeds received in connection with our refranchising activities in each period (dollars in thousands):

For further information, see Note 3, Summary of Refranchisings and Assets Held for Sale, in the notes to the condensed consolidated financial statements.

Financing Activities. Cash flows used in financing activities decreased by $30.1 million compared with a year ago. The change is primarily due to a $35.0 million decrease in stock repurchases compared with a year ago, partially offset by a $6.0 million repayment in the current year on the Variable Funding Notes.

Repurchases of common stock — The Company repurchased 0.1 million shares of its common stock in fiscal 2025 for an aggregate cost of $5.0 million. As of April 13, 2025, there was $175.0 million remaining under share repurchase programs authorized by the Board of Directors which does not expire.

Dividends — Up through April 13, 2025, the Board of Directors declared two cash dividend of $0.44 per common share totaling $16.7 million. Jack in the Box announced on April 23, 2025, that it will discontinue its dividend effective immediately and direct a majority of those funds toward leverage reduction.

Securitized Refinancing Transaction — On February 11, 2022, the Company completed the sale of $550.0 million of its Series 2022-1 3.445% Fixed Rate Senior Secured Notes, Class A-2-I (the “Class A-2-I Notes”) and $550.0 million of its Series 2022-1 4.136% Fixed Rate Senior Secured Notes, Class A-2-II (the “Class A-2-II Notes” and, together with the Class A-2-I Notes, the “2022 Notes”). Interest payments on the 2022 Notes are payable on a quarterly basis. The anticipated repayment dates of the 2022 Class A-2-I Notes and the Class A-2-II Notes will be February 2027 and February 2032, respectively, unless earlier prepaid to the extent permitted under the indenture that governs the 2022 Notes. The anticipated repayment dates of the existing 2019-1 Class A-2-II Notes and the Class A-2-III Notes are August 2026 and August 2029, respectively.

The Company also entered into a revolving financing facility of Series 2022-1 Variable Funding Senior Secured Notes (the “Variable Funding Notes”), which permits borrowings up to a maximum of $150.0 million, subject to certain borrowing conditions, a portion of which may be used to issue letters of credit. As of April 13, 2025, we did not have any outstanding borrowings and had available borrowing capacity of $96.5 million under our Variable Funding Notes, net of letters of credits issued of $53.5 million.

The 2022 Notes were issued in a privately placed securitization transaction pursuant to which certain of the Company’s revenue-generating assets, consisting principally of franchise-related agreements, real estate assets, and intellectual property and license agreements for the use of intellectual property, are held by the Master Issuer and certain other limited-purpose, bankruptcy remote, wholly owned indirect subsidiaries of the Company that act as Guarantors of the Notes and that have pledged substantially all of their assets, excluding certain real estate assets and subject to certain limitations, to secure the Notes. The 2022 Notes are subject to the same covenants and restrictions as the Series 2019-1 Notes.

The quarterly principal payment on the Class A-2 Notes may be suspended when the specified leverage ratio, which is a measure of outstanding debt to earnings before interest, taxes, depreciation, and amortization, adjusted for certain items (as defined in the Indenture), is less than or equal to 5.0x. Exceeding the leverage ratio of 5.0x does not violate any covenant related to the Class A-2 Notes. Subsequent to closing the issuance of the 2022 Notes, the Company has had a leverage ratio of greater than 5.0x and, accordingly, the Company resumed making the scheduled amortization payments on its 2022 Notes and Series 2019-1 Notes beginning in the second quarter of 2022.

Restricted cash — In accordance with the terms of the Indenture, certain cash accounts have been established with the Indenture trustee for the benefit of the note holders and are restricted in their use. As of April 13, 2025, the Company had restricted cash of $29.8 million, which primarily represented cash collections and cash reserves held by the trustee to be used for payments of interest and commitment fees required for the Class A-1 and A-2 Notes.

Covenants and restrictions — The Notes are subject to a series of covenants and restrictions customary for transactions of this type, including (i) that the Master Issuer maintains specified reserve accounts to be used to make required payments in respect of the Notes, (ii) provisions relating to optional and mandatory prepayments and the related payment of specified amounts, including specified make-whole payments in the case of the Class A-2 Notes under certain circumstances, (iii) certain indemnification payments in the event, among other things, the assets pledged as collateral for the Notes are in stated ways defective or ineffective and (iv) covenants relating to recordkeeping, access to information and similar matters. The Notes are also subject to customary rapid amortization events provided for in the Indenture, including events tied to failure to maintain stated debt service coverage ratios, the sum of gross sales for specified restaurants being below certain levels on certain measurement dates, certain manager termination events, an event of default, and the failure to repay or refinance the Class A-2 Notes on the applicable scheduled maturity date. The Notes are also subject to certain customary events of default, including events relating to non-payment of required interest, principal, or other amounts due on or with respect to the Notes, failure to comply with covenants within certain time frames, certain bankruptcy events, breaches of specified representations and warranties, failure of security interests to be effective, and certain judgments. As of April 13, 2025, we were in compliance with all of our debt covenant requirements and were not subject to any rapid amortization events.

Revolving credit facility — In 2022, Del Taco had entered into a syndicated revolving credit facility with an aggregate principal amount of up to $75.0 million. The credit facility matured on February 28, 2025, and was not renewed.

DISCUSSION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Critical accounting policies and estimates are those that we believe are most important for the portrayal of the Company’s financial condition and results, and that require management’s most subjective and complex judgments. Judgments and uncertainties regarding the application of these policies may result in materially different amounts being reported under various conditions or using different assumptions. There have been no material changes to the critical accounting policies and estimates previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended September 29, 2024.

NEW ACCOUNTING PRONOUNCEMENTS

Refer to Note 1, Basis of Presentation, of the notes to condensed consolidated financial statements.

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of the federal securities laws. Any statements contained herein that are not historical facts may be deemed to be forward-looking statements. Forward-looking statements may be identified by words such as “anticipate,” “assume,” “believe,” “estimate,” “expect,” “forecast,” “goals,” “guidance,” “intend,” “plan,” “project,” “may,” “will,” “would”, “should” and similar expressions. These statements are based on management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate. These estimates and assumptions involve known and unknown risks, uncertainties, and other factors that are in some cases beyond our control. Factors that may cause our actual results to differ materially from any forward-looking statements include, but are not limited to:

• Changes in the availability of and the cost of labor could adversely affect our business.
• Changes in consumer confidence and declines in general economic conditions could negatively impact our financial results.
• Increases in food and commodity costs could decrease our profit margins or result in a modified menu, which could adversely affect our financial results.
• Failure to receive scheduled deliveries of high-quality food ingredients and other supplies could harm our operations and reputation.
• Inability to attract, train and retain top-performing personnel could adversely impact our financial results or business.
• Our business could be adversely affected by increased labor costs.
• Unionization activities or labor disputes may disrupt our operations and affect our profitability.
• Our insurance may not provide adequate levels of coverage against claims.
• We face significant competition in the food service industry and our inability to compete may adversely affect our business.
• Changes in demographic trends and in customer tastes and preferences could cause sales and the royalties we receive from franchisees to decline.
• Negative publicity relating to our business or industry could adversely impact our reputation.
• We may not have the same resources as our competitors for marketing, advertising and promotion.
• We may be adversely impacted by severe weather conditions, natural disasters, terrorist acts or civil unrest that could result in property damage, injury to employees and staff, and lost restaurant sales.
• Food safety and food-borne illness concerns may have an adverse effect on our business by reducing demand and increasing costs.
• We may not achieve our development goals.
• Our business and Del Taco’s business may not be integrated successfully, or such integration may be more difficult, time consuming, or costly than expected. Operating costs, customer loss, and business disruptions, including difficulties maintaining relationships with employees, customers, suppliers or vendors, may be greater than expected.
• Our highly franchised business model presents a number of risks, and the failure of our franchisees to operate successful and profitable restaurants could negatively impact our business.
• We are subject to financial and regulatory risks associated with our owned and leased properties and real estate development projects.
• We have a limited number of suppliers for our major products and rely on a distribution network with a limited number of distribution partners for the majority of our national distribution program. If our suppliers or distributors are unable to fulfill their obligations under their contracts, it could harm our operations.
• Increasing regulatory and legal complexity may adversely affect restaurant operations and our financial results.
• Governmental regulation may adversely affect our existing and future operations and results, including by harming our ability to profitably operate our restaurants.
• The proliferation of federal, state, and local regulations increases our compliance risks, which in turn could adversely affect our business.
• Legislation and regulations regarding our products and ingredients, including the nutritional content of our products, could impact customer preferences and negatively impact our financial results.
• We may not be able to adequately protect our intellectual property, which could harm the value of our brand and adversely affect our business.
• We are subject to increasing legal complexity and may be subject to claims or lawsuits that are costly to defend and could result in our payment of substantial damages or settlement costs.
• If we fail to maintain an effective system of internal controls, we may not be able to accurately determine our financial results or prevent fraud. As a result, the Company’s stockholders could lose confidence in our financial results, which would harm our business and the value of the Company’s common shares.
• Changes in tax laws, interpretations of existing tax law, or adverse determinations by tax authorities could adversely affect our income tax expense and income tax payments.
• We may be subject to risk associated with disagreements with key stakeholders, such as franchisees.
• Actions of activist stockholders could cause us to incur substantial costs, divert management’s attention and resources, and have an adverse effect on our business.
• We are subject to the risk of cybersecurity breaches, intrusions, data loss, or other data security incidents.
• We are subject to risks associated with our increasing dependence on digital commerce platforms and technologies to maintain and grow sales, and we cannot predict the impact that these digital commerce platforms and technologies, other new or improved technologies or alternative methods of delivery may have on consumer behavior and our financial results.
• We are dependent on information technology and digital service providers and any material failure, misuse or interruption of our computer systems, supporting infrastructure, consumer-facing digital capabilities or social media platforms could adversely affect our business.
• The securitized debt instruments issued by certain of our wholly-owned subsidiaries have restrictive terms, and any failure to comply with such terms could result in default, which could harm the value of our brand and adversely affect our business.
• We have a significant amount of debt outstanding. Such indebtedness, along with the other contractual commitments of our Company or its subsidiaries, could adversely affect our business, financial condition and results of operations, as well as the ability of certain of our subsidiaries to meet debt payment obligations.
• The securitization transaction documents impose certain restrictions on our activities or the activities of our subsidiaries, and the failure to comply with such restrictions could adversely affect our business.

These and other factors are identified and described in more detail in our filings with the Securities and Exchange Commission, including, but not limited to: the “Discussion of Critical Accounting Estimates,” and other sections in this Form 10-Q and the “Risk Factors” section of our most recent Annual Report on Form 10-K for the fiscal year ended September 29, 2024 (“Form 10-K”). These documents may be read free of charge on the SEC’s website at www.sec.gov (http://www.sec.gov). Potential investors are urged to consider these factors, more fully described in our Form 10-K, carefully in evaluating any forward-looking statements, and are cautioned not to place undue reliance on the forward-looking statements. All forward-looking statements are made only as of the date issued, and we do not undertake any obligation to update any forward-looking statements.

There have been no material changes in our quantitative and qualitative market risks set forth in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended September 29, 2024.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Based on an evaluation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, as amended), as of the end of the Company’s quarter ended April 13, 2025, the Company’s Chief Executive Officer and Chief Financial Officer (its principal executive officer and principal financial officer, respectively) have concluded that the Company’s disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended April 13, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

There is no information required to be reported for any items under Part II, except as follows:

When evaluating our business and our prospects, you should consider the risks and uncertainties described under Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year ended September 29, 2024, which we filed with the SEC on November 20, 2024, as updated in this Item 1A. You should also consider the risks and uncertainties discussed under the heading “Cautionary Statements Regarding Forward-Looking Statements” in Item 2 of this Quarterly Report on Form 10-Q. You should also refer to the other information set forth in this Quarterly Report and in our Annual Report on Form 10-K for the fiscal year ended September 29, 2024, including our financial statements and the related notes. These risks and uncertainties are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently consider immaterial may also impair our business operations. If any of the risks or uncertainties actually occur, our business and financial results could be harmed. In that case, the market price of our common stock could decline.