Denny'S Corp

DENNCIK 0000852772 · Every Form 4 filed by insiders at this issuer. See financials →

Annual report (10-K)

Latest 10-K filed Feb 24, 2025. Sentiment + YoY language diff vs prior year. Read sections →

Signal:Neutral

Risk Factors:tone -0.0401Δ-0.000596% similar+14/-11 ¶

MD&A:tone -0.0095Δ-0.001790% similar+53/-50 ¶

Sentiment via Loughran-McDonald lexicon · YoY diff via Jaccard similarity + paragraph set difference.

Recent 8-K announcements

Per-item disclosure feed. Item 2.02 is the earnings release.

Jan 16, 2026no items parsed Jan 13, 2026no items parsed Jan 5, 2026no items parsed Nov 4, 2025no items parsed Nov 4, 2025no items parsed

YoY shift: Neutral

Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.11pp more bearish than last year's.

Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.

Tone shift by section

The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.

Risk Factors

-0.05pp

Flat

Net-tone change vs last year's 10-K.

MD&A

-0.17pp

Flat

Net-tone change vs last year's 10-K.

Per-snippet highlights

Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.

Language change vs prior 10-K

Risk Factors (Item 1A) - words with the biggest YoY frequency increase

Negative rising

adverse+1
inability+1
challenges+1
disasters+1
closures+1

Positive rising

No words rose this year.

Risk Factors (Item 1A)

4,937 words

Item 1A. Risk Factors

Various risks and uncertainties could affect our business. Any of the risk factors described below or elsewhere in this report or our other filings with the SEC could have a material and adverse impact on our business, financial condition and results of operations. In any such event, the trading price of our common stock could decline. It is not possible to predict or identify all risk factors. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also impair our business operations.

Risks Related to Macroeconomic Conditions

A decline in general economic conditions could adversely affect our financial results.

Consumer spending habits, including discretionary spending on dining at restaurants such as ours, are affected by many factors including:

• prevailing economic conditions, including interest rates;

• energy costs, especially gasoline prices;

• levels of employment;

• salaries and wage rates, including tax rates;

• other taxes;

• increased uncertainty related to tariffs;

• impacts on food prices, especially in regards to egg prices, resulting from the most recent outbreak of avian flu; and

• consumer confidence.

Weakness or uncertainty regarding the economy, both domestic and international, as a result of reactions to consumer credit availability, increasing energy prices, inflation, increasing interest rates, unemployment, pandemics such as the COVID-19 pandemic and other outbreaks of illness, such as a higher than average rate of influenza, adverse weather conditions, natural disasters, war, terrorist activity or other unforeseen events could adversely affect consumer spending habits, which may result in lower operating revenue.

Risks Related to Restaurant Operations and the Restaurant Industry

The restaurant business is highly competitive, and if we are unable to compete effectively, our business will be adversely affected.

Each of our company and franchised restaurants competes with a wide variety of restaurants ranging from national and regional restaurant chains to locally owned restaurants. The following are important aspects of competition:

• restaurant location;

• advantageous commercial real estate suitable for restaurants;

• number and location of competing restaurants;

• attractiveness and repair and maintenance of facilities;

• ability to develop and support evolving technology to deliver a consistent and compelling guest experience;

• food quality, new product development and value;

• dietary trends, including nutritional content;

• training, courtesy and hospitality standards;

• ability to attract and retain high quality staff;

• quality and speed of service; and

• the effectiveness of marketing and advertising programs, including the effective use of social media platforms and digital marketing initiatives.

If we are unable to compete effectively, we could experience lower demand for our products, downward pressure on prices, reduced margins, a loss of market share, reduced franchisee profitability and an inability to attract qualified franchisees in the future, all of which could lead to an increase in restaurant closures or an inability of current and future franchisees to open new restaurants.

Our returns and profitability may be negatively impacted by a number of factors, including those described below.

Food service businesses and the performance of company and franchised restaurants may be materially and adversely affected by factors such as:

• consumer preferences, including nutritional and dietary concerns;

• consumer spending habits;

• global, national, regional and local economic conditions;

• demographic trends;

• traffic patterns;

• the type, number and location of competing restaurants; and

• the ability to renew leased properties on commercially acceptable terms, if at all.

Dependence on frequent deliveries of fresh produce and other food products subjects food service businesses to the risk that shortages or interruptions in supply caused by adverse weather, food safety warnings, animal disease outbreak or other conditions beyond our control could adversely affect the availability, quality and cost of ingredients. Our inability to effectively manage supply chain risk could increase our costs and limit the availability of products critical to restaurant operations.

In addition, the food service industry in general, and our results of operations and financial condition in particular, may be adversely affected by unfavorable trends or developments, such as:

• volatility in certain commodity markets;

• increased food costs;

• health concerns arising from food safety issues and other food-related pandemics, outbreaks of flu or viruses, such as COVID-19, avian flu (such as the outbreak ongoing in early 2025) or other diseases;

• increased energy costs;

• labor and employee benefits costs (including increases in minimum hourly wage, employment tax rates, health care costs and workers’ compensation costs);

• regional weather conditions;

• the availability of experienced management and hourly employees; and

• other general inflation impacts.

Operating results that are lower than our current estimates may cause us to incur impairment charges on certain long-lived assets and potentially close certain restaurants.

The financial performance of our franchisees can negatively impact our business.

As we are heavily franchised, our financial results are contingent upon the operational and financial success of our franchisees. We receive royalties, advertising contributions and, in some cases, lease payments from our franchisees. While our franchise agreements are designed to require our franchisees to maintain brand consistency, the significant percentage of franchise-operated restaurants may expose us to risks not otherwise encountered if we maintained ownership and control of the restaurants. If our franchisees do not successfully operate their restaurants in a manner consistent with our standards, or if customers have negative experiences due to issues with food quality or operational execution at our franchised locations, our brands could be harmed, which in turn could negatively impact our business. Additional risks include:

• franchisee defaults on their obligations to us arising from financial or other difficulties encountered by them, such as the inability to pay financial obligations including royalties, rent on leases on which we retain contingent liability, and certain loans;

• limitations on enforcement of franchisee obligations due to bankruptcy or insolvency proceedings;

• the inability to participate in business strategy changes due to financial constraints;

• failure to operate restaurants in accordance with required standards, including food quality and safety; and

• impacts of the financial performance of other businesses operated by franchisees on the overall financial performance and condition of the franchisee.

If a significant number of franchisees become financially distressed, it could harm our operating results. For 2024, our ten largest franchisees accounted for approximately 38% of our total franchise and license revenue. The balance of our franchise revenue was derived from the remaining 218 Denny’s and Keke’s franchisees.

The locations of company and franchised restaurants may cease to be attractive as demographic patterns change.

The success of our company and franchised restaurants is significantly influenced by location. Current locations may not continue to be attractive as demographic patterns change. It is possible that economic or other conditions where restaurants are located could decline in the future, potentially resulting in reduced sales at those locations.

Food safety and quality concerns may negatively impact our business and profitability.

Incidents or reports of foodborne or waterborne illness, or other food safety issues, food contamination or tampering, employee hygiene and cleanliness failures, improper employee conduct, or presence of communicable disease at our restaurants or suppliers could lead to product liability or other claims. Such incidents or reports could negatively affect our brands and reputation, and a decrease in customer traffic resulting from these reports could negatively impact our revenues and profits. Similar incidents or reports occurring at other restaurant brands unrelated to us could likewise create negative publicity, which could negatively impact consumer behavior towards us. In addition, if a regional or global health pandemic occurs, depending upon its location, duration and severity, our business could be severely affected.

We rely on our domestic and international vendors, as do our franchisees, to provide quality ingredients and to comply with applicable laws and industry standards. A failure of one of our domestic or international vendors to meet our quality standards, or meet domestic or international food industry standards, could result in a disruption in our supply chain and negatively impact our brand and our business and profitability. Our inability to manage an event such as a product recall or product related litigation could also cause our results to suffer.

Unfavorable publicity, or a failure to respond effectively to adverse publicity, could harm the reputations of our brands.

Multi-unit food service businesses such as ours can be materially and adversely affected by widespread negative publicity of any type, including food safety, outbreak of flu or viruses or other health concerns, criminal activity, guest discrimination, harassment, employee relations or other operating issues. The increasing use of social media platforms has increased the speed and scope of unfavorable publicity and could hinder our ability to quickly and effectively respond to such reports. Regardless of whether the allegations or complaints are accurate or valid, negative publicity relating to a particular restaurant or a limited number of restaurants could adversely affect public perception of any of our brands.

A decline in general economic conditions could adversely affect our financial results.

Consumer spending habits, including discretionary spending on dining at restaurants such as ours, are affected by many factors including:

• prevailing economic conditions, including interest rates;

• energy costs, especially gasoline prices;

• inflationary pressures, including grocery prices;

• levels of employment;

• salaries and wage rates, including tax rates; and

• consumer confidence.

Weakness or uncertainty regarding the economy, both domestic and international, as a result of reactions to consumer credit availability, increasing energy prices, inflation, increasing interest rates, unemployment, war, terrorist activity or other unforeseen events could adversely affect consumer spending habits, which may result in lower operating revenue.

If we fail to recruit, develop and retain talented employees, our business could suffer.

Our future success significantly depends on the continued services and performance of our key management personnel. Our future performance will depend on our ability to attract, motivate and retain these and other key officers and key team members, particularly regional and area managers and restaurant general managers. Competition for these employees is intense.

If we fail to attract or retain key officers and team members, our succession planning and operations could be materially and adversely affected. We continue to recruit, retain and motivate management and other employees sufficiently to maintain our current business and support our projected growth. We have experienced and may continue to experience challenges in recruiting and retaining team members in various locations.

Risks Related to Development Strategies

Our growth strategy depends on our ability and that of our franchisees to open new restaurants.

The development of new restaurants may be adversely affected by risks such as:

• inability to identify suitable franchisees;

• costs and availability of capital for the Company and/or franchisees;

• competition for restaurant sites;

• negotiation of favorable purchase or lease terms for restaurant sites;

• inability to obtain all required governmental approvals and permits;

• delays in completion of construction;

• cost of materials;

• challenge of identifying, recruiting and training qualified restaurant managers;

• restaurants not achieving the expected revenue or cash flow once opened;

• expansion of the Keke’s brand outside of the state of Florida due to lower customer awareness in a highly competitive category;

• challenges specific to the growth of international operations that are different from domestic development; and

• general economic conditions.

Delays or failures in opening new restaurants could adversely affect our planned growth and operating results.

The expansion of the Denny’s brand into international markets may present increased risks due to lower customer awareness of our brand, our unfamiliarity with those markets and other factors.

The international markets in which our franchisees currently operate, and any additional markets our franchisees may enter outside of the United States, have many differences compared to our domestic markets. There may be lower consumer familiarity with the Denny’s brand in these markets, as well as different competitive conditions, consumer tastes and economic, political and health conditions. Additionally, there are risks associated with sourcing quality ingredients and other commodities in a cost-effective and timely manner. As a result, franchised international restaurants may take longer to reach expected sales and profit levels, or may never do so, thereby affecting the brand’s overall growth and profitability. Building brand awareness may take longer than expected, which could negatively impact our profitability in those markets.

We are subject to governmental regulations in our international markets impacting the way we do business with our international franchisees. These include antitrust and tax requirements, anti-boycott regulations, import/export/customs and other international trade regulations, the USA Patriot Act and the Foreign Corrupt Practices Act. Failure to comply with any such legal requirements could subject us to monetary liabilities and other sanctions, which could adversely impact our results of operations and financial condition.

Legal and Regulatory Risks

Litigation may adversely affect our business, financial condition and results of operations.

We are subject to the risk of, or are involved in from time to time, complaints or litigation brought by former, current or prospective employees, customers, franchisees, vendors, landlords, regulatory agencies, shareholders or others. We assess contingencies to determine the degree of probability and range of possible loss for potential accrual in our financial statements. An estimated loss contingency is accrued if it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Because lawsuits are inherently unpredictable and unfavorable resolutions could occur, assessing contingencies is highly subjective and requires judgments about future events. We regularly review contingencies to determine the adequacy of the accruals and related disclosures. However, the amount of ultimate loss may differ from these estimates. A judgment that is not covered by insurance or that is significantly in excess of our insurance coverage for any claims could materially adversely affect our financial condition or results of operations. In addition, regardless of whether any claims against us are valid or whether we are found to be liable, claims may be expensive to defend, and may divert management’s attention away from operations and hurt our performance. Further, adverse publicity resulting from claims may harm our business or that of our franchisees.

Our amended and restated by-laws provide that the Court of Chancery of the State of Delaware will be the exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.

Our amended and restated by-laws provide that consistent with the applicable provisions of the Delaware General Corporation Law (the “DGCL”), unless our Board of Directors, acting on behalf of the Company, consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for any and all internal corporate claims, including but not limited to:

• any derivative action or proceeding brought on our behalf;

• any action asserting a claim of breach of fiduciary duty owed by any stockholder, director, officer, other employee or stockholder of the Company to us or our stockholders;

• any action arising pursuant to any provision of the DGCL or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware; and

• any action asserting a claim against us that is governed by the internal affairs doctrine.

These provisions would not apply to suits brought to enforce a duty or liability created by the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or any claim for which the federal district courts of the United States of America have exclusive jurisdiction. Furthermore, Section 22 of the Securities Act of 1933, as amended (the “Securities Act”) creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims.

Our stockholders cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of, and consented to, the provisions of our amended and restated by-laws described in the preceding sentences.

While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than that designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated by-laws. This may require significant additional costs associated with resolving such action in other jurisdictions, and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.

This choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees. If any other court of competent jurisdiction were to find the exclusive-forum provision in our amended and restated by-laws to be inapplicable or unenforceable, we may incur additional costs associated with resolving the dispute in other jurisdictions.

Numerous government regulations impact our business, and our failure to comply with them could adversely affect our business.

We are subject to federal, state, local and international laws and regulations governing, among other things:

• preparation, labeling, advertising and sale of food;

• sanitation;

• health and fire safety;

• land use, sign restrictions and environmental matters, including those associated with efforts to address climate change;

• employee health care requirements;

• management and protection of the personnel data of our guests, employees and franchisees;

• payment card regulation and related industry rules;

• the sale of alcoholic beverages;

• hiring and employment practices, including minimum wage and tip credit laws and fair labor standards; and

• Americans with Disabilities Act.

A substantial number of our employees are paid the minimum wage. Accordingly, increases in the minimum wage or decreases in the allowable tip credit (which reduces wages deemed to be paid to tipped employees in certain states) increase our labor costs. We have attempted to offset increases in the minimum wage through pricing and various cost control efforts; however, there can be no assurance that we will be successful in these efforts in the future.

The operation of our franchisee system is also subject to regulations enacted by a number of states and rules promulgated by the Federal Trade Commission. Due to our international franchising, we are subject to governmental regulations throughout the world impacting the way we do business with our international franchisees. These include antitrust and tax requirements, anti-boycott regulations, import/export/customs and other international trade regulations, the USA Patriot Act and the Foreign Corrupt Practices Act. Additionally, given our significant concentration of restaurants in California, changes in regulations in that state could have a disproportionate impact on our operations. If we or our franchisees fail to comply with these laws and regulations, we or our franchisees could be subjected to restaurant closure, fines, penalties and litigation, which may be costly and could adversely affect our results of operations and financial condition. In addition, the future enactment of additional legislation regulating the franchise relationship could adversely affect our operations.

We have implemented applicable aspects of The Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act. However, the law or other related requirements may change.

We are also subject to federal, state, local and international laws regulating the offer and sale of franchises. Such laws impose registration and disclosure requirements on franchisors in the offer and sale of franchises, and may contain provisions that supersede the terms of franchise agreements, including limitations on the ability of franchisors to terminate franchises and alter franchise arrangements.

Existing and changing legal and regulatory requirements, as well as an increasing focus on environmental, social and governance issues, could adversely affect our brand, business, results of operations and financial condition.

There has been increasing public focus by investors, environmental activists, the media and governmental and nongovernmental organizations on social and environmental sustainability matters, including packaging and waste, animal health and welfare, human rights, climate change, greenhouse gases and land, energy and water use. As a result, not only have we experienced increased pressure from our shareholders but they now have a heightened level of expectation for us to provide expanded disclosure and make commitments, establish goals or set targets with respect to various environmental and social issues and to take the actions necessary to meet those commitments, goals and targets. If we are not effective in addressing social and environmental sustainability matters, consumer trust in our brand may suffer. In addition, the actions needed to achieve our commitments, goals and targets could result in market, operational, execution and other costs, which could have a material adverse effect on our results of operations and financial condition. Our results of operations and financial condition could be adversely impacted if we are unable to effectively manage the risks or costs to us, our franchisees and our supply chain associated with social and environmental sustainability matters.

Being liable as a joint employer could adversely affect our business

Joint employer status is a developing area of franchise and labor and employment law that could be subject to changes in legislation, administrative agency interpretation or jurisprudential developments that may increase franchisor liability in the future. Following the federal court’s invalidation of the National Labor Relations Board’s 2023 rule, the legal standards around joint employment continue to evolve as the likelihood of the National Labor Relations Board addressing joint employer liability in a new rulemaking or through adjudication remains. As the joint employer standard reverts to the 2020 rule, and with the looming possibility of the establishment of a new standard through rulemaking or case adjudication, we face challenges in accurately assessing potential impacts, which could include liability for unfair labor practices and other violations by franchisees or we could be required to conduct collective bargaining negotiations regarding employees of franchisees, who are independent employers. In such event, our operating costs may increase as a result of required modifications to business practices, increased litigation, governmental investigations or proceedings, administrative enforcement actions, fines and civil liability. Employee claims that are brought against us as a result of joint employer standards and status may also, in addition to legal and financial liability, create negative publicity that could adversely affect our brands and divert financial and management resources. A significant increase in the number of these claims, or an increase in the number of successful claims, could adversely impact the reputation of our brands, which may cause significant harm.

If our internal controls are ineffective, we may not be able to accurately report our financial results or prevent fraud.

Our management is responsible for establishing and maintaining effective internal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting principles generally accepted in the United States. We maintain a documented system of internal controls which is reviewed and tested by the Company’s full time Internal Audit department. The Internal Audit department reports directly to the Audit and Finance Committee of the Board of Directors. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that we would prevent or detect a misstatement of our financial statements or fraud. Any failure to maintain an effective system of internal control over

financial reporting could limit our ability to report our financial results accurately and timely or to detect and prevent fraud. A significant financial reporting failure or material weakness in internal control over financial reporting could cause a loss of investor confidence and decline in the market price of our common stock.

Changes to existing accounting rules or the questioning of current accounting practices may adversely affect our reported financial results.

A change in accounting standards can have a significant effect on our reported financial results. New pronouncements and varying interpretations of pronouncements have occurred and may occur in the future. Additionally, generally accepted accounting principles and related accounting pronouncements, implementation guidelines and interpretations are highly complex and involve many subjective assumptions, estimates and judgments by us. Changes in these principles or their interpretations or changes in underlying assumptions, estimates and judgments by us could significantly change our reported or expected financial performance.

Information Technology Risks

Failure of computer systems, information technology, or the ability to provide a continuously secure network, or cyber attacks against our computer systems, could result in material harm to our reputation and business.

We and our franchisees rely heavily on computer systems and information technology to conduct business and operate efficiently. We have instituted monitoring controls intended to protect our computer systems, our point-of-sale systems and our information technology platforms and networks against external threats. Those controls include an annual proactive risk assessment, advanced comprehensive analysis of data threats, identification of business email compromise and proper security awareness education. The Audit & Finance Committee of our Board of Directors has oversight responsibility related to our cybersecurity risk management programs and periodically reviews reports on cybersecurity metrics, data privacy and other information technology risks.

We receive and maintain certain personal information about our guests, employees and franchisees. Our use of this information is subject to international, federal and state regulations, as well as conditions included in certain third-party contracts. If our cybersecurity is compromised and this information is obtained by unauthorized persons or used inappropriately, it could adversely affect our reputation, operations, results of operations and financial condition, and could result in litigation against us or the imposition of penalties. As privacy and information security laws and regulations change or cyber risks evolve, we may incur additional costs to ensure we remain compliant.

A material system failure or interruption, a breach in the security of our information technology systems caused by a cyber attack, or other failure to maintain a secure cyber network could result in reduced efficiency in our operations, loss or misappropriation of data, business interruptions, or could impact delivery of food to restaurants or financial functions such as vendor payment or employee payroll. We have disaster recovery and business continuity plans that are designed to anticipate and mitigate such failures, but it is possible that significant capital investment could be required to rectify these problems, or more likely that cash flows could be impacted, in the shorter term.

We rely on third parties for certain business processes and services. Failure or inability of such third-party vendors to perform subjects us to risks, including business disruption and increased costs.

We depend on suppliers and other third parties for the operation of certain aspects of our business. Some third-party business processes we utilize include information technology, payment processing, gift card authorization and processing, employee benefits, third-party delivery and other business services. We conduct third-party due diligence and seek to obtain contractual assurance that our vendors will maintain adequate controls, such as adequate security against data breaches. However, the failure of our suppliers to maintain adequate controls or comply with our expectations and standards could have a material adverse effect on our business, financial condition and operating results.

Risks Related to Indebtedness

Our indebtedness could have an adverse effect on our financial condition and operations.

As of December 25, 2024, we had total indebtedness of $271.9 million, including finance leases. Although we believe that our existing cash balances, funds from operations and amounts available under our credit facility will be adequate to cover our cash flow and liquidity needs, we could seek additional sources of funds, including incurring additional debt or through the sale of real estate, to maintain sufficient cash flow to fund our ongoing operating needs, pay interest and scheduled debt amortization and fund anticipated capital expenditures. We have no material debt maturities scheduled until August 2026. The credit agreement governing most of our indebtedness contains various covenants that could have an adverse effect on our business by limiting our ability to take advantage of financing, merger, acquisition or other corporate opportunities and to fund our operations. Restrictions under our credit agreement could also restrict our ability to repurchase shares in the future. If we incur additional debt in the future, covenant limitations on our activities and risks associated with such increased debt levels generally could increase. If we are unable to satisfy or refinance our current debt as it comes due, we may default on our debt obligations and lenders could elect to declare all amounts outstanding to be immediately due and payable and terminate all commitments to extend further credit. For additional information concerning our indebtedness see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.”

Risks Related to our Common Stock

Many factors, including those over which we have no control, affect the trading price of our common stock.

Factors such as reports on the economy or the price of commodities, as well as negative or positive announcements by competitors, regardless of whether the report directly relates to our business, could have an impact on the trading price of our common stock. In addition to investor expectations about our prospects, trading activity in our common stock can reflect the portfolio strategies and investment allocation changes of institutional holders, as well as non-operating initiatives such as our share repurchase programs. Evolving business strategies or any failure to meet market expectations whether for same-restaurant sales, restaurant unit growth, earnings per share, or other metrics could cause our share price to decline.

Language change vs prior 10-K

MD&A (Item 7) - words with the biggest YoY frequency increase

Negative rising

closed+4
impairment+3
against+1
negative+1
forfeitures+1

Positive rising

progress+1

MD&A (Item 7)

6,894 words

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto.

Overview

We manage our business by brand and as a result have identified two operating segments, Denny’s and Keke’s. In addition, we have identified Denny’s as a reportable segment. The Denny’s reportable segment includes the results of all company and franchised and licensed Denny’s restaurants.

Denny’s restaurants are operated in 50 states, the District of Columbia, two U.S. territories and 12 foreign countries with principal concentrations in California (24% of total restaurants), Texas (13%) and Florida (8%). At December 25, 2024, the Denny’s brand consisted of 1,499 franchised, licensed and company restaurants. Of this amount, 1,438 of Denny’s restaurants were franchised or licensed, representing 96% of the total restaurants, and 61 were company restaurants.

We acquired Keke's on July 20, 2022. Total revenues at Keke’s for the year ended December 25, 2024 represented less than 10% of total consolidated revenues, therefore, the Keke’s operating segment is included in Other for segment reporting purposes. Our Keke’s operating segment includes the results of all company and franchised Keke’s restaurants. As of December 25, 2024, the Keke’s brand consisted of 69 franchised and company restaurants in six states with principal concentration in Florida (88% of total restaurants). Of this amount, 55 Keke’s restaurants were franchised, representing 80% of total Keke’s restaurants, and 14 were company restaurants.

The primary sources of revenues for all operating segments are the sale of food and beverages at our company restaurants and the collection of royalties, advertising revenue, initial and other fees, including occupancy revenue, from restaurants operated by our franchisees. Sales and customer traffic at both company and franchised restaurants are affected by the success of our marketing campaigns, new product introductions, product quality enhancements, customer service, availability of off-premises dining options, and menu pricing, as well as external factors including competition, economic conditions affecting consumer spending and changes in guests’ tastes and preferences. Sales at company restaurants and royalty, advertising and fee income from franchised restaurants are also impacted by the opening of new restaurants, the closing of existing restaurants, the sale of company restaurants to franchisees and the acquisition of restaurants from franchisees.

Costs of company restaurant sales are exposed to volatility in two main areas: payroll and benefit costs and product costs. The volatility of payroll and benefit costs results primarily from changes in wage rates and increases in labor related expenses, such as medical benefit costs and workers’ compensation costs. Additionally, changes in guest counts and investments in store-level labor impact payroll and benefit costs as a percentage of sales. Many of the products sold in our restaurants are affected by commodity pricing and are, therefore, subject to price volatility. This volatility is caused by factors that are fundamentally outside of our control and are often unpredictable. In general, we purchase food products based on market prices or we set firm prices in purchase agreements with our vendors. In an inflationary commodity environment, our ability to lock in prices on certain key commodities is imperative to controlling food costs. In addition, our continued success with menu management helps us offer menu items that provide a compelling value to our customers while maintaining attractive product costs and profitability. Packaging costs (included as a component of product costs) and delivery fees (included as a component of other operating expenses) also fluctuate with changes in delivery and off-premises sales.

Our fiscal year ends on the last Wednesday in December. As a result, a fifty-third week is added to a fiscal year every five or six years. Fiscal 2024, 2023 and 2022 each included 52 weeks of operations. Our next 53-week year will be fiscal 2025.

Factors Impacting Comparability

For 2024, 2023 and 2022, the following items impacted the comparability of our results:

• Company restaurant sales increased from $199.8 million in 2022 to $215.5 million in 2023, primarily due to the acquisition of Keke’s in 2022, and decreased to $211.8 million in 2024, primarily due to a decrease in same-restaurant sales in 2024.

• Royalty income, which is included as a component of franchise and license revenue, increased from $113.9 million in 2022 to $120.1 million in 2023, primarily due to the acquisition of Keke’s in 2022, and decreased to $118.7 million in 2024, primarily due to a decrease in Denny’s equivalent units and same-restaurant sales in 2024.

• Initial and other fees, which is included as a component of franchise and license revenue, decreased from $28.3 million in 2022 to $13.9 million in 2023 and $8.7 million in 2024. This decrease was the result of completion in 2023 of the kitchen modernization program that began in early 2022. We billed our franchisees and recognized revenue when the related equipment was installed with a like amount recorded as a component of other direct costs.

• Occupancy revenues, included as a component of franchise and license revenue, result from leasing or subleasing restaurants to franchisees. When restaurants are sold and leased or subleased to franchisees, the occupancy costs related to these restaurants move from costs of company restaurant sales to costs of franchise and license revenue to match the related occupancy revenue. Additionally, as leases or subleases with franchisees expire, franchise occupancy revenue and costs could decrease if franchisees enter into direct leases with landlords. Occupancy revenue has decreased from $38.6 million in 2022 to $35.9 million in 2023 and $33.2 million in 2024 primarily as a result of lease expirations. At the end of 2024, we had 191 franchised restaurants that were leased or subleased from Denny’s, compared to 214 at the end of 2022.

• We closed 89, 57 and 66 restaurants in 2024, 2023 and 2022, respectively. As a result of our recently announced plan to strategically accelerate the closure of lower volume restaurants, we expect to close between 70 and 90 restaurants in 2025.

Information discussed in this Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations relates to the Denny’s brand unless otherwise noted.

Statements of Income

Fiscal Year Ended

December 25, 2024

December 27, 2023

December 28, 2022

(Dollars in thousands)

Revenue:

Company restaurant sales

Franchise and license revenue

Total operating revenue

Costs of company restaurant sales, excluding depreciation and amortization (a)(b):

Product costs

Payroll and benefits

Occupancy

Other operating expenses

Total costs of company restaurant sales, excluding depreciation and amortization

Costs of franchise and license revenue (a)

General and administrative expenses

Depreciation and amortization

Goodwill impairment charges

Operating (gains), losses and other charges, net

Total operating costs and expenses, net

Operating income

Interest expense, net

Other nonoperating (income) expense, net

Net income before income taxes

Provision for income taxes

Net income

(a) Costs of company restaurant sales percentages are as a percentage of company restaurant sales. Costs of franchise and license revenue percentages are as a percentage of franchise and license revenue. All other percentages are as a percentage of total operating revenue.

(b) Certain reclassifications have been made in the 2023 presentation to conform to the 2024 presentation. These reclassifications did not affect total revenues or net income.

Statistical Data

Fiscal Year Ended

December 25, 2024

December 27, 2023

December 28, 2022

(Dollars in thousands)

Denny’s

Company average unit sales

Franchise average unit sales

Company equivalent units (a)

Franchise equivalent units (a)

Company same-restaurant sales increase vs. prior year (b)(c)

Domestic franchised same-restaurant sales increase vs. prior year (b)(c)

Keke’s (d)

Company average unit sales

Franchise average unit sales

Company equivalent units (a)

Franchise equivalent units (a)

Company same-restaurant sales decrease (b)

Franchise same-restaurant sales decrease (b)

(a) Equivalent units are calculated as the weighted average number of units outstanding during a defined time period.

(b) Same-restaurant sales include sales from company restaurants or non-consolidated franchised and licensed restaurants that were open the same period in the prior year. While we do not record franchise and licensed sales as revenue in our consolidated financial statements, we believe domestic franchised same-restaurant sales information is useful to investors in understanding our financial performance, as our sales-based royalties are calculated based on a percentage of franchise sales. Accordingly, domestic franchised same-restaurant sales should be considered as a supplement to, not a substitute for, our results as reported under GAAP.

(d) Effective July 20, 2022, the Company acquired Keke’s. As a result, data presented for the year ended December 28, 2022 only represent post-acquisition results.

Unit Activity

Fiscal Year Ended

December 25, 2024

December 27, 2023

December 28, 2022

Denny’s

Company restaurants, beginning of period

Units acquired from franchisees

Units sold to franchisees

Units closed

End of period

Franchised and licensed restaurants, beginning of period

Units opened

Units purchased from Company

Units acquired by Company

Units closed

End of period

Total restaurants, end of period

Fiscal Year Ended

December 25, 2024

December 27, 2023

December 28, 2022

Keke’s

Company restaurants, beginning of period

Units opened

Units acquired

Units sold to franchisees

End of period

Franchised and licensed restaurants, beginning of period

Units opened

Units purchased from Company

Units acquired

Units closed

End of period

Total restaurants, end of period

Company Restaurant Operations

Company restaurant sales for 2024 decreased $3.8 million, or 1.7%, primarily driven by a 1.5% decrease in Denny’s company same-restaurant sales and three less Denny’s equivalent units. The decrease in company restaurant sales was partially offset by three additional Keke’s equivalent units. Company restaurant sales for 2023 increased $15.8 million, or 7.9%, primarily driven by a 2.7% increase in Denny’s company same-restaurant sales and the operation of Keke’s for a full year in 2023. The increase in Denny’s company same-restaurant sales primarily resulted from price increases to partially offset inflationary pressures. Company restaurant sales from Keke’s increased $8.2 million in 2023.

Total costs of company restaurant sales as a percentage of company restaurant sales were 89.6% in 2024, 87.0% in 2023 and 89.8% in 2022 consisting of the following:

Product costs as a percentage of company restaurant sales were 25.5% in 2024, 25.9% in 2023 and 26.8% in 2022. For 2024 and 2023, the decreases as a percentage of sales were primarily due to increased pricing to offset a portion of higher commodity costs.

Payroll and benefits as a percentage of company restaurant sales were 38.1% in 2024, 37.4% in 2023 and 38.3% in 2022. The 2024 increase as a percentage of sales was primarily due to a 0.2 percentage point increase in group insurance costs, 0.2 percentage point increase in management labor, 0.1 percentage point increase in incentive compensation and a 0.1 percentage point increase in payroll taxes and fringe benefits. The 2023 decrease as a percentage of sales was primarily due to a 0.4 percentage point decrease in team labor costs, 0.5 percentage point decrease in incentive compensation and a 0.2 percentage point decrease in payroll taxes and fringe benefits. Team labor costs decreased due to the leveraging effect of higher sales and efficiency gains. The 2023 decrease was partially offset by a 0.5 percentage point increase in workers’ compensation costs.

Occupancy costs as a percentage of company restaurant sales were 8.6% in 2024, 7.8% in 2023 and 7.6% in 2022. The 2024 increase as a percentage of sales was primarily due to a 0.4 percentage point increase in rent and property taxes related to new restaurants and a 0.4 percentage point increase in general liability insurance costs resulting from negative claims development in the current year. The 2023 increase as a percentage of sales was primarily due to an increase in rent and property taxes.

Other operating expenses consisted of the following amounts and percentages of company restaurant sales:

Fiscal Year Ended

December 25, 2024

December 27, 2023

December 28, 2022

(Dollars in thousands)

Utilities

Repairs and maintenance

Marketing

Legal settlements

Pre-opening costs

Other direct costs

Other operating expenses

For 2024, the increase in other operating expenses was primarily due to increased marketing and increased pre-opening costs. For 2023, the increase in other operating expenses was primarily due to increased marketing and other direct costs, partially offset by decreased legal settlement costs related to unfavorable developments in certain claims during the prior year.

Franchise Operations

Franchise and license revenue and costs of franchise and license revenue consisted of the following amounts and percentages of franchise and license revenue for the periods indicated:

Fiscal Year Ended

December 25, 2024

December 27, 2023

December 28, 2022

(Dollars in thousands)

Royalties

Advertising revenue

Initial and other fees

Occupancy revenue

Franchise and license revenue

Advertising costs

Occupancy costs

Other direct costs

Costs of franchise and license revenue

Royalties decreased by $1.4 million, or 1.2%, in 2024 primarily resulting from a decrease of 44 Denny’s equivalent units, partially offset by an increase of two Keke’s equivalent units. In 2023, royalties increased by $6.2 million, or 5.5%, primarily resulting from a 3.6% increase in Denny’s domestic franchise same-restaurant sales as compared to the prior year. Royalties from Keke’s franchise restaurants increased $3.0 million as a result of operating for a full year in 2023. The 2023 increase was partially offset by a decrease of 39 Denny’s franchise equivalent units. The average domestic contractual royalty rate was 4.40%, 4.42% and 4.39% for 2024, 2023 and 2022, respectively.

Advertising revenue increased $1.5 million, or 1.9%, in 2024 primarily resulting from a $1.6 million increase in local advertising co-op contributions, partially offset by the impact from a 0.1% decrease in domestic franchise same-restaurant sales and a decrease of 44 Denny’s equivalent units. Advertising revenue increased $2.6 million, or 3.4%, in 2023 primarily resulting from the increase in Denny’s domestic franchise same-restaurant sales. The increase also includes $0.6 million collected from Keke’s franchised restaurants. The 2023 increase was partially offset by a decrease of 39 Denny’s franchise equivalent units.

Initial and other fees decreased $5.2 million, or 37.2%, in 2024 primarily resulting from a $4.0 million decrease in revenue from the sale of equipment to franchisees, as our kitchen modernization program was completed in 2023. Initial and other fees decreased $14.4 million, or 50.9%, in 2023 primarily resulting from a decrease in revenue from the sale of equipment to franchisees, as our kitchen modernization program was completed in 2023.

Occupancy revenue decreased $2.7 million, or 7.6%, in 2024 and $2.7 million, or 7.0%, in 2023 primarily due to lease terminations.

Costs of franchise and license revenue decreased $2.2 million, or 1.8%, in 2024. Advertising costs increased $1.5 million, or 1.9%, which corresponds to the related advertising revenue increases noted above. Occupancy costs decreased $1.6 million, or 7.3%, in 2024, primarily related to lease terminations. Other direct costs decreased $2.1 million, or 9.6%, primarily due to the completion of our kitchen modernization program at franchise restaurants as mentioned above. As a result, costs of franchise and license revenue as a percentage of franchise and license revenue increased to 50.0% for 2024 from 49.3% in 2023.

Costs of franchise and license revenue decreased $12.9 million, or 9.5%, in 2023. Advertising costs increased $2.6 million, or 3.4%, which corresponds to the related advertising revenue increases noted above. Occupancy costs decreased $1.9 million, or 8.0%, in 2023, primarily related to lease terminations. Other direct costs decreased $13.5 million, or 38.3%, primarily due to the completion of our kitchen modernization program at franchise restaurants as mentioned above. As a result, costs of franchise and license revenue as a percentage of franchise and license revenue decreased to 49.3% for 2023 from 52.7% in 2022.

Other Operating Costs and Expenses

Other operating costs and expenses such as general and administrative expenses and depreciation and amortization expense relate to both company and franchise operations.

General and administrative expenses consisted of the following:

Fiscal Year Ended

December 25, 2024

December 27, 2023

December 28, 2022

(In thousands)

Corporate administrative expenses

Share-based compensation

Incentive compensation

Deferred compensation valuation adjustments

Total general and administrative expenses

Total general and administrative expenses increased by $2.4 million, or 3.1%, in 2024 and increased by $10.6 million, or 15.8%, in 2023.

Corporate administrative expenses increased by $2.0 million in 2024 and increased by $8.2 million in 2023. The 2024 increase was primarily due to compensation increases and software subscription costs. The 2023 increase was primarily due to compensation increases and administrative costs related to Keke’s.

Share-based compensation increased by $1.8 million in 2024 and decreased by $2.5 million in 2023. The 2024 increase was primarily due to our performance against plan metrics and prior year forfeitures. The 2023 decrease was primarily due to forfeitures and our performance against plan metrics. Incentive compensation decreased by $1.2 million in 2024 and increased by $0.8 million in 2023. The changes in incentive compensation for both periods primarily resulted from our performance against plan metrics. Changes in deferred compensation valuation adjustments have offsetting gains or losses on the underlying nonqualified deferred plan investments included as a component of other nonoperating expense (income), net, for the corresponding periods.

Depreciation and amortization consisted of the following:

Fiscal Year Ended

December 25, 2024

December 27, 2023

December 28, 2022

(In thousands)

Depreciation of property and equipment

Amortization of finance right-of-use assets

Amortization of intangible and other assets

Total depreciation and amortization expense

The increase in total depreciation and amortization expense during 2024 was primarily related to new Keke’s units. The 2023 decrease was primarily due to certain assets becoming fully depreciated.

Goodwill impairment charges were less than $0.1 million in 2024 related to assets eventually sold by Denny’s. We performed an annual impairment test of goodwill and other intangible assets with indefinite lives as of December 27, 2023 and determined that a portion of the goodwill related to Keke’s was impaired. As a result, we recorded $6.4 million of goodwill impairment charges in 2023. See Note 6.

Operating (gains), losses and other charges, net consisted of the following:

Fiscal Year Ended

December 25, 2024

December 27, 2023

December 28, 2022

(In thousands)

Gains on sales of assets and other, net

Impairment charges (1)

Restructuring and exit costs

Operating (gains), losses and other charges, net

(1) Impairment charges include impairments related to property, operating lease right-of-use assets, finance lease right-of-use assets, franchise agreements, and reacquired franchise rights.

Gains on sales of assets and other, net for 2024, 2023, and 2022 were primarily related to the sales of real estate and restaurants.

Impairment charges of $0.8 million, $2.2 million and $1.0 million for 2024, 2023 and 2022, respectively, primarily related to assets held for sale and resulting from our assessments of underperforming and closed restaurants.

Restructuring charges and exit costs consisted of the following:

Fiscal Year Ended

December 25, 2024

December 27, 2023

December 28, 2022

(In thousands)

Exit costs

Severance and other restructuring charges

Total restructuring and exit costs

Total restructuring and exit costs for 2024, 2023 and 2022 primarily consisted of severance costs.

Operating income was $45.3 million in 2024, $52.8 million in 2023 and $60.6 million in 2022.

Interest expense, net consisted of the following:

Fiscal Year Ended

December 25, 2024

December 27, 2023

December 28, 2022

(In thousands)

Interest on credit facilities

Interest on interest rate swaps

Interest on finance lease liabilities

Letters of credit and other fees

Interest income

Total cash interest

Amortization of deferred financing costs

Amortization of interest rate swap losses

Interest accretion on other liabilities

Total interest expense, net

Interest expense, net increased during 2024 and 2023 primarily due to increased average borrowings and higher average interest rates, partially offset by receipts from our interest rate swaps.

Other nonoperating expense (income), net was income of $1.9 million, expense of $8.3 million and income of $52.6 million for 2024, 2023 and 2022, respectively. Nonoperating income for 2024 includes $1.7 million of gains on deferred compensation investments. Nonoperating expense for 2023 includes $10.6 million of losses related to valuation adjustments for dedesignated interest rate hedges, partially offset by gains of $2.1 million on deferred compensation plan investments. Nonoperating income for 2022 includes $55.0 million of gains related to dedesignated interest rate swap valuation adjustments, partially offset by losses of $2.2 million on deferred compensation plan investments. For additional details related to the interest rate swaps, see Note 10 to our consolidated financial statements.

The provision for income taxes was $7.7 million for 2024, $7.0 million for 2023 and $24.7 million for 2022. The effective tax rate was 26.3% for 2024, 26.0% for 2023 and 24.9% for 2022.

For 2024, the difference in the overall effective rate from the U.S. statutory rate was primarily due to state and foreign taxes, partially offset by the generation of employment and foreign tax credits. The 2024 rate was also impacted by $1.8 million of disallowed compensation deductions.

For 2023, the difference in the overall effective rate from the U.S. statutory rate was primarily due to state and foreign taxes, partially offset by the generation of employment and foreign tax credits. The 2023 rate was also impacted by $1.9 million of disallowed compensation deductions.

For 2022, the difference in the overall effective rate from the U.S. statutory rate was primarily due to state and foreign taxes, partially offset by the generation of employment and foreign tax credits.

For additional details related to the provision for income taxes as well as changes in the effective tax rate, see Note 15 to our consolidated financial statements.

Net income was $21.6 million for 2024, $19.9 million for 2023 and $74.7 million for 2022.

Liquidity and Capital Resources

Summary of Cash Flows

Our primary sources of liquidity and capital resources are cash generated from operations and borrowings under our credit facility (as described below). Principal uses of cash are operating expenses, acquisitions and capital expenditures and the repurchase of shares of our common stock.

The following table presents a summary of our sources and uses of cash and cash equivalents for the periods indicated:

Fiscal Year Ended

December 25, 2024

December 27, 2023

December 28, 2022

(In thousands)

Net cash provided by operating activities

Net cash used in investing activities

Net cash (used in) provided by financing activities

Increase (decrease) in cash and cash equivalents

Net cash flows provided by operating activities were $29.5 million for the year ended December 25, 2024 compared to net cash flows provided by operating activities of $72.1 million for the year ended December 27, 2023. The decrease in cash flows provided by operating activities was primarily due to decreases in operating income, accounts payable, and other accrued liabilities. Net cash flows provided by operating activities were $72.1 million for the year ended December 27, 2023 compared to net cash flows provided by operating activities of $39.5 million for the year ended December 28, 2022. The increase in cash flows provided by operating activities was primarily due to the timing of inventory purchases, receivables collections, and accrual payments related to our franchise kitchen equipment project during 2022 and 2023. We believe that our estimated cash flows from operations for 2025, combined with our capacity for additional borrowings under our credit facility, will enable us to meet our anticipated cash requirements and fund capital expenditures over the next twelve months.

Net cash flows used in investing activities were $26.7 million for the year ended December 25, 2024. These cash flows included capital expenditures of $28.6 million and investment purchases of $1.5 million, partially offset by net proceeds from the sale of real estate and restaurants for $1.4 million and net investment proceeds of $1.8 million. Net cash flows used in investing activities were $7.6 million for the year ended December 27, 2023. These cash flows included capital expenditures of $10.0 million, investment purchases of $1.3 million, and a real estate acquisition of $1.2 million, partially offset by net proceeds from the sale of three parcels of real estate for $3.2 million and net investment proceeds of $1.9 million. Net cash flows used in investing activities were $86.6 million for the year ended December 28, 2022. These cash flows included $82.5 million for the acquisition of Keke’s and capital expenditures of $11.8 million, partially offset by proceeds from the sale of real estate and other assets of $4.1 million and the collection of a real estate acquisition deposit of $3.6 million.

Our principal capital requirements have been largely associated with the following:

Fiscal Year Ended

December 25, 2024

December 27, 2023

December 28, 2022

(In thousands)

Facilities

New construction

Remodeling

Information technology

Other

Capital expenditures (excluding acquisitions)

Cash flows used in financing activities were $6.0 million for the year ended December 25, 2024, which included cash payments for stock repurchases of $11.7 million and payments of tax withholding on share-based compensation of $1.9 million, partially offset by net debt borrowings of $4.4 million and net bank overdrafts of $3.2 million. Cash flows used in financing activities were $63.2 million for the year ended December 27, 2023, which included cash payments for stock repurchases of $52.1 million, net debt payments of $7.8 million and payments of tax withholding on share-based compensation of $3.0 million. Cash flows provided by financing activities were $20.0 million for the year ended December 28, 2022, which included net debt borrowings of $89.5 million, partially offset by cash payments for stock repurchases of $65.0 million and payments of tax withholding on share-based compensation of $4.8 million.

Our working capital deficit was $55.6 million at December 25, 2024 compared with $59.3 million at December 27, 2023, primarily due to a decrease in accounts payable and other accrued liabilities, partially offset by a decrease in current assets. We are able to operate with a substantial working capital deficit because (1) restaurant operations and most food service operations are conducted primarily on a cash and cash equivalent basis with a low level of accounts receivable, (2) rapid turnover allows a limited investment in inventories and (3) accounts payable for food, beverages and supplies usually become due after the receipt of cash from the related sales.

Credit Facility

The Company and certain of its subsidiaries have a credit facility consisting of a five-year $400 million senior secured revolver (with a $25 million letter of credit sublimit). The credit facility includes an accordion feature that would allow us to increase the size of the revolver to $450 million. Borrowings bear a tiered interest rate, which is based on the Company's consolidated leverage ratio. The maturity date for the credit facility is August 26, 2026.

The credit facility is available for working capital, capital expenditures and other general corporate purposes. The credit facility is guaranteed by the Company and its material subsidiaries and is secured by assets of the Company and its subsidiaries, including the stock of its subsidiaries (other than its insurance captive subsidiary). It includes negative covenants that are usual for facilities and transactions of this type. The credit facility also contains certain financial covenants, including a maximum consolidated leverage ratio of 4.0 times and a minimum consolidated fixed charge coverage ratio of 1.5 times. As of December 25, 2024, our consolidated leverage ratio was 3.85 times and our consolidated fixed charge coverage ratio was 2.18 times. We were in compliance with all financial covenants as of December 25, 2024, and we expect to remain in compliance throughout 2025.

As of December 25, 2024, we had outstanding revolver loans of $261.3 million and outstanding letters of credit under the credit facility of $16.1 million. These balances resulted in unused commitments of $122.6 million as of December 25, 2024 under the credit facility.

As of December 25, 2024, borrowings under the credit facility bore interest at a rate of Adjusted Daily Simple SOFR plus 2.25%. Letters of credit under the credit facility bore interest at a rate of 2.38%. The commitment fee, paid on the unused portion of the credit facility, was set to 0.35%.

Prior to considering the impact of our interest rate swaps, described below, the weighted-average interest rate on outstanding revolver loans was 6.98% and 7.41% as of December 25, 2024 and December 27, 2023, respectively. Taking into consideration our interest rate swaps that are designated as cash flow hedges, the weighted-average interest rate of outstanding revolver loans was 5.01% and 5.04% as of December 25, 2024 and December 27, 2023, respectively.

Interest Rate Hedges

We have interest rate swaps to hedge a portion of the forecasted cash flows of our floating rate debt. See Part II Item 7A. Quantitative and Qualitative Disclosures About Market Risk for details on our interest rate swaps.

Technology Transformation Initiatives

The Company has committed to investing approximately $4 million toward a new cloud-based restaurant technology platform in domestic franchise restaurants, which will lay the foundation for future technology initiatives to further enhance the guest experience. The rollout is in progress and is expected to continue through 2026.

Contractual Obligations

Our future contractual obligations and commitments at December 25, 2024 consisted of the following:

Payments Due by Period

Total

Less than 1 Year

1-2 Years

3-4 Years

5 Years and Thereafter

(In thousands)

Long-term debt (a)

Finance lease obligations (b)(c)

Operating lease obligations (b)

Interest obligations (c)

Defined benefit plan obligations (d)

Purchase obligations (e)

Unrecognized tax benefits (f)

Total

(a) Refer to Note 10 to our consolidated financial statements for a further discussion of our long-term debt and timing of expected payments.

(b) Refer to Note 9 to our consolidated financial statements for a further discussion of our lease obligations and timing of expected payments.

(c) Interest obligations represent payments related to our long-term debt outstanding at December 25, 2024. For long-term debt with variable rates, we have used the rate applicable at December 25, 2024 to project interest over the periods presented in the table above, taking into consideration the impact of the interest rate swaps that are designated as cash flow hedges for the applicable periods. The finance lease obligation amounts above are inclusive of interest.

(d) Refer to Note 12 to our consolidated financial statements for a further discussion of our defined benefit plan obligations and timing of expected payments.

(e) Refer to Note 18 to our consolidated financial statements for a further discussion of our purchase obligations and timing of expected payments.

(f) Unrecognized tax benefits are related to uncertain tax positions. As we are not able to reasonably estimate the timing or amount of these payments, the related balances have not been reflected in this table.

Critical Accounting Policies and Estimates

Our reported results are impacted by the application of certain accounting policies that require us to make subjective or complex judgments. These judgments involve estimations of the effect of matters that are inherently uncertain and may significantly impact our quarterly or annual results of operations or financial condition. Changes in the estimates and judgments could significantly affect our results of operations and financial condition and cash flows in future years.

Our significant accounting policies are discussed in Note 2 to our consolidated financial statements. We consider financial reporting and disclosure practices and accounting policies quarterly to ensure that they provide accurate and transparent information relative to the current economic and business environment. We have not made any material changes to the accounting methodologies used to assess the areas discussed below, unless noted otherwise. Descriptions of what we consider to be our most significant critical accounting policies are as follows:

Self-insurance liabilities. We are self-insured for a portion of our losses related to certain medical plans, workers’ compensation, general, product and automobile insurance liability. In estimating these liabilities, we utilize independent actuarial estimates of expected losses, which are based on statistical analysis of historical data, including certain actuarial assumptions regarding the frequency and severity of claims and claim development history and settlement practices.

We have not made any material changes in the methodology used to establish our insurance liabilities during the past three years and do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions used to calculate the insurance reserves. However, our estimates of expected losses are adjusted over time based on changes to the actual costs of the underlying claims, which could result in additional expense or reversal of expense previously recorded. Additionally, the change in the number of company restaurants impacts the balance of liabilities over time.

Total workers’ compensation, general, product and automobile insurance liabilities were $9.3 million and $9.7 million at December 25, 2024 and December 27, 2023, respectively.

See Note 2 to our consolidated financial statements for a further discussion of our policies regarding self-insurance liabilities.

Impairment of long-lived assets . We evaluate our long-lived assets for impairment at the restaurant level on a quarterly basis, when assets are identified as held for sale or whenever changes or events indicate that the carrying value may not be recoverable. For assets identified as held for sale, we use the market approach and consider proceeds from similar asset sales. We assess impairment of restaurant-level assets based on the operating cash flows of the restaurant, expected proceeds from the sale of assets and our plans for restaurant closings. For underperforming assets, we use the income approach to determine both the recoverability and estimated fair value of the assets. To estimate future cash flows, we make certain assumptions about expected future operating performance, such as revenue growth, operating margins, risk-adjusted discount rates, and future economic and market conditions. If the long-lived assets of a restaurant are not recoverable based upon estimated future, undiscounted cash flows, we write the assets down to their fair value.

We have not made any material changes in our methodology for assessing impairments during the past three years and we do not believe that there is a reasonable likelihood that there will be a material change in the estimates or assumptions used by us to assess impairment of long-lived assets. However, if actual results are not consistent with our estimates and assumptions used in estimating future cash flows and fair values of long-lived assets, we may be exposed to losses that could be material.

Impairment charges of $0.8 million, $2.2 million and $1.0 million for the years ended December 25, 2024, December 27, 2023 and December 28, 2022, respectively, primarily related to assets held for sale and resulting from our assessments of underperforming restaurants and closed restaurants.

See Note 2 and Note 14 to our consolidated financial statements for further discussion of our policies regarding impairment of long-lived assets.

Impairment of Goodwill. We perform our annual goodwill impairment test as of the end of each fiscal year, or more frequently if events and circumstances indicate that the asset might be impaired, at the reporting unit level. The fair value of each reporting unit will generally be calculated using either the income approach or the market approach or a blend of both those approaches. An impairment loss is recognized to the extent that the carrying amount exceeds the fair value of the reporting unit.

The income approach involves the use of estimates and assumptions including forecasted future revenues and operating margins, including projected growth in restaurant unit counts and average unit volumes, royalty rate, and discount rates. Inputs used are generally obtained from historical data supplemented by current and anticipated market conditions and growth rates.

The market approach involves the selection and application of cash flows multiples of a group of similar companies to the projected cash flows of the reporting unit.

Considerable management judgment is necessary in determining the inputs to these approaches. Changes in our assumptions or estimates could materially affect the estimation of the fair value of a reporting unit and, therefore, could reduce the excess of fair value over the carrying value of a reporting unit entirely and could result in goodwill impairment. Events and conditions that could indicate impairment include a sustained drop in the market price of our common stock, increased competition or loss of market share, changes to restaurant development strategies, or changes in general economic conditions.

We performed an annual impairment test as of December 25, 2024 and determined that the fair value of the reporting units substantially exceeded their respective carrying values. No impairment charges related to goodwill or other intangible assets with indefinite lives were recorded. For the year ended December 27, 2023, we recorded goodwill impairment charges related to Keke’s of $6.4 million. No impairment charges related to goodwill were recorded for the year ended December 28, 2022. The fair value of the reporting unit's goodwill is sensitive to differences between estimated and actual cash flows, including changes in the projected revenue, projected operating margins, discount rate and the selection of market multiples used to evaluate the fair value of the reporting unit. In 2023, for example, if the discount rate increased by 0.5%, the impairment would have increased by approximately $1.5 million. Although we believe our estimate of fair value is reasonable, the reporting unit's future financial performance is dependent on our ability to execute our business plan and to successfully implement certain strategic actions which we expect will improve our long-term operating margin and cash flows. We cannot guarantee that we will not record a material impairment charge in the future. At December 25, 2024 and December 27, 2023, the carrying value of Keke’s goodwill totaled approximately $28.9 million and $28.4 million, respectively.

See Note 2, Note 6 and Note 8 to our consolidated financial statements for further discussion of our policies regarding impairment of goodwill.

Recent Accounting Pronouncements

See the “Accounting Standards to be Adopted” section of Note 2 to our consolidated financial statements for further details of recent accounting pronouncements.

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Miller John C	OfficerDirector	18
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