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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 -0.10pp 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
+0.04pp
Flat
Net-tone change vs last year's 10-K.
MD&A
-0.25pp
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
unable+1
decline+1
conflicts+1
denied+1
retaliatory+1
Positive rising
friendly+1
favorable+1
Risk Factors (Item 1A)
7,240 words
ITEM 1A. RISK FACTORS
Various risks and uncertainties could affect our business. In addition to the information contained elsewhere in this report and other filings that we make with the SEC, the risk factors described below could have a material impact on our business, financial condition, results of operations, cash flows or the trading price of our common stock. It is not possible to 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.
Strategic and Operational Risks
If we are unable to successfully design and execute a business strategy plan, our gross sales and profitability may be adversely affected.
Our ability to increase revenues and profitability is dependent on designing and executing effective business strategies. If we are delayed or unsuccessful in executing our strategies or if our strategies do not yield the results, our business, financial condition and results of operations may . Our ability to meet our business strategy plan is dependent upon, among other things, our and our franchisees’ ability to:
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
unfavorable+3
claims+2
loss+2
abandon+2
disasters+2
Positive rising
gain+2
benefit+1
beautiful+1
MD&A (Item 7)
4,470 words
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help you understand our Company, our operations and our current operating environment. For an understanding of the significant factors that influenced our performance, the MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes to Consolidated Financial Statements included in Part II, Item 8 - Financial Statements and Supplementary Data of this report. Our MD&A consists of the following sections:
• Overview - a brief description of our business and a discussion on the external trends impacting our business;
• Results of Operations - an analysis of the Consolidated Statements of Comprehensive Income included in the Consolidated Financial Statements;
• Liquidity and Capital Resources - an analysis of cash flows, including capital expenditures, aggregate contractual obligations, financing activity, and known trends that may impact liquidity, including off-balance sheet arrangements; and
• Critical Accounting Estimates - a discussion of accounting policies that require critical judgments and estimates, including recent accounting pronouncements.
The following MD&A includes a discussion comparing our results in fiscal 2025 to fiscal 2024. For a discussion comparing our results from fiscal 2024 to fiscal 2023, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended June 26, 2024, filed with the SEC on August 21, 2024.
• Increase gross sales and operating profits at existing restaurants with food and beverage options desired by our guests;
• Evolve our marketing and branding strategies in order to appeal to guests and drive traffic and sales;
• Innovate and implement technology initiatives that provide an engaging digital guest experience;
• Identify adequate sources of capital to fund and finance strategic initiatives, including re-imaging existing restaurants, new restaurant development, and new restaurant equipment;
• Grow and expand operations, including identifying available, suitable and economically viable locations for new restaurants, or making strategic acquisitions; and
• Improve the speed and quality of our service by simplifying operations.
Changes in consumer preferences may decrease demand for food at our restaurants.
Changing health or dietary preferences and current and new medical treatments may cause consumers to avoid our products in favor of alternative foods and/or to consume less of our products. The food service industry as a whole depends on consumer preferences at the local, regional, national, and international levels. New information or changes in dietary, nutritional or health insurance guidelines, whether issued by government agencies, academic studies, advocacy organizations or similar groups, may cause consumers to select foods other than those that are offered by our restaurants. We may not be able to adequately adapt our menu offerings to keep pace with developments in current consumer preferences, which may result in reductions to the revenues generated by our Company-owned restaurants and the payments we receive from franchisees.
Food safety incidents at our restaurants or in our industry or supply chain may adversely affect customer perception of our brands or industry and result in declines in sales and profits.
Regardless of the source or cause, any report of food-borne illnesses or other food safety issues at one of our restaurants or our franchisees’ restaurants could irreparablydamage our brand reputations and result in declines in
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guest traffic and sales at our restaurants. A food safety incident may subject us to regulatory actions and litigation, including criminalinvestigations, and we may be required to incur significant legal costs and other liabilities. Food safety incidents may occur in our supply chain and be out of our control. Health concerns or outbreaks of disease in a food product could also reduce demand for particular menu offerings. Even instances of food-borne illness, food tampering or food contamination occurring solely at restaurants of our competitors could result in negative publicity about the restaurant industry in general and adversely affect our sales or cause us to incur additional costs to implement food safety protocols beyond industry standards. The occurrence of food-borne illnesses or food safety issues could also adversely affect the price and availability of affected ingredients, resulting in higher costs and lower margins.
Unfavorable publicity relating to one or more of our restaurants in a particular brand may affect public perception of the brand.
Multi-unit restaurant businesses can be adversely affected by publicity resulting from poor food quality, customer complaints, litigation, illness or health concerns or other issues stemming from one or a limited number of restaurants, regardless of whether such events have a factual basis. In particular, since we depend heavily on the Chili’s brand for a majority of our revenues, unfavorable publicity relating to one or more Chili’s restaurants could have a material adverse effect on the Chili’s brand, and consequently on our business, financial condition and results of operations. The speed at which negative publicity (whether or not accurate) can be disseminated has increased dramatically with the capabilities of social media and the internet. If we are unable to quickly and effectively respond to such reports, we may sufferdeclines in guest traffic which could materially impact our financial performance.
Additionally, consumers’ ability to immediately post opinions on social media platforms to a broad audience of consumers and other interested persons, often without filters or checks on accuracy of the content posted, may be adverse to our interests and may harm our performance, prospects or business, regardless of the information’s accuracy. The use of social media vehicles by our guests or employees could increase our costs, lead to litigation or result in negative publicity that could damage our reputation.
We face risks related to our ability to continue to grow sales through delivery orders and digital commerce.
Part of our strategy for growth is dependent on increased sales from guests that want to enjoy our food off-premises. Customers are increasingly using websites and applications, including both our internally developed brand websites and third-party delivery aggregators, to place and pay for their orders. As we become increasingly reliant on digital ordering and payment as a sales channel, our business could be negatively impacted if we are unable to successfully implement, execute or maintain our consumer-facing digital initiatives, such as application-based ordering and brand websites, as well as a user friendly pick up experience. These digital ordering and payment platforms also could be damaged or interrupted by power loss, technological failures, user errors, cyber-attacks, other forms of sabotage, inclement weather or natural disasters. The digital ordering platforms we rely on could experience interruptions, which could limit or delay customers’ ability to order through such platforms or make customers less inclined to return to such platforms.
We currently rely on third-party delivery providers for our off-premise delivery (other than Maggiano’s catering). We rely on such third-party providers for ordering and payment platforms that receive guest orders and that send orders directly to our point-of-sale system. These platforms, as well as our own brand websites, could be damaged or interrupted by technological failures, cyber-attacks or other factors, which may adversely impact our sales through these channels.
Delivery providers generally fulfill delivery orders through drivers that are independent contractors. These drivers may make errors, fail to make timely deliveries, damage our food or poorly represent our brands, which may lead to customer disappointment, reputational harm and unmet sales expectations. Our sales may also be adversely impacted if there is a shortage of drivers that are willing and available to make deliveries from our restaurants. If the third-party aggregators that we utilize for delivery cease or curtail their operations, fail to maintain sufficient a labor force to satisfy demand, materially change fees, access or visibility to our products or give greater priority or promotions on their platforms to our competitors, our business may be negatively impacted.
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Loss of key management personnel could hurt our business and limit our ability to operate and grow successfully.
Our success depends, to a significant extent, on our leadership team and other key management personnel. These personnel serve to maintain a corporate vision for our Company, execute our business strategy, and maintain consistency in the operating standards of our restaurants. If we are unable to attract and retain sufficiently experienced and capable key management personnel, our business and financial results may suffer.
Failure to recruit, train and retain high-quality restaurant management and team members may result in lower guest satisfaction and lower sales and profitability.
Our restaurant-level management and team members are largely responsible for the quality of our service. Our guests may be dissatisfied and our sales may decline if we fail to recruit, train and retain managers and team members that effectively implement our business strategy and provide high quality guest service. There is active competition for quality management personnel and hourly team members. We are experiencing and may continue to experience challenges in recruiting and retaining team members in various locations as we are experiencing an increasingly tight and competitive labor market. These challenges may continue to result in higher labor costs (such as increased overtime to meet demand and increased wages to attract and retain team members), increased turnover and a shortage of adequate management personnel and hourly team members required for operations and for future growth, which can lead to lower guest satisfaction and decreased profitability.
Our results can be adversely affected by events, such as adverse weather conditions, natural disasters, climate change, pandemics or other catastrophic events.
Adverse weather conditions, natural disasters, climate change or catastrophic events, such as terrorist acts, can adversely impact restaurant sales. Natural disasters such as earthquakes, tornadoes, hurricanes, and severeadverse weather conditions, climate change and health pandemics, whether occurring in the United States or abroad, can keep customers in the affected area from dining out, adversely affect consumer spending and confidence levels and supply availability and costs, cause damage to or closure of restaurants and result in lostopportunities for our restaurants. Our receipt of proceeds under any insurance we maintain with respect to some of these risks may be denied or delayed or the proceeds may be insufficient to cover our losses fully. Moreover, we may be unable to obtain or maintain insurance in the amounts and on terms we view as appropriate and favorable for our operations.
The large number of Company-owned restaurants concentrated in Texas, Florida and California makes us susceptible to changes in economic and other trends in those regions.
A high concentration of our Company-owned restaurants are located in Texas, Florida and California comprising 18.9%, 11.8% and 9.2%, respectively, as of June 25, 2025. As a result, we are particularly susceptible to adverse trends and economic conditions in those states, as well as to laws and regulations in these states that have a direct or indirect impact on our operations. Negative publicity, local economic conditions, new local or state laws or regulations, health epidemics or pandemics, local strikes, energy shortages or extreme fluctuations in energy prices, droughts, earthquakes, fires or other natural disasters in regions where our restaurants are highly concentrated could have a material adverse effect on our business and operations.
The operational success of our franchise system is important to our business and future international growth.
Approximately 29.0% of system-wide restaurants are owned and operated by our franchisees. Our franchise related revenue is not material to our total revenues; however, franchise agreements are designed to require our franchisees to maintain brand consistency and the franchise relationship reduces our direct day-to-day oversight of these restaurants and may expose us to risks not otherwise encountered if we maintained ownership and control. Our international restaurants are substantially all franchised and our ability to grow internationally is largely dependent on the success of our franchise partners in developing and maintaining new restaurants.
Our reputation and financial results may be negatively impacted by: franchisee defaults in their obligations to us; limitations on our ability to enforce franchise obligations due to bankruptcy proceedings or differences in legal remedies in international markets; franchisee failures to participate in business strategy changes due to financial
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constraints; franchisee failures to meet obligations to pay employees; and franchisee failures to comply with food quality and preparation requirements.
Additionally, our international franchisees are subject to risks not encountered by our domestic franchisees, and royalties paid to us may decrease if their businesses are negatively impacted. These risks include:
• Difficulties in achieving consistency of product quality and service as compared to domestic operations;
• Changes to recipes and menu offerings to meet cultural norms;
• Challenges to obtain adequate and reliable supplies necessary to provide menu items and maintain food quality; and
• Differences, changes or uncertainties in economic, regulatory, legal, cultural, social and political conditions.
Failure to protect our service marks or other intellectual property could harm our business.
We regard our Chili’s ® and Maggiano’s ® trademarks and other trademarks related to our restaurant businesses, as having significant value and being important to our marketing efforts. We rely on a combination of protections provided by contracts, copyrights, patents, trademarks, service marks and other common law rights, such as trade secret and unfair competition laws, to protect our restaurants and services from infringement. We have registered certain trademarks and service marks in the United States and foreign jurisdictions. However, we are aware of names and marks identical or similar to our service marks being used from time to time by other entities. Although our policy is to oppose any such infringement, further or unknown unauthorized uses or other misappropriation of our trademarks or service marks could diminish the value of our brands and adversely affect our business. In addition, effective intellectual property protection may not be available in every country in which we have or intend to open or franchise a restaurant. Although we believe we have taken appropriate measures to protect our intellectual property, there can be no assurance that these protections will be adequate and defending or enforcing our service marks and other intellectual property could result in the expenditure of significant resources.
We outsource certain business processes to third-party vendors that subject us to risks, including disruptions in business and increased costs.
Some business processes are or may in the future be outsourced to third parties. Such processes include certain information technology processes, gift card tracking and authorization, credit card authorization and processing, insurance claims processing, certain payroll processing, tax filings and other accounting processes. We also continue to evaluate our other business processes to determine if additional outsourcing is a viable option to accomplish our goals. We make a diligent effort to ensure that all providers of outsourced services are observing proper internal control practices, such as redundant processing facilities and adequate security frameworks to guard againstbreaches or data loss; however, there are no guarantees that failures will not occur. Failure of third parties to provide adequate services could have an adverse effect on our results of operations, financial condition or ability to accomplish our financial and management reporting.
Corporate responsibility matters, including those related to climate change and sustainability, may have an adverse effect on our business, financial condition, and operating results and may damage our reputation.
Companies across all industries are facing stakeholder scrutiny relating to their sustainability practices. Changing consumer preferences may result in increased demands regarding our products and supply chain and their respective environmental and social impact, including on sustainability. These demands could require additional transparency, due diligence, and reporting and could cause us to incur additional costs or to make changes to our operations to comply with such demands. We may also determine that certain changes to our business are required in anticipation of further evolution of consumer preferences and demands. Increased focus and activism related to corporate responsibility and sustainability may also result in investors reconsidering their investment decisions as a result of their or a third party’s assessment of a company’s sustainability practices. Further, concern over climate change and other environmental sustainability matters has and may in the future result in new or increased legal and regulatory requirements to reduce or mitigate impacts to the environment, including greenhouse gas emissions regulations, alternative energy policies, and sustainability initiatives. At the same time, stakeholders and regulators have
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increasingly expressed or pursued opposing views, legislation and investment expectations with respect to sustainability initiatives, including the enactment or proposal of "Anti-ESG" legislation or policies, which may partially or wholly conflict with existing or future legislation, regulations or policies applicable to us. If we fail to achieve any goals, targets, or objectives we may set with respect to corporate responsibility matters, if we do not meet or comply with new regulations or evolving consumer, investor, industry, or stakeholder expectations and standards (which are not uniform), including those related to reporting, or if we are perceived to have not responded appropriately to the growing concern for sustainability matters, we may face legal or regulatory actions, the imposition of fines, penalties, or other sanctions, adverse publicity, decreased demand from consumers, or a decline in the price of our common shares, any of which could materially harm our reputation or have a material adverse effect on our business, financial condition, or operating results.
Macroeconomic and Industry Risks
Competition may adversely affect our operations and financial results.
The restaurant business is highly competitive as to price, service, restaurant location, convenience, and type and quality of food. We compete within each market with locally-owned restaurants as well as national and regional restaurant chains. The casual dining segment of the restaurant industry has not seen significant growth in customer traffic in recent years. If these trends continue, our ability to grow customer traffic at our restaurants (including through off-premise) will depend on our ability to increase our market share within the casual dining segment. We also face competition from quick service and fast casual restaurants; the convergence in grocery, deli and restaurant services; and meal kit and food delivery providers. We compete primarily on the quality, variety and value perception of menu items, as well as the quality and efficiency of service, the attractiveness of facilities and the effectiveness of advertising and marketing programs. A key component of our corporate strategy involves our value platform as it relates to our competition; failure to maintain the customer perception of brand value could negatively impact our sales. If we are unable to compete effectively, our gross sales, guest traffic and profitability may decline.
A failure to identify and execute innovative marketing and guest engagement tactics, ineffective or improper use of other marketing initiatives, and increased advertising and marketing costs could adversely affect our results of operations.
Our ability to reach consumers and drive results is heavily influenced by brand marketing and advertising and our ability to adapt to evolving consumer preferences. We rely on identifying trends and data analytics to create successful advertising programs, including customer relationship management, social media, television and other digital marketing efforts. Increased costs in advertising may limit the amount of coverage we are able to achieve with any given campaign. Our marketing and advertising programs may not be as successful as intended, and thus, may adversely affect our reputation, business, our growth prospects and the strength of our brand. A failure to sufficiently innovate, develop guest relationship initiatives, or maintain adequate and effective advertising could inhibit our ability to maintain brand relevance or awareness and drive increased sales.
Our business could be adversely affected by our inability to respond to or effectively manage social media.
As part of our marketing strategy, we utilize social media platforms to promote our concepts and attract, engage and retain guests. Our strategy may not be successful, resulting in expenses incurred without improvement in guest traffic or brand relevance. In addition, a variety of risks are associated with the use of social media, including negative comments about us, exposure of personally identifiable information, fraud, dissemination of false information, and copyright and trademark risks. The inappropriate use of social media vehicles by our guests or employees could increase our costs, lead to litigation or result in negative publicity that could damage our reputation and adversely affect our results of operations.
Given the marked increase in the use of social media platforms, individuals have access to a broad audience of consumers and other interested persons. The availability of information on social media platforms is virtually immediate as is its impact. Many social media platforms immediately publish the content their users and participants post (which may include influencers with large audiences), often without filters or checks on the accuracy of the content posted. Information concerning our Company may be posted on such platforms at any time. If we are unable to quickly and effectively respond to such reports, we may sufferdeclines in guest traffic. The
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impact may be immediate without affording us an opportunity for redress or correction. These factors could have a material adverse impact on our business.
Global and domestic economic conditions negatively impact consumer discretionary spending and our business operations and could have a material negative effect on our financial performance.
The restaurant industry is dependent upon consumer discretionary spending, which is negatively affected by global and domestic economic conditions, such as: fluctuations in disposable income and changes in consumer confidence, the price of gasoline, slow or negative growth, unemployment, credit conditions and availability, volatility in financial markets, inflationary pressures, weakness in the housing market, tariffs and trade barriers, wars or conflict in certain regions, pandemics or public health concerns, and changes in government and central bank monetary policies. When economic conditions negatively affect consumer spending, discretionary spending for restaurant visits will be challenged, our guest traffic may deteriorate and the average amount guests spend in our restaurants may be reduced. This will negatively impact our revenues and also result in lower royalties collected, spreading fixed costs across a lower level of sales, and in turn, cause downward pressure on our profitability. This could result in further reductions in staff levels, asset impairment charges and potential restaurant closures.
On a broader scale, shifts in U.S. trade policy and retaliatory measures by global trade partners may lead to widespread economic effects, including increased consumer prices and a reduction in discretionary income. As a result, consumer spending on non-essential categories such as dining out may decline.
We have been adversely impacted by, and may continue to be adversely impacted by, ongoing macroeconomic challenges in the U.S. and other regions of the world where our franchisees operate, including recent labor, commodity, transportation and other inflationary pressures, supply chain disruptions, and military conflicts.
General economic conditions, including inflation and fluctuations in energy costs, and changes in U.S. or global trade policy may continue to increase our operating expenses.
We have in the past experienced, and are currently experiencing, the impacts of economic conditions, including inflation and fluctuations in utility and energy costs. Inflation has caused added food, labor and benefits costs and increased our operating expenses. Fluctuations and increases in utility and energy costs have also increased our operating expenses at regional and national levels, including through suppliers increasing prices due to higher prices for petroleum-based fuels, and as a result, putting pressure on margins. As operating expenses rise, we, to the extent permitted by competition, recover costs by raising menu prices, or by implementing alternative products, processes or cost reduction procedures. Changes in U.S. or global trade policy, such as new or increased tariffs on certain food products or other imported goods could further elevate costs, disrupt supply availability, and constrain our ability to protect operating margins through pricing strategies or adjustments in purchasing practices. We cannot ensure we will be able to continue to recover some of the increases in operating expenses due to economic conditions, including inflation, in this manner.
Shortages or interruptions in the availability and delivery of food and other products may increase costs or reduce revenues.
Possible shortages or interruptions in the supply of food items and other products to our restaurants caused by inclement weather; natural disasters such as floods, droughts and hurricanes; health epidemics or pandemics; shortages in the availability of truck drivers; the inability of our suppliers to obtain credit in a tight credit market; trade barriers; food safety warnings or advisories or the prospect of such pronouncements; animal disease outbreaks; or other conditions beyond our control could adversely affect the availability, quality and cost of items we buy and the operations of our restaurants. Our inability to effectively manage supply chain risk could increase our costs or reduce revenues and limit the availability of products critical to our restaurant operations.
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Information and Technology Related Risks
We are exposed to risks related to cybersecurity and protection of confidential information, and failure to protect the integrity and security of payment card or individually identifiable information of our guests and teammates or confidential and proprietary information of the Company could damage our reputation and expose us to loss of revenues, increased costs and litigation.
Our technology systems contain personal, financial and other information that is entrusted to us by our guests and team members, as well as financial, proprietary and other confidential information related to our business. In addition, a significant portion of our restaurant sales are by credit or debit cards. If our technology systems, or those of third-party services providers we rely upon, are compromised as a result of a cyber-attack (including whether from circumvention of security systems, denial-of-service attacks, hacking, use of artificial intelligence, “phishing” attacks, computer viruses, ransomware, malware, or social engineering) or other external or internal methods, it could result in an adverse and material impact on our reputation, operations, and financial condition. The cyber risks we face range from cyber-attacks common to most industries, to attacks that target us due to the confidential consumer information we obtain through our electronic processing of credit and debit card transactions. The rapid evolution and increased adoption of artificial intelligence technologies may also heighten our cybersecurity risks by making cyber-attacks more difficult to detect, contain, and mitigate. Such security breaches could also result in litigation or governmental investigationagainst us, as well as the imposition of penalties. These impacts could also occur if we are perceived either to have had an attack or to have failed to properly respond to an incident.
To conduct our operations, we regularly move data across national borders, and consequently are subject to a variety of continuously evolving and developing laws and regulations regarding privacy, data protection, and data security, including those related to the collection, storage, handling, use, disclosure, transfer, and security of personal data. The use and disclosure of such information is regulated and enforced at the federal, state and international levels, and these laws, rules and regulations are subject to change.
As privacy and information security laws and regulations change, or cyber risks evolve pertaining to data, we may incur significant additional costs in technology, third-party services and personnel to maintain systems designed to anticipate and prevent cyber-attacks. As with many public companies, our defenses are under attack regularly. There have been, and will be, minor intrusions from time-to-time. We regularly implement and monitor preventative measures to reduce cyber risks. However, we cannot provide assurance that our security frameworks and measures will be successful in preventing future significant cyber-attacks or data loss.
We are dependent on information technology and any material failure in the operation or security of that technology or our ability to execute a comprehensive business continuity plan could impair our ability to efficiently operate our business.
We rely on information systems across our operations, including, for example, point-of-sale processing in our restaurants, management of our supply chain, collection of cash, payment of obligations and various other processes and procedures. Our ability to efficiently manage our business depends significantly on the reliability and capacity of these systems. The failure of these systems to operate effectively, problems with maintenance, larger scale outages, upgrading or transitioning to replacement systems or a breach in security of these systems could cause delays in customer service and reduce efficiency in our operations. Furthermore, as we continue to incorporate technology increasingly into our guests’ experiences, disruptions or performance issues with guest-facing technology or systems could negatively impact the guest experience and counteract the intended benefits of such systems.
Additionally, our corporate systems and processes and corporate support for our restaurant operations are handled primarily at our restaurant support center. We have disaster recovery procedures and business continuity plans in place to address most events of a crisis nature, including tornadoes and other natural disasters, and back up and off-site locations for recovery of electronic and other forms of data and information. However, if we are unable to fully implement our disaster recovery plans, we may experience delays in recovery of data, inability to perform vital corporate functions, loss of productivity, tardiness in required reporting and compliance, failures to adequately support field operations and other breakdowns in normal communication and operating procedures that could have a
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material adverse effect on our financial condition, results of operations and exposure to administrative and other legal claims.
Financial Risks
Downgrades in our credit ratings could impact our ability to access capital and materially adversely affect our business, financial condition and results of operations.
Credit rating agencies have, and in the future may, change their credit rating for us, among other things, based on the performance of our business, our capital strategies or their overall view of our industry. There can be no assurance that any rating assigned to our currently outstanding public debt securities will remain in effect for any given period of time or that any such ratings will not be further lowered, suspended or withdrawn entirely by a rating agency if, in that agency’s judgment, circumstances so warrant. A downgrade of our credit ratings could, among other things:
• Increase our cost of borrowing;
• Limit our ability to access capital;
• Result in more restrictive covenants in agreements governing the terms of any future indebtedness that we may incur, including restrictions on our ability to pay distributions or repurchase shares;
• Require us to provide collateral for any future borrowings; and
• Adversely affect the market price of our outstanding debt securities.
These ratings and our current credit condition affect, among other things, our ability to access new capital. Negative changes to these ratings may result in more stringent covenants and higher interest rates under the terms of any new debt agreement. Our credit ratings could be further lowered, or rating agencies could issue adverse commentaries in the future, which could have a material adverse effect on our business, financial condition, results of operations and liquidity. In particular, a weakening of our financial condition, including any further increase in our leverage or decrease in our profitability or cash flows, could adversely affect our ability to obtain necessary funds, could result in a credit rating downgrade or change in outlook, or could otherwise increase our cost of borrowing.
Declines in the market price of our common stock or changes in other circumstances that may indicate an impairment of goodwill could adversely affect our financial position and results of operations.
We perform our annual goodwill impairment tests in the second quarter of each fiscal year. Interim goodwill impairment tests are also required when events or circumstances change between annual tests that would more likely than not reduce the fair value of our reporting units below their carrying value. We performed our annual goodwill impairment test in the second quarter of fiscal 2025 and no indicators of impairment were identified. Additionally, no indicators of impairment were identified through the end of fiscal 2025. This assessment is predicated on our ability to continue to operate dining and banquet rooms and generate off-premise sales at our restaurants. We will continue to monitor and evaluate our results and evaluate the likelihood of any potential impairment charges at our reporting units.
It is possible that a change in circumstances such as the decline in the market price of our common stock or changes in consumer spending levels, or in the numerous variables associated with the judgments, assumptions and estimates made in assessing the appropriate valuation of our goodwill, could negatively impact the valuation of our brands and create the potential for the recognition of impairmentlosses on some or all of our goodwill. If we were required to write down a portion of our goodwill and record related non-cash impairment charges, our financial position and results of operations would be adversely affected.
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Changes to estimates related to our property and equipment, or operating results that are lower than our current estimates at certain restaurant locations, may cause us to incur impairment charges on certain long-lived assets.
In connection with our impairment analysis for long-lived assets, we may make certain estimates and projections with respect to individual restaurant future cash flows as well as overall performance. If actual results differ significantly from our estimates and projections, this could result in future impairments that, could adversely impact our results. In fiscal 2025, we recognized $4.6 million of long-lived asset and liquor license impairment charges Refer to Note 1 - Nature of Operations and Summary of Significant Accounting Policies within Part II, Item 8 - Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements for more information.
Legal and Regulatory Risks
Litigation could have a material adverse impact on our business and our financial performance.
We are subject to lawsuits, administrative proceedings and claims that arise in the regular course of business or out of special circumstances. These matters typically involve claims by guests, team members and others regarding issues such as food-borne illness, food safety, premises liability, compliance with wage and hour requirements, work-related injuries, discrimination, harassment, disability and other operational issues common to the food service industry, as well as contract disputes and intellectual property infringement matters. Our franchise activity also creates a risk of us being named as a joint employer of workers of franchisees for allegedviolations of labor and wage laws. We could be adversely affected by negative publicity and litigation costs resulting from these claims, regardless of their validity. Significant legal fees and costs in complex class action litigation or an adverse judgment or settlement that is not insured or is in excess of insurance coverage could have a material adverse effect on our financial position and results of operations.
Our business and operation could be negatively affected if we become subject to any securities litigation or shareholder activism, which could cause us to incur significant expenses, hinder execution of investment strategy and impact our stock price.
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Publicly traded companies also may become the target of shareholder activism, which could take many forms or arise in a variety of situations. Due to the potential volatility of our stock price and for a variety of other reasons, we may become the target of securities litigation or shareholder activism. Securities litigation and shareholder activism, including potential proxy contests, could result in substantial costs and legal fees and divert management’s and our Board of Directors’ attention and resources from our business. Additionally, such securities litigation and shareholder activism could give rise to perceived uncertainties as to our future, adversely affect our relationships with service providers and make it more difficult to attract and retain qualified personnel. Further, our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any securities litigation and shareholder activism.
From time to time we may implement measures that make it more difficult for an activist investor or potential acquirer to purchase a large portion of our securities, to initiate a tender offer or a proxy contest, or to acquire the Company through a merger or similar transaction. These measures may discourage investment in our common stock and may delay or discourage acquisitions that would result in our stockholders receiving a premium for their shares over the then-current market price.
Employment and labor laws and regulations have increased, and in the future may further increase, the cost of labor for our restaurants.
We are subject to various federal, state and local employment and labor laws and regulations that govern employment and labor matters, including, employment discrimination, minimum wages, work scheduling, overtime, tip credits, tax reporting, working conditions, safety standards, employment of minors, family leave and immigration status. Compliance with these laws and regulations can be costly, and a failure or perceived failure to comply with these laws could result in negative publicity or litigation. We have been and are under investigation for compliance periodically, and we have been and will be fined for allegedviolations of these regulations.
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Some states and localities have, and many others are contemplating, increases to their minimum wage and tip credit wage, and such increases can have a significant impact on our labor costs. For example, in September 2023, California passed legislation setting the minimum wage for fast food restaurant employees at $20 per hour effective April 1, 2024 and establishing a council to set future wage increases and to make recommendations to state agencies for other sector-wide workplace standards. In addition, new employment or labor laws may mandate additional benefits for employees or impose additional obligations that may adversely impact the costs of labor, the availability of labor and our business operations. In addition, our suppliers may be affected by higher minimum wage standards or availability of labor, which may increase the price of goods and services they supply to us. There are no assurances that a combination of cost management and price increases can offset costs associated with compliance.
Governmental regulation may adversely affect our ability to maintain our existing and future operations and to open new restaurants.
We are subject to extensive federal, state, local and international laws and regulations, which vary from jurisdiction to jurisdiction and which increase our exposure to litigation and governmental proceedings. Among other laws and regulations, we are subject to laws and regulations relating to the design and operation of facilities, minimum wage, licensing and regulation by alcoholic beverage control, health, sanitation, safety and fire agencies, nutritional content and menu labeling, including the Affordable Care Act, which requires restaurant companies such as ours to disclose calorie information on their menus. Compliance with these laws and regulations may lead to increased costs and operational complexity, changes in sales mix and profitability, and increased exposure to governmental investigations or litigation. We cannot reliably anticipate any changes in guest behavior resulting from implementation of these laws.
We are also subject to federal and state environmental regulations, and although these have not had a material negative effect on our operations, we cannot ensure this will not occur in the future. For example, regulations by the United States and other foreign governments focused on environmental matters such as climate change, greenhouse gases and water conservation could result in increased taxation or in future restrictions on or increases in costs associated with food and other restaurant supplies, transportation costs and utility costs, any of which could decrease our operating profits and/or necessitate future investments in our restaurant facilities and equipment to achieve compliance.
We are subject to federal and state laws and regulations which govern the offer and sale of franchises and which may supersede the terms of franchise agreements between us and our franchisees. Failure to comply with such laws and regulations or to obtain or retain licenses or approvals to sell franchises could adversely affect us and our franchisees. Due to our international franchising, we are also 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. Failure to comply with any such legal requirements could subject us to monetary liabilities and other sanctions, which could adversely impact our business and financial performance.
The impact of current laws and regulations, the effect of future changes in laws or regulations that impose additional requirements and the consequences of litigation relating to current or future laws and regulations, or our inability to respond effectively to significant regulatory or public policy issues, could increase our compliance and other costs of doing business and therefore have an adverse effect on our results of operations. Failure to comply with the laws and regulatory requirements of federal, state, local, and international authorities could result in, among other things, revocation of required licenses, administrative enforcement actions, fines and civil and criminal liability. Compliance with these laws and regulations can be costly and can increase our exposure to litigation or governmental investigations or proceedings.
Changes in tax laws and unanticipated tax liabilities could adversely affect the taxes we pay and our profitability.
We are subject to income and other taxes in the United States and foreign jurisdictions, and our operations, plans and results are affected by tax and other initiatives around the world. In particular, we are affected by the impact of changes to tax laws or policy or related authoritative interpretations. We are also impacted by settlements of
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pending or any future adjustments proposed by taxing and governmental authorities inside and outside of the United States in connection with our tax audits, all of which will depend on their timing, nature and scope. Any significant increases in income tax rates, changes in income tax laws or unfavorable resolution of tax matters could have a material adverse impact on our financial results.
Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price .
We are subject to the internal control requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which require management to assess the effectiveness of our internal control over financial reporting and our independent auditors to attest to the effectiveness of our internal control over financial reporting. Our processes for designing and implementing effective internal controls involve continuous effort that requires us to anticipate and react to changes in our business as well as in the economic and regulatory environments. As a result, we expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. We cannot assure you that the measures we will take as part of this effort will be sufficient to maintain effective internal control over our financial reporting. Failure to maintain effective internal controls could result in consolidated financial statements that do not accurately reflect our financial condition, cause investors to lose confidence in our reported financial information, or result in regulatory scrutiny, penalties or shareholder litigation, all of which could have a negative effect on the trading price of our common stock.
General Risk Factors
Other risk factors may adversely affect our financial performance.
Other risk factors that could cause our actual results to differ materially from those indicated in forward-looking statements, include, without limitation, changes in financial and credit markets (including rising interest rates); increased fuel costs and availability for our team members, customers and suppliers; increased health care costs; health epidemics or pandemics or the prospects of these events; changes in consumer behaviors; changes in demographic trends; labor shortages and availability of employees; union organization; strikes; wars or conflicts in certain regions; terrorist acts; energy shortages and rolling blackouts; weather and climate change (including, major hurricanes and regional winter storms); inadequate insurance coverage; and limitations imposed by our credit agreements.
The Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States, and include the accounts of Brinker International, Inc. and our wholly-owned subsidiaries. All
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intercompany accounts and transactions have been eliminated in consolidation. We have a 52 or 53 week fiscal year ending on the last Wednesday in June. We utilize a 13 week accounting period for quarterly reporting purposes, except in years containing 53 weeks when the fourth quarter contains 14 weeks. Fiscal 2025, Fiscal 2024, and Fiscal 2023 which ended on June 25, 2025, June 26, 2024, and June 28, 2023, respectively, each contained 52 weeks. All amounts within the MD&A are presented in millions unless otherwise specified.
OVERVIEW
The Company is principally engaged in the ownership, operation, development, and franchising of the Chili’s ® Grill & Bar (“Chili’s”) and Maggiano’s Little Italy ® (“Maggiano’s”) restaurant brands. Our two restaurant brands, Chili’s and Maggiano’s, are both operating segments and reporting units. Refer to Part I, Item 1 - Business of this document for additional information about our business and operational strategies.
Operating Environment
During the recent years, our operating results were impacted by geopolitical and other macroeconomic events, leading to higher than usual inflation on wages and food and beverage costs. Geopolitical and other macroeconomic events have led, and in the future may lead to, wage inflation, staffing challenges, product cost inflation and/or disruptions in the supply chain that impact our restaurants’ ability to obtain the products needed to support their operation. Such events could also negatively affect consumer spending potentially reducing guest traffic and/or reducing the average amount guests spend in our restaurants.
RESULTS OF OPERATIONS
The following table sets forth selected operating data:
Fiscal Years Ended
June 25, 2025
June 26, 2024
Dollars
As a percentage (1)
Dollars
As a percentage (1)
Revenues
Company sales
Franchise revenues
Total revenues
Operating costs and expenses
Food and beverage costs
Restaurant labor
Restaurant expenses
Depreciation and amortization
General and administrative
Other (gains) and charges
Total operating costs and expenses
Operating income
Interest expenses
Other income, net
Income before income taxes
Provision (benefit) for income taxes
Net income
(1) Food and beverage costs, Restaurant labor and Restaurant expenses are calculated based on a percentage of Company sales. All others are calculated as a percentage of Total revenues.
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Revenues
Revenues are presented in two separate captions in the Consolidated Statements of Comprehensive Income to provide more clarity around Company-owned restaurant revenues and operating expenses trends:
• Company sales include revenues generated by the operation of Company-owned restaurants including food and beverage sales, net of discounts, Maggiano’s banquet service charge income, delivery, gift card breakage, digital entertainment revenues, merchandise income and are net of gift card discount costs from third-party gift card sales.
• Franchise revenues include royalties, franchise advertising fees, franchise and development fees, and other service fees.
The following is a summary of the change in Total revenues:
Total Revenues
Chili’s
Maggiano’s
Total Revenues
Fiscal year ended June 26, 2024
Change from:
Comparable restaurant sales (1)
Restaurant openings
Maggiano's banquet income
Gift card breakage
Merchandise income
Digital entertainment revenues
Delivery service fee income
Restaurant closures
Company sales
Franchise revenues (2)
Fiscal year ended June 25, 2025
(1) Comparable restaurant sales increased due to higher traffic, favorable menu item mix, and menu price increases.
(2) Franchise revenues increased primarily due to higher royalties. Our Chili’s and Maggiano’s franchisees generated sales of approximately $967.4 million and $16.9 million respectively in fiscal 2025 compared to $856.2 million and $11.8 million respectively in fiscal 2024.
The table below presents the percentage change in comparable restaurant sales and restaurant capacity for fiscal 2025 compared to fiscal 2024:
Comparable
Sales (1)
Price Impact
Mix-Shift Impact (2)
Traffic Impact
Restaurant Capacity (3)
Company-owned
Chili’s
Maggiano’s
Franchise (4)
International
Chili’s domestic (5)
System-wide (6)
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(1) Comparable Restaurant Sales include all restaurants that have been in operation for more than 18 full months. Restaurants temporarily closed 14 days or more are excluded from Comparable Restaurant Sales. Percentage amounts are calculated based on the comparable periods year-over-year.
(2) Mix-Shift is calculated as the year-over-year percentage change in Company sales resulting from the change in menu items ordered by guests.
(3) Restaurant Capacity is measured by sales weeks and is calculated based on comparable periods year-over-year. No adjustments have been made to capacity for temporary closures.
(4) Franchise sales generated by franchisees are not included in Total revenues in the Consolidated Statements of Comprehensive Income; however, we generate royalty revenues and advertising fees based on franchisee revenues, where applicable. We believe presenting Franchise Comparable Restaurant Sales provides investors relevant information regarding total brand performance.
(5) Chili’s domestic Comparable Restaurant Sales percentages are derived from sales generated by Company-owned and franchise-operated Chili’s restaurants in the United States.
(6) System-wide Comparable Restaurant Sales are derived from sales generated by Chili’s and Maggiano’s Company-owned and franchise-operated restaurants.
Costs and Expenses
The following is a summary of the changes in Costs and Expenses:
Fiscal Years Ended
Favorable (Unfavorable) Variance
June 25, 2025
June 26, 2024
Dollars
% of Company Sales
Dollars
% of Company Sales
Dollars
% of Company Sales
Food and beverage costs
Restaurant labor
Restaurant expenses
Depreciation and amortization
General and administrative
Other (gains) and charges
Interest expenses
Other income, net
As a percentage of Company sales:
• Food and beverage costs were flat, due to 1.5% of favorable menu pricing, offset by 1.1% of unfavorable menu item mix and 0.4% of unfavorable commodity costs driven by poultry, meat, produce, and dairy.
• Restaurant labor was favorable 1.4%, due to 4.0% of sales leverage and 0.2% of lower other labor expenses, partially offset by 2.1% of higher hourly labor driven by increased staffing levels and wage rates, 0.4% of higher manager salaries, and 0.3% of higher manager bonus.
• Restaurant expenses were favorable 2.8%, due to 3.8% of sales leverage and 0.1% of lower other restaurant expenses, partially offset by 0.5% of higher repairs and maintenance, 0.4% of higher advertising, and 0.2% of higher rent.
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Depreciation and amortization increased $35.8 million as follows:
Depreciation and Amortization
Fiscal year ended June 26, 2024
Change from:
Additions for existing and new restaurant assets
Finance leases (1)
Corporate assets
Retirements and fully depreciated restaurant assets
Other (2)
Fiscal year ended June 25, 2025
(1) Finance lease amortization increased primarily due to new tabletop and tablet devices in our restaurants.
(2) Other includes accelerated depreciation of certain equipment over the remaining expected useful life as a result of management’s decision to abandon and replace the equipment.
General and administrative expenses increased $38.3 million as follows:
General and Administrative
Fiscal year ended June 26, 2024
Change from:
Corporate technology initiatives (1)
Payroll expenses
Performance-based compensation
Stock-based compensation
Defined contribution plan employer expenses and other benefits
Professional fees
Other
Fiscal year ended June 25, 2025
(1) Corporate technology initiatives increased primarily due to ERP system subscription costs and amortization of software implementation costs.
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Other (gains) and charges consisted of the following (for further details refer to Note 13 - Other Gains and Charges):
Fiscal Years Ended
June 25, 2025
June 26, 2024
Litigation & claims, net (1)
Enterprise system implementation costs
Restaurant-level impairment charges
Restaurant closure asset write-offs and charges
Severance and other benefit charges
Lease contingencies
Gain on sale of assets, net
Loss from natural disasters, net (of insurance recoveries)
Lease modification gain, net
Other
(1) Litigation & claims, net in the current year primarily relates to legal contingencies, inclusive of certain extraordinary one-time settlements related to employment and intellectual property claims, and alcohol service-related cases.
Interest expenses decreased $11.9 million primarily due to lower average outstanding debt balances, partially offset by higher interest on financed leased equipment.
Income Taxes
Fiscal Years Ended
June 25, 2025
June 26, 2024
Effective income tax rate
The change in the effective income tax rate from fiscal 2024 to fiscal 2025 is primarily due to higher Income before income taxes and the resulting deleverage of the FICA tip tax credit. Refer to Note 9 - Income Taxes for more information.
H.R. 1., also known as the One Big Beautiful Bill Act (“OBBBA”), was enacted on July 4, 2025. The legislation includes several provisions that may impact the timing and magnitude of certain tax deductions. Key provisions include the permanent extension of several business tax benefits originally introduced under the 2017 Tax Cuts and Jobs Act. We are currently evaluating the provisions of the OBBBA to assess their potential impact on our financial position, results of operations and cash flows.
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Segment Results
Chili’s Segment
Fiscal Years Ended
Favorable (Unfavorable) Variance
June 25, 2025
June 26, 2024
Dollars
Company sales
Franchise revenues
Total revenues
Chili’s Total revenues increased 24.6% primarily due to favorable comparable restaurant sales driven by higher traffic, favorable menu item mix, and menu pricing. Refer to the “Revenues” section above for further details about Chili’s revenues changes.
The following is a summary of the changes in Chili’s operating costs and expenses:
Fiscal Years Ended
Favorable (Unfavorable) Variance
June 25, 2025
June 26, 2024
Dollars
% of Company Sales
Dollars
% of Company Sales
Dollars
% of Company Sales
Food and beverage costs
Restaurant labor
Restaurant expenses
Depreciation and amortization
General and administrative
Other (gains) and charges
As a percentage of Company sales:
• Chili’s Food and beverage costs were flat, due to 1.5% of favorable menu pricing, offset by 1.1% of unfavorable menu item mix, and 0.4% of unfavorable commodity costs driven by higher poultry, meat, produce, and dairy.
• Chili’s Restaurant labor was favorable 1.5%, due to 4.5% of sales leverage, partially offset by 2.3% of higher hourly labor driven by increased staffing levels and wage rates and 0.4% of higher manager salaries and 0.3% of higher manager bonus.
• Chili’s Restaurant expenses were favorable 3.1%, due to 4.2% of sales leverage, partially offset by 0.5% of higher repairs and maintenance, 0.4% of higher advertising, and 0.2% of higher rent.
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Chili’s Depreciation and amortization increased $34.8 million as follows:
Depreciation and Amortization
Fiscal year ended June 26, 2024
Change from:
Additions for new and existing restaurant assets
Finance leases (1)
Retirements and fully depreciated restaurant assets
Other (2)
Fiscal year ended June 25, 2025
(1) Finance lease amortization increased primarily due to new tabletop and tablet devices in our restaurants.
(2) Other includes accelerated depreciation of certain equipment over the remaining expected useful life as a result of management’s decision to abandon and replace the equipment.
Chili’s General and administrative increased $7.6 million as follows:
General and Administrative
Fiscal year ended June 26, 2024
Change from:
Performance-based compensation
Defined contribution plan employer expenses and other benefits
Payroll expenses
Stock-based compensation
Other
Fiscal year ended June 25, 2025
Chili’s Other (gains) and charges consisted of the following (for further details, refer to Note 13 - Other Gains and Charges):
Fiscal Years Ended
June 25, 2025
June 26, 2024
Litigation & claims, net
Restaurant-level impairment charges
Restaurant closure asset write-offs and charges
Loss from natural disasters, net (of insurance recoveries)
Lease modification gain, net
Gain on sale of assets, net
Other
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Maggiano’s Segment
Fiscal Years Ended
Favorable (Unfavorable) Variance
June 25, 2025
June 26, 2024
Dollars
Company sales
Franchise revenues
Total revenues
Maggiano’s Total revenues increased 1.1% primarily due to favorable comparable restaurant sales driven by increased menu pricing and favorable menu item mix, partially offset by lower traffic. Refer to the “Revenues” section above for further details about Maggiano’s revenues changes.
The following is a summary of the changes in Maggiano’s operating costs and expenses:
Fiscal Years Ended
Favorable (Unfavorable) Variance
June 25, 2025
June 26, 2024
Dollars
% of Company Sales
Dollars
% of Company Sales
Dollars
% of Company Sales
Food and beverage costs
Restaurant labor
Restaurant expenses
Depreciation and amortization
General and administrative
Other (gains) and charges
As a percentage of Company sales:
• Maggiano’s Food and beverage costs were favorable 0.1%, due to 1.3% of favorable menu pricing partially offset by 0.8% of unfavorable commodity costs driven by dairy and poultry and 0.4% of unfavorable menu item mix.
• Maggiano’s Restaurant labor was favorable 0.8%, due to 0.5% of lower hourly labor, 0.4% of lower manager bonus, 0.2% of sales leverage, and 0.1% of lower other labor expenses, partially offset by 0.4% of higher manager salaries.
• Maggiano’s Restaurant expenses were unfavorable 0.9%, due to 0.5% of higher advertising, 0.3% of higher repairs and maintenance, 0.3% higher rent, and 0.1% of higher other restaurant expenses, partially offset by 0.3% of sales leverage.
CRITICAL ACCOUNTING ESTIMATES
Our significant accounting policies are disclosed in Note 1 - Nature of Operations and Summary of Significant Accounting Policies in Part II, Item 8 - Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements. The following discussion addresses our most critical accounting estimates, which are those that are most important to the portrayal of our financial condition and results, and that require significant judgment.
Gift Card Revenues Recognition
Proceeds from the sale of gift cards are recorded as deferred revenues and recognized as revenues when the gift cards are redeemed by the holders. Breakage income represents the value associated with the portion of gift cards sold that will most likely never be redeemed and is estimated based on our historical gift card redemption patterns and actuarial estimates. Breakage revenues are recognized proportionate to the pattern of related gift card redemptions. We recognize breakage income in Company sales in the Consolidated Statements of Comprehensive Income.
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We update our breakage rate estimate periodically and, if necessary, adjust the deferred revenues balance accordingly. If actual redemption patterns vary from our estimate, actual gift card breakage income may differ from the amounts recorded. Changing our breakage-rate assumption used to record breakage attributable to gift cards sold in fiscal 2025 by 50 basis points would result in an impact to the Consolidated Statements of Comprehensive Income of approximately $0.6 million on the current year.
Valuation of Long-Lived Assets
We review the carrying amount of property, equipment and lease assets on an annual basis or more often if events or circumstances indicate that the carrying amount may not be recoverable. The impairment test is a two-step process. Step one includes comparing the operating cash flows of each restaurant (asset group) over its remaining service life to the carrying value of the asset group. If the cash flows exceed the carrying value, then the asset group is not impaired, and no further evaluation is required. If the carrying value of the asset group exceeds its cash flows, impairment may exist and performing step two is necessary to determine the impairmentloss. If the carrying amount is not recoverable, we record an impairment charge for the excess of the carrying amount over the fair value of the asset group. We determine fair value based on discounted projected future operating cash flows of each restaurant over its remaining service life using a risk adjusted discount rate. This process requires the use of estimates and assumptions, which are subject to a high degree of judgment.
Effect of New Accounting Standards
The impact of new accounting pronouncements can be found at Note 1 - Nature of Operations and Summary of Significant Accounting Policies in Part II, Item 8 - Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
Our principal sources of liquidity are net cash provided by operating activities and borrowings if any, under our $1.0 billion revolving credit facility as further discussed below. Our main requirements for liquidity are to support our working capital, capital expenditures for new and existing restaurants, obligations under our operating leases, and interest payments on our debt. Our operations have typically not required significant working capital. Substantially all of our sales are tendered in cash and cash equivalents, which are received before related trade payables for food and beverage products, supplies, labor and services become due.
Changes in our cash flows from operating, investing and financing activities during fiscal 2025 compared to fiscal 2024 are outlined below.
Cash Flows from Operating Activities
Fiscal Years Ended
Favorable (Unfavorable) Variance
June 25, 2025
June 26, 2024
Net cash provided by operating activities
Net cash provided by operating activities increased due to an increase in operating income partially offset by an increase in payments of income taxes and the timing of other operational receipts and payments.
Cash Flows from Investing Activities
Fiscal Years Ended
Favorable (Unfavorable) Variance
June 25, 2025
June 26, 2024
Net cash used in investing activities
Net cash used in investing activities increased primarily due to new equipment purchases and increased spend on Chili’s capital maintenance.
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Cash Flows from Financing Activities
Fiscal Years Ended
Favorable (Unfavorable) Variance
June 25, 2025
June 26, 2024
Net cash used in financing activities
Net cash used in financing activities increased primarily due to the payoff of the $350.0 million 5.00% notes and an increase in share repurchases in fiscal 2025 compared to net repayment activity on the revolving credit facility of $161.3 million in fiscal 2024.
Debt
On May 1, 2025, we amended our $900.0 million revolving credit facility to increase the capacity to $1.0 billion. The Company incurred and capitalized $3.6 million of debt issuance costs associated with the revolving credit facility during fiscal 2025, which are included in Other assets in the Consolidated Balance Sheets.
The $1.0 billion revolving credit facility, as amended, matures on May 1, 2030 and bears interest at a rate of SOFR plus an applicable margin of 1.25% to 2.00% and an undrawn commitment fee of 0.20% to 0.30%, both based on a function of our debt-to-cash-flow ratio. As of June 25, 2025, our interest rate was 5.82% consisting of SOFR of 4.32% plus the applicable margin and spread adjustment of 1.50%. As of June 25, 2025, there were no amounts outstanding under the revolving credit facility.
Our $350.0 million 8.25% notes mature July 15, 2030, and require semi-annual interest payments in arrears, on each January 15 and July 15.
In October 2024, the $350.0 million of 5.00% senior notes matured and were repaid in full using borrowings under the revolving credit facility.
As of June 25, 2025, we were in compliance with our covenants pursuant to the $1.0 billion revolving credit facility and under the terms of the indentures governing our 8.25% notes. Refer to Note 7 - Debt within Part II, Item 8 - Financial Statements and Supplementary Data for further information about our notes and revolving credit facility.
Share Repurchase Program
Our Board of Directors approved a $300.0 million share repurchase program in August 2021. Our share repurchase program is used to return capital to shareholders and to minimize the dilutive impact of stock options and other share-based awards. We evaluate potential share repurchases under our plan based on several factors, including our cash position, share price, operational liquidity, proceeds from divestitures, borrowings and planned investment and financing needs. As part of our share repurchase program, we repurchased 1.0 million shares of our common stock for $76.0 million in fiscal 2025 and 0.7 million shares of our common stock for $21.0 million in fiscal 2024. As of June 25, 2025, we had $107.0 million of authorized repurchases remaining under the share repurchase program.
Subsequent to fiscal 2025 year end, our Board of Directors authorized an additional $400.0 million under our share repurchase program, allowing for a total available authority of $507.0 million.
Dividend Program
There were no dividends declared in fiscal 2025 or fiscal 2024. The Company’s decision to pay dividends in the future is at the discretion of the Board of Directors and will be dependent on our operating performance, financial condition, capital expenditure requirements, limitations on cash distributions pursuant to the terms and conditions of our revolving credit facility and applicable law, and such other factors that the Board of Directors considers relevant.
Cash Flow Outlook
In light of an unpredictable macroeconomy, including commodity and labor inflation and supply chain disruptions, we continue to focus on cash flow generation and maintaining a solid and flexible financial position to execute our
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long-term strategy of investing in our business. We continue to assess the macro environment and will adjust our overall approach to capital allocation, including share repurchases, based on market conditions and trends.
Based on the current level of operations, we believe that our current cash and cash equivalents, coupled with cash generated from operations and availability under our existing revolving credit facility will be adequate to meet our capital expenditure and working capital needs for at least the next twelve months, including the repayment of current debt obligations.
Future Commitments and Contractual Obligations
Payments due under our contractual obligations for outstanding indebtedness, leases and purchase obligations as of June 25, 2025 are as follows:
Payments Due by Period
Less than 1 Year
1-3 Years
3-5 Years
More than 5 Years
Total
Long-term debt (1)
Interest (2)
Finance leases (3)
Operating leases (3)
Purchase obligations (4)
(1) Long-term debt consists of principal amounts owed on the 8.25% notes which mature on July 15, 2030. As of June 25, 2025, there was no outstanding balance on the $1.0 billion revolving credit facility.
(2) Interest consists of remaining interest payments on the 8.25% fixed rate notes.
(3) Finance leases and Operating leases total future lease payments represent the contractual obligations due under the lease agreements, including cancellable option periods where we are reasonably assured to exercise the options.
(4) Purchase obligations are defined as an agreement to purchase goods or services that is enforceable and legally binding on us and that specifies all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Our purchase obligations primarily consist of long-term obligations for software and professional services contracts, as well as non-cancellable insurance premiums, and exclude agreements that are cancellable without significant penalty.
Off -Balance Sheet Arrangements
We have entered into certain pre-commencement leases as disclosed in Note 6 - Leases and have obligations for guarantees on certain lease agreements and letters of credit as disclosed in Note 8 - Commitments and Contingencies included within Part II, Item 8 - Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements of this Annual Report on Form 10-K.
