0001606366-24-000028 | 10-Q | XBRL Viewer | EL Pollo Loco Holdings INC

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Details)	3 Months Ended
	Mar. 27, 2024 restaurant segment
DESCRIPTION OF BUSINESS
Number of operating segments \| segment	1
Company-operated
DESCRIPTION OF BUSINESS
Number of restaurants	172
Franchised
DESCRIPTION OF BUSINESS
Number of restaurants	323

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

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+ Details

COMMITMENTS AND CONTINGENCIES	3 Months Ended
Mar. 27, 2024
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES	7. COMMITMENTS AND CONTINGENCIES Legal Matters The Company is involved in various claims such as wage and hour and other legal actions that arise in the ordinary course of business. The outcomes of these actions are not predictable but the Company does not believe that the ultimate resolution of these other actions will have a material adverse effect on its financial position, results of operations, liquidity, or capital resources. A significant increase in the number of claims, or an increase in amounts owing under successful claims, could materially and adversely affect its business, condensed consolidated financial condition, results of operations, and cash flows. Purchasing Commitments The Company has long-term beverage supply agreements with certain major beverage vendors. Pursuant to the terms of these arrangements, marketing rebates are provided to the Company and its franchisees from the beverage vendors based upon the dollar volume of purchases for system-wide restaurants which will vary according to their demand for beverage syrup and fluctuations in the market rates for beverage syrup. These contracts have terms extending through the end of 2024. At March 27, 2024, the Company’s total estimated commitment to purchase chicken was $24.8 million. Contingent Lease Obligations As a result of assigning the Company’s interest in obligations under real estate leases in connection with the sale of company-operated restaurants to some of the Company’s franchisees, the Company is contingently liable on three lease agreements. These leases have various terms, the latest of which expires in 2038. As of March 27, 2024, the potential amount of undiscounted payments the Company could be required to make in the event of non-payment by the primary lessee was $3.6 million. The present value of these potential payments discounted at the Company’s estimated pre-tax cost of debt at March 27, 2024 was $2.5 million. The Company’s franchisees are primarily liable on the leases. The Company has cross-default provisions with these franchisees that would put them in default of their franchise agreements in the event of non-payment under the leases. The Company believes that these cross-default provisions reduce the risk that payments will be required to be made under these leases. Employment Agreements As of March 27, 2024, the Company had employment agreements with three of the officers of the Company. These agreements provide for minimum salary levels, possible annual adjustments for cost-of-living changes, and incentive bonuses that are payable under certain business conditions. Indemnification Agreements The Company has entered into indemnification agreements with each of its current directors and officers. These agreements require the Company to indemnify these individuals to the fullest extent permitted under Delaware law against liabilities that may arise by reason of their service to the Company and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. The Company also intends to enter into indemnification agreements with future directors and officers.

COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 27, 2024

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

7. COMMITMENTS AND CONTINGENCIES

Legal Matters

The Company is involved in various claims such as wage and hour and other legal actions that arise in the ordinary course of business. The outcomes of these actions are not predictable but the Company does not believe that the ultimate resolution of these other actions will have a material adverse effect on its financial position, results of operations, liquidity, or capital resources. A significant increase in the number of claims, or an increase in amounts owing under

successful claims, could materially and adversely affect its business, condensed consolidated financial condition, results of operations, and cash flows.

Purchasing Commitments

The Company has long-term beverage supply agreements with certain major beverage vendors. Pursuant to the terms of these arrangements, marketing rebates are provided to the Company and its franchisees from the beverage vendors based upon the dollar volume of purchases for system-wide restaurants which will vary according to their demand for beverage syrup and fluctuations in the market rates for beverage syrup. These contracts have terms extending through the end of 2024.

At March 27, 2024, the Company’s total estimated commitment to purchase chicken was $24.8 million.

Contingent Lease Obligations

As a result of assigning the Company’s interest in obligations under real estate leases in connection with the sale of company-operated restaurants to some of the Company’s franchisees, the Company is contingently liable on three lease agreements. These leases have various terms, the latest of which expires in 2038. As of March 27, 2024, the potential amount of undiscounted payments the Company could be required to make in the event of non-payment by the primary lessee was $3.6 million. The present value of these potential payments discounted at the Company’s estimated pre-tax cost of debt at March 27, 2024 was $2.5 million. The Company’s franchisees are primarily liable on the leases. The Company has cross-default provisions with these franchisees that would put them in default of their franchise agreements in the event of non-payment under the leases. The Company believes that these cross-default provisions reduce the risk that payments will be required to be made under these leases.

Employment Agreements

As of March 27, 2024, the Company had employment agreements with three of the officers of the Company. These agreements provide for minimum salary levels, possible annual adjustments for cost-of-living changes, and incentive bonuses that are payable under certain business conditions.

Indemnification Agreements

The Company has entered into indemnification agreements with each of its current directors and officers. These agreements require the Company to indemnify these individuals to the fullest extent permitted under Delaware law against liabilities that may arise by reason of their service to the Company and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. The Company also intends to enter into indemnification agreements with future directors and officers.

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Income Taxes (Details) - USD ($) $ in Thousands		3 Months Ended
	Jul. 30, 2014	Mar. 27, 2024	Mar. 29, 2023	Dec. 27, 2023
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unrecognized tax benefits, interest or penalties expenses		$ 0	$ 0
Unrecognized tax benefits, accrual of interest or penalties		0		$ 0
Percentage of cash savings in taxes realized as a result of utilizing net operating losses payable to pre-IPO stockholders	85.00%
Income tax receivable agreement income			122
Provision for income taxes		$ 2,203	$ 1,951
Estimated effective tax rate		27.10%	28.40%
Statutory federal income tax rate applied to earnings before income taxes and extraordinary items		21.00%

- Definition

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

+ References + Details

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Mar. 27, 2024

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments necessary for a fair statement of the Company’s condensed consolidated financial position and results of operations and cash flows for the periods presented. Interim results of operations are not necessarily indicative of the results that may be achieved for the full year. The condensed consolidated financial statements and related notes do not include all information and footnotes required by GAAP for annual reports. This quarterly report should be read in conjunction with the consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 27, 2023.

The Company uses a 52- or 53-week fiscal year ending on the last Wednesday of the calendar year. In a 52-week fiscal year, each quarter includes 13 weeks of operations; in a 53-week fiscal year, the first, second and third quarters each include 13 weeks of operations, and the fourth quarter includes 14 weeks of operations. Every six or seven years, a 53-week fiscal year occurs. Fiscal 2024 and 2023 are both 52-week years, ending on December 25, 2024 and December 27, 2023, respectively. Revenues, expenses, and other financial and operational figures may be elevated in a 53-week year.

Holdings has no material assets or operations. Holdings and Holdings’ direct subsidiary, EPL Intermediate, Inc. (“Intermediate”), guarantee EPL’s 2022 Revolver (as defined below) on a full and unconditional basis (see Note 4, “Long-Term Debt”), and Intermediate has no subsidiaries other than EPL. EPL is a separate and distinct legal entity and has no obligation to make funds available to Intermediate. EPL and Intermediate may pay dividends to Intermediate and to Holdings, respectively, subject to the terms of the 2022 Revolver.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of Holdings and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and revenue and expenses during the periods reported. Actual results could materially differ from those estimates. The Company’s significant estimates include estimates for impairment of goodwill, intangible assets and property and equipment, insurance reserves, lease accounting matters and contingent liabilities.

Cash and Cash Equivalents

The Company considers all liquid instruments with an original maturity of three months or less at the date of purchase to be cash equivalents.

Liquidity

The Company’s principal liquidity and capital requirements are new restaurants, existing restaurant capital investments (remodels and maintenance), interest payments on its debt, lease obligations and working capital and general corporate needs. At March 27, 2024, the Company’s total debt was $80.0 million. The Company’s ability to make payments on its indebtedness and to fund planned capital expenditures depends on available cash and its ability to generate adequate cash flows in the future, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory, and other factors that are beyond the Company’s control. Based on current operations, the Company believes that its cash flow from operations, available cash of $9.1 million at March 27, 2024, and the outstanding borrowing availability under the 2022 Revolver will be adequate to meet the Company’s liquidity needs for the next twelve months from the date of filing of these condensed consolidated financial statements.

Subsequent Events

Subsequent to the quarter-end, the Company paid down $5.0 million on its 2022 Revolver resulting in outstanding borrowings as of May 2, 2024 of $75.0 million.

Concentration of Risk

Cash and cash equivalents are maintained at financial institutions and, at times, these balances may exceed federally-insured limits. The Company has never experienced any losses related to these balances.

The Company had no supplier for which amounts due totaled more than 10.0% of the Company’s accounts payable at March 27, 2024. As of December 27, 2023, the Company had one supplier to whom amounts due totaled 15.1% of the Company’s accounts payable. Purchases from the Company’s largest supplier totaled 24.7% of total expenses for the thirteen weeks ended March 27, 2024, and 26.5% of total expenses for the thirteen weeks ended March 29, 2023, respectively.

Company-operated and franchised restaurants in the greater Los Angeles area generated, in the aggregate, approximately 71.5% of total revenue for the thirteen weeks ended March 27, 2024, and 70.7% for the thirteen weeks ended March 29, 2023.

Goodwill and Indefinite Lived Intangible Assets

The Company’s indefinite-lived intangible assets consist of trademarks. Goodwill represents the excess of cost over fair value of net identified assets acquired in business combinations accounted for under the purchase method. The Company does not amortize its goodwill and indefinite-lived intangible assets. Goodwill resulted from the acquisition of certain franchise locations.

Upon the sale or refranchising of a restaurant, the Company evaluates whether there is a decrement of goodwill. The amount of goodwill included in the cost basis of the asset sold is determined based on the relative fair value of the portion of the reporting unit disposed of compared to the fair value of the reporting unit retained. The Company reports as one reporting unit. The fair value of the portion of the reporting unit disposed of in a refranchising is determined by reference to the discounted value of the future cash flows expected to be generated by the restaurant and retained by the franchisee, which includes a deduction for the anticipated, future royalties the franchisee will pay the Company associated with the franchise agreement entered into simultaneously with the refranchising transition. The fair value of the reporting unit retained is based on the price a willing buyer would pay for the reporting unit and includes the value of franchise agreements. As such, the fair value of the reporting unit retained can include expected cash flows from future royalties from those restaurants currently being refranchised, future royalties from existing franchise businesses and company restaurant operations. The Company did not record any decrement to goodwill related to the disposition of restaurants in fiscal 2023 or the thirteen weeks ended March 27, 2024.

The Company performs an annual impairment test for goodwill during the fourth fiscal quarter of each year, or more frequently if impairment indicators arise.

The Company reviews goodwill for impairment utilizing either a qualitative assessment or a fair value test by comparing the fair value of a reporting unit with its carrying amount. If the Company decides that it is appropriate to perform a qualitative assessment and concludes that the fair value of a reporting unit more likely than not exceeds its carrying value, no further evaluation is necessary. If the Company performs the fair value test, the Company will compare the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. If the carrying amount of a reporting unit exceeds its fair value, the Company will recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized cannot exceed the total amount of goodwill allocated to that reporting unit.

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

The assumptions used in the estimate of fair value are generally consistent with the past performance of the Company’s reporting segment and are also consistent with the projections and assumptions that are used in current operating plans. These assumptions are subject to change as a result of changing economic and competitive conditions.

The Company determined that there were no indicators of potential impairment of its goodwill and indefinite-lived intangible assets during the thirteen weeks ended March 27, 2024. Accordingly, the Company did not record any impairment to its goodwill or indefinite-lived intangible assets during the thirteen weeks ended March 27, 2024.

Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:

●

Level 1: Quoted prices for identical instruments in active markets.

●

Level 2: Observable prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs or significant value drivers are observable.

●

Level 3: Unobservable inputs used when little or no market data is available.

Certain assets and liabilities are measured at fair value on a nonrecurring basis. In other words, the instruments are not measured at fair value on an ongoing basis, but are subject to fair value adjustments only in certain circumstances (e.g., when there is evidence of impairment).

There were no non-financial instruments measured at fair value on a nonrecurring basis as of and for the thirteen weeks ended March 27, 2024.

The following non-financial instruments were measured at fair value on a nonrecurring basis as of and for the thirteen weeks ended March 29, 2023, reflecting certain property and equipment assets and ROU assets for which an impairment loss was recognized during the corresponding periods, as discussed immediately below under “Impairment of Property and Equipment and ROU Assets” (in thousands):


									Thirteen Weeks
			Fair Value Measurements at March 29, 2023 Using						Ended March 29, 2023
	Total		Level 1		Level 2		Level 3		Impairment Losses
Certain ROU assets, net	$	275	$	—	$	—	$	275	$	39

Impairment of Property and Equipment and ROU Assets

The Company reviews its property and equipment and ROU assets for impairment on a restaurant-by-restaurant basis whenever events or changes in circumstances indicate that the carrying value of certain property and equipment and ROU assets may not be recoverable. The Company considers a triggering event related to property and equipment assets or ROU assets in a net asset position to have occurred related to a specific restaurant if the restaurant’s average unit volume for the last twelve months is less than a minimum threshold or if consistent levels of undiscounted cash flows for the remaining lease period are less than the carrying value of the restaurant’s assets. Additionally, the Company considers a triggering event related to ROU assets to have occurred related to a specific lease if the location has closed or been subleased and future estimated sublease income is less than lease payments under the head lease. If the Company concludes that the carrying value of certain property and equipment and ROU assets will not be recovered based on expected undiscounted future cash flows, an impairment loss is recorded to reduce the property and equipment or ROU assets to their estimated fair value. The fair value is measured on a nonrecurring basis using unobservable (Level 3) inputs. There is uncertainty in the projected undiscounted future cash flows used in the Company’s impairment review analysis, which requires the use of estimates and assumptions. If actual performance does not achieve the projections, or if the assumptions used change in the future, the Company may be required to recognize impairment charges in future periods, and such charges could be material. The Company determined that triggering events occurred for certain restaurants during the thirteen weeks ended March 27, 2024 that required an impairment review of certain of the Company’s property and equipment and ROU assets. Based on the results of the analysis, the Company did not record any non-cash impairment charges for the thirteen weeks ended March 27, 2024.

The Company recorded a non-cash impairment charge of less than $0.1 million for the thirteen weeks ended March 29, 2023, primarily related to the carrying value of the ROU assets of one restaurant in California. For this restaurant, if expected performance is not realized, an impairment charge may be recognized in future periods, and such charge could be material.

Closed-Store Reserves

When a restaurant is closed, the Company will evaluate the ROU asset for impairment, based on anticipated sublease recoveries. The remaining value of the ROU asset is amortized on a straight-line basis, with the expense recognized in closed-store reserve expense. Additionally, any property tax and common area maintenance (“CAM”) payments relating to closed restaurants are included within closed-store expense. During both the thirteen weeks ended March 27, 2024 and March 29, 2023, the Company recognized less than $0.1 million of closed-store reserve expense related to the amortization of ROU assets, property taxes and CAM payments for its closed locations.

Gain on Recovery of Insurance Proceeds, Lost Profits

During fiscal 2022, one of the Company’s restaurants incurred damage resulting from a fire. In fiscal 2023, the Company incurred costs directly related to the fire of less than $0.1 million. The Company recognized gains of $0.2 million, related to the reimbursement of property and equipment and expenses incurred and $0.2 million related to the reimbursement of lost profits. The gain on recovery of insurance proceeds and reimbursement of lost profits, net of the related costs, is included in the accompanying condensed consolidated statements of income, for the thirteen weeks ended March 29, 2023, as a reduction of company restaurant expenses. The Company received from the insurance company cash of $0.4 million, net of the insurance deductible, during fiscal 2023.

Gain on Disposition of Restaurants

During the thirteen weeks ended March 29, 2023, the Company completed the sale of one restaurant within California to an existing franchisee. The Company has determined that this restaurant disposition represents multiple element arrangements, and as a result, the cash consideration received was allocated to the separate elements based on its relative standalone selling price. Cash proceeds included upfront consideration for the sale of the restaurant and franchise fees. The cash consideration per restaurant related to franchise fees is consistent with the amounts stated in the related franchise agreement, which are charged for separate standalone arrangements. The Company initially defers and subsequently recognizes the franchise fees over the term of the franchise agreement. During the thirteen weeks ended March 29, 2023, this sale resulted in cash proceeds of $0.2 million and a net gain on sale of restaurant of $0.1 million. Since the date of their sale, this restaurant is now included in the total number of franchised El Pollo Loco restaurants.

Income Taxes

The provision for income taxes, income taxes payable and deferred income taxes is determined using the asset and liability method. Deferred tax assets and liabilities are determined based on temporary differences between the financial carrying amounts and the tax bases of assets and liabilities using enacted tax rates in effect in the years in which the temporary differences are expected to reverse. On a periodic basis, the Company assesses the probability that its net deferred tax assets, if any, will be recovered. If, after evaluating all of the positive and negative evidence, a conclusion is made that it is more likely than not that some portion or all of the net deferred tax assets will not be recovered, a valuation allowance is provided by charging to tax expense a reserve for the portion of deferred tax assets which are not expected to be realized.

The Company reviews its filing positions for all open tax years in all U.S. federal and state jurisdictions where the Company is required to file.

When there are uncertainties related to potential income tax benefits, in order to qualify for recognition, the position the Company takes has to have at least a “more likely than not” chance of being sustained (based on the position’s technical merits) upon challenge by the respective authorities. The term “more likely than not” means a likelihood of more than 50 percent. Otherwise, the Company may not recognize any of the potential tax benefit associated with the position. The Company recognizes a benefit for a tax position that meets the “more likely than not” criterion at the largest amount of tax benefit that is greater than 50 percent likely of being realized upon its effective resolution. Unrecognized tax benefits involve management’s judgment regarding the likelihood of the benefit being sustained. The final resolution of uncertain tax positions could result in adjustments to recorded amounts and may affect the Company’s condensed consolidated financial position, results of operations, and cash flows.

The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties at March 27, 2024 or at December 27, 2023. The Company did not recognize interest or penalties during the thirteen weeks ended March 27, 2024 and March 29, 2023, respectively, since there were no material unrecognized tax benefits. Management believes no significant changes to the amount of unrecognized tax benefits will occur within the next twelve months.

On July 30, 2014, the Company entered into the income tax receivable agreement (the “TRA”), which calls for the Company to pay to its pre-initial public offering (“IPO”) stockholders 85% of the savings in cash that the Company realizes in its income taxes as a result of utilizing its net operating losses (“NOLs”) and other tax attributes attributable to preceding periods. For the thirteen weeks ended March 27, 2024, the Company did not record any income tax receivable agreement income or expense, and for the thirteen weeks ended March 29, 2023, the Company recorded income tax receivable agreement income of $0.1 million, in each case, related to the amortization of interest expense related to the total expected TRA payments and changes in estimates for actual tax returns filed and future forecasted taxable income.

For the quarter ended March 27, 2024, the Company recorded an income tax provision of $2.2 million, reflecting an estimated effective tax rate of 27.1%. For the quarter ended March 29, 2023, the Company recorded an income tax provision of $2.0 million, reflecting an estimated effective tax rate of approximately 28.4%. The difference between the 21.0% statutory rate and the effective tax rate of 27.1% for the quarter ended March 27, 2024 is primarily a result of state taxes, a non-deductible executive compensation, partially offset by a Work Opportunity Tax Credit benefit.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure.” The ASU updates reportable segment disclosure requirements, primarily through requiring enhanced disclosures about significant segment expenses and information used to assess segment performance. These disclosures are required quarterly. The ASU is effective for fiscal years beginning after December 15, 2023 and interim periods beginning after December 15, 2024, with early adoption permitted. It is required to be adopted retrospectively for all prior periods presented in the financial statements The Company is currently evaluating the impact of adopting this ASU on its disclosures.

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The ASU includes amendments requiring enhanced income tax disclosures, primarily related to

standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and should be applied prospectively with the option of retrospective application. The Company is currently evaluating the impact of adopting this ASU on its disclosures.

The Company reviewed all other recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact to the condensed consolidated financial statements.

LEASES (Tables)

3 Months Ended

Mar. 27, 2024

LEASES

Schedule of lease cost

The following table presents the Company’s total lease cost, disaggregated by underlying asset (in thousands):


	Thirteen Weeks Ended
	March 27, 2024						March 29, 2023
	Property		Equipment				Property		Equipment
	Leases		Leases		Total		Leases		Leases		Total
Finance lease cost:
Amortization of right-of-use assets	$	18	$	1	$	19	$	18	$	1	$	19
Interest on lease liabilities		11		4		15		10		1		11
Operating lease cost:
Fixed rent cost		7,028		103		7,131		6,832		202		7,034
Short-term lease cost		—		1		1		—		3		3
Variable lease cost		133		347		480		142		233		375
Sublease income		(1,779)		—		(1,779)		(1,247)		—		(1,247)
Total lease cost	$	5,411	$	456	$	5,867	$	5,755	$	440	$	6,195

The following table presents the Company’s total lease cost on the condensed consolidated statements of income (in thousands):


	March 27, 2024		March 29, 2023
Lease cost – Occupancy and other operating expenses	$	5,715	$	6,009
Lease cost – General & administrative		118		136
Lease cost – Depreciation and amortization		19		19
Lease cost – Interest expense		15		11
Lease cost – Closed-store reserve		—		20
Total lease cost	$	5,867	$	6,195

During the thirteen weeks ended March 27, 2024 and March 29, 2023, the Company had the following cash and non-cash activities associated with its leases (dollars in thousands):


	March 27, 2024								March 29, 2023
	Property			Equipment					Property			Equipment
	Leases			Leases			Total		Leases			Leases			Total
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows used for operating leases	$	7,000		$	20		$	7,020	$	6,907		$	188		$	7,095
Financing cash flows used for finance leases	$	23		$	25		$	48	$	24		$	14		$	38

Non-cash investing and financing activities:
Operating lease ROU assets obtained in exchange for lease liabilities:
Operating lease ROU assets	$	5,860		$	488		$	6,348	$	10,097		$	—		$	10,097
Finance lease ROU assets obtained in exchange for lease liabilities:
Finance lease ROU assets	$	—		$	148		$	148	$	—		$	28		$	28
Derecognition of ROU assets due to terminations, impairment or modifications	$	—		$	—		$	—	$	(40)		$	—		$	(40)

Other Information
Weighted-average remaining years in lease term—finance leases		16.63			3.08					17.62			2.95
Weighted-average remaining years in lease term—operating leases		10.39			4.18					10.78			2.33
Weighted-average discount rate—finance leases		2.57	%		6.25	%				2.57	%		1.53	%
Weighted-average discount rate—operating leases		5.11	%		6.37	%				2.55	%		3.71	%

Schedule of Financing Leases

Information regarding the Company’s minimum future lease obligations as of March 27, 2024 is as follows (in thousands):


	Finance Leases		Operating Leases
	Minimum		Minimum		Minimum
	Lease		Lease		Sublease
For the Years Ending	Payments		Payments		Income
December 25, 2024	$	260	$	21,848	$	4,406
December 31, 2025		343		28,435		5,518
December 30, 2026		310		26,390		5,034
December 29, 2027		300		25,005		4,858
December 27, 2028		233		22,794		4,484
Thereafter		1,376		125,417		27,838
Total	$	2,822	$	249,889	$	52,138
Less: imputed interest (2.57% - 6.37%)		(951)		(60,632)
Present value of lease obligations		1,871		189,257
Less: current maturities		(168)		(19,640)
Noncurrent portion	$	1,703	$	169,617

Schedule of Operating Leases

Information regarding the Company’s minimum future lease obligations as of March 27, 2024 is as follows (in thousands):


	Finance Leases		Operating Leases
	Minimum		Minimum		Minimum
	Lease		Lease		Sublease
For the Years Ending	Payments		Payments		Income
December 25, 2024	$	260	$	21,848	$	4,406
December 31, 2025		343		28,435		5,518
December 30, 2026		310		26,390		5,034
December 29, 2027		300		25,005		4,858
December 27, 2028		233		22,794		4,484
Thereafter		1,376		125,417		27,838
Total	$	2,822	$	249,889	$	52,138
Less: imputed interest (2.57% - 6.37%)		(951)		(60,632)
Present value of lease obligations		1,871		189,257
Less: current maturities		(168)		(19,640)
Noncurrent portion	$	1,703	$	169,617

STOCK-BASED COMPENSATION - Changes in Stock Options (Details) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 27, 2024 USD ($) $ / shares shares
Shares
Outstanding-beginning balance (shares) \| shares	843,320
Exercised (shares) \| shares	(5)
Forfeited, cancelled or expired (shares) \| shares	(51,150)
Outstanding-ending balance (shares) \| shares	792,165
Vested and expected to vest at end of period (shares) \| shares	786,160
Exercisable at end of period (shares) \| shares	375,412
Weighted-Average Exercise Price
Outstanding-beginning balance (usd per share) \| $ / shares	$ 10.13
Exercised (usd per share) \| $ / shares	9.04
Forfeited, cancelled or expired (usd per share) \| $ / shares	9.90
Outstanding-ending balance (usd per share) \| $ / shares	10.14
Vested and expected to vest at end of period (usd per share) \| $ / shares	11.12
Exercisable at end of period (usd per share) \| $ / shares	$ 10.15
Weighted-Average Contractual Life (Years)
Outstanding contractual life (years)	6 years 29 days
Vested and expected to vest contractual life (years)	6 years 21 days
Exercisable contractual life (years)	3 years 3 days
Aggregate Intrinsic Value
Outstanding \| $	$ 94
Vested and expected to vest \| $	92
Exercisable \| $	$ 7

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - $ / shares	Mar. 27, 2024	Dec. 27, 2023
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Preferred stock, par value (usd per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (shares)	100,000,000	100,000,000
Shares designated as Series A Preferred Stock	100,000	100,000
Preferred stock, shares issued (shares)	0	0
Preferred stock, shares outstanding (shares)	0	0
Common stock, par value (usd per share)	$ 0.01	$ 0.01
Common stock, shares authorized (shares)	200,000,000	200,000,000
Common stock, shares issued (shares)	31,179,519	31,353,223
Common stock, shares outstanding (shares)	31,179,519	31,353,223

OTHER ACCRUED EXPENSES AND CURRENT LIABILITIES (Tables)

3 Months Ended

Mar. 27, 2024

OTHER ACCRUED EXPENSES AND CURRENT LIABILITIES

Schedule of Other Accrued Expenses and Current Liabilities

Other accrued expenses and current liabilities consist of the following (in thousands):


	March 27, 2024		December 27, 2023
Accrued sales and property taxes	$	5,666	$	5,229
Gift card liability		4,497		4,877
Loyalty rewards program liability		711		687
Accrued advertising		6,035		3,010
Accrued legal settlements and professional fees		926		720
Deferred franchise and development fees		571		586
Other		3,578		3,252
Total other accrued expenses and current liabilities	$	21,984	$	18,361

OTHER ACCRUED EXPENSES AND CURRENT LIABILITIES

3 Months Ended

Mar. 27, 2024

OTHER ACCRUED EXPENSES AND CURRENT LIABILITIES

OTHER ACCRUED EXPENSES AND CURRENT LIABILITIES

5. OTHER ACCRUED EXPENSES AND CURRENT LIABILITIES

Other accrued expenses and current liabilities consist of the following (in thousands):


	March 27, 2024		December 27, 2023
Accrued sales and property taxes	$	5,666	$	5,229
Gift card liability		4,497		4,877
Loyalty rewards program liability		711		687
Accrued advertising		6,035		3,010
Accrued legal settlements and professional fees		926		720
Deferred franchise and development fees		571		586
Other		3,578		3,252
Total other accrued expenses and current liabilities	$	21,984	$	18,361

PROPERTY AND EQUIPMENT (Tables)

3 Months Ended

Mar. 27, 2024

PROPERTY AND EQUIPMENT

Schedule of Costs and Related Accumulated Depreciation and Amortization of Major Classes of Property and Equipment

The costs and related accumulated depreciation and amortization of major classes of property and equipment are as follows (in thousands):


	March 27, 2024		December 27, 2023
Land	$	12,323	$	12,323
Buildings and improvements		149,209		148,259
Other property and equipment		88,158		86,423
Construction in progress		10,323		7,270
		260,013		254,275
Less: accumulated depreciation and amortization		(173,709)		(170,248)
	$	86,304	$	84,027

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Liquidity and subsequent events (Details) - USD ($) $ in Thousands	May 02, 2024	Mar. 27, 2024	Dec. 27, 2023
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Total amount of outstanding debt		$ 80,000
Cash available		9,121	$ 7,288
Revolving line of credit		80,000	$ 84,000
Revolving Credit Facility \| 2022 Credit Agreement
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revolving line of credit		$ 80,000
Revolving Credit Facility \| Subsequent Event \| 2022 Credit Agreement
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Repayment for long-term line of credit	$ 5,000
Revolving line of credit	$ 75,000

- Definition

Amount, after deduction of unamortized premium (discount) and debt issuance cost, of long-term debt. Excludes lease obligation.

+ References + Details

- Definition

The carrying value as of the balance sheet date of the noncurrent portion of long-term obligations drawn from a line of credit, which is a bank's commitment to make loans up to a specific amount. Examples of items that might be included in the application of this element may consist of letters of credit, standby letters of credit, and revolving credit arrangements, under which borrowings can be made up to a maximum amount as of any point in time conditional on satisfaction of specified terms before, as of and after the date of drawdowns on the line. Includes short-term obligations that would normally be classified as current liabilities but for which (a) postbalance sheet date issuance of a long term obligation to refinance the short term obligation on a long term basis, or (b) the enterprise has entered into a financing agreement that clearly permits the enterprise to refinance the short-term obligation on a long term basis and the following conditions are met (1) the agreement does not expire within 1 year and is not cancelable by the lender except for violation of an objectively determinable provision, (2) no violation exists at the BS date, and (3) the lender has entered into the financing agreement is expected to be financially capable of honoring the agreement.

+ References + Details

LEASES (Details) $ in Thousands	3 Months Ended
LEASES (Details) $ in Thousands	Mar. 27, 2024 USD ($) item lease restaurant	Mar. 29, 2023 USD ($) restaurant
Lessee, Lease, Description [Line Items]
Initial lease term	20 years
Number of renewable options \| item	4
Renewal term	5 years
Lessee, Operating Lease, Existence of Option to Extend [true false]	true
Operating lease ROU assets	$ 6,348	$ 10,097
Restaurants sold \| restaurant		1
California \| Maximum
Lessee, Lease, Description [Line Items]
Operating lease, impairment charges		$ 100
Lease Not Yet Commenced
Lessee, Lease, Description [Line Items]
Number of operating leases \| lease	2
Property Lease
Lessee, Lease, Description [Line Items]
Operating lease ROU assets	$ 5,860	$ 10,097
Property Lease \| California
Lessee, Lease, Description [Line Items]
Number of restaurants primarily responsible for impairment \| restaurant		1
Equipment Lease
Lessee, Lease, Description [Line Items]
Number of finance leases \| lease	26
Operating lease ROU assets	$ 488
Property lease modification
Lessee, Lease, Description [Line Items]
Number of Restaurants with lease modification \| restaurant	8	12
Operating lease ROU assets	$ 5,900	$ 10,100
Facility Leases
Lessee, Lease, Description [Line Items]
Number of finance leases \| lease	1

STOCK-BASED COMPENSATION

3 Months Ended

Mar. 27, 2024

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

3. STOCK-BASED COMPENSATION

Stock Options

At March 27, 2024, options to purchase 792,165 shares of common stock were outstanding, including 375,412 vested and 416,753 unvested options. Unvested options vest over time; however, upon a change in control, the Board of Directors may accelerate vesting. At March 27, 2024, there were no premium options, which are options granted above the stock price at date of grant, that were outstanding. A summary of stock option activity at March 27, 2024 and changes during the thirteen weeks ended March 27, 2024 is as follows:


				Weighted-Average		Aggregate
		Weighted-Average		Contractual Life		Intrinsic Value
	Shares	Exercise Price		Life (Years)		(in thousands)
Outstanding – December 27, 2023	843,320	$	10.13
Exercised	(5)		9.04
Forfeited, cancelled or expired	(51,150)	$	9.90
Outstanding – March 27, 2024	792,165	$	10.14		6.08	$	94
Vested and expected to vest at March 27, 2024	786,160	$	11.12		6.06	$	92
Exercisable at March 27, 2024	375,412	$	10.15		3.01	$	7

At March 27, 2024, the Company had total unrecognized compensation expense of $1.4 million related to unvested stock options, which it expects to recognize over a weighted-average period of 2.70 years.

Restricted Shares

A summary of restricted share activity as of March 27, 2024 and changes during the thirteen weeks ended March 27, 2024 is as follows:


		Weighted-Average
	Shares	Fair Value
Unvested shares at December 27, 2023	537,461	$	9.94
Forfeited, cancelled, or expired	(37,309)	$	10.91
Unvested shares at March 27, 2024	500,152	$	9.87

Unvested shares at March 27, 2024, included 458,189 unvested restricted shares and 41,963 unvested restricted units.

At March 27, 2024, the Company had unrecognized compensation expense of $2.7 million related to unvested restricted shares, which it expects to recognize over a weighted-average period of 2.43 years and unrecognized compensation expense of $0.2 million related to unvested restricted units, which it expects to recognize over a weighted-average period of 0.62 years.

Total stock-based compensation expense was $0.9 million for the thirteen weeks ended March 27, 2024, and $0.8 million for the thirteen weeks ended March 29, 2023.

Share Repurchase Program

On November 2, 2023, the Company announced that its Board of Directors approved a share repurchase program (“Share Repurchase Program”) under which the Company is authorized to repurchase up to $20,000,000 of shares of the Company’s common stock. Under the Share Repurchase Program, the Company is permitted to repurchase its common stock from time to time, in amounts and at prices that the Company deemed appropriate, subject to market conditions and other considerations. Pursuant to the Share Repurchase Program, the Company is authorized to effect repurchases using open market purchases, including pursuant to Rule 10b5-1 trading plans, and/or through privately negotiated transactions. The repurchase program does not obligate the Company to acquire any particular number of shares. The repurchase program will terminate on March 31, 2025.

Further, on December 4, 2023, the Company repurchased 1.5 million shares for a total purchase price of $12.6 million under the Stock Repurchase Agreement with FS Equity Partners V, L.P. and FS Affiliates V, L.P. Following completion of this repurchase, approximately $7.4 million of the Company’s common stock remained available for repurchase under the share repurchase program at December 27, 2023.

For the thirteen weeks ended March 27, 2024, the Company repurchased 136,400 shares of common stock under the Share Repurchase Program, using open market purchases, for total consideration of approximately $1.2 million. Following completion of these repurchases, approximately $6.2 million of the Company’s common stock remained available for repurchase under the Share Repurchase Program at March 27, 2024.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended
	Mar. 27, 2024	Mar. 29, 2023
Cash flows from operating activities:
Net income	$ 5,912	$ 4,918
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation and amortization	3,851	3,637
Stock-based compensation expense	920	771
Income tax receivable agreement income		(122)
Fire insurance proceeds for expenses paid and lost profit		151
Gain on disposition of restaurants		(136)
Loss on disposal of assets	41	30
Gain on recovery of insurance proceeds, property, equipment and expenses, net		(242)
Impairment of property and equipment	0	40
Amortization of deferred financing costs	48	58
Deferred income taxes, net	(65)	723
Changes in operating assets and liabilities:
Accounts and other receivables	(312)	(2,218)
Inventories	175	335
Prepaid expenses and other current assets	273	(1,073)
Income taxes payable	2,115	1,142
Other assets	(67)	(51)
Accounts payable	(2,732)	(806)
Accrued salaries and vacation	(2,455)	(1,733)
Accrued insurance	(92)	173
Other accrued expenses and liabilities	3,551	(1,778)
Net cash flows provided by operating activities	11,163	3,819
Cash flows from investing activities:
Proceeds from disposition of restaurants		162
Proceeds from fire insurance for property and equipment	41	138
Purchase of property and equipment	(4,162)	(5,980)
Net cash flows used in investing activities	(4,121)	(5,680)
Cash flows from financing activities:
Payments on revolver and swingline loan	(4,000)	(8,000)
Proceeds from issuance of common stock upon exercise of stock options, net of expenses		43
Payment of obligations under finance leases	(48)	(38)
Repurchases of common stock	(1,161)	(5,848)
Net cash flows used in by financing activities	(5,209)	(13,843)
Increase (decrease) in cash and cash equivalents	1,833	(15,704)
Cash and cash equivalents, beginning of period	7,288	20,493
Cash and cash equivalents, end of period	9,121	4,789
Supplemental cash flow information
Cash paid during the period for interest	1,595	1,014
Unpaid purchases of property and equipment	7,105	3,872
Unpaid repurchases of common stock	$ 65	$ 425

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Goodwill and Indefinite Lived Intangible Assets (Details) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 27, 2024 USD ($) item	Dec. 27, 2023 USD ($)
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Number of reporting unit \| item	1
Goodwill decrement related to dispositions of restaurants	$ 0.0	$ 0.0
Goodwill and intangible asset impairment	$ 0.0

LEASES - Lessor (Details) - USD ($) $ in Millions	3 Months Ended
LEASES - Lessor (Details) - USD ($) $ in Millions	Mar. 27, 2024	Mar. 29, 2023
Lessor, Lease, Description [Line Items]
Operating lease income	$ 0.1	$ 0.1
Operating Lease, Lease Income, Statement of Income or Comprehensive Income [Extensible Enumeration]	Revenue from Contract with Customer, Excluding Assessed Tax	Revenue from Contract with Customer, Excluding Assessed Tax
Minimum
Lessor, Lease, Description [Line Items]
Lessor, operating lease term of contract	3 years
Maximum
Lessor, Lease, Description [Line Items]
Lessor, operating lease term of contract	20 years

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Thousands	Mar. 27, 2024	Dec. 27, 2023
Current assets:
Cash and cash equivalents	$ 9,121	$ 7,288
Accounts and other receivables, net	10,613	10,148
Inventories	1,736	1,911
Prepaid expenses and other current assets	5,361	5,634
Income tax receivable		153
Total current assets	26,831	25,134
Property and equipment, net	86,304	84,027
Property and equipment held under finance lease, net	1,635	1,528
Property and equipment held under operating leases, net ("ROU asset")	169,628	168,007
Goodwill	248,674	248,674
Trademarks	61,888	61,888
Other assets	3,063	3,043
Total assets	598,023	592,301
Current liabilities:
Current portion of obligations under finance leases	168	140
Current portion of obligations under operating leases	19,640	19,490
Accounts payable	11,881	12,541
Accrued salaries and vacation	6,877	9,332
Accrued insurance	11,739	11,831
Accrued income taxes payable	2,185	70
Accrued interest	325	394
Current portion of income tax receivable agreement payable	422	422
Other accrued expenses and current liabilities	21,984	18,361
Total current liabilities	75,221	72,581
Revolver loan	80,000	84,000
Obligations under finance leases, net of current portion	1,703	1,617
Obligations under operating leases, net of current portion	169,617	168,084
Deferred taxes	8,813	8,878
Other noncurrent liabilities	6,380	6,445
Total liabilities	341,734	341,605
Commitments and contingencies (Note 7)
Stockholders' equity
Preferred stock, $0.01 par value, 100,000,000 shares authorized; 100,000 shares designated as Series A Preferred Stock; none issued or outstanding
Common stock, $0.01 par value, 200,000,000 shares authorized; 31,179,519 and 31,353,223 shares issued and outstanding as of March 27, 2024 and December 27, 2023, respectively	312	313
Additional paid-in-capital	236,103	236,421
Retained earnings	19,874	13,962
Total stockholders' equity	256,289	250,696
Total liabilities and stockholders' equity	$ 598,023	$ 592,301

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended
	Mar. 27, 2024	Mar. 29, 2023
Revenue
Total revenue	$ 116,153	$ 114,526
Cost of operations
Food and paper cost	25,619	26,902
Labor and related expenses	30,580	31,541
Occupancy and other operating expenses	23,865	24,886
Gain on recovery of insurance proceeds, lost profits, net		(151)
Company restaurant expenses	80,064	83,178
General and administrative expenses	11,925	11,199
Franchise expenses	10,602	9,032
Depreciation and amortization	3,851	3,637
Loss on disposal of assets	41	30
Gain on recovery of insurance proceeds, property, equipment and expenses	(41)	(242)
Gain on disposition of restaurants		(136)
Impairment and closed-store reserves	32	77
Total expenses	106,474	106,775
Income from operations	9,679	7,751
Interest expense, net	1,564	1,004
Income tax receivable agreement income		(122)
Income before provision for income taxes	8,115	6,869
Provision for income taxes	2,203	1,951
Net income	$ 5,912	$ 4,918
Net income per share
Basic (usd per share)	$ 0.19	$ 0.14
Diluted (usd per share)	$ 0.19	$ 0.13
Weighted-average shares used in computing net income per share
Basic (shares)	30,777,769	36,234,105
Diluted (shares)	30,937,226	36,478,158
Company-operated restaurant revenue
Revenue
Total revenue	$ 97,153	$ 97,873
Franchise revenue
Revenue
Total revenue	11,348	9,672
Franchise advertising fee revenue
Revenue
Total revenue	$ 7,652	$ 6,981

REVENUE FROM CONTRACTS WITH CUSTOMERS - Revenues Disaggregated by Geographic Market (Details) - Revenue - Geographic Concentration Risk	3 Months Ended
	Mar. 27, 2024	Mar. 29, 2023
Disaggregation of Revenue [Line Items]
Percentage of concentration	100.00%	100.00%
Greater Los Angeles area market
Disaggregation of Revenue [Line Items]
Percentage of concentration	71.50%	70.70%
Other markets
Disaggregation of Revenue [Line Items]
Percentage of concentration	28.50%	29.30%

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References + Details

SHAREHOLDER RIGHTS AGREEMENT

3 Months Ended

Mar. 27, 2024

SHAREHOLDER RIGHTS AGREEMENT

SHAREHOLDER RIGHTS AGREEMENT

12. SHAREHOLDER RIGHTS AGREEMENT

On August 8, 2023, the Company’s Board of Directors declared a dividend of one preferred share purchase right (a “Right”) for each share of common stock, par value $0.01 per share, of the Company (the “Common Shares”), outstanding on August 18, 2023, to the stockholders of record on that date. In connection with the distribution of the Rights, the Company entered into a Rights Agreement (the “Rights Agreement”), dated as of August 8, 2023, between the Company and Equiniti Trust Company, LLC, as rights agent. Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Preferred Stock, par value $0.01 per share, of the Company (the “Preferred Shares”) at a price of $53.75 per one one-thousandth of a Preferred Share represented by a Right, subject to adjustment. The Rights will expire at the close of business on August 7, 2024.

Under the Rights Agreement, the Rights are generally exercisable only in the event that a person or group of affiliated or associated persons (such person or group being an “Acquiring Person”), other than certain exempt persons, acquires (or commences a tender offer or exchange offer the consummation of which would result in) beneficial ownership of 12.5% or more of the outstanding Common Shares. In such case (with certain limited exceptions), each holder of a Right (other than the Acquiring Person, whose Rights shall become void) will have the right to receive, upon exercise at the then

current exercise price of the Right, Common Shares (or, if the Company’s Board of Directors so elects, cash, securities, or other property) having a value equal to two times (2x) the exercise price of the Right.

Right to Exchange

At any time after any person or group becomes an Acquiring Person, the Board may exchange the Rights at an exchange ratio of one Common Share per Right (subject to adjustment).

Flip-over Event

If, at any time after a person or group becomes an Acquiring Person, (i) the Company engages in a consolidation or merger and, in connection there with all or part of the Common Shares are or will be changed into or exchanged for stock or other securities of any other person or cash or any other property; or (ii) 50% or more of the Company’s consolidated assets or earning power are sold, then each holder of a Right will thereafter have the right to receive, upon exercise at the then current exercise price of the Right, that number of shares of common stock of the acquiring company having a market value of two times the exercise price of the Right.

Redemption

At any time prior to the time any person or group becomes an Acquiring Person, the Board may redeem the Rights at a price of $0.001 per Right (the “Redemption Price”). Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.

Rights of Holders

Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends.

REVENUE FROM CONTRACTS WITH CUSTOMERS - Change in Contract Liabilities (Details) - Franchise revenue - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 27, 2024	Mar. 29, 2023	Dec. 27, 2023
Change in Contract with Customer, Liability [Roll Forward]
Loyalty rewards liability, beginning balance	$ 6,997	$ 6,377	$ 6,377
Revenue recognized - beginning balance	(158)	(214)
Additional contract liability	80	289
Loyalty rewards liability, ending balance	$ 6,919	$ 6,452	$ 6,997

PROPERTY AND EQUIPMENT

3 Months Ended

Mar. 27, 2024

PROPERTY AND EQUIPMENT

PROPERTY AND EQUIPMENT

2. PROPERTY AND EQUIPMENT

The costs and related accumulated depreciation and amortization of major classes of property and equipment are as follows (in thousands):


	March 27, 2024		December 27, 2023
Land	$	12,323	$	12,323
Buildings and improvements		149,209		148,259
Other property and equipment		88,158		86,423
Construction in progress		10,323		7,270
		260,013		254,275
Less: accumulated depreciation and amortization		(173,709)		(170,248)
	$	86,304	$	84,027

Depreciation expense was $3.9 million and $3.6 million for the thirteen weeks ended March 27, 2024 and March 29, 2023, respectively.

Based on the Company’s review of its property and equipment assets for impairment, the Company did not record any non-cash impairment charges for the thirteen weeks ended March 27, 2024 and March 29, 2023, respectively. See Note 1, “Basis of Presentation and Summary of Significant Accounting Policies – Impairment of Property and Equipment Assets and ROU Assets” for additional information.

REVENUE FROM CONTRACTS WITH CUSTOMERS (Tables)

3 Months Ended

Mar. 27, 2024

Disaggregation of Revenue [Line Items]

Schedule of revenues disaggregated by geographic market


	March 27, 2024		March 29, 2023
Greater Los Angeles area market	71.5	%	70.7	%
Other markets	28.5	%	29.3	%
Total	100	%	100	%

Schedule of Estimated Revenue to be Recognized Related to Performance Obligations

The following table illustrates the estimated revenue to be recognized in future periods related to performance obligations under the applicable contracts that are unsatisfied as of March 27, 2024 (in thousands):


Franchise revenues:
2024	$	445
2025		560
2026		538
2027		517
2028		486
Thereafter		4,373
Total	$	6,919

Loyalty reward program

Disaggregation of Revenue [Line Items]

Schedule of Change in Franchise Contract Liability Balances

Changes in the loyalty rewards program liability included in deferred revenue within other accrued expenses and current liabilities on the condensed consolidated balance sheets were as follows (in thousands):


	March 27, 2024		December 27, 2023
Loyalty rewards liability, beginning balance	$	687	$	526
Revenue deferred		503		2,065
Revenue recognized		(479)		(1,904)
Loyalty rewards liability, ending balance	$	711	$	687

Gift card liability

Disaggregation of Revenue [Line Items]

Schedule of Change in Franchise Contract Liability Balances

The gift card liability included in other accrued expenses and current liabilities on the condensed consolidated balance sheets was as follows (in thousands):


	March 27, 2024		December 27, 2023
Gift card liability	$	4,497	$	4,877

Revenue recognized from the redemption of gift cards that was included in other accrued expenses and current liabilities at the beginning of the year was as follows (in thousands):


	Thirteen Weeks Ended
	March 27, 2024		March 29, 2023
Revenue recognized from gift card liability balance at the beginning of the year	$	362	$	486

Franchise revenue

Disaggregation of Revenue [Line Items]

Schedule of Change in Franchise Contract Liability Balances

The following table provides information about the change in the franchise contract liability balances during the thirteen weeks ended March 27, 2024 and March 29, 2023 (in thousands):


December 27, 2023	$	6,997
Revenue recognized - beginning balance		(158)
Additional contract liability		80
March 27, 2024	$	6,919

December 28, 2022	$	6,377
Revenue recognized - beginning balance		(214)
Additional contract liability		289
March 29, 2023	$	6,452

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References + Details

LEASES

3 Months Ended

Mar. 27, 2024

LEASES

LEASES

11. LEASES

Nature of Leases

The Company’s operations utilize property, facilities, equipment and vehicles leased from others. Additionally, the Company has various contracts with vendors that have been determined to contain an embedded lease in accordance with Topic 842.

As of March 27, 2024, the Company had two leases that it had entered into, but had not yet commenced. The Company does not have control of the property until lease commencement.

Building and Facility Leases

The majority of the Company’s building and facilities leases are classified as operating leases; however, the Company currently has one facility and 26 equipment leases that are classified as finance leases.

Restaurants are operated under lease arrangements that generally provide for a fixed base rent and, in some instances, contingent rent based on a percentage of gross operating profit or net revenues in excess of a defined amount. Additionally, a number of the Company’s leases have payments that increase at pre-determined dates based on the change in the consumer price index. For all leases, the Company also reimburses the landlord for non-lease components, or items that are not considered components of a contract, such as CAM, property tax and insurance costs. While the Company determined not to separate lease and non-lease components, these payments are based on actual costs, making them variable consideration and excluding them from the calculations of the ROU asset and lease liability.

The initial terms of land and restaurant building leases are generally 20 years, exclusive of options to renew. These leases typically have four 5-year renewal options, which have generally been excluded in the calculation of the ROU asset and lease liability, as they are not considered reasonably certain to be exercised, unless (1) the renewal had already occurred as of the time of adoption of Topic 842, or (2) there have been significant leasehold improvements that have a useful life that extend past the original lease term. Furthermore, there are no residual value guarantees and no restrictions imposed by the lease.

During the thirteen weeks ended March 27, 2024, the Company reassessed the lease terms on eight restaurants due to certain triggering events, such as the addition of significant leasehold improvements with useful lives that extend past the current lease expiration, the decision to terminate a lease, or the decision to renew. As a result of the reassessment, an additional $5.9 million of ROU asset and lease liabilities for the thirteen weeks ended March 27, 2024, respectively, were recognized and will be amortized over the new lease term. During the thirteen weeks ended March 29, 2023, the Company reassessed the lease terms on 12 restaurants due to certain triggering events, such as the addition of significant leasehold improvements with useful lives that extend past the current lease expiration, the decision to terminate a lease, or the decision to renew. This reassessment resulted in an additional $10.1 million of ROU asset and lease liabilities for the thirteen weeks ended March 29, 2023, which were recognized and will be amortized over the new lease term. Additionally, as the Company adopted all practical expedients available under Topic 842, no reallocation between lease and non-lease components was necessary.

The Company also subleases facilities to certain franchisees and other non-related parties which are also considered operating leases. Sublease income also includes contingent rental income based on net revenues. The vast majority of these leases have rights to extend terms via fixed rental increases. However, none of these leases have early termination rights, the right to purchase the premises or any residual value guarantees. The Company does not have any related party leases.

During the thirteen weeks ended March 27, 2024, the Company did not record any non-cash impairment charges. During the thirteen weeks ended March 29, 2023, the Company recorded a less than $0.1 million non-cash impairment charge related to the carrying value of ROU assets of one restaurant in California. See Note 1, “Basis of Presentation and Summary of Significant Accounting Policies – Impairment of Long-Lived Assets and ROU Assets” for additional information.

Equipment

Leases of equipment primarily consist of restaurant equipment, copiers and vehicles. These leases are fixed payments with no variable component. Additionally, no optional renewal periods have been included in the calculation of the ROU asset, there are no residual value guarantees and no restrictions imposed.

Significant Assumptions and Judgments

In applying the requirements of Topic 842, the Company made significant assumptions and judgments related to determination of whether a contract contains a lease and the discount rate used for the lease.

In determining if any of the Company’s contracts contain a lease, the Company made assumptions and judgments related to its ability to direct the use of any assets stated in the contract and the likelihood of renewing any short-term contracts for a period extending past twelve months.

The Company also made significant assumptions and judgments in determining an appropriate discount rate for property leases. These included using a consistent discount rate for a portfolio of leases entered into at varying dates, using the full 20-year term of the lease, excluding any options, and using the total minimum lease payments. The Company utilizes a third-party valuation firm in determining the discount rate, based on the above assumptions. For all other leases, the Company uses the discount rate implicit in the lease, or the Company’s incremental borrowing rate.

As the Company has adopted the practical expedient not to separate lease and non-lease components, no significant assumptions or judgments were necessary in allocating consideration between these components, for all classes of underlying assets.

The following table presents the Company’s total lease cost, disaggregated by underlying asset (in thousands):


	Thirteen Weeks Ended
	March 27, 2024						March 29, 2023
	Property		Equipment				Property		Equipment
	Leases		Leases		Total		Leases		Leases		Total
Finance lease cost:
Amortization of right-of-use assets	$	18	$	1	$	19	$	18	$	1	$	19
Interest on lease liabilities		11		4		15		10		1		11
Operating lease cost:
Fixed rent cost		7,028		103		7,131		6,832		202		7,034
Short-term lease cost		—		1		1		—		3		3
Variable lease cost		133		347		480		142		233		375
Sublease income		(1,779)		—		(1,779)		(1,247)		—		(1,247)
Total lease cost	$	5,411	$	456	$	5,867	$	5,755	$	440	$	6,195

The following table presents the Company’s total lease cost on the condensed consolidated statements of income (in thousands):


	March 27, 2024		March 29, 2023
Lease cost – Occupancy and other operating expenses	$	5,715	$	6,009
Lease cost – General & administrative		118		136
Lease cost – Depreciation and amortization		19		19
Lease cost – Interest expense		15		11
Lease cost – Closed-store reserve		—		20
Total lease cost	$	5,867	$	6,195

During the thirteen weeks ended March 27, 2024 and March 29, 2023, the Company had the following cash and non-cash activities associated with its leases (dollars in thousands):


	March 27, 2024								March 29, 2023
	Property			Equipment					Property			Equipment
	Leases			Leases			Total		Leases			Leases			Total
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows used for operating leases	$	7,000		$	20		$	7,020	$	6,907		$	188		$	7,095
Financing cash flows used for finance leases	$	23		$	25		$	48	$	24		$	14		$	38

Non-cash investing and financing activities:
Operating lease ROU assets obtained in exchange for lease liabilities:
Operating lease ROU assets	$	5,860		$	488		$	6,348	$	10,097		$	—		$	10,097
Finance lease ROU assets obtained in exchange for lease liabilities:
Finance lease ROU assets	$	—		$	148		$	148	$	—		$	28		$	28
Derecognition of ROU assets due to terminations, impairment or modifications	$	—		$	—		$	—	$	(40)		$	—		$	(40)

Other Information
Weighted-average remaining years in lease term—finance leases		16.63			3.08					17.62			2.95
Weighted-average remaining years in lease term—operating leases		10.39			4.18					10.78			2.33
Weighted-average discount rate—finance leases		2.57	%		6.25	%				2.57	%		1.53	%
Weighted-average discount rate—operating leases		5.11	%		6.37	%				2.55	%		3.71	%

Information regarding the Company’s minimum future lease obligations as of March 27, 2024 is as follows (in thousands):


	Finance Leases		Operating Leases
	Minimum		Minimum		Minimum
	Lease		Lease		Sublease
For the Years Ending	Payments		Payments		Income
December 25, 2024	$	260	$	21,848	$	4,406
December 31, 2025		343		28,435		5,518
December 30, 2026		310		26,390		5,034
December 29, 2027		300		25,005		4,858
December 27, 2028		233		22,794		4,484
Thereafter		1,376		125,417		27,838
Total	$	2,822	$	249,889	$	52,138
Less: imputed interest (2.57% - 6.37%)		(951)		(60,632)
Present value of lease obligations		1,871		189,257
Less: current maturities		(168)		(19,640)
Noncurrent portion	$	1,703	$	169,617

Short-Term Leases

The Company has multiple short-term leases, which have terms of less than 12 months, and thus were excluded from the recognition requirements of Topic 842. The Company has recognized these lease payments in its condensed consolidated statements of income on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments was incurred.

Lessor

The Company is a lessor for certain property, facilities and equipment owned by the Company and leased to others, principally franchisees, under non-cancelable leases with initial terms ranging from three to 20 years. These lease agreements generally provide for a fixed base rent and, in some instances, contingent rent based on a percentage of gross operating profit or net revenues. All leases are considered operating leases.

For the leases in which the Company is the lessor, there are options to extend the lease. However, there are no terms and conditions to terminate the lease, no right to purchase premises and no residual value guarantees. Additionally, there are no related party leases.

The Company received $0.1 million of lease income from company-owned locations for each of the thirteen weeks ended March 27, 2024 and March 29, 2023.

PROPERTY AND EQUIPMENT - Schedule of Costs and Related Accumulated Depreciation and Amortization of Major Classes of Property (Details) - USD ($) $ in Thousands	Mar. 27, 2024	Dec. 27, 2023
Property and Equipment, Net
Property and equipment, gross	$ 260,013	$ 254,275
Less: accumulated depreciation and amortization	(173,709)	(170,248)
Property and equipment, net	86,304	84,027
Land
Property and Equipment, Net
Property and equipment, gross	12,323	12,323
Buildings and improvements
Property and Equipment, Net
Property and equipment, gross	149,209	148,259
Other property and equipment
Property and Equipment, Net
Property and equipment, gross	88,158	86,423
Construction in progress
Property and Equipment, Net
Property and equipment, gross	$ 10,323	$ 7,270

Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended
Pay vs Performance Disclosure - USD ($) $ in Thousands	Mar. 27, 2024	Mar. 29, 2023
Pay vs Performance Disclosure
Net Income (Loss)	$ 5,912	$ 4,918

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
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-Name Accounting Standards Codification
-Section S99
-Paragraph 1
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

COMMITMENTS AND CONTINGENCIES - Additional Information (Details) $ in Millions	3 Months Ended
	Mar. 27, 2024 USD ($) agreement lease
Officers
COMMITMENTS AND CONTINGENCIES
Number of at-will employment agreements \| agreement	3
Property Lease Guarantee
COMMITMENTS AND CONTINGENCIES
Number of leases assigned to franchisees \| lease	3
Latest lease expiration year	2038
Contingent lease obligations, maximum exposure	$ 3.6
Contingent lease obligations, maximum exposure, if discounted at estimated pre-tax cost of debt	2.5
Chicken Acquisition Corp
COMMITMENTS AND CONTINGENCIES
Purchase commitments, estimated obligations	$ 24.8

PROPERTY AND EQUIPMENT - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 27, 2024	Mar. 29, 2023
PROPERTY AND EQUIPMENT
Depreciation expense	$ 3.9	$ 3.6
Impairment of property and equipment	$ 0.0	$ 0.0

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Concentration of Risk (Details) - item	3 Months Ended		12 Months Ended
	Mar. 27, 2024	Mar. 29, 2023	Dec. 27, 2023
Supplier Concentration Risk \| Accounts Payable
Concentration of Risk
Number Of Suppliers	0		1
Supplier Concentration Risk \| Supplier One \| Accounts Payable
Concentration of Risk
Percentage of concentration			15.10%
Supplier Concentration Risk \| Largest Supplier One \| Purchased
Concentration of Risk
Percentage of concentration	24.70%	26.50%
Geographic Concentration Risk \| Revenue
Concentration of Risk
Percentage of concentration	100.00%	100.00%
Greater Los Angeles area market \| Geographic Concentration Risk \| Revenue
Concentration of Risk
Percentage of concentration	71.50%	70.70%

OTHER NONCURRENT LIABILITIES (Tables)

3 Months Ended

Mar. 27, 2024

OTHER NONCURRENT LIABILITIES

Schedule of Other Noncurrent Liabilities

Other noncurrent liabilities consist of the following (in thousands):


	March 27, 2024		December 27, 2023
Deferred franchise and development fees	$	6,348	$	6,411
Other		32		34
Total other noncurrent liabilities	$	6,380	$	6,445

OTHER NONCURRENT LIABILITIES - Schedule of Other Noncurrent Liabilities (Details) - USD ($) $ in Thousands	Mar. 27, 2024	Dec. 27, 2023
OTHER NONCURRENT LIABILITIES
Deferred franchise and development fees	$ 6,348	$ 6,411
Other	32	34
Total other noncurrent liabilities	$ 6,380	$ 6,445

STOCK-BASED COMPENSATION - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 27, 2024	Mar. 29, 2023	Dec. 27, 2023
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock, options outstanding (shares)	792,165		843,320
Common stock, options vested (in shares)	375,412
Common stock, options unvested (shares)	416,753
Unrecognized compensation expense	$ 1,400
Unvested restricted shares outstanding (shares)	500,152		537,461
Unrecognized compensation expense, recognition period	2 years 8 months 12 days
Stock-based compensation expense	$ 920	$ 771
Premium Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock, options outstanding (shares)	0
Restricted Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense	$ 2,700
Unvested restricted shares outstanding (shares)	458,189
Unrecognized compensation expense, recognition period	2 years 5 months 4 days
Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense	$ 200
Unvested restricted shares outstanding (shares)	41,963
Unrecognized compensation expense, recognition period	7 months 13 days

EARNINGS PER SHARE

3 Months Ended

Mar. 27, 2024

EARNINGS PER SHARE

EARNINGS PER SHARE

8. EARNINGS PER SHARE

Basic earnings per share (“EPS”) is calculated using the weighted-average number of shares of common stock outstanding during the thirteen weeks ended March 27, 2024 and March 29, 2023. Diluted EPS is calculated using the weighted-average number of shares of common stock outstanding and potentially dilutive during the period, using the treasury stock method.

Below are basic and diluted EPS data for the periods indicated (in thousands except for share and per share data):



	Thirteen Weeks Ended
	March 27, 2024		March 29, 2023
Numerator:
Net income	$	5,912	$	4,918
Denominator:
Weighted-average shares outstanding—basic		30,777,769		36,234,105
Weighted-average shares outstanding—diluted		30,937,226		36,478,158
Net income per share—basic	$	0.19	$	0.14
Net income per share—diluted	$	0.19	$	0.13
Anti-dilutive securities not considered in diluted EPS calculation		840,830		645,356

Below is a reconciliation of basic and diluted share counts:



	Thirteen Weeks Ended
	March 27, 2024	March 29, 2023
Weighted-average shares outstanding—basic	30,777,769	36,234,105
Dilutive effect of stock options and restricted shares	159,457	244,053
Weighted-average shares outstanding—diluted	30,937,226	36,478,158

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Impairment of Property and Equipment and ROU Assets (Details) $ in Millions	3 Months Ended
	Mar. 27, 2024 USD ($)	Mar. 29, 2023 USD ($) restaurant
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Asset impairment charges	$ 0.0
Maximum
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Asset impairment charges		$ 0.1
Closed-store reserve expense	$ 0.1	$ 0.1
California
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Number of restaurants with ROU asset impairment charges \| restaurant		1

LEASES - Minimum Future Lease Obligations (Details) - USD ($) $ in Thousands	Mar. 27, 2024	Dec. 27, 2023
Finance Minimum Lease Payments
For the Years Ending December 25, 2024	$ 260
For the Years Ending December 31, 2025	343
For the Years Ending December 30, 2026	310
For the Years Ending December 29, 2027	300
For the Years Ending December 27, 2028	233
Thereafter	1,376
Total	2,822
Less: imputed interest	(951)
Present value of lease obligations	1,871
Less: current maturities	(168)	$ (140)
Noncurrent portion	1,703	1,617
Operating Leases Minimum Lease Payments
For the Years Ending December 25, 2024	21,848
For the Years Ending December 31, 2025	28,435
For the Years Ending December 30, 2026	26,390
For the Years Ending December 29, 2027	25,005
For the Years Ending December 27, 2028	22,794
Thereafter	125,417
Total	249,889
Less: imputed interest	(60,632)
Present value of lease obligations	189,257
Less: current maturities	(19,640)	(19,490)
Noncurrent portion	169,617	$ 168,084
Operating Leases Minimum Sublease Payments
For the Years Ending December 25,2024	4,406
For the Years Ending December 31,2025	5,518
For the Years Ending December 30, 2026	5,034
For the Years Ending December 29, 2027	4,858
For the Years Ending December 27, 2028	4,484
Thereafter	27,838
Total	$ 52,138
Minimum
Operating Leases Minimum Sublease Payments
Imputed interest rate	2.57%
Maximum
Operating Leases Minimum Sublease Payments
Imputed interest rate	6.37%

STOCK-BASED COMPENSATION (Tables)

3 Months Ended

Mar. 27, 2024

STOCK-BASED COMPENSATION

Schedule of changes in Stock Options


				Weighted-Average		Aggregate
		Weighted-Average		Contractual Life		Intrinsic Value
	Shares	Exercise Price		Life (Years)		(in thousands)
Outstanding – December 27, 2023	843,320	$	10.13
Exercised	(5)		9.04
Forfeited, cancelled or expired	(51,150)	$	9.90
Outstanding – March 27, 2024	792,165	$	10.14		6.08	$	94
Vested and expected to vest at March 27, 2024	786,160	$	11.12		6.06	$	92
Exercisable at March 27, 2024	375,412	$	10.15		3.01	$	7

Schedule of Changes in Restricted Shares


		Weighted-Average
	Shares	Fair Value
Unvested shares at December 27, 2023	537,461	$	9.94
Forfeited, cancelled, or expired	(37,309)	$	10.91
Unvested shares at March 27, 2024	500,152	$	9.87

STOCK-BASED COMPENSATION - Schedule of Changes in Restricted Shares (Details)	3 Months Ended
	Mar. 27, 2024 $ / shares shares
Shares
Unvested shares, beginning balance (shares) \| shares	537,461
Forfeited, cancelled, or expired (shares) \| shares	(37,309)
Unvested shares, ending balance (shares) \| shares	500,152
Weighted-Average Fair Value
Unvested shares Weighted-Average Fair Value, beginning balance (usd per share) \| $ / shares	$ 9.94
Forfeited, cancelled, or expired, Weighted-Average Fair Value (usd per share) \| $ / shares	10.91
Unvested shares Weighted-Average Fair Value, ending balance (usd per share) \| $ / shares	$ 9.87

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Gain on Recovery of Insurance Proceeds (Details) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 27, 2024 USD ($)	Mar. 29, 2023 USD ($) restaurant	Dec. 27, 2023 USD ($)	Dec. 28, 2022 restaurant
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Gain on recovery of insurance proceeds		$ 151	$ 200
Gain on recovery of insurance proceeds, property, equipment and expenses	$ 41	242	200
Received from the insurance		$ 400
Restaurants sold \| restaurant		1
Proceeds from disposition of restaurants		$ 162
Gain on sale of restaurants		$ 136
Fire
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Number of Restaurants \| restaurant				1
Fire \| Maximum
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Incurred costs			$ 100

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 27, 2024

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Overview

El Pollo Loco Holdings, Inc. (“Holdings”) is a Delaware corporation headquartered in Costa Mesa, California. Holdings and its direct and indirect subsidiaries are collectively referred to herein as the “Company.” The Company’s activities are conducted principally through its indirect wholly owned subsidiary, El Pollo Loco, Inc. (“EPL”), which develops, franchises, licenses, and operates quick-service restaurants under the name El Pollo Loco® and operates under one operating segment. At March 27, 2024, the Company operated 172 and franchised 323 El Pollo Loco restaurants.

Basis of Presentation

Principles of Consolidation

Use of Estimates

Cash and Cash Equivalents

The Company considers all liquid instruments with an original maturity of three months or less at the date of purchase to be cash equivalents.

Liquidity

Subsequent Events

Subsequent to the quarter-end, the Company paid down $5.0 million on its 2022 Revolver resulting in outstanding borrowings as of May 2, 2024 of $75.0 million.

Concentration of Risk

Goodwill and Indefinite Lived Intangible Assets

The Company performs an annual impairment test for goodwill during the fourth fiscal quarter of each year, or more frequently if impairment indicators arise.

Fair Value Measurements

●

Level 1: Quoted prices for identical instruments in active markets.

●

Level 3: Unobservable inputs used when little or no market data is available.

There were no non-financial instruments measured at fair value on a nonrecurring basis as of and for the thirteen weeks ended March 27, 2024.


									Thirteen Weeks
			Fair Value Measurements at March 29, 2023 Using						Ended March 29, 2023
	Total		Level 1		Level 2		Level 3		Impairment Losses
Certain ROU assets, net	$	275	$	—	$	—	$	275	$	39

Impairment of Property and Equipment and ROU Assets

Closed-Store Reserves

Gain on Recovery of Insurance Proceeds, Lost Profits

Gain on Disposition of Restaurants

Income Taxes

The Company reviews its filing positions for all open tax years in all U.S. federal and state jurisdictions where the Company is required to file.

Recently Issued Accounting Pronouncements

Insider Trading Arrangements	3 Months Ended
Insider Trading Arrangements	Mar. 27, 2024
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

EARNINGS PER SHARE- Schedule of Reconciliation of Basic and Diluted Share Counts (Details) - shares	3 Months Ended
	Mar. 27, 2024	Mar. 29, 2023
EARNINGS PER SHARE
Weighted-average shares outstanding-basic (shares)	30,777,769	36,234,105
Dilutive effect of stock options and restricted shares (shares)	159,457	244,053
Weighted-average shares outstanding-diluted (shares)	30,937,226	36,478,158

LEASES - Lease Cost (Details) - USD ($) $ in Thousands	3 Months Ended
LEASES - Lease Cost (Details) - USD ($) $ in Thousands	Mar. 27, 2024	Mar. 29, 2023
Lessee, Lease, Description [Line Items]
Amortization of right-to-use assets	$ 19	$ 19
Interest on lease liabilities	15	11
Fixed rent cost	7,131	7,034
Short-term lease cost	1	3
Variable lease cost	480	375
Sublease income	(1,779)	(1,247)
Total lease cost	5,867	6,195
Occupancy and other operating expenses
Lessee, Lease, Description [Line Items]
Total lease cost	5,715	6,009
General & administrative
Lessee, Lease, Description [Line Items]
Total lease cost	118	136
Depreciation and amortization
Lessee, Lease, Description [Line Items]
Total lease cost	19	19
Interest expense
Lessee, Lease, Description [Line Items]
Total lease cost	15	11
Closed-store reserve
Lessee, Lease, Description [Line Items]
Total lease cost		20
Property Lease
Lessee, Lease, Description [Line Items]
Amortization of right-to-use assets	18	18
Interest on lease liabilities	11	10
Fixed rent cost	7,028	6,832
Variable lease cost	133	142
Sublease income	(1,779)	(1,247)
Total lease cost	5,411	5,755
Equipment Lease
Lessee, Lease, Description [Line Items]
Amortization of right-to-use assets	1	1
Interest on lease liabilities	4	1
Fixed rent cost	103	202
Short-term lease cost	1	3
Variable lease cost	347	233
Total lease cost	$ 456	$ 440

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) - USD ($) $ in Thousands	Common Stock	Additional Paid-in Capital	(Accumulated Deficit) Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Total
Beginning balance (shares) at Dec. 28, 2022	37,008,061
Beginning balance at Dec. 28, 2022	$ 370	$ 292,244	$ (11,592)	$ 126	$ 281,148
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation		771			771
Issuance of common stock upon exercise of stock options, net		43			43
Issuance of common stock upon exercise of stock options, net (shares)	4,344
Repurchase of common stock	$ (6)	(6,205)			(6,211)
Repurchase of common stock (shares)	(552,349)
Repurchase of common stock - excise tax		(62)			(62)
Forfeiture of common stock related to restricted shares (shares)	(9,579)
Other comprehensive income (loss), net of tax				(63)	(63)
Net income			4,918		4,918
Ending balance (shares) at Mar. 29, 2023	36,450,477
Ending balance at Mar. 29, 2023	$ 364	286,791	(6,674)	$ 63	280,544
Beginning balance (shares) at Dec. 27, 2023	31,353,223
Beginning balance at Dec. 27, 2023	$ 313	236,421	13,962		250,696
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation		920			$ 920
Issuance of common stock upon exercise of stock options, net (shares)	5				5
Repurchase of common stock	$ (1)	(1,226)			$ (1,227)
Repurchase of common stock (shares)	(136,400)
Repurchase of common stock - excise tax		(12)			$ (12)
Forfeiture of common stock related to restricted shares (shares)	(37,309)				(37,309)
Net income			5,912		$ 5,912
Ending balance (shares) at Mar. 27, 2024	31,179,519
Ending balance at Mar. 27, 2024	$ 312	$ 236,103	$ 19,874		$ 256,289

EARNINGS PER SHARE - Computation of Basic and Diluted Net Income per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 27, 2024	Mar. 29, 2023
Numerator:
Net Income (Loss)	$ 5,912	$ 4,918
Denominator:
Weighted-average shares outstanding-basic (shares)	30,777,769	36,234,105
Weighted-average shares outstanding-diluted (shares)	30,937,226	36,478,158
Net income per share-basic (usd per share)	$ 0.19	$ 0.14
Net income per share-diluted (usd per share)	$ 0.19	$ 0.13
Anti-dilutive securities not considered in diluted EPS calculation (shares)	840,830	645,356

- Definition

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 250
-SubTopic 10
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-Section 50
-Paragraph 3
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-URI https://asc.fasb.org//1943274/2147483443/250-10-50-3

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 260
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-URI https://asc.fasb.org//1943274/2147482635/260-10-55-15

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 815
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-Section 65
-Paragraph 1
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

- Definition

The amount of net income (loss) for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 250
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 3
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483443/250-10-50-3

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

+ Details

LONG-TERM DEBT (Tables)

3 Months Ended

Mar. 27, 2024

LONG-TERM DEBT.

Schedule of Derivatives Instruments Statements of Financial Performance and Financial Position, Location

The following table summarizes the effect of the Company’s cash flow hedge accounting on the condensed consolidated statements of income (in thousands):


	Thirteen Weeks Ended
	March 27, 2024		March 29, 2023
Interest expense on hedged portion of debt	$	—	$	—
Interest income on interest rate swap		—		(85)
Interest income on debt and derivatives, net	$	—	$	(85)

Schedule of Derivative Instruments, Effect on Other Comprehensive Income (Loss)

The following table summarizes the effect of the Company’s cash flow hedge accounting on AOCI for the thirteen weeks ended March 27, 2024 and March 29, 2023 (in thousands):


	Thirteen Weeks Ended
					Gain Reclassified from
	Net Gain Recognized in OCI				AOCI into Interest Income
	March 27, 2024			March 29, 2023	March 27, 2024			March 29, 2023
Interest rate swap	$	—	$	—	$	—	$	(85)

LEASES - Cash and Non-cash Lease Activities (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 27, 2024	Mar. 29, 2023
Lessee, Lease, Description [Line Items]
Operating cash flows used for operating leases	$ 7,020	$ 7,095
Financing cash flows used for finance leases	48	38
Operating lease ROU assets	6,348	10,097
Finance lease ROU assets	148	28
Derecognition of ROU assets due to terminations, impairment or modifications		(40)
Property Lease
Lessee, Lease, Description [Line Items]
Operating cash flows used for operating leases	7,000	6,907
Financing cash flows used for finance leases	23	24
Operating lease ROU assets	$ 5,860	10,097
Derecognition of ROU assets due to terminations, impairment or modifications		$ (40)
Weighted-average remaining years in lease term-finance leases	16 years 7 months 17 days	17 years 7 months 13 days
Weighted-average remaining years in lease term-operating leases	10 years 4 months 20 days	10 years 9 months 10 days
Weighted-average discount rate-finance leases	2.57%	2.57%
Weighted-average discount rate-operating leases	5.11%	2.55%
Equipment Lease
Lessee, Lease, Description [Line Items]
Operating cash flows used for operating leases	$ 20	$ 188
Financing cash flows used for finance leases	25	14
Operating lease ROU assets	488
Finance lease ROU assets	$ 148	$ 28
Weighted-average remaining years in lease term-finance leases	3 years 29 days	2 years 11 months 12 days
Weighted-average remaining years in lease term-operating leases	4 years 2 months 4 days	2 years 3 months 29 days
Weighted-average discount rate-finance leases	6.25%	1.53%
Weighted-average discount rate-operating leases	6.37%	3.71%

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended
	Mar. 27, 2024	Mar. 29, 2023
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Net income	$ 5,912	$ 4,918
Reclassifications of (loss) gains into net income		(85)
Income tax benefit		22
Other comprehensive (loss) income, net of taxes		(63)
Comprehensive income	$ 5,912	$ 4,855

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

+ Details

STOCK-BASED COMPENSATION - Share Repurchase program (Details) - USD ($)		3 Months Ended
	Dec. 04, 2023	Mar. 27, 2024	Dec. 27, 2023	Nov. 02, 2023
Equity, Class of Treasury Stock [Line Items]
Authorized amount under share repurchase agreement				$ 20,000,000
Amount remained available for repurchases			$ 7,400,000
FS Equity Partners V, L.P. and FS Affiliates V, L.P
Equity, Class of Treasury Stock [Line Items]
Shares repurchased	1,500,000
Total consideration	$ 12,600,000
2022 Stock Repurchase Plan
Equity, Class of Treasury Stock [Line Items]
Shares repurchased		136,400
Total consideration		$ 1,200,000
Amount remained available for repurchases		$ 6,200,000

- Definition

Number of shares that have been repurchased during the period and have not been retired and are not held in treasury. Some state laws may govern the circumstances under which an entity may acquire its own stock and prescribe the accounting treatment therefore. This element is used when state law does not recognize treasury stock.

+ References + Details

- Definition

Equity impact of the value of stock that has been repurchased during the period and has not been retired and is not held in treasury. Some state laws may mandate the circumstances under which an entity may acquire its own stock and prescribe the accounting treatment therefore. This element is used when state law does not recognize treasury stock.

+ References + Details

LONG-TERM DEBT

3 Months Ended

Mar. 27, 2024

LONG-TERM DEBT.

LONG-TERM DEBT

4. LONG-TERM DEBT

On July 27, 2022, the Company refinanced and terminated its credit agreement (the “2018 Credit Agreement”) among EPL, as borrower, the Company and Intermediate, as guarantors, Bank of America, N.A., as administrative agent, swingline lender, and letter of credit issuer, the lenders party thereto, and the other parties thereto, which provided for a $150.0 million five-year senior secured revolving credit facility (the “2018 Revolver”). The 2018 Revolver was refinanced pursuant to a credit agreement (the “2022 Credit Agreement”) among EPL, as borrower, the Company and Intermediate, as guarantors, Bank of America, N.A., as administrative agent, swingline lender, and letter of credit issuer, the lenders party thereto, and the other parties thereto, which provides for a $150.0 million five-year senior secured revolving credit facility (the “2022 Revolver”). In connection with the refinancing, the 2018 Credit Agreement was terminated.

The 2022 Revolver includes a sub limit of $15.0 million for letters of credit and a sub limit of $15.0 million for swingline loans. The 2022 Revolver and 2022 Credit Agreement will mature on July 27, 2027. The obligations under the 2022 Credit Agreement and related loan documents are guaranteed by Holdings and Intermediate. The obligations of

Holdings, EPL and Intermediate under the 2022 Credit Agreement and related loan documents are secured by a first priority lien on substantially all of their respective assets subject to certain customary exceptions.

The special dividend announced by the Company’s Board of Directors on October 11, 2022 was permitted under the terms of 2022 Revolver pursuant to both subclause (iii)(d) and (iii)(e) of the following sentence. Under the 2022 Revolver, Holdings is restricted from making certain payments such as cash dividends, except that it may, inter alia, (i) pay up to $1.0 million per year to repurchase or redeem qualified equity interests of Holdings held by past or present officers, directors, or employees (or their estates) of the Company upon death, disability, or termination of employment, (ii) pay under its TRA, and (iii) so long as no default or event of default has occurred and is continuing, (a) make non-cash repurchases of equity interests in connection with the exercise of stock options by directors, officers and management, provided that those equity interests represent a portion of the consideration of the exercise price of those stock options, (b) pay up to $0.5 million in any 12 month consecutive period to redeem, repurchase or otherwise acquire equity interests of any subsidiary that is not a wholly-owned subsidiary from any holder of equity interest in such subsidiary, (c) pay up to $2.5 million per year pursuant to stock option plans, employment agreements, or incentive plans, (d) make up to $5.0 million in other restricted payments per year, and (e) make other restricted payments, subject to its compliance, on a pro forma basis, with (x) a lease-adjusted consolidated leverage ratio not to exceed 4.25 times and (y) the financial covenants applicable to the 2022 Revolver.

Borrowings under the 2022 Credit Agreement (other than any swingline loans) bear interest, at the borrower’s option, at rates based upon either the secured overnight financing rate (“SOFR”) or a base rate, plus, for each rate, a margin determined in accordance with a lease-adjusted consolidated leverage ratio-based pricing grid. The base rate is calculated as the highest of (a) the federal funds rate plus 0.50%, (b) the published Bank of America prime rate, or (c) Term SOFR (as defined in the 2022 Credit Agreement) with a term of one-month SOFR plus 1.00%. For Term SOFR loans, the margin is in the range of 1.25% to 2.25%, and for base rate loans the margin is in a range of 0.25% to 1.25%. Borrowings under the 2022 Revolver may be repaid and reborrowed. The interest rate range under the 2022 Revolver was 6.92% to 6.96% for the thirteen weeks ended March 27, 2024, and 5.69% to 6.30% for the thirteen weeks ended March 29, 2023.

The 2022 Credit Agreement contains certain customary financial covenants, subject to certain exceptions. The Company was in compliance with the financial covenants as of March 27, 2024.

At March 27, 2024, the Company had $80.0 million in outstanding borrowings under the 2022 Revolver and one letter of credit in the amount of $9.8 million outstanding, and as a result, the Company had $60.2 million in borrowing availability.

Maturities, Borrowings and Paydowns

On July 27, 2022, the Company refinanced and terminated the 2018 Revolver pursuant to the 2022 Credit Agreement. During the thirteen weeks ended March 27, 2024 and March 29, 2023 the Company paid down $4.0 million and $8.0 million, respectively, on the 2022 Revolver. No amounts were borrowed on the 2022 Revolver during both the thirteen weeks ended March 27, 2024 and March 29, 2023. There are no required principal payments prior to maturity for the 2022 Revolver which matures on July 27, 2027.

Interest Rate Swap

During the year ended December 25, 2019, the Company entered into a variable-to-fixed interest rate swap agreement with a notional amount of $40.0 million with a maturity date in June 2023. The objective of the interest rate swap was to reduce the Company’s exposure to interest rate risk for a portion of its variable-rate interest payments on its borrowings under the 2018 Revolver. The interest rate swap was designated as a cash flow hedge, as the changes in the future cash flows of the swap were expected to offset changes in expected future interest payments on the related variable-rate debt, in accordance with Accounting Standards Codification (“ASC”) 815 “Derivatives and Hedging.”

In connection with the Company’s entry into the 2022 Credit Agreement, it terminated the interest rate swap on July 28, 2022, which was previously used to hedge interest rate risk. Prior to the interest rate swap termination, the swap was a highly effective cash flow hedge. In settlement of this swap, the Company received approximately $0.6 million and derecognized the corresponding interest rate swap asset. The remaining amount in AOCI related to the hedging relationship was reclassified into earnings when the hedged forecasted transaction was reported in earnings.

As of March 27, 2024, there were no estimated net gains to be included in AOCI related to the Company’s cash flow hedge that would be reclassified into earnings, based on current Term SOFR interest rates.

The following table summarizes the effect of the Company’s cash flow hedge accounting on the condensed consolidated statements of income (in thousands):


	Thirteen Weeks Ended
	March 27, 2024		March 29, 2023
Interest expense on hedged portion of debt	$	—	$	—
Interest income on interest rate swap		—		(85)
Interest income on debt and derivatives, net	$	—	$	(85)

The following table summarizes the effect of the Company’s cash flow hedge accounting on AOCI for the thirteen weeks ended March 27, 2024 and March 29, 2023 (in thousands):


	Thirteen Weeks Ended
					Gain Reclassified from
	Net Gain Recognized in OCI				AOCI into Interest Income
	March 27, 2024			March 29, 2023	March 27, 2024			March 29, 2023
Interest rate swap	$	—	$	—	$	—	$	(85)

See Note 1, “Basis of Presentation and Summary of Significant Accounting Policies” for information about the fair value of the Company’s derivative asset.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Subparagraph (h)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

RELATED PARTY TRANSACTIONS

3 Months Ended

Mar. 27, 2024

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

9. RELATED PARTY TRANSACTIONS

None.

- Definition

The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

LONG-TERM DEBT - Interest Rate Swap (Details) - USD ($) $ in Thousands		3 Months Ended
	Jul. 28, 2022	Mar. 27, 2024	Mar. 29, 2023	Dec. 25, 2019
DESCRIPTION OF BUSINESS
Interest income on interest rate swap			$ (85)
(Gain) Loss Reclassified from AOCI into Interest Income			85
Interest Rate Swap
DESCRIPTION OF BUSINESS
Derivative asset, notional amount				$ 40,000
Interest income on interest rate swap			(85)
(Gain) Loss Reclassified from AOCI into Interest Income			$ (85)
Interest Rate Swap \| 2022 Credit Agreement
DESCRIPTION OF BUSINESS
Proceeds from swap	$ 600
Cash flow hedge will be reclassified into earnings in the next 12 months		$ 0

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References

+ Details

- Definition

Nominal or face amount used to calculate payments on the derivative asset.

+ References + Details

OTHER ACCRUED EXPENSES AND CURRENT LIABILITIES - Schedule of Other Accrued Expenses and Current Liabilities (Details) - USD ($) $ in Thousands	Mar. 27, 2024	Dec. 27, 2023
OTHER ACCRUED EXPENSES AND CURRENT LIABILITIES
Accrued sales and property taxes	$ 5,666	$ 5,229
Gift card liability	4,497	4,877
Loyalty rewards program liability	711	687
Accrued advertising	6,035	3,010
Accrued legal settlements and professional fees	926	720
Deferred franchise and development fees	571	586
Other	3,578	3,252
Total other accrued expenses and current liabilities	$ 21,984	$ 18,361

REVENUE FROM CONTRACTS WITH CUSTOMERS - Loyalty Reward Liability and Gift Card Liability (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 27, 2024	Mar. 29, 2023	Dec. 27, 2023
Change in Contract with Customer, Liability [Roll Forward]
Gift card liability	$ 4,497		$ 4,877
Gift card liability
Change in Contract with Customer, Liability [Roll Forward]
Gift card liability	4,497		4,877
Revenue recognized from gift card liability balance at the beginning of the year	362	$ 486
Loyalty reward program
Change in Contract with Customer, Liability [Roll Forward]
Loyalty rewards liability, beginning balance	687	$ 526	526
Revenue deferred	503		2,065
Revenue recognized	(479)		(1,904)
Loyalty rewards liability, ending balance	$ 711		$ 687
Loyalty reward program \| Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-03-28
Change in Contract with Customer, Liability [Roll Forward]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	1 year

EARNINGS PER SHARE (Tables)

3 Months Ended

Mar. 27, 2024

EARNINGS PER SHARE

Computation of Basic and Diluted Net Income per Share

Below are basic and diluted EPS data for the periods indicated (in thousands except for share and per share data):



	Thirteen Weeks Ended
	March 27, 2024		March 29, 2023
Numerator:
Net income	$	5,912	$	4,918
Denominator:
Weighted-average shares outstanding—basic		30,777,769		36,234,105
Weighted-average shares outstanding—diluted		30,937,226		36,478,158
Net income per share—basic	$	0.19	$	0.14
Net income per share—diluted	$	0.19	$	0.13
Anti-dilutive securities not considered in diluted EPS calculation		840,830		645,356

Schedule of Reconciliation of Basic and Diluted Share Counts

Below is a reconciliation of basic and diluted share counts:



	Thirteen Weeks Ended
	March 27, 2024	March 29, 2023
Weighted-average shares outstanding—basic	30,777,769	36,234,105
Dilutive effect of stock options and restricted shares	159,457	244,053
Weighted-average shares outstanding—diluted	30,937,226	36,478,158

REVENUE FROM CONTRACTS WITH CUSTOMERS - Additional Information (Details) $ in Thousands	3 Months Ended
	Mar. 27, 2024 USD ($) item	Mar. 29, 2023 USD ($)	Dec. 27, 2023 USD ($)
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Number of revenue streams \| item	2
Loyalty Rewards Program, Expiration Period For Inactivity	1 year
Accrued Loyalty Rewards Program Liability, Current	$ 700		$ 700
Loyalty Rewards Program, Expected Loyalty Points Redemption Period	1 year
Gain on sale of restaurants		$ 136
Franchise Rights
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Finite-Lived Intangible Asset, Useful Life	20 years
Finite-Lived Intangible Asset, Useful Life Renewal Period	20 years
Minimum
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Contract with Customer, Liability, Revenue Recognized, Period	10 years
Maximum
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Contract with Customer, Liability, Revenue Recognized, Period	20 years
Hardware Services
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Unsatisfied performance obligations	$ 0

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

3 Months Ended

Mar. 27, 2024

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Summary of Non-Financial Instruments Measured at Fair Value on Nonrecurring Basis


									Thirteen Weeks
			Fair Value Measurements at March 29, 2023 Using						Ended March 29, 2023
	Total		Level 1		Level 2		Level 3		Impairment Losses
Certain ROU assets, net	$	275	$	—	$	—	$	275	$	39

LONG-TERM DEBT (Details) $ in Thousands			3 Months Ended
LONG-TERM DEBT (Details) $ in Thousands	May 02, 2024 USD ($)	Jul. 27, 2022 USD ($)	Mar. 27, 2024 USD ($)	Mar. 29, 2023 USD ($)	Dec. 27, 2023 USD ($)
DESCRIPTION OF BUSINESS
Revolving line of credit			$ 80,000		$ 84,000
Repayments of Lines of Credit			4,000	$ 8,000
2022 Credit Agreement \| Letter of Credit
DESCRIPTION OF BUSINESS
Letters of credit outstanding			$ 9,800
2022 Credit Agreement \| SOFR \| Minimum
DESCRIPTION OF BUSINESS
Debt instrument basis percentage			1.25%
2022 Credit Agreement \| SOFR \| Maximum
DESCRIPTION OF BUSINESS
Debt instrument basis percentage			2.25%
2022 Credit Agreement \| Base Rate \| Minimum
DESCRIPTION OF BUSINESS
Debt instrument basis percentage			0.25%
2022 Credit Agreement \| Base Rate \| Maximum
DESCRIPTION OF BUSINESS
Debt instrument basis percentage			1.25%
Revolving Credit Facility \| 2022 Credit Agreement
DESCRIPTION OF BUSINESS
Maximum borrowing capacity		$ 150,000
Senior secured revolving facility term		5 years
Debt Instrument, Maturity Date			Jul. 27, 2027
Revolving line of credit			$ 80,000
Amount of borrowings available			60,200
Repayments of Lines of Credit			4,000	8,000
Proceeds from lines of credit			$ 0	$ 0
Debt Instrument, Restrictive Covenants, Maximum Annual Repurchase or Redemption of Qualified Entity Interests		$ 1,000
Debt Instrument, Restrictive Covenants, Maximum Annual Redemption, Repurchase, Acquired Equity Interests		500
Debt Instrument, Restrictive Covenants, Maximum Annual Payment For Stock Option Plans, Employment Agreements and Incentive Plans		2,500
Debt Instrument, Restrictive Covenants, Maximum Annual Payment For Other Restricted Payments		$ 5,000
Debt Instrument, Covenant Description, Maximum Leverage Ratio		4.25
Revolving Credit Facility \| 2022 Credit Agreement \| Subsequent Event
DESCRIPTION OF BUSINESS
Revolving line of credit	$ 75,000
Repayment for long-term line of credit	$ 5,000
Revolving Credit Facility \| 2022 Credit Agreement \| Minimum
DESCRIPTION OF BUSINESS
Debt instrument, interest rate			6.92%
Revolving Credit Facility \| 2022 Credit Agreement \| Maximum
DESCRIPTION OF BUSINESS
Debt instrument, interest rate			6.96%
Revolving Credit Facility \| 2022 Credit Agreement \| Federal Funds Rate
DESCRIPTION OF BUSINESS
Debt instrument basis percentage			0.50%
Revolving Credit Facility \| 2022 Credit Agreement \| One Month SOFR
DESCRIPTION OF BUSINESS
Debt instrument basis percentage			1.00%
Revolving Credit Facility \| 2018 Credit Agreement
DESCRIPTION OF BUSINESS
Maximum borrowing capacity		$ 150,000
Senior secured revolving facility term		5 years
Revolving Credit Facility \| 2022 and 2018 Credit Agreements \| Minimum
DESCRIPTION OF BUSINESS
Debt instrument, interest rate				5.69%
Revolving Credit Facility \| 2022 and 2018 Credit Agreements \| Maximum
DESCRIPTION OF BUSINESS
Debt instrument, interest rate				6.30%
Letter of Credit \| 2022 Credit Agreement
DESCRIPTION OF BUSINESS
Sub limit of revolving facility		$ 15,000
Principal payments prior to maturity		0
Swing Line Loans \| 2022 Credit Agreement
DESCRIPTION OF BUSINESS
Sub limit of revolving facility		$ 15,000

REVENUE FROM CONTRACTS WITH CUSTOMERS

3 Months Ended

Mar. 27, 2024

REVENUE FROM CONTRACTS WITH CUSTOMERS

REVENUE FROM CONTRACTS WITH CUSTOMERS

10. REVENUE FROM CONTRACTS WITH CUSTOMERS

Revenue Recognition

Nature of products and services

The Company has two revenue streams, company-operated restaurant revenue and franchise related revenue.

Company-operated restaurant revenue

Revenues from the operation of company-operated restaurants are recognized as food and beverage products are delivered to customers and payment is tendered at the time of sale. The Company presents sales, net of sales-related taxes and promotional allowances.

The Company offers a loyalty rewards program, which awards points to a customer for dollars spent. Customers earn points for each dollar spent and points can be redeemed for multiple redemption options. If a customer does not earn or use points within a one-year period, their account is deactivated and all points expire. When a customer is part of the rewards program, the obligation to provide future discounts related to points earned is considered a separate performance obligation, to which a portion of the transaction price is allocated. The performance obligation related to loyalty points is deemed to have been satisfied, and the amount deferred in the balance sheet is recognized as revenue, when the points are transferred to a reward and redeemed, the reward or points have expired, or the likelihood of redemption is remote. A portion of the transaction price is allocated to loyalty points, if necessary, on a pro-rata basis, based on stand-alone selling price, as determined by menu pricing and loyalty points terms. As of both March 27, 2024 and December 27, 2023, the revenue allocated to loyalty points that have not been redeemed was $0.7 million, which is reflected in the Company’s accompanying condensed consolidated balance sheets within other accrued expenses and current liabilities. The Company expects the loyalty points to be redeemed and recognized over a one-year period.

The Company sells gift cards to its customers in the restaurants and through selected third parties. The gift cards sold to customers have no stated expiration dates and are subject to actual and/or potential escheatment rights in several of the

jurisdictions in which the Company operates. Furthermore, due to these escheatment rights, the Company does not recognize breakage related to the sale of gift cards due to the immateriality of the amount remaining after escheatment. The Company recognizes income from gift cards when redeemed by the customer. Unredeemed gift card balances are deferred and recorded as other accrued expenses on the accompanying condensed consolidated balance sheets.

Franchise and franchise advertising revenue

Franchise revenue consists of franchise royalties, initial franchise fees, license fees due from franchisees, IT support services, and rental income for subleases to franchisees. Franchise advertising revenue consists of advertising contributions received from franchisees. These revenue streams are made up of the following performance obligations:

●

Franchise license - inclusive of advertising services, development agreements, training, access to plans and help desk services.

●

Discounted renewal option.

●

Hardware services.

The Company satisfies the performance obligation related to the franchise license over the term of the franchise agreement, which is typically 20 years. Payment for the franchise license consists of three components, a fixed-fee related to the franchise/development agreement, a sales-based royalty fee and a sales-based advertising fee. The fixed fee, as determined by the signed development and/or franchise agreement, is due at the time the development agreement is entered into, and/or when the franchise agreement is signed, and does not include a finance component.

The sales-based royalty fee and sales-based advertising fee are considered variable consideration and will continue to be recognized as revenue as such sales are earned by the franchisees. Both sales-based fees qualify under the royalty constraint exception, and do not require an estimate of future transaction price. Additionally, the Company is utilizing the practical expedient available under ASC Topic 606, “Revenue from Contracts with Customers” (“Topic 606”) regarding disclosure of the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied for sales-based royalties.

In certain franchise agreements, the Company offers a discounted renewal to incentivize future renewals after the end of the initial franchise term. As this is considered a separate performance obligation, the Company allocates a portion of the initial franchise fee to this discounted renewal, on a pro-rata basis, assuming a 20-year renewal. This performance obligation is satisfied over the renewal term, typically 10 or 20 years, while payment is fixed and due at the time the renewal is signed.

The Company purchases hardware, such as scanners, printers, cash registers and tablets, from third party vendors, which it then sells to franchisees. As the Company is considered the principal in this relationship, payment for the hardware is considered revenue, and is received upon transfer of the goods from the Company to the franchisee. As of March 27, 2024, there were no performance obligations related to hardware services that were unsatisfied or partially satisfied.

The following table presents the Company’s revenues disaggregated by geographic market:


	March 27, 2024		March 29, 2023
Greater Los Angeles area market	71.5	%	70.7	%
Other markets	28.5	%	29.3	%
Total	100	%	100	%

Contract balances

The following table provides information about the change in the franchise contract liability balances during the thirteen weeks ended March 27, 2024 and March 29, 2023 (in thousands):


December 27, 2023	$	6,997
Revenue recognized - beginning balance		(158)
Additional contract liability		80
March 27, 2024	$	6,919

December 28, 2022	$	6,377
Revenue recognized - beginning balance		(214)
Additional contract liability		289
March 29, 2023	$	6,452

The Company’s franchise contract liability includes development fees, initial franchise and license fees, franchise renewal fees, lease subsidies and royalty discounts and is included within other accrued expenses and current liabilities and other noncurrent liabilities within the accompanying condensed consolidated balance sheets. The Company receives area development fees from franchisees when they execute multi-unit area development agreements. Initial franchise and license fees, or franchise renewal fees, are received from franchisees upon the execution of, or renewal of, a franchise agreement. Revenue is recognized from these agreements as the underlying performance obligation is satisfied, which is over the term of the agreement.


Franchise revenues:
2024	$	445
2025		560
2026		538
2027		517
2028		486
Thereafter		4,373
Total	$	6,919


	March 27, 2024		December 27, 2023
Loyalty rewards liability, beginning balance	$	687	$	526
Revenue deferred		503		2,065
Revenue recognized		(479)		(1,904)
Loyalty rewards liability, ending balance	$	711	$	687

The Company expects all loyalty points revenue related to performance obligations unsatisfied as of March 27, 2024 to be recognized within one year.

Gift Cards

The gift card liability included in other accrued expenses and current liabilities on the condensed consolidated balance sheets was as follows (in thousands):


	March 27, 2024		December 27, 2023
Gift card liability	$	4,497	$	4,877

Revenue recognized from the redemption of gift cards that was included in other accrued expenses and current liabilities at the beginning of the year was as follows (in thousands):


	Thirteen Weeks Ended
	March 27, 2024		March 29, 2023
Revenue recognized from gift card liability balance at the beginning of the year	$	362	$	486

Contract Costs

The Company does not currently incur costs to obtain or fulfill a contract that would be considered contract assets under Topic 606.

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 9
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-9

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 10
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-10

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 15
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-15

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (e)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-13

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Name Accounting Standards Codification
-Topic 606
-Publisher FASB
-URI https://asc.fasb.org//606/tableOfContent

+ Details

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Fair Value Measurements (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 27, 2024	Mar. 29, 2023
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impairment of property and equipment	$ 0	$ 0
Impairment Losses of Right-of-Use Assets		39
Fair Value, Measurements, Nonrecurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Right-of-Use Assets, Net		275
Fair Value, Measurements, Nonrecurring \| Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Right-of-Use Assets, Net		0
Fair Value, Measurements, Nonrecurring \| Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Right-of-Use Assets, Net		0
Fair Value, Measurements, Nonrecurring \| Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Right-of-Use Assets, Net		$ 275

OTHER NONCURRENT LIABILITIES

3 Months Ended

Mar. 27, 2024

OTHER NONCURRENT LIABILITIES

OTHER NONCURRENT LIABILITIES

6. OTHER NONCURRENT LIABILITIES

Other noncurrent liabilities consist of the following (in thousands):


	March 27, 2024		December 27, 2023
Deferred franchise and development fees	$	6,348	$	6,411
Other		32		34
Total other noncurrent liabilities	$	6,380	$	6,445

Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Mar. 27, 2024	Apr. 26, 2024
Document Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 27, 2024
Document Transition Report	false
Entity File Number	001-36556
Entity Registrant Name	EL POLLO LOCO HOLDINGS, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	20-3563182
Entity Address, Address Line One	3535 Harbor Blvd.
Entity Address, Address Line Two	Suite 100
Entity Address, City or Town	Costa Mesa
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92626
City Area Code	714
Local Phone Number	599-5000
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Smaller reporting company	false
Emerging Growth Company	false
Shell Company	false
Entity Common Stock, Shares Outstanding		31,099,611
Entity Central Index Key	0001606366
Current Fiscal Year End Date	--12-25
Document Fiscal Year Focus	2024
Document Fiscal Period Focus	Q1
Amendment Flag	false
Common Stock, par value $0.01 per share
Document Information [Line Items]
Title of 12(b) Security	Common Stock, par value $0.01 per share
Trading Symbol	LOCO
Security Exchange Name	NASDAQ
Rights to Purchase Series A Preferred Stock, par value $0.01 per share
Document Information [Line Items]
Title of 12(b) Security	Rights to Purchase Series A Preferred Stock, par value $0.01 per share
No Trading Symbol Flag	true
Security Exchange Name	NASDAQ

REVENUE FROM CONTRACTS WITH CUSTOMERS - Unsatisfied Performance Obligation (Details) - Franchise revenue $ in Thousands	Mar. 27, 2024 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Unsatisfied performance obligations	$ 6,919
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-03-28
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	9 months
Unsatisfied performance obligations	$ 445
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-12-26
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	1 year
Unsatisfied performance obligations	$ 560
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-12-25
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	1 year
Unsatisfied performance obligations	$ 538
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-12-24
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	1 year
Unsatisfied performance obligations	$ 517
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2027-12-23
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	1 year
Unsatisfied performance obligations	$ 486
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2028-12-21
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period
Unsatisfied performance obligations	$ 4,373

SHAREHOLDER RIGHTS AGREEMENT (Details) - $ / shares	Aug. 08, 2023	Mar. 27, 2024	Dec. 27, 2023
RIGHTS AGREEMENT
Common stock, par value (usd per share)		$ 0.01	$ 0.01
Preferred stock, par value (usd per share)		$ 0.01	$ 0.01
Preferred shares purchase right
RIGHTS AGREEMENT
Dividends declared	1
Common stock, par value (usd per share)	$ 0.01
Beneficial Ownership percentage	12.50%
Rights exercisable multiplier	2
Rights exchange ratio	1
Percentage of consolidated assets or Earning Power	50.00%
Redemption price (usd per share)	$ 0.001
Preferred shares purchase right \| Series A Preferred Stock
RIGHTS AGREEMENT
Shares called by purchase right	0.001
Share price	$ 53.75
Preferred stock, par value (usd per share)	$ 0.01