As filed with the Securities and Exchange Commission on July 1, 2010

Registration No. 333-      

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

 

 

Form S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

 

 

 

 

 

 

777 Goodale Boulevard, Suite 100

Columbus, Ohio 43212

(614) 326-7944

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

 

 

Saed Mohseni

President and Chief Executive Officer

777 Goodale Boulevard, Suite 100

Columbus, Ohio 43212

(614) 326-7944

(Name, address including zip code, and telephone number, including area code, of agent for service)

 

 

 

 

With copies to:

 

 

 

 

 

Approximate date of commencement of proposed sale to the public:   As soon as practicable after the effective date of this Registration Statement.

 

 

 

 

If any of the securities being registered on this Form are being offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box:   o

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

(Do not check if a smaller reporting company)

 

 

 

 

 

 

Table of Contents

 

 

Until          , 2010 (25 days after the date of this prospectus), all dealers that buy, sell or trade the common shares, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

 

We have not authorized anyone to give any information or to make any representations other than those contained in this prospectus. Do not rely upon any information or representations made outside of this prospectus. This prospectus is not an offer to sell, and it is not soliciting an offer to buy, (1) any securities other than shares of our common stock or (2) shares of our common stock in any circumstances in which our offer or solicitation is unlawful. The information contained in this prospectus may change after the date of this prospectus. Do not assume after the date of this prospectus that the information contained in this prospectus is still correct.

 

We utilize a typical restaurant 52- or 53-week fiscal year ending on the Sunday closest to December 31. Fiscal years are identified in this prospectus according to the calendar year in which the fiscal years end. For example, references to “2009,” “fiscal 2009,” “fiscal year 2009” or similar references refer to the fiscal year ending December 27, 2009.

 

This prospectus includes industry data that we derived from internal company records, publicly available information and industry publications and surveys. Industry publications and surveys generally state that the information contained therein has been obtained from sources believed to be reliable. Neither we, the selling shareholders nor the underwriters have independently verified any third-party industry data or guarantee the accuracy or completeness of such data. In addition, while we believe that the results and estimates from our internal research are reliable, such results and estimates have not been verified by any independent source. As a result, you should carefully consider the inherent risks and uncertainties associated with the industry and market data contained in this prospectus, including those discussed under the heading “Risk Factors.”

 

In this prospectus, we refer (without the ownership notation) to several registered and common law trademarks that we own, including BRAVO! ^® , BRAVO! Cucina Italiana ^® , Cucina BRAVO! Italiana ^® , BRAVO! Italian Kitchen ^® , Brio ^® , Brio Tuscan Grille ^tm and Bon Vie ^® . All brand names or other trademarks appearing in this prospectus are the property of their respective owners.

 

Prospectus Summary

	•	The Food.   We offer made-to-order menu items prepared using traditional Italian culinary techniques with an emphasis on fresh ingredients and authentic recipes. Our food menu is complemented by a wine list that offers both familiar varieties as well as wines exclusive to our restaurants. An attention to detail, culinary expertise and focused execution reflects our chef-driven culture.
	•	The Service.   We are committed to delivering superior service to each guest, at each meal, each and every day. We place significant emphasis on maintaining high waitstaff-to-table ratios, thoroughly training all service personnel on the details of each menu item and staffing each restaurant with experienced management teams to ensure consistent and attentive guest service.
	•	The Experience.   Lively, high-energy environments blending dramatic design elements with a warm and inviting atmosphere create a memorable guest experience. Signature architectural and décor elements include the lively theatre of exhibition kitchens, high ceilings, white tablecloths, a centerpiece bar and relaxing patio areas. These elements, along with our superior service and value, help form a bond between our guests and our restaurants, encouraging guest loyalty and more frequent visits.

Risk Factors

 

Before you invest in our shares, you should carefully consider all of the information in this prospectus, including matters set forth under the heading “Risk Factors.” Risks relating to our business include, among others, that our financial results depend significantly upon the success of our existing and new restaurants and our long-term success is highly dependent on our ability to successfully develop and expand our operations.

 

Company Information

 

Our principal executive office is located at 777 Goodale Boulevard, Suite 100, Columbus, Ohio 43212 and our telephone number is (614) 326-7944. Our website address is www.bbrg.com. Our website and the information contained therein or connected thereto shall not be deemed to be incorporated into this prospectus or the registration statement of which it forms a part.

		directors and will depend on then existing conditions, including our financial condition, results of operations, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant. In addition, we anticipate that our ability to declare and pay dividends will also be restricted by covenants in our new senior credit facilities. See “Description of Indebtedness — New Senior Credit Facilities” and “Risk Factors— Our substantial indebtedness may limit our ability to invest in the ongoing needs of our business.”
Proposed Nasdaq Global Market symbol		BBRG.
Risk factors		Investment in our common stock involves substantial risks. You should read this prospectus carefully, including the section entitled “Risk Factors” and the consolidated financial statements and the related notes to those statements included elsewhere in this prospectus before investing in our common stock.

	•	assumes that the underwriters do not exercise their over-allotment option; and
	•	other than historical financial information, reflects (1) the exchange of one share of new common stock for each outstanding share of common stock, (2) the amendment and restatement of our articles of incorporation to give effect to a     -for-1 stock split of our outstanding common stock, and (3) the exchange of all shares of our issued and outstanding Series A preferred stock for          shares of common stock at an exchange ratio of 1:      immediately prior to the consummation of this offering, based upon an initial public offering price of $      per share, the midpoint of the price range set forth on the cover of this prospectus. See “Reorganization Transactions.”

		Year Ended(1)												Thirteen Weeks Ended
		December 30,				December 28,				December 27,				March 29,				March 28,
		2007				2008				2009				2009				2010
		(Dollars in thousands, except per share data)
Statement of Operations Data:
Revenues		$	265,374			$	300,783			$	311,709			$	73,593			$	81,844
Cost of Sales			75,340				84,618				82,609				19,721				21,357
Labor			89,663				102,323				106,330				26,096				28,096
Operating			41,567				47,690				48,917				12,505				12,753
Occupancy			16,054				18,736				19,636				5,061				5,525
Total restaurant operating costs			222,624				253,367				257,492				63,383				67,731
General and administrative expenses			16,768				15,042				17,123				4,583				4,423
Restaurant pre-opening costs			5,647				5,434				3,758				1,106				1,205
Depreciation and amortization			12,309				14,651				16,088				3,816				4,124
Asset impairment charges							8,506				6,436
Other expenses, net			462				229				157				105				(25	)
Total costs and expenses			35,186				43,862				43,562				9,610				9,727
Income (loss) from operations			7,564				3,554				10,655				600				4,386
Net interest expense			11,853				9,892				7,119				1,895				1,770
Income (loss) from continuing operations before income taxes			(4,289	)			(6,338	)			3,536				(1,295	)			2,616
Income tax provision (benefit)			(3,503	)			55,061				135				(2	)			100
Net income (loss)		$	(786	)		$	(61,399	)		$	3,401			$	(1,293	)		$	2,516
Undeclared preferred dividend			(8,920	)			(10,175	)			(11,599	)			(2,710	)			(3,089	)
Net income (loss) available to common shareholders		$	(9,706	)		$	(71,574	)		$	(8,198	)		$	(4,003	)		$	(573	)
As Adjusted Per Share Data: (2)
Income (loss) from continuing operations										$				$				$
Weighted average common shares outstanding, basic and diluted
Other Financial Data:
Net cash provided from operating activities		$	31,291			$	32,501			$	33,782			$	2,948			$	6,108
Net cash provided from (used for) investing activities		$	(35,536	)		$	(43,088	)		$	(24,957	)		$	(6,399	)		$	(6,410	)
Net cash (used in) provided by financing activities		$	4,156			$	10,529			$	(9,258	)		$	3,230			$	294
Capital expenditures		$	28,782			$	24,578			$	14,121			$	2,109			$	2,332
Adjusted EBITDA(3)		$	20,260			$	27,218			$	34,790			$	4,917			$	8,920
Adjusted EBITDA margin			7.6	%			9.0	%			11.2	%			6.7	%			10.9	%
Operating Data:
Total restaurants (at end of period)			63				75				81				77				83
Total comparable restaurants (at end of period)			49				54				61				62				74
Change in comparable restaurant sales			0.6	%			(3.8	)%			(7.4	)%			(8.2	)%			0.2	%
BRAVO!:
Restaurants (at end of period)			38				44				45				45				46
Total comparable restaurants (at end of period)			31				33				36				37				43
Average sales per comparable restaurant		$	3,890			$	3,715			$	3,457			$	836			$	820
Change in comparable restaurant sales			0.9	%			(4.1	)%			(7.1	)%			(8.6	)%			(0.6	)%

		Year Ended(1)												Thirteen Weeks Ended
		December 30,				December 28,				December 27,				March 29,				March 28,
		2007				2008				2009				2009				2010
		(Dollars in thousands, except per share data)
BRIO:
Restaurants (at end of period)			25				31				36				32				37
Total comparable restaurants (at end of period)			18				21				25				25				31
Average sales per comparable restaurant		$	5,308			$	5,401			$	4,812			$	1,196			$	1,215
Change in comparable restaurant sales			0.2	%			(3.6	)%			(7.8	)%			(7.7	)%			1.0	%
Balance Sheet Data (at end of period):
Cash and cash equivalents		$	740			$	682			$	249			$	461			$	241
Working capital (deficit)		$	(33,110	)		$	(34,320	)		$	(36,156	)		$	(33,162	)		$	(33,781	)
Total assets		$	195,048			$	157,764			$	160,842			$	159,055			$	162,114
Total debt		$	114,136			$	125,950			$	118,031			$	129,509			$	118,439
Total stockholders’ equity (deficiency in assets)		$	(14,692	)		$	(76,091	)		$	(72,690	)		$	(77,385	)		$	(70,174	)

 

		Actual				As Adjusted(2)
		As of				As of
		March 28,				March 28,
		2010				2010
		(In thousands)
Balance Sheet Data:
Cash and cash equivalents		$	241
Working capital (deficit)		$	(33,781	)
Total assets		$	162,114
Total debt		$	118,439
Total stockholders’ equity (deficiency in assets)		$	(70,174	)

(1)		We utilize a 52- or 53-week accounting period which ends on the Sunday closest to December 31. The fiscal years ended December 27, 2009, December 28, 2008 and December 30, 2007 each have 52 weeks.
(2)		Gives effect to (i) the reorganization transactions expected to occur prior to the consummation of this offering, (ii) this offering and (iii) the application of the net proceeds of this offering and of borrowings under our new senior credit facilities as described under “Use of Proceeds.”
(3)		Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization plus the sum of asset impairment charges and management fees and expenses. We are presenting Adjusted EBITDA, which is not required by U.S. generally accepted accounting principles, or GAAP, because it provides an additional measure to view our operations, when considered with both our GAAP results and the reconciliation to net income (loss) which we believe provides a more complete understanding of our business than could be obtained absent this disclosure. We use Adjusted EBITDA, together with financial measures prepared in accordance with GAAP, such as revenue and cash flows from operations, to assess our historical and prospective operating performance and to enhance our understanding of our core operating performance. Adjusted EBITDA is presented because: (i) we believe it is a useful measure for investors to assess the operating performance of our business without the effect of non-cash depreciation and amortization expenses and asset impairment charges; (ii) we believe that investors will find it useful in assessing our ability to service or incur indebtedness; and (iii) we use Adjusted EBITDA internally as a benchmark to evaluate our operating performance or compare our performance to that of our competitors. The use of Adjusted EBITDA as a performance measure permits a comparative assessment of our operating performance relative to our performance based on our GAAP results, while isolating the effects of some items that vary from period to period without any correlation to core operating performance or that vary widely among similar companies. Companies within our industry exhibit significant variations with respect to capital structures and cost of capital (which affect interest expense and tax rates) and differences in book depreciation of facilities and equipment (which affect relative depreciation expense), including significant differences in the depreciable lives of similar assets among various companies. Our management believes that Adjusted EBITDA facilitates company-to-company comparisons within our industry by eliminating some of the foregoing variations.
		Adjusted EBITDA is not a measurement determined in accordance with GAAP and should not be considered in isolation or as an alternative to net income, net cash provided by operating, investing or financing activities or other financial statement data presented as indicators of financial performance or liquidity, each as presented in accordance with GAAP. Adjusted EBITDA should not be considered as a measure of discretionary cash

		available to us to invest in the growth of our business. Adjusted EBITDA as presented may not be comparable to other similarly titled measures of other companies and our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual items.
		Our management recognizes that Adjusted EBITDA has limitations as an analytical financial measure, including the following:

	•	Adjusted EBITDA does not reflect our capital expenditures or future requirements for capital expenditures;
	•	Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, associated with our indebtedness;
	•	Adjusted EBITDA does not reflect depreciation and amortization, which are non-cash charges, although the assets being depreciated and amortized will likely have to be replaced in the future, nor does Adjusted EBITDA reflect any cash requirements for such replacements; and
	•	Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs.

		This prospectus also includes information concerning Adjusted EBITDA margin, which is defined as the ratio of Adjusted EBITDA to revenues. We present Adjusted EBITDA margin because it is used by management as a performance measurement to judge the level of Adjusted EBITDA generated from revenues and we believe its inclusion is appropriate to provide additional information to investors.
		A reconciliation of Adjusted EBITDA and EBITDA to net income is provided below.

		Year Ended												Thirteen Weeks Ended
		December 30,				December 28,				December 27,				March 29,				March 28,
		2007				2008				2009				2009				2010
		(In thousands)
Net income (loss)		$	(786	)		$	(61,399	)		$	3,401			$	(1,293	)		$	2,516
Income tax expense (benefit)			(3,503	)			55,061				135				(2	)			100
Interest expense			11,853				9,892				7,119				1,895				1,770
Depreciation and amortization			12,309				14,651				16,088				3,816				4,124
EBITDA		$	19,873			$	18,205			$	26,743			$	4,416			$	8,510
Asset impairment charges			—				8,506				6,436				—				—
Management fees and expenses			387				507				1,611				501				410
Adjusted EBITDA		$	20,260			$	27,218			$	34,790			$	4,917			$	8,920

 

Investing in our common stock involves a high degree of risk. You should consider carefully the following risk factors and the other information in this prospectus, including our consolidated financial statements and related notes to those statements, before you decide to invest in our common stock. If any of the following risks actually occur, our business, financial condition and operating results could be adversely affected. As a result, the trading price of our common stock could decline and you could lose part or all of your investment.

 

Risks Relating to Our Business and Industry

 

Our financial results depend significantly upon the success of our existing and new restaurants.

 

Future growth in revenues and profits will depend on our ability to grow sales and efficiently manage costs in our existing and new restaurants. As of June 27, 2010, we operated 47 BRAVO! restaurants and 38 BRIO restaurants, of which three BRAVO! restaurants and four BRIO restaurants have opened within the preceding twelve months. The results achieved by these restaurants may not be indicative of longer-term performance or the potential market acceptance of restaurants in other locations.

 

In particular, the success of our restaurants revolves principally around guest traffic and average check per guest. Significant factors that might adversely impact our guest traffic levels and average guest check include, without limitation:

 

 

Our restaurants are also susceptible to increases in certain key operating expenses that are either wholly or partially beyond our control, including, without limitation:

 

 

The failure of our existing or new restaurants to perform as expected could have a significant negative impact on our financial condition and results of operations.

 

Our long-term success is highly dependent on our ability to successfully develop and expand our operations.

 

We intend to develop new restaurants in our existing markets, and selectively enter into new markets. Since the end of 2005, we have expanded from 30 BRAVO! restaurants and 19 BRIO restaurants to 47 and 38 BRAVO!

and BRIO restaurants, respectively, as of June 27, 2010. We also expect to open one additional BRIO restaurant prior to the end of 2010. There can be no assurance that any new restaurant that we open will have similar operating results to those of existing restaurants. The number and timing of new restaurants actually opened during any given period, and their associated contribution to operating growth, may be negatively impacted by a number of factors including, without limitation:

 

 

We may not be able to open our planned new restaurants on a timely basis, if at all, and, if opened, these restaurants may not be operated profitably. We have experienced, and expect to continue to experience, delays in restaurant openings from time to time. Such actions may limit our growth opportunities. We cannot assure you that we will be able to successfully expand or acquire critical market presence for our brands in new geographical markets, as we may encounter well-established competitors with substantially greater financial resources. We may be unable to find attractive locations, acquire name recognition, successfully market our brands or attract new guests. Competitive circumstances and consumer characteristics in new market segments and new geographical markets may differ substantially from those in the market segments and geographical markets in which we have substantial experience. If we are unable to expand in existing markets or penetrate new markets, our ability to increase our revenues and profitability may be harmed.

 

Changes in economic conditions, including continuing effects from the recent recession, could materially affect our financial condition and results of operations.

 

We, together with the rest of the restaurant industry, depend upon consumer discretionary spending. The recent recession, coupled with high unemployment rates, reduced home values, increases in home foreclosures, investment losses, personal bankruptcies and reduced access to credit and reduced consumer confidence, has impacted consumers’ ability and willingness to spend discretionary dollars. Economic conditions may remain volatile and may continue to repress consumer confidence and discretionary spending for the near term. If the weak economy continues for a prolonged period of time or worsens, guest traffic could be adversely impacted if our guests choose to dine out less frequently or reduce the amount they spend on meals while dining out. We believe that if the current negative economic conditions persist for a long period of time or become more pervasive, consumers might make long- lasting changes to their discretionary spending behavior, including dining out less frequently on a

permanent basis. Additionally, a decline in corporate travel and entertainment spending could result in a decrease in the traffic of business travelers at our restaurants. If restaurant sales decrease, our profitability could decline as we spread fixed costs across a lower level of sales. Reductions in staff levels, asset impairment charges and potential restaurant closures have resulted and could result from prolonged negative restaurant sales.

 

Damage to our reputation or lack of acceptance of our brands could negatively impact our business, financial condition and results of operations.

 

We believe we have built a strong reputation for the quality and breadth of our menu and our restaurants, and we must protect and grow the value of our BRAVO! and BRIO brands to continue to be successful in the future. Any incident that erodes consumer affinity for our brands could significantly reduce their respective values and damage our business. If guests perceive or experience a reduction in food quality, service or ambiance, or in any way believe we failed to deliver a consistently positive experience, our brand value could suffer and our business may be adversely affected.

 

A multi-location restaurant business such as ours can be adversely affected by negative publicity or news reports, whether or not accurate, regarding food quality issues, public health concerns, illness, safety, injury or government or industry findings concerning our restaurants, restaurants operated by other foodservice providers or others across the food industry supply chain. While we have taken steps to mitigate food quality, public health and other foodservice-related risks, these types of health concerns or negative publicity cannot be completely eliminated or mitigated and may materially harm our results of operations and result in damage to our brands. For example, in May 2006, a food virus outbreak in Michigan affected area restaurants, including one of our BRAVO! restaurants. As a result, this restaurant was closed for four days. While the effect of the outbreak was immaterial to our business, food quality issues or other public health concerns could have an adverse impact on our profitability.

 

In addition, our ability to successfully develop new restaurants in new markets may be adversely affected by a lack of awareness or acceptance of our brands in these new markets. To the extent that we are unable to foster name recognition and affinity for our brands in new markets, our new restaurants may not perform as expected and our growth may be significantly delayed or impaired.

 

Because many of our restaurants are concentrated in local or regional areas, we are susceptible to economic and other trends and developments, including adverse weather conditions, in these areas.

 

Our financial performance is highly dependent on restaurants located in Ohio, Florida, Michigan and Pennsylvania , which comprise approximately 45% of our total restaurants. As a result, adverse economic conditions in any of these areas could have a material adverse effect on our overall results of operations. In recent years, certain of these states have been more negatively impacted by the housing decline, high unemployment rates and the overall economic crisis than other geographic areas. In addition, given our geographic concentrations, negative publicity regarding any of our restaurants in these areas could have a material adverse effect on our business and operations, as could other regional occurrences such as local strikes, terrorist attacks, increases in energy prices, adverse weather conditions, hurricanes, droughts or other natural or man-made disasters.

 

In particular, adverse weather conditions can impact guest traffic at our restaurants, cause the temporary underutilization of outdoor patio seating, and, in more severe cases, cause temporary restaurant closures, sometimes for prolonged periods. Approximately 34% of our total restaurants are located in Ohio, Michigan and Pennsylvania, which are particularly susceptible to snowfall, and 13% of our total restaurants are located in Florida and Louisiana, which are particularly susceptible to hurricanes. Our business is subject to seasonal fluctuations, with restaurant sales typically higher during certain months, such as December. Adverse weather conditions during our most favorable months or periods may exacerbate the effect of adverse weather on guest traffic and may cause fluctuations in our operating results from quarter-to-quarter within a fiscal year. For example, the significant snowfall in the Northeast United States in February 2010 led to reduced guest traffic at several of our restaurants. In addition, outdoor patio seating is available at most of our restaurants and may be impacted by a number of weather-related factors. Our inability to fully utilize our restaurants’ seating capacity as planned may negatively impact our revenues and results of operations.

The impact of negative economic factors, including the availability of credit, on our landlords and other retail center tenants could negatively affect our financial results.

 

Negative effects on our existing and potential landlords due to the inaccessibility of credit and other unfavorable economic factors may, in turn, adversely affect our business and results of operations. If our landlords are unable to obtain financing or remain in good standing under their existing financing arrangements, they may be unable to provide construction contributions or satisfy other lease covenants to us. Approximately 6% of our restaurants are in locations that are owned, managed or controlled by a landlord that has filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code in the last 12 months. This landlord may be able to reject our leases in the bankruptcy proceedings. As of June 27, 2010, none of our leases have been rejected, but we cannot assure you that any landlord that has filed, or may in the future file, for bankruptcy protection may not attempt to reject leases with us. In addition, if our landlords are unable to obtain sufficient credit to continue to properly manage their retail sites, we may experience a drop in the level of quality of such retail centers. Our development of new restaurants may also be adversely affected by the negative financial situations of developers and potential landlords. Many landlords have delayed or cancelled recent development projects (as well as renovations of existing projects) due to the instability in the credit markets and recent declines in consumer spending, which has reduced the number of high-quality locations available that we would consider for our new restaurants.

 

In addition, several other tenants at retail centers in which we are located or where we have executed leases have ceased operations or, in some cases, have deferred openings or failed to open after committing to do so. These failures may lead to reduced guest traffic at retail centers in which our restaurants are located and may contribute to lower guest traffic at our restaurants.

 

Changes in food availability and costs could adversely affect our operating results.

 

Our profitability and operating margins are dependent in part on our ability to anticipate and react to changes in food costs. We rely on local, regional and national suppliers to provide our produce, beef, poultry, seafood and other ingredients. Other than for a portion of our commodities, which are purchased locally by each restaurant, we rely on Gordon Food Service, or GFS, as the primary distributor of a majority of our ingredients. We have a non-exclusive contract with GFS on terms and conditions that we believe are consistent with those made available to similarly situated restaurant companies. Although we believe that alternative distribution sources are available, any increase in distribution prices or failure to perform by GFS could cause our food costs to increase. Additionally, we currently rely on sole suppliers for certain of our food products, including substantially all of our soups and the majority of our sauces. Failure to identify an alternate source of supply for these items may result in significant cost increases. Increases in distribution costs or sale prices could also cause our food costs to increase. In addition, any material interruptions in our supply chain, such as a material interruption of ingredient supply due to the failures of third-party suppliers, or interruptions in service by common carriers that ship goods within our distribution channels, may result in significant cost increases and reduce sales. Changes in the price or availability of certain food products could affect our ability to offer a broad menu and price offering to guests and could materially adversely affect our profitability and reputation.

 

The type, variety, quality and price of produce, beef, poultry and seafood are more volatile than other types of food and are subject to factors beyond our control, including weather, governmental regulation, availability and seasonality, each of which may affect our food costs or cause a disruption in our supply. For example, weather patterns in recent years have resulted in lower than normal levels of rainfall in key agricultural states such as California, impacting the price of water and the corresponding prices of food commodities grown in states facing drought conditions. Our food suppliers also may be affected by higher costs to produce and transport commodities used in our restaurants, higher minimum wage and benefit costs and other expenses that they pass through to their customers, which could result in higher costs for goods and services supplied to us. Although we are able to contract for the majority of the food commodities used in our restaurants for periods of up to one year, the pricing and availability of some of the commodities used in our operations cannot be locked in for periods of longer than one week or at all. Currently, we have pricing understandings of varying lengths with several key suppliers, including our suppliers of poultry, seafood, dairy products, soups and sauces, bakery items and certain meat products. We do not use financial instruments to hedge our risk to market fluctuations in the price of beef, seafood, produce and other food products at this time. We may not be able to anticipate and react to changing

food costs through our purchasing practices and menu price adjustments in the future, and failure to do so could negatively impact our revenues and results of operations.

 

Increases in our labor costs, including as a result of changes in government regulation, could slow our growth or harm our business.

 

We are subject to a wide range of labor costs. Because our labor costs are, as a percentage of revenues, higher than other industries, we may be significantly harmed by labor cost increases.

 

We retain the financial responsibility for up to $250,000 of risks and associated liabilities with respect to workers’ compensation, general liability, employment practices and other insurable risks through our self insurance programs. Unfavorable fluctuations in market conditions, availability of such insurance or changes in state and/or federal regulations could significantly increase our self insurance costs and insurance premiums. In addition, we are subject to the risk of employment-related litigation at both the state and federal levels, including claims styled as class action lawsuits which are more costly to defend. Also, some employment related claims in the area of wage and hour disputes are not insurable risks.

 

Despite our efforts to control costs while still providing competitive health care benefits to our staff members, significant increases in health care costs continue to occur, and we can provide no assurance that our cost containment efforts in this area will be effective. Further, we are continuing to assess the impact of recently-adopted federal health care legislation on our health care benefit costs, and significant increases in such costs could adversely impact our operating results. There is no assurance that we will be able to pass through the costs of such legislation in a manner that will not adversely impact our operating results.

 

In addition, many of our restaurant personnel are hourly workers subject to various minimum wage requirements or changes to tip credits. Mandated increases in minimum wage levels and changes to the tip credit, which are the amounts an employer is permitted to assume an employee receives in tips when calculating the employee’s hourly wage for minimum wage compliance purposes, have recently been and continue to be proposed and implemented at both federal and state government levels. Minimum wage increases or changes to allowable tip credits may increase our labor costs or effective tax rate.

 

Additionally, potential changes in labor legislation, including the Employee Free Choice Act (EFCA), could result in portions of our workforce being subjected to greater organized labor influence. The EFCA could impact the nature of labor relations in the United States and how union elections and contract negotiations are conducted. The EFCA aims to facilitate unionization, and employers of unionized employees may face mandatory, binding arbitration of labor scheduling, costs and standards, which could increase the costs of doing business. Although we do not currently have any unionized employees, EFCA or similar labor legislation could have an adverse effect on our business and financial results by imposing requirements that could potentially increase costs and reduce our operating flexibility.

 

Labor shortages could increase our labor costs significantly or restrict our growth plans.

 

Our restaurants are highly dependent on qualified management and operating personnel, including regional management, general managers and executive chefs. Qualified individuals have historically been in short supply and an inability to attract and retain them would limit the success of our existing restaurants as well as our development of new restaurants. We can make no assurances that we will be able to attract and retain qualified individuals in the future. Additionally, the cost of attracting and retaining qualified individuals may be higher than we anticipate, and as a result, our profitability could decline.

 

Guest traffic at our restaurants could be significantly affected by competition in the restaurant industry in general and, in particular, within the dining segments of the restaurant industry in which we compete.

 

The restaurant industry is highly competitive with respect to food quality, ambiance, service, price and value and location, and a substantial number of restaurant operations compete with us for guest traffic. The main competitors for our brands are mid-priced, full service concepts in the multi-location upscale casual dining segment, including Maggiano’s, Cheesecake Factory, BJ’s Restaurants and P.F. Chang’s, as well as high quality,

locally owned and operated Italian restaurants. Some of our competitors have significantly greater financial, marketing, personnel and other resources than we do, and many of our competitors are well established in markets in which we have existing restaurants or intend to locate new restaurants. Any inability to successfully compete with the other restaurants in our markets will place downward pressure on our guest traffic and may prevent us from increasing or sustaining our revenues and profitability. We may also need to evolve our concepts in order to compete with popular new restaurant formats or concepts that develop from time to time, and we cannot offer any assurance that we will be successful in doing so or that modifications to our concepts will not reduce our profitability. In addition, with improving product offerings at fast casual restaurants, quick-service restaurants and grocery stores and the influence of negative economic conditions and other factors, consumers may choose less expensive alternatives, which could also negatively affect guest traffic at our restaurants.

 

New information or attitudes regarding diet and health or adverse opinions about the health effects of consuming our menu offerings could result in adverse changes in regulations and consumer eating habits.

 

Government regulation and consumer eating habits may impact our business as a result of changes in attitudes regarding diet and health or new information regarding the health effects of consuming our menu offerings. These changes may result in the enactment of laws and regulations that impact the ingredients and nutritional content of our menu offerings, or laws and regulations requiring us to disclose the nutritional content of our food offerings. For example, a number of states, counties and cities have enacted menu labeling laws requiring multi-unit restaurant operators to disclose certain nutritional information available to guests, or have enacted legislation restricting the use of certain types of ingredients in restaurants. Furthermore, the federal Patient Protection and Affordable Care Act, or PPACA, which was enacted on March 23, 2010, establishes a uniform, federal requirement for certain restaurants to post nutritional information on their menus. Specifically, the law requires chain restaurants with 20 or more locations operating under the same trade name and offering substantially the same menus to publish the total number of calories of standard menu items on menus and menu boards, along with a succinct statement regarding the suggested daily caloric intake, to enable consumers to understand the number of calories in the menu item in the context of a total daily diet. The law also requires such restaurants to provide to consumers, upon request, a written summary of detailed nutritional information, including total calories and calories from fat, total fat, saturated fat, cholesterol, sodium, total carbohydrates, complex carbohydrates, sugars, dietary fiber, and total protein in each serving size or other unit of measure, for each standard menu item. The menu must include a prominent, clear and conspicuous statement about the availability of this information upon request. The United States Food and Drug Administration, or FDA, is also permitted to require additional nutrient disclosures, such as trans fat content. An unfavorable report on our menu ingredients, the size of our portions or the nutritional content of our menu items could negatively influence the demand for our offerings.

 

The federal nutrition labeling law under the PPACA became effective upon enactment, on March 23, 2010. However, the FDA, is required to issue proposed regulations by March 23, 2011 to establish the methods by which restaurants should measure the nutrient content of their standard menu items to arrive at the declared value, and the format and manner of the nutrient content disclosures required under the law. Thus, it is expected that the FDA will not enforce the requirements until these regulations are finalized. The new law specifically preempts conflicting state and local laws, and instead provides a single, national standard for nutrition labeling of restaurant menu items. In the meantime, we will be subject to a patchwork of state and local laws and regulations regarding nutritional content disclosure requirements. Many of these requirements are inconsistent or are interpreted differently from one jurisdiction to another.

 

Compliance with these laws and regulations, as well as others regarding the ingredients and nutritional content of our menu items, may be costly and time-consuming. Additionally, if consumer health regulations or consumer eating habits change significantly, we may be required to modify or discontinue certain menu items, and we may experience higher costs associated with the implementation of those changes. We cannot predict the impact of the new nutrition labeling requirements under the PPACA, once they are issued and implemented. Additionally, we cannot make any assurances regarding our ability to effectively respond to changes in consumer health perceptions or our ability to successfully implement the nutrient content disclosure requirements and to adapt our menu offerings to trends in eating habits.

Our marketing programs may not be successful.

 

We expend significant resources in our marketing efforts, using a variety of media, including social media venues. We expect to continue to conduct brand awareness programs and guest initiatives to attract and retain guests. These initiatives may not be successful, resulting in expenses incurred without the benefit of higher revenues. Additionally, some of our competitors have greater financial resources, which enable them to purchase significantly more television and radio advertising than we are able to purchase. Should our competitors increase spending on advertising and promotions or our advertising funds decrease for any reason, or should our advertising and promotions be less effective than our competitors, there could be a material adverse effect on our results of operations and financial condition.

 

The impact of new restaurant openings could result in fluctuations in our financial performance.

 

Quarterly results have been, and in the future may continue to be, significantly impacted by the timing of new restaurant openings (often dictated by factors outside of our control), including associated pre-opening costs and operating inefficiencies, as well as changes in our geographic concentration due to the opening of new restaurants. We typically incur the most significant portion of pre-opening expenses associated with a given restaurant within the two months immediately preceding and the month of the opening of the restaurant. Our experience has been that labor and operating costs associated with a newly opened restaurant for the first several months of operation are materially greater than what can be expected after that time, both in aggregate dollars and as a percentage of revenues. Our new restaurants commonly take several months to reach planned operating levels due to inefficiencies typically associated with new restaurants, including the training of new personnel, lack of market awareness, inability to hire sufficient qualified staff and other factors. Accordingly, the volume and timing of new restaurant openings has had, and may continue to have, a meaningful impact on our profitability. Due to the foregoing factors, results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for a full fiscal year, and these fluctuations may cause our operating results to be below expectations of public market analysts and investors.

 

Opening new restaurants in existing markets may negatively effect sales at our existing restaurants.

 

The consumer target area of our restaurants varies by location, depending on a number of factors such as population density, local retail and business attractions, area demographics and geography. As a result, the opening of a new restaurant, whether using the same brand or a different brand, in or near markets in which we already have existing restaurants could adversely impact the sales of new or existing restaurants. We do not intend to open new restaurants that materially impact the existing sales of our existing restaurants. However, there can be no assurance that sales cannibalization between our restaurants will not occur or become more significant in the future as we continue to expand our operations.

 

Our business operations and future development could be significantly disrupted if we lose key members of our management team.

 

The success of our business continues to depend to a significant degree upon the continued contributions of our senior officers and key employees, both individually and as a group. Our future performance will be substantially dependent in particular on our ability to retain and motivate Saed Mohseni, our President and Chief Executive Officer, and certain of our other senior executive officers. We currently have an employment agreement in place with Mr. Mohseni. The loss of the services of our CEO, senior officers or other key employees could have a material adverse effect on our business and plans for future development. We have no reason to believe that we will lose the services of any of these individuals in the foreseeable future; however, we currently have no effective replacement for any of these individuals due to their experience, reputation in the industry and special role in our operations. We also do not maintain any key man life insurance policies for any of our employees.

 

Our growth may strain our infrastructure and resources, which could slow our development of new restaurants and adversely affect our ability to manage our existing restaurants.

 

We opened two BRAVO! and five BRIO restaurants in 2009, and in 2008 we opened seven BRAVO! and six BRIO restaurants. We have opened two BRAVO! and two BRIO restaurants during 2010 and expect to open one

additional BRIO restaurant before fiscal year end. Our recent and future growth may strain our restaurant management systems and resources, financial controls and information systems. Those demands on our infrastructure and resources may also adversely affect our ability to manage our existing restaurants. If we fail to continue to improve our infrastructure or to manage other factors necessary for us to meet our expansion objectives, our operating results could be materially and adversely affected. Likewise, if sales decline, we may be unable to reduce our infrastructure quickly enough to prevent sales deleveraging, which would adversely affect our profitability.

 

Changes in, or any failure to comply with, applicable laws or regulations may adversely affect our business and our growth strategy.

 

Our operations are subject to regulation by federal agencies and to licensing and regulation by state and local health, sanitation, building, zoning, safety, fire and other departments. The regulations cover matters relating to building construction (including environmental impact), zoning requirements, employment, nutritional information disclosure and the preparation and sale of food and alcoholic beverages. The impact of compliance with the laws and regulations of certain states, including states in which we are not currently located but may open restaurants in the future, may be more costly than compliance in other states.

 

Various state and local health, sanitation, fire and safety codes govern our existing restaurants. In addition, the development of additional restaurants will be subject to compliance with applicable construction, zoning, land use and environmental regulations. Difficulties in obtaining or renewing, or failures to obtain or renew, the required licenses or approvals on a cost-effective and timely basis could delay or prevent the development and openings of new restaurants, or could disrupt the operations of existing restaurants. As is the case with any operator of real property, we are subject to a variety of federal, state and local governmental regulations relating to the use, storage, discharge, emission and disposal of hazardous materials. Failure to comply with environmental laws could result in the imposition of severe penalties or restrictions on operations by governmental agencies or courts of law, which could adversely affect operations. We are unaware of any significant hazards on properties we operate or have operated, the remediation of which would result in material liability. We do not have separate environmental liability insurance nor do we maintain a reserve to cover such events. In the event of the determination of contamination on such properties, the Company, as operator, could be held liable for severe penalties and costs of remediation.

 

Our relationships with employees are governed by various federal and state labor laws and regulations, including minimum wage requirements, breaks, overtime pay, fringe benefits, safety, working conditions, unemployment tax rates, workers’ compensation rates and citizenship or work authorization requirements. We are also subject to the regulations of the U.S. Citizenship and Immigration Services and U.S. Customs and Immigration Enforcement. Our failure to comply with federal and state labor laws and regulations, or our staff members failure to meet federal citizenship or residency requirements, could result in a disruption in our work force, sanctions or fines against us and adverse publicity. We may be unable to increase our prices in order to pass increased labor costs on to our guests, in which case our margins would be negatively affected. Significant government-imposed increases in minimum wages, paid or unpaid leaves of absence, sick leave, and mandated health benefits, or increased tax reporting, assessment or payment requirements related to our staff members who receive gratuities, could be detrimental to the profitability of our restaurants operations. In addition, while we carry employment practices insurance covering a variety of labor-related liability claims, a settlement or judgment against us that is uninsured or in excess of our coverage limitations could have a material adverse effect on our results of operations, liquidity, financial position or business.

 

Our business is subject to extensive state and local government regulation relating to alcoholic beverage control, public health and food safety and labeling. For example, alcoholic beverage control regulations require each of our restaurants to obtain licenses and permits to sell alcoholic beverages on the premises, and each restaurant must obtain a food service license from local health authorities. In fiscal 2009, approximately 16.4% of our gross revenues at BRAVO! and 22.5% of our gross revenues at BRIO were attributable to the sale of alcoholic beverages. Typically, licenses must be renewed annually and may be revoked or suspended for cause at any time. The failure of a restaurant to obtain or retain its licenses, permits or other approvals, or any suspension of such licenses, permits or other approvals, would adversely affect that restaurant’s operations and profitability and could adversely

affect our ability to obtain these licenses elsewhere. We may also be subject to “dram shop” statutes in certain states, which generally provide a person injured by an intoxicated person the right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person. Even though we are covered by general liability insurance, a settlement or judgment against us under a “dram shop” statute in excess of liability coverage could adversely affect our financial condition and results of operations.

 

Recent legislation enacted in March 2010 will require chain restaurants with 20 or more locations in the United States to comply with federal nutritional disclosure requirements, making applicable to restaurants certain nutrition labeling requirements from which restaurants have historically been exempt. Additionally, the United States Congress is currently considering food safety legislation that is expected to greatly expand the FDA’s authority over food safety. If this legislation is enacted, we cannot assure you that it will not impact our industry. The costs associated with such compliance may increase over time, and while our ability to adapt to consumer preferences is a strength of our concepts, the effect of such labeling requirements on consumer choices, if any, is unclear at this time.

 

In addition, our facilities must comply with the applicable requirements of the Americans with Disabilities Act of 1990 (“ADA”) and related federal and state statutes that prohibit discrimination on the basis of disability in public accommodations and employment. Although our restaurants are designed to be accessible to the disabled, we could be required to make modifications to our restaurants to provide service to, or make reasonable accommodations for, disabled persons.

 

Restaurant companies have been the target of class-actions and other litigation alleging, among other things, violations of federal and state law.

 

We are subject to a variety of lawsuits, administrative proceedings and claims that arise in the ordinary course of our business. In recent years, a number of restaurant companies have been subject to claims by guests, employees and others regarding issues such as food safety, personal injury and premises liability, employment-related claims, harassment, discrimination, disability and other operational issues common to the foodservice industry. A number of these lawsuits have resulted in the payment of substantial damages by the defendants. Similar lawsuits have been instituted against us from time to time, including a 2004 class action lawsuit initiated by servers at a BRIO location in Newport, Kentucky. In this lawsuit, certain of our servers alleged that they were required to remit back to the restaurant a percentage of their tips in violation of Kentucky law. While we settled this lawsuit for an immaterial amount and no other such lawsuits have had a material impact historically , an adverse judgment or settlement that is not insured or is in excess of insurance coverage could have an adverse impact on our profitability and could cause variability in our results compared to expectations. We are self-insured, or carry insurance programs with specific retention levels, for a significant portion of our risks and associated liabilities with respect to workers’ compensation, general liability, employer’s liability, health benefits and other insurable risks. Regardless of whether any claims against us are valid or whether we are ultimately determined to be liable, we could also be adversely affected by negative publicity, litigation costs resulting from the defense of these claims and the diversion of time and resources from our operations.

 

Our insurance policies may not provide adequate levels of coverage against all claims, and fluctuating insurance requirements and costs could negatively impact our profitability.

 

We believe our insurance coverage is customary for businesses of our size and type. However, there are types of losses we may incur that cannot be insured against or that we believe are not commercially reasonable to insure. These losses, if they occur, could have a material and adverse effect on our business and results of operations. In addition, the cost of workers’ compensation insurance, general liability insurance and directors and officers’ liability insurance fluctuates based on our historical trends, market conditions and availability. Additionally, health insurance costs in general have risen significantly over the past few years and are expected to continue to increase in 2010. These increases, as well as recently-enacted federal legislation requiring employers to provide specified levels of health insurance to all employees, could have a negative impact on our profitability, and there can be no assurance that we will be able to successfully offset the effect of such increases with plan modifications and cost control measures, additional operating efficiencies or the pass-through of such increased costs to our guests.

Our substantial indebtedness may limit our ability to invest in the ongoing needs of our business.

 

We have a substantial amount of indebtedness. On an as adjusted basis giving effect to this offering and the use of the offering proceeds, as well as entry into our new senior credit facilities, as of March 28, 2010 we had approximately $      million of total indebtedness. In particular, we expect to have approximately $     and $      of outstanding indebtedness under our new term loan facility and new revolving credit facility, respectively, and $      million of revolving loan availability under our new revolving credit facility. For the year ended December 27, 2009 and the thirteen week period ended March 28, 2010, our principal repayments/(borrowings) on indebtedness (including net repayments/(borrowings) under our existing revolving credit facility) were $9.3 million and $(0.3) million, respectively, and cash interest expenses for such periods were $7.0 million and $1.4 million, respectively.

 

Our indebtedness could have important consequences to you. For example, it:

 

 

Although our new senior credit facilities will contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial. Also, these restrictions do not prevent us from incurring obligations that do not constitute indebtedness.

 

Our new senior credit facilities to be put in place with the consummation of this offering are expected to require us to maintain certain interest expense coverage ratios and leverage ratios which become more restrictive over time. While we have never defaulted on compliance with any financial covenants under the terms of our indebtedness, our ability to comply with these ratios in the future may be affected by events beyond our control, and an inability to comply with the required financial ratios could result in a default under our new senior credit facilities. In the event of any default, the lenders under our new senior credit facilities could elect to terminate lending commitments and declare all borrowings outstanding, together with accrued and unpaid interest and other fees, to be immediately due and payable.

 

See “Description of Indebtedness,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Capital Resources.”

 

We may be unable to obtain debt or other financing on favorable terms or at all.

 

There are inherent risks in our ability to borrow. Our lenders, including the lenders participating in our new senior credit facilities, may have suffered losses related to their lending and other financial relationships, especially because of the general weakening of the national economy, increased financial instability of many borrowers and the declining value of their assets. As a result, lenders may become insolvent or tighten their lending standards, which could make it more difficult for us to borrow under our new senior credit facilities, refinance our existing indebtedness or to obtain other financing on favorable terms or at all. Our access to funds under our new senior credit facilities is dependent upon the ability of our lenders to meet their funding commitments. Our financial condition and results of operations would be adversely affected if we were unable to draw funds under our new senior credit facilities because of a lender default or to obtain other cost-effective financing.

Longer term disruptions in the capital and credit markets as a result of uncertainty, changing or increased regulation, reduced alternatives or failures of significant financial institutions could adversely affect our access to liquidity needed for our business. Any disruption could require us to take measures to conserve cash until the markets stabilize or until alternative credit arrangements or other funding for our business can be arranged. Such measures could include deferring capital expenditures (including the opening of new restaurants) and reducing or eliminating other discretionary uses of cash.

 

We may be required to record additional asset impairment charges in the future.

 

In accordance with accounting guidance as it relates to the impairment of long-lived assets, we review long-lived assets, such as property and equipment and intangibles, subject to amortization, for impairment when events or circumstances indicate the carrying value of the assets may not be recoverable. In determining the recoverability of the asset value, an analysis is performed at the individual restaurant level and primarily includes an assessment of historical cash flows and other relevant factors and circumstances. Negative restaurant-level cash flow over the previous 12-month period is considered a potential impairment indicator. In such situations, we evaluate future cash flow projections in conjunction with qualitative factors and future operating plans. Based on this analysis, if we believe that the carrying amount of the assets are not recoverable, an impairment charge is recognized based upon the amount by which the assets carrying value exceeds fair value as measured by undiscounted future cash flows expected to be generated by these assets. We recognized asset impairment charges of approximately $6.4 million and $8.5 million in fiscal 2009 and 2008, respectively, related to three and five restaurants, respectively.

 

The estimates of fair value used in these analyses requires the use of estimates and assumptions regarding future cash flows and operating outcomes, which are based upon a significant degree of management’s judgment. If actual results differ from our estimates or assumptions, additional impairment charges may be required in the future. Changes in the economic environment, real estate markets, capital spending, and overall operating performance could impact these estimates and result in future impairment charges. There can be no assurance that future impairment tests will not result in additional charges to earnings.

 

Security breaches of confidential guest information in connection with our electronic processing of credit and debit card transactions may adversely affect our business.

 

The majority of our restaurant sales are by credit or debit cards. Other restaurants and retailers have experienced security breaches in which credit and debit card information of their customers has been stolen. We may in the future become subject to lawsuits or other proceedings for purportedly fraudulent transactions arising out of the actual or alleged theft of our guests’ credit or debit card information. Any such claim or proceeding, or any adverse publicity resulting from these allegations, may have a material adverse effect on us and our restaurants.

 

We may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brands and adversely affect our business.

 

Our ability to implement our business plan successfully depends in part on our ability to further build brand recognition using our trademarks, service marks and other proprietary intellectual property, including our names and logos and the unique ambiance of our restaurants. We have registered or applied to register a number of our trademarks. We cannot assure you that our trademark applications will be approved. Third parties may also oppose our trademark applications, or otherwise challenge our use of the trademarks. In the event that our trademarks are successfully challenged, we could be forced to rebrand our goods and services, which could result in loss of brand recognition, and could require us to devote resources to advertising and marketing new brands.

 

If our efforts to register, maintain and protect our intellectual property are inadequate, or if any third party misappropriates, dilutes or infringes on our intellectual property, the value of our brands may be harmed, which could have a material adverse effect on our business and might prevent our brands from achieving or maintaining market acceptance. We may also face the risk of claims that we have infringed third parties’ intellectual property rights. If third parties claim that we infringe upon their intellectual property rights, our operating profits could be adversely affected. Any claims of intellectual property infringement, even those without merit, could be expensive

and time consuming to defend, require us to rebrand our services, if feasible, divert management’s attention and resources or require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property.

 

Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against us could result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products or services, any of which could have a negative impact on our operating profits and harm our future prospects.

 

Information technology system failures or breaches of our network security could interrupt our operations and adversely affect our business.

 

We rely on our computer systems and network infrastructure across our operations, including point-of-sale processing at our restaurants. Our operations depend upon our ability to protect our computer equipment and systems against damage from physical theft, fire, power loss, telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses, worms and other disruptive problems. Any damage or failure of our computer systems or network infrastructure that causes an interruption in our operations could have a material adverse effect on our business and subject us to litigation or actions by regulatory authorities. Although we employ both internal resources and external consultants to conduct auditing and testing for weaknesses in our systems, controls, firewalls and encryption and intend to maintain and upgrade our security technology and operational procedures to prevent such damage, breaches or other disruptive problems, there can be no assurance that these security measures will be successful.

 

A major natural or man-made disaster at our corporate facility could have a material adverse effect on our business.

 

Most of our corporate systems, processes and corporate support for our restaurant operations are centralized at one Ohio location, with the exception of back-up data tapes that are sent off-site on a weekly basis. We are currently implementing a new disaster recovery plan, including the establishment of a datacenter/co-location facility. If we are unable to fully develop a new disaster recovery plan, we may experience failures or delays in recovery of data, delayed reporting and compliance, inability to perform necessary corporate functions and other breakdowns in normal operating procedures that could have a material adverse effect on our business and create exposure to administrative and other legal claims against us.

 

We will incur increased costs and obligations as a result of being a public company.

 

As a privately held company, we have not been responsible for certain corporate governance and financial reporting practices and policies required of a publicly traded company. Following this offering, we will be a publicly traded company and will incur significant legal, accounting and other expenses that we were not required to incur in the recent past. In addition, the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), as well as rules implemented by the U.S. Securities and Exchange Commission (the “SEC”) and the Nasdaq Global Market, require changes in corporate governance practices of public companies. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time consuming and costly. Furthermore, the need to establish the corporate infrastructure demanded of a public company may divert management’s attention from implementing our growth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make, changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a publicly traded company. However, the measures we take may not be sufficient to satisfy our obligations as a publicly traded company.

 

Section 404 of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting, starting with the second annual report that we file with the SEC after the consummation of this offering, and will likely require in the same report a report by our independent registered public accounting firm on the effectiveness of our internal control over financial reporting. In connection with the implementation of the necessary procedures and practices related to internal control over financial reporting, we

may identify deficiencies that we may not be able to remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the requirements of Section 404. We will be unable to issue securities in the public markets through the use of a shelf registration statement if we are not in compliance with Section 404. In addition, failure to achieve and maintain an effective internal control environment could have a material adverse effect on our business and stock price.

 

Federal, state and local tax rules may adversely impact our results of operations and financial position.

 

We are subject to federal, state and local taxes in the U.S. Although we believe our tax estimates are reasonable, if the Internal Revenue Service (“IRS”) or other taxing authority disagrees with the positions we have taken on our tax returns, we could face additional tax liability, including interest and penalties. If material, payment of such additional amounts upon final adjudication of any disputes could have a material impact on our results of operations and financial position. In addition, complying with new tax rules, laws or regulations could impact our financial condition, and increases to federal or state statutory tax rates and other changes in tax laws, rules or regulations may increase our effective tax rate. Any increase in our effective tax rate could have a material impact on our financial results.

 

Risks Relating to this Offering

 

The price of our common stock may be volatile and you could lose all or part of your investment.

 

Volatility in the market price of our common stock may prevent you from being able to sell your shares at or above the price you paid for your shares. The market price of our common stock could fluctuate significantly for various reasons, which include:

 

 

In addition, in recent years, the stock market has experienced extreme price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies, including companies in our industry. The price of our common stock could fluctuate based upon factors that have little or nothing to do with our company, and these fluctuations could materially reduce our stock price.

 

In the past, following periods of market volatility in the price of a company’s securities, security holders have often instituted class action litigation. If the market value of our common stock experiences adverse fluctuations and we become involved in this type of litigation, regardless of the outcome, we could incur substantial legal costs and our management’s attention could be diverted from the operation of our business, causing our business to suffer.

 

There is no existing market for our common stock and we do not know if one will develop to provide you with adequate liquidity.

 

Prior to this offering, there has not been a public market for our common stock. An active market for our common stock may not develop following the completion of this offering, or if it does develop, may not be maintained. If an active trading market does not develop, you may have difficulty selling any of our common stock that you buy. The initial public offering price for the shares of our common stock will be determined by negotiations between us, the selling shareholders and the representatives of the underwriters and may not be indicative of prices that will prevail in the open market following this offering. Consequently, you may not be able to sell shares of our common stock at prices equal to or greater than the price paid by you in this offering.

 

Future sales of our common stock, including shares purchased in this offering, in the public market could lower our stock price.

 

Sales of substantial amounts of our common stock in the public market following this offering by our existing shareholders, upon the exercise of outstanding stock options or by persons who acquire shares in this offering may adversely affect the market price of our common stock. Such sales could also create public perception of difficulties or problems with our business. These sales might also make it more difficult for us to sell securities in the future at a time and price that we deem appropriate.

 

Upon the completion of this offering, we will have outstanding           shares of common stock, of which:

 

 

With limited exceptions, as described under the caption “Underwriting,” these lock-up agreements prohibit a shareholder from selling, contracting to sell or otherwise disposing of any common stock or securities that are convertible or exchangeable for common stock or entering into any arrangement that transfers the economic consequences of ownership of our common stock for at least 180 days from the date of this prospectus, although the lead underwriters may, in their sole discretion and at any time without notice, release all or any portion of the securities subject to these lock-up agreements. The lead underwriters have advised us that they have no present intent or arrangement to release any shares subject to a lock-up and will consider the release of any lock-up on a case-by-case basis. Upon a request to release any shares subject to a lock-up, the lead underwriters would consider the particular circumstances surrounding the request including, but not limited to, the length of time before the lock-up expires, the number of shares requested to be released, reasons for the request, the possible impact on the market for our common stock and whether the holder of our shares requesting the release is an officer, director or other affiliate of ours. As a result of these lock-up agreements, notwithstanding earlier eligibility for sale under the provisions of Rule 144, none of these shares may be sold until at least 180 days after the date of this prospectus.

 

As restrictions on resale end, our stock price could drop significantly if the holders of these restricted shares sell them or are perceived by the market as intending to sell them. These sales might also make it more difficult for us to sell securities in the future at a time and at a price that we deem appropriate.

You will suffer immediate and substantial dilution.

 

The initial public offering price per share is substantially higher than the pro forma net tangible book value per share immediately after this offering. As a result, you will pay a price per share that substantially exceeds the book value of our assets after subtracting our liabilities. Assuming an offering price of $      per share, you will incur immediate and substantial dilution in the amount of $      per share. If outstanding options to purchase our common stock are exercised, you will experience additional dilution. Any future equity issuances will result in even further dilution to holders of our common stock.

 

If securities analysts or industry analysts downgrade our stock, publish negative research or reports, or do not publish reports about our business, our stock price and trading volume could decline.

 

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us, our business and our industry. If one or more analysts adversely change their recommendation regarding our stock or our competitors’ stock, our stock price would likely decline. If one or more analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

 

Certain provisions of Ohio law and our articles of incorporation and regulations that will be in effect after this offering may deter takeover attempts, which may limit the opportunity of our shareholders to sell their shares at a favorable price, and may make it more difficult for our shareholders to remove our board of directors and management.

 

Provisions in our articles of incorporation and regulations, as they will be in effect upon the closing of this offering, may have the effect of delaying or preventing a change of control or changes in our management. These provisions include the following:

 

 

In addition, because we are incorporated in Ohio, we are governed by the provisions of Section 1704 of the Ohio Revised Code. These provisions may prohibit large shareholders, particularly those owning 10% or more of our outstanding voting stock, from merging or combining with us. These provisions in our articles of incorporation and regulations and under Ohio law could discourage potential takeover attempts, could reduce the price that investors are willing to pay for shares of our common stock in the future and could potentially result in the market price being lower than they would without these provisions.

 

Although no shares of preferred stock will be outstanding upon the completion of this offering and although we have no present plans to issue any preferred stock, our articles of incorporation authorize the board of directors to issue up to          shares of preferred stock. The preferred stock may be issued in one or more series, the terms of which will be determined at the time of issuance by our board of directors without further action by the shareholders. These terms may include voting rights, including the right to vote as a series on particular matters, preferences as to dividends and liquidation, conversion rights, redemption rights and sinking fund provisions. The issuance of any preferred stock could diminish the rights of holders of our common stock and, therefore, could reduce the value of our common stock. In addition, specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with, or sell assets to, a third party. The ability of our board of directors to issue preferred stock and the foregoing anti-takeover provisions may prevent or frustrate attempts by a

third party to acquire control of our company, even if some of our shareholders consider such change of control to be beneficial. See “Description of Capital Stock.”

 

Since we do not expect to pay any dividends for the foreseeable future, investors in this offering may be forced to sell their stock in order to realize a return on their investment.

 

We have not declared or paid any dividends on our common stock. We do not anticipate that we will pay any dividends to holders of our common stock for the foreseeable future. Any payment of cash dividends will be at the discretion of our board of directors and will depend on our financial condition, capital requirements, legal requirements, earnings and other factors. We anticipate that our ability to pay dividends will be restricted by the terms of our new senior credit facilities and might be restricted by the terms of any indebtedness that we incur in the future. Consequently, you should not rely on dividends in order to receive a return on your investment. See “Dividend Policy.”

 

The concentration of our capital stock ownership with insiders upon the completion of this offering will likely limit an investor’s ability to influence corporate matters.

 

Upon completion of this offering, our executive officers, directors and affiliated entities controlled by us or these individuals will together beneficially own or control approximately     % of our outstanding common stock, or     % if the underwriters exercise their over-allotment option in full. As a result, certain shareholders will have substantial influence and control over management and matters that require approval by our shareholders, including amendments to our articles of incorporation and regulations and approval of significant corporate transactions, including mergers and sales of substantially all of our assets. It is possible that the interests of these shareholders may in some circumstances conflict with our interests and the interests of our other shareholders, including you.

 

Our reported financial results may be adversely affected by changes in accounting principles applicable to us.

 

Generally accepted accounting principles in the U.S. are subject to interpretation by the Financial Accounting Standards Board, or FASB, the American Institute of Certified Public Accountants, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a change. In addition, the SEC has announced a multi-year plan that could ultimately lead to the use of International Financial Reporting Standards by U.S. issuers in their SEC filings. Any such change could have a significant effect on our reported financial results.

 

Our ability to raise capital in the future may be limited.

 

Our business and operations may consume resources faster than we anticipate. In the future, we may need to raise additional funds through the issuance of new equity securities, debt or a combination of both. Additional financing may not be available on favorable terms, or at all. If adequate funds are not available on acceptable terms, we may be unable to fund our capital requirements. If we issue new debt securities, the debt holders would have rights senior to common shareholders to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our common stock. If we issue additional equity securities, existing shareholders will experience dilution, and the new equity securities could have rights senior to those of our common stock. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, our shareholders bear the risk of our future securities offerings reducing the market price of our common stock and diluting their interest.

 

The diagram below illustrates our ownership structure prior to the reorganization transactions described below. The ownership percentages presented in the charts below exclude all outstanding options.

 

Structure Prior to IPO Reorganization

 

 

It is anticipated that our majority shareholder, Bravo Development Holdings LLC, or Holdings, will enter into an exchange agreement with us pursuant to which Holdings will exchange its shares of our Series A preferred stock and common stock for new shares of our common stock immediately prior to the consummation of this offering. Additionally, we and each of our other current shareholders will simultaneously enter into a similar exchange agreement pursuant to which each such shareholder will exchange all of their shares of our Series A preferred stock and common stock for new shares of our common stock immediately prior to the consummation of this offering.

 

The aggregate number of shares of our new common stock issued by us in exchange for the shares of our Series A preferred stock and our outstanding common stock, or the new common shares, will equal           shares. The number of new common shares will not be affected by the initial public offering price of shares of our common stock in this offering, although the allocation of such shares to the holders of our Series A preferred stock and to the holders of our outstanding common stock will be based upon the initial public offering price in this offering. Under the terms of the exchange of our Series A preferred stock, each share of Series A preferred stock will be exchanged for           new common shares, which have an aggregate fair value, based upon an initial public offering price of          , the midpoint of the price range set forth on the cover of this prospectus, equal to the liquidation preference for each share of Series A preferred stock. The “liquidation preference,” as defined in our amended and restated articles of incorporation, for each share of Series A preferred stock equals $1,000 plus all accumulated but unpaid dividends that have accrued on such share. The holders of our outstanding common stock will receive      new common shares (based upon an exchange ratio of one to one and after giving effect to a           -for-1 stock split of our outstanding common stock) equal to the aggregate number of new common shares issued less the new common shares issued to the holders of Series A preferred stock. Based upon an initial public offering price of $      per share, the midpoint of the price range set forth on the cover of this prospectus, holders of our Series A preferred stock will receive an aggregate of approximately           new common shares, representing a beneficial ownership interest of     % of our company. A $1.00 increase (decrease) in the assumed initial public offering price of $      per share, the midpoint of the price range set forth on the cover of this prospectus, would increase (decrease) the beneficial ownership of our new common shares held by holders of our Series A preferred stock by          %. Any such increase (decrease) in the assumed initial public offering price,

however, will not affect the number of new common shares outstanding after giving effect to this offering and the reorganization transactions.

 

After determining the allocation of the new common shares as described above, prior to the consummation of this offering, we will (i) exchange one share of our new common stock for each outstanding share of our common stock, (ii) following this exchange, amend and restate our articles of incorporation to give effect to a          -for-1 stock split of our outstanding common stock and (iii) the shares of Series A preferred stock will be exchanged for the new common shares as described above. Following these transactions and immediately prior to the consummation of this offering, Holdings will in turn distribute the new common shares it received as part of the transactions detailed above to its members on a pro rata basis in accordance with such members’ ownership interest in the common units of Holdings. Holdings will then be dissolved. The reorganization transactions will have no effect on our total stockholders’ equity.

 

In this prospectus, we collectively refer to the transactions described above as the “reorganization transactions.” Upon the consummation of this offering and the reorganization transactions, there will be no shares of Series A preferred stock outstanding.

 

As a result of the reorganization transactions and immediately following the consummation of this offering, BRS and its affiliates will beneficially own approximately     % of our common stock, Castle Harlan and its affiliates will beneficially own approximately     % of our common stock and our executive officers, directors and principal shareholders will collectively beneficially own approximately     % of our common stock. A $1.00 increase (decrease) in the assumed initial public offering price of $      per share, the midpoint of the price range set forth on the cover of this prospectus, would increase (decrease) the beneficial ownership of our common stock by BRS and its affiliates by     %, Castle Harlan and its affiliates by     % and our executive officers, directors and principal shareholders by     %. The diagram below illustrates our ownership structure following the reorganization transactions and the sale of common stock by us and the selling shareholders in this offering.

 

Structure Following IPO Reorganization

 

 

This prospectus contains forward-looking statements. These statements relate to future events or our future financial performance. We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should” or “will” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors, including those discussed under “Risk Factors.” The following factors, among others, could cause our actual results and performance to differ materially from the results and performance projected in, or implied by, the forward-looking statements:

 

 

 

Although we believe that the expectations reflected in the forward-looking statements are reasonable based on our current knowledge of our business and operations, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this prospectus. We assume no obligation to provide revisions to any forward-looking statements should circumstances change.

 

We estimate that the net proceeds to us from this offering will be approximately $      million, assuming an initial public offering price of $      per share, which is the midpoint of the range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Each $1.00 increase or decrease in the assumed initial public offering price of $      per share would increase or decrease, as applicable, the net proceeds to us by approximately $      , assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

The selling shareholders will receive $      million in proceeds from their sale of          shares of common stock in this offering, or approximately $      million if the underwriters exercise in full their option to purchase additional shares of common stock to cover over-allotments. We will not receive any proceeds from the sale of shares by the selling shareholders. See “Reorganization Transactions,” “Principal and Selling Shareholders” and “Underwriting.”

 

In connection with this offering, we intend to enter into new senior credit facilities, consisting of a $      million term loan facility and a $      million revolving credit facility. We intend to use the net proceeds of this offering, together with $      million of borrowings under our new senior credit facilities, as follows:

 

 

Any remaining net proceeds will be used for general corporate purposes.

 

We do not currently pay cash dividends on our common stock and do not anticipate paying any dividends on our common stock in the foreseeable future. We currently intend to retain any future earnings to fund the operation, development and expansion of our business. Any future determinations relating to our dividend policies will be made at the discretion of our board of directors and will depend on existing conditions, including our financial condition, results of operations, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant. In addition, we anticipate that our ability to declare and pay dividends will be restricted by covenants in our new senior credit facilities.

 

The following table sets forth our capitalization as of March 28, 2010:

 

 

You should read this information in conjunction with “Reorganization Transactions,” “Use of Proceeds,” “Selected Historical Consolidated Financial and Operating Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Description of Indebtedness” and our consolidated financial statements and related notes included elsewhere in this prospectus.

 

 

 

Purchasers of shares of common stock in this offering will experience immediate and substantial dilution in the net tangible book value of the common stock from the initial public offering price. Net tangible book value per share represents the amount of our total tangible assets less our total liabilities, divided by the number of shares of our common stock outstanding. Dilution in net tangible book value per share represents the difference between the amount per share that you pay in this offering and the net tangible book value per share immediately after this offering. Our net tangible book value (deficit) as of March 28, 2010 was approximately $(70.2) million, or $      per share.

 

After giving effect to (i) the sale of           shares of our common stock in this offering at an assumed initial public offering price of $      per share, which is the midpoint of the range set forth on the cover page of this prospectus, (ii) the reorganization transactions and (iii) the deduction of estimated underwriting discounts and commissions and estimated fees and expenses payable by us, our pro forma net tangible book value at March 28, 2010 would have been approximately $      million, or $      per share. This represents an immediate increase in net tangible book value of $      per share to existing shareholders and an immediate and substantial dilution of $      per share to new investors. This calculation does not give effect to our use of proceeds from this offering or any borrowings under our new senior credit facilities. The following table illustrates this per share dilution:

 

 

Sales of           shares of common stock by the selling shareholders in this offering will reduce the number of shares of common stock held by existing shareholders to          , or approximately     % of the total shares of common stock outstanding after this offering, and will increase the number of shares held by new investors to          , or approximately     % of the total shares of common stock outstanding after this offering.

 

If the underwriters exercise in full their over-allotment option to purchase additional shares of our common stock in this offering at the assumed initial public offering price of $      per share, which is the midpoint of the range set forth on the cover page of this prospectus, the number of shares of common stock held by existing shareholders will be reduced to           , or     % of the aggregate number of shares of common stock outstanding after this offering, the number of shares of common stock held by new investors will be increased to           , or     % of the aggregate number of shares of common stock outstanding after this offering, the increase per share attributable to new investors would be $      , the pro forma net tangible book value per share after this offering would be $     , and the dilution per share to new investors would be $     .

 

A $1.00 increase (decrease) in the assumed initial public offering price of $      per share, which is the midpoint of the range set forth on the cover page of this prospectus, would increase (decrease) our pro forma net tangible book value by $      million, the pro forma net tangible book value per share after this offering by $      per share, and the dilution per share to new investors by $      per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

 

The following table summarizes, on the pro forma basis described above as of March 28, 2010, after giving effect to the reorganization transactions, the total number of shares of common stock purchased from us and the selling shareholders and the total consideration and the average price per share paid by existing shareholders and by investors participating in this offering. The calculation below is based on the assumed initial public offering price

of $      per share, which is the midpoint of the range set forth on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated fees and expenses payable by us.

 

 

Each $1.00 increase (decrease) in the assumed offering price of $      per share, which is the midpoint of the range set forth on the cover page of this prospectus, would increase (decrease) total consideration paid by new investors and total consideration paid by all shareholders by $      million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and before deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

 

The pro forma dilution information above is for illustration purposes only. Our net tangible book value following the completion of this offering is subject to adjustment based on the actual initial public offering price of our shares and other terms of this offering determined at pricing. The number of shares of our common stock outstanding after this offering as shown above is based on the number of shares outstanding as of March 28, 2010. As of March 28, 2010, without giving effect to the     -for-1 stock split of our outstanding common stock expected to occur prior to the consummation of this offering, there were options outstanding to purchase 257,875 shares of our common stock, with exercise prices of either $5.00 or $10.00 per share and a weighted average exercise price of $9.92 per share. The tables and calculations above assume that those options have not been exercised. To the extent outstanding options are exercised, you would experience further dilution if the exercise price is less than our net tangible book value per share. In addition, if we grant options, warrants, or other convertible securities or rights to purchase our common stock in the future with exercise prices below the initial public offering price, new investors will incur additional dilution upon exercise of such securities or rights.

 

You should read the following selected historical consolidated financial and operating data in conjunction with our consolidated financial statements and the related notes to those statements included elsewhere in this prospectus. You should also read “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All of these materials are contained elsewhere in this prospectus. The selected historical consolidated financial data as of December 28, 2008 and December 27, 2009 and for the three years in the period ended December 27, 2009 have been derived from consolidated financial statements audited by Deloitte & Touche LLP, an independent registered public accounting firm, included elsewhere in this prospectus. The selected historical consolidated financial data as of December 25, 2005, December 31, 2006 and December 30, 2007 and for the two years in the period ended December 31, 2006 have been derived from our audited consolidated financial statements not included elsewhere in this prospectus. We derived the historical financial data for the thirteen weeks ended March 28, 2010 from our unaudited interim consolidated financial statements, which are included elsewhere in this prospectus. We have derived the balance sheet data as of March 29, 2009 from our unaudited interim consolidated financial statements not included elsewhere in this prospectus.

 

Basic and diluted net income (loss) per share and basic and diluted weighted average shares outstanding for the years ended December 31, 2006, December 30, 2007, December 28, 2008 and December 27, 2009 and for the thirteen weeks ended March 29, 2009 and March 28, 2010 are presented on a historical basis.

 

 

 

Adjusted EBITDA is not a measurement determined in accordance with GAAP and should not be considered in isolation or as an alternative to net income, net cash provided by operating, investing or financing activities or other financial statement data presented as indicators of financial performance or liquidity, each as presented in accordance with GAAP. Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. Adjusted EBITDA as presented may not be comparable to other similarly titled measures of other companies and our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual items.

 

Our management recognizes that Adjusted EBITDA has limitations as an analytical financial measure, including the following:

 

 

This prospectus also includes information concerning Adjusted EBITDA margin, which is defined as the ratio of Adjusted EBITDA to revenues. We present Adjusted EBITDA margin because it is used by management as a performance measurement to judge the level of Adjusted EBITDA generated from revenues and we believe its inclusion is appropriate to provide additional information to investors.

A reconciliation of Adjusted EBITDA and EBITDA to net income is provided below.

 

 

The following discussion should be read in conjunction with “Selected Historical Consolidated Financial and Operating Data” and our consolidated financial statements and the related notes to those statements included elsewhere in this prospectus. The following discussion contains, in addition to historical information, forward-looking statements that include risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under the heading “Risk Factors” and elsewhere in this prospectus.

 

Overview