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☒
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
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|
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Delaware
|
|
20-3563182
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State or other jurisdiction of
incorporation or organization
|
|
(I.R.S. Employer
Identification No.)
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|
|
|
3535 Harbor Blvd., Suite 100, Costa Mesa, California
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|
92626
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(Address of principal executive offices)
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(Zip Code)
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Title of each class
|
Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock, par value $0.01 per share
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LOCO
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The Nasdaq Stock Market LLC
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|
Large accelerated filer
|
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☐
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Accelerated filer
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☒
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|
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Non-accelerated filer
|
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☐
|
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Smaller reporting company
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☒
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|
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Emerging growth company
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☐
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PART I
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PART II
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PART III
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PART IV
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ITEM 1.
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BUSINESS
|
ITEM 1A.
|
RISK FACTORS
|
•
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identify available and suitable restaurant sites;
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•
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compete for restaurant sites;
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•
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reach acceptable agreements regarding the lease or purchase of locations;
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•
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obtain or have available the financing required to acquire and operate a restaurant, including construction and opening costs;
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•
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respond to unforeseen engineering or environmental problems with leased premises;
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•
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avoid the impact of inclement weather and natural and man-made disasters;
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•
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hire, train, and retain the skilled management and other employees necessary to meet staffing needs;
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•
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obtain, in a timely manner and for an acceptable cost, required licenses, permits, and regulatory approvals;
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•
|
respond effectively to any changes in local, state, and federal law and regulations that adversely affect our and our franchisees’ costs or abilities to open new restaurants; and
|
•
|
control construction and equipment cost increases for new restaurants.
|
•
|
evaluating size of the site, traffic patterns, local retail, residential and business attractions and infrastructure that will drive high levels of customer traffic and sales;
|
•
|
competition in new markets, including competition for restaurant sites;
|
•
|
financial conditions affecting developers and potential landlords, such as the effects of macro-economic conditions and the credit market (including the potential for rising interest rates), which could lead to these parties delaying or canceling development projects (or renovations of existing projects), in turn reducing the number of appropriate restaurant sites available;
|
•
|
developers and potential landlords obtaining licenses or permits for development projects on a timely basis;
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•
|
proximity of potential restaurant sites to existing restaurants;
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•
|
anticipated commercial, residential and infrastructure development near the potential restaurant site; and
|
•
|
availability of acceptable lease terms and arrangements, including construction costs.
|
•
|
limiting our ability to borrow additional amounts to fund working capital, capital expenditures, acquisitions, debt service requirements, execution of our growth strategy, and other purposes;
|
•
|
requiring us to dedicate a portion of our cash flow from operations to pay interest on our debt, which could reduce availability of our cash flow to fund working capital, capital expenditures, acquisitions, execution of our growth strategy, and other general corporate purposes;
|
•
|
making us more vulnerable to adverse changes in general economic, industry, government regulatory, and competitive conditions in our business by limiting our ability to plan for and react to changing conditions;
|
•
|
placing us at a competitive disadvantage compared with our competitors with less debt; and
|
•
|
exposing us to risks inherent in interest rate fluctuations, because our borrowings are at variable rates of interest, which could result in higher interest expense in the event of increases in interest rates.
|
•
|
govern activities or operations that may have adverse environmental effects, such as discharges into the air, water and soils, as well as waste handling and disposal practices for solid and hazardous wastes and waste water; and
|
•
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impose liability for the costs of remediating, and the damage resulting from, past spills, disposals, or other releases of petroleum products and hazardous materials.
|
•
|
variations in our quarterly or annual operating results;
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•
|
changes in our earnings estimates, if provided, or differences between our actual financial and operating results and those expected by investors and analysts;
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•
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the contents of published research reports about us or our industry, or the failure of securities analysts to cover our common stock;
|
•
|
additions or departures of key management personnel;
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•
|
any increased indebtedness that we may incur in the future;
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•
|
announcements by us or others and developments affecting us;
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•
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actions by institutional stockholders;
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•
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litigation and governmental investigations;
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•
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legislative or regulatory changes;
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•
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judicial pronouncements interpreting laws and regulations;
|
•
|
changes in government programs;
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•
|
changes in market valuations of similar companies;
|
•
|
speculation or reports by the press or investment community with respect to us or our industry in general;
|
•
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announcements by us or our competitors of significant contracts, acquisitions, dispositions, strategic relationships, joint ventures, or capital commitments; and
|
•
|
general market, political, and economic conditions, including local conditions in the markets in which we operate.
|
•
|
provide for a classified board of directors with staggered three-year terms;
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•
|
do not permit cumulative voting in the election of directors, which would allow a minority of stockholders to elect director candidates;
|
•
|
delegate the sole power to a majority of the board of directors to fix the number of directors;
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•
|
provide the power to our board of directors to fill any vacancy on our board of directors, whether such vacancy occurs as a result of an increase in the number of directors or otherwise;
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•
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authorize the issuance of “blank check” preferred stock without any need for action by stockholders;
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•
|
eliminate the ability of stockholders to call special meetings of stockholders;
|
•
|
establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings; and
|
•
|
provide that, on or after the date that LLC ceases to beneficially own at least 40% of the total votes eligible to be cast in the election of directors, a 75% supermajority vote will be required to amend or repeal provisions relating to, among other things, the classification of the board of directors, the filling of vacancies on the board of directors, and the advance notice requirements for stockholder proposals and director nominations.
|
ITEM 1B.
|
UNRESOLVED STAFF COMMENTS
|
ITEM 2.
|
PROPERTIES
|
State
|
Company-
Operated
|
|
Franchised
|
|
Total
|
|||
California
|
163
|
|
|
220
|
|
|
383
|
|
Nevada
|
22
|
|
|
5
|
|
|
27
|
|
Arizona
|
—
|
|
|
26
|
|
|
26
|
|
Texas
|
9
|
|
|
28
|
|
|
37
|
|
Utah
|
1
|
|
|
7
|
|
|
8
|
|
Louisiana
|
—
|
|
|
1
|
|
|
1
|
|
Total
|
195
|
|
|
287
|
|
|
482
|
|
ITEM 3.
|
LEGAL PROCEEDINGS
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
|
|
Total Number of Shares Purchased (1)
|
|
Average Price Paid Per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
|
Approximate Dollar Value of Shares That May Be Purchased Under the Plans or Programs
|
||||||
September 26, 2019 to October 23, 2019
|
|
12,346
|
|
|
$
|
11.50
|
|
|
10,872
|
|
|
$
|
—
|
|
October 24, 2019 to November 20, 2019
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
November 21, 2019 to December 25, 2019
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
Total
|
|
12,346
|
|
|
|
|
10,872
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
Date
|
LOCO
|
|
Nasdaq
Composite
|
|
S&P Supercomposite
Restaurants Index
|
||||||
December 31, 2014
|
$
|
100.00
|
|
|
$
|
100.00
|
|
|
$
|
100.00
|
|
April 1, 2015
|
$
|
126.24
|
|
|
$
|
103.35
|
|
|
$
|
106.65
|
|
July 1, 2015
|
$
|
102.50
|
|
|
$
|
106.47
|
|
|
$
|
113.59
|
|
September 30, 2015
|
$
|
53.98
|
|
|
$
|
98.39
|
|
|
$
|
115.34
|
|
December 30, 2015
|
$
|
63.50
|
|
|
$
|
108.21
|
|
|
$
|
121.61
|
|
March 30, 2016
|
$
|
67.35
|
|
|
$
|
104.35
|
|
|
$
|
126.61
|
|
June 29, 2016
|
$
|
63.45
|
|
|
$
|
102.76
|
|
|
$
|
122.09
|
|
September 28, 2016
|
$
|
65.40
|
|
|
$
|
114.69
|
|
|
$
|
121.01
|
|
December 28, 2016
|
$
|
63.09
|
|
|
$
|
117.64
|
|
|
$
|
129.28
|
|
March 29, 2017
|
$
|
60.09
|
|
|
$
|
127.93
|
|
|
$
|
134.59
|
|
June 28, 2017
|
$
|
71.11
|
|
|
$
|
135.61
|
|
|
$
|
149.56
|
|
September 27, 2017
|
$
|
60.09
|
|
|
$
|
140.73
|
|
|
$
|
143.21
|
|
December 27, 2017
|
$
|
50.08
|
|
|
$
|
151.73
|
|
|
$
|
157.37
|
|
March 28, 2018
|
$
|
47.57
|
|
|
$
|
152.36
|
|
|
$
|
153.16
|
|
June 27, 2018
|
$
|
56.58
|
|
|
$
|
163.65
|
|
|
$
|
153.20
|
|
September 26, 2018
|
$
|
62.34
|
|
|
$
|
176.09
|
|
|
$
|
166.41
|
|
December 26, 2018
|
$
|
75.61
|
|
|
$
|
144.85
|
|
|
$
|
169.41
|
|
March 27, 2019
|
$
|
65.10
|
|
|
$
|
169.40
|
|
|
$
|
190.38
|
|
June 26, 2019
|
$
|
51.90
|
|
|
$
|
175.79
|
|
|
$
|
208.19
|
|
September 25, 2019
|
$
|
55.48
|
|
|
$
|
179.99
|
|
|
$
|
217.41
|
|
December 25, 2019
|
$
|
75.36
|
|
|
$
|
200.03
|
|
|
$
|
207.48
|
|
ITEM 6.
|
SELECTED FINANCIAL DATA
|
|
Fiscal Year
|
||||||||||||||||||
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenue
|
|
|
|
|
|
|
|
|
|
||||||||||
Company-operated restaurant revenue(1)
|
$
|
391,112
|
|
|
$
|
388,835
|
|
|
$
|
376,615
|
|
|
$
|
355,468
|
|
|
$
|
332,040
|
|
Franchise revenue (1)
|
28,819
|
|
|
25,771
|
|
|
25,086
|
|
|
24,655
|
|
|
23,017
|
|
|||||
Franchise advertising fee revenue(1)
|
22,399
|
|
|
21,222
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total revenue
|
442,330
|
|
|
435,828
|
|
|
401,701
|
|
|
380,123
|
|
|
355,057
|
|
|||||
Cost of operations
|
|
|
|
|
|
|
|
|
|
||||||||||
Food and paper costs
|
109,264
|
|
|
111,142
|
|
|
109,898
|
|
|
107,218
|
|
|
105,917
|
|
|||||
Labor and related expenses
|
116,703
|
|
|
112,417
|
|
|
106,584
|
|
|
97,471
|
|
|
84,231
|
|
|||||
Occupancy and other operating expenses
|
92,005
|
|
|
91,385
|
|
|
85,631
|
|
|
78,263
|
|
|
69,977
|
|
|||||
Gain on recovery of insurance proceeds, lost profits
|
—
|
|
|
—
|
|
|
—
|
|
|
(502
|
)
|
|
—
|
|
|||||
Company restaurant expenses
|
317,972
|
|
|
314,944
|
|
|
302,113
|
|
|
282,450
|
|
|
260,125
|
|
|||||
General and administrative expenses
|
40,389
|
|
|
50,261
|
|
|
38,523
|
|
|
34,661
|
|
|
28,997
|
|
|||||
Legal settlements
|
—
|
|
|
36,258
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Franchise expenses
|
27,612
|
|
|
24,429
|
|
|
3,335
|
|
|
3,823
|
|
|
3,456
|
|
|||||
Depreciation and amortization
|
17,855
|
|
|
17,825
|
|
|
18,128
|
|
|
16,053
|
|
|
13,092
|
|
|||||
Loss on disposal of assets
|
266
|
|
|
278
|
|
|
799
|
|
|
674
|
|
|
471
|
|
|||||
Expenses related to fire loss
|
—
|
|
|
—
|
|
|
—
|
|
|
48
|
|
|
—
|
|
|||||
Gain on recovery of insurance proceeds, property,
equipment and expenses |
—
|
|
|
—
|
|
|
—
|
|
|
(741
|
)
|
|
—
|
|
|||||
Recovery of securities lawsuits related legal expenses
|
(10,000
|
)
|
|
(8,356
|
)
|
|
(1,666
|
)
|
|
—
|
|
|
—
|
|
|||||
Impairment and closed-store reserves
|
4,852
|
|
|
9,650
|
|
|
33,645
|
|
|
8,554
|
|
|
92
|
|
|||||
Loss on disposition of restaurants
|
5,058
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total expenses
|
404,004
|
|
|
445,289
|
|
|
394,877
|
|
|
345,522
|
|
|
306,233
|
|
|||||
Gain on disposition of restaurants
|
—
|
|
|
—
|
|
|
—
|
|
|
28
|
|
|
—
|
|
|||||
Income (loss) from operations
|
38,326
|
|
|
(9,461
|
)
|
|
6,824
|
|
|
34,629
|
|
|
48,824
|
|
|||||
Interest expense, net
|
3,687
|
|
|
3,502
|
|
|
3,278
|
|
|
3,155
|
|
|
3,707
|
|
|||||
Expenses related to selling shareholders
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
50
|
|
|||||
Income tax receivable agreement expense (income)
|
57
|
|
|
(761
|
)
|
|
(5,570
|
)
|
|
352
|
|
|
156
|
|
|||||
Income (loss) before provision (benefit) for income taxes
|
34,582
|
|
|
(12,202
|
)
|
|
9,116
|
|
|
31,122
|
|
|
44,911
|
|
|||||
Provision (benefit) for income taxes
|
9,682
|
|
|
(3,208
|
)
|
|
497
|
|
|
12,783
|
|
|
20,857
|
|
|||||
Net income (loss)
|
$
|
24,900
|
|
|
$
|
(8,994
|
)
|
|
$
|
8,619
|
|
|
$
|
18,339
|
|
|
$
|
24,054
|
|
Per Share Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income (loss) per share
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
$
|
0.68
|
|
|
$
|
(0.23
|
)
|
|
$
|
0.22
|
|
|
$
|
0.48
|
|
|
$
|
0.63
|
|
Diluted
|
$
|
0.67
|
|
|
$
|
(0.23
|
)
|
|
$
|
0.22
|
|
|
$
|
0.47
|
|
|
$
|
0.62
|
|
Weighted average shares used in computing net income (loss) per share
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
36,739,209
|
|
|
38,574,553
|
|
|
38,453,347
|
|
|
38,357,805
|
|
|
37,949,316
|
|
|||||
Diluted
|
37,441,503
|
|
|
38,574,553
|
|
|
39,086,676
|
|
|
39,026,950
|
|
|
39,039,558
|
|
(1)
|
On December 28, 2017 we adopted Accounting Standards Update (“ASU") No. 2014-09, “Revenue from Contracts with Customers (Topic 606)" ("ASU 2014-09"). Results for reporting periods beginning on or after December 28, 2017 are presented under Accounting Standards Codification ("ASC") Topic 606 ("ASC 606"). Prior period amounts were not revised and continue to be reported in accordance with ASC Topic 605 ("ASC 605"), the accounting standard then in effect. See "Note 15 Revenue from Contracts with Customers" for further information.
|
|
Fiscal Year
|
||||||||||||||||||
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
Consolidated Statements of Cash Flows Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net cash provided by operating activities
|
$
|
36,135
|
|
|
$
|
45,442
|
|
|
$
|
53,671
|
|
|
$
|
49,299
|
|
|
$
|
57,971
|
|
Net cash used in investing activities
|
$
|
(10,669
|
)
|
|
$
|
(27,802
|
)
|
|
$
|
(36,238
|
)
|
|
$
|
(35,202
|
)
|
|
$
|
(30,835
|
)
|
Net cash used in financing activities
|
$
|
(24,365
|
)
|
|
$
|
(19,221
|
)
|
|
$
|
(11,051
|
)
|
|
$
|
(18,030
|
)
|
|
$
|
(32,534
|
)
|
Consolidated Balance Sheet Data—(at period end):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cash and cash equivalents
|
$
|
8,070
|
|
|
$
|
6,969
|
|
|
$
|
8,550
|
|
|
$
|
2,168
|
|
|
$
|
6,101
|
|
Net property (1)
|
$
|
91,778
|
|
|
$
|
104,145
|
|
|
$
|
102,794
|
|
|
$
|
118,470
|
|
|
$
|
102,421
|
|
Total assets (2)
|
$
|
624,752
|
|
|
$
|
450,226
|
|
|
$
|
442,711
|
|
|
$
|
471,305
|
|
|
$
|
461,028
|
|
Total debt (2), (3)
|
$
|
97,000
|
|
|
$
|
74,184
|
|
|
$
|
93,316
|
|
|
$
|
104,461
|
|
|
$
|
123,638
|
|
Total stockholders’ equity
|
$
|
245,566
|
|
|
$
|
265,236
|
|
|
$
|
274,950
|
|
|
$
|
265,182
|
|
|
$
|
244,633
|
|
(1)
|
Net property consists of property and equipment, net of accumulated depreciation and amortization.
|
(2)
|
On December 27, 2018 we adopted ASU No. 2016-02, “Leases (Topic 842)". Results for reporting periods beginning on or after December 27, 2018 are presented under Topic 842. Prior period amounts were not revised and continue to be reported in accordance with ASC Topic 840 ("Topic 840"), the accounting standard then in effect. See "Note 2. Summary of Significant Accounting Policies - Change in Accounting Policies" and "Note 5. Leases" for further information.
|
(3)
|
Total debt consists of borrowings under the 2018 Revolver and the 2014 Revolver (each, as defined below in "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Debt and Other Obligations”), and our capital lease obligations in 2018 and prior.
|
ITEM 7.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
Fiscal Year
|
|||||||
|
2019
|
|
2018
|
|
2017
|
|||
Company-operated restaurant activity:
|
|
|
|
|
|
|
|
|
Beginning of period
|
213
|
|
|
212
|
|
|
201
|
|
Openings
|
2
|
|
|
8
|
|
|
16
|
|
Restaurant sale to franchisee
|
(16
|
)
|
|
—
|
|
|
—
|
|
Closures
|
(4
|
)
|
|
(7
|
)
|
|
(5
|
)
|
Restaurants at end of period
|
195
|
|
|
213
|
|
|
212
|
|
Franchised restaurant activity:
|
|
|
|
|
|
|
|
|
Beginning of period
|
271
|
|
|
265
|
|
|
259
|
|
Openings
|
2
|
|
|
9
|
|
|
7
|
|
Restaurant sale to franchisee
|
16
|
|
|
—
|
|
|
—
|
|
Closures
|
(2
|
)
|
|
(3
|
)
|
|
(1
|
)
|
Restaurants at end of period
|
287
|
|
|
271
|
|
|
265
|
|
Total restaurant activity:
|
|
|
|
|
|
|
|
|
Beginning of period
|
484
|
|
|
477
|
|
|
460
|
|
Openings
|
4
|
|
|
17
|
|
|
23
|
|
Closures
|
(6
|
)
|
|
(10
|
)
|
|
(6
|
)
|
Restaurants at end of period
|
482
|
|
|
484
|
|
|
477
|
|
|
Fiscal Year
|
|||||||||||||||||||
|
2019
(52-Weeks)
|
|
2018
(52-Weeks)
|
|
Increase / (Decrease)
|
|||||||||||||||
|
($ ,000)
|
|
(%)
|
|
($ ,000)
|
|
(%)
|
|
($ ,000)
|
|
(%)
|
|||||||||
Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Company-operated restaurant revenue
|
$
|
391,112
|
|
|
88.4
|
|
|
$
|
388,835
|
|
|
89.2
|
|
|
$
|
2,277
|
|
|
0.6
|
|
Franchise revenue
|
28,819
|
|
|
6.5
|
|
|
25,771
|
|
|
5.9
|
|
|
3,048
|
|
|
11.8
|
|
|||
Franchise advertising fee revenue
|
22,399
|
|
|
5.1
|
|
|
21,222
|
|
|
4.9
|
|
|
1,177
|
|
|
5.5
|
|
|||
Total revenue
|
442,330
|
|
|
100.0
|
|
|
435,828
|
|
|
100.0
|
|
|
6,502
|
|
|
1.5
|
|
|||
Cost of operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Food and paper costs (1)
|
109,264
|
|
|
27.9
|
|
|
111,142
|
|
|
28.6
|
|
|
(1,878
|
)
|
|
(1.7
|
)
|
|||
Labor and related expenses (1)
|
116,703
|
|
|
29.8
|
|
|
112,417
|
|
|
28.9
|
|
|
4,286
|
|
|
3.8
|
|
|||
Occupancy and other operating expenses (1)
|
92,005
|
|
|
23.5
|
|
|
91,385
|
|
|
23.5
|
|
|
620
|
|
|
0.7
|
|
|||
Company restaurant expenses (1)
|
317,972
|
|
|
81.3
|
|
|
314,944
|
|
|
81.0
|
|
|
3,028
|
|
|
1.0
|
|
|||
General and administrative expenses
|
40,389
|
|
|
9.1
|
|
|
50,261
|
|
|
11.5
|
|
|
(9,872
|
)
|
|
(19.6
|
)
|
|||
Legal settlements
|
—
|
|
|
—
|
|
|
36,258
|
|
|
8.3
|
|
|
(36,258
|
)
|
|
(100.0
|
)
|
|||
Franchise expenses
|
27,612
|
|
|
6.2
|
|
|
24,429
|
|
|
5.6
|
|
|
3,183
|
|
|
13.0
|
|
|||
Depreciation and amortization
|
17,855
|
|
|
4.0
|
|
|
17,825
|
|
|
4.1
|
|
|
30
|
|
|
0.2
|
|
|||
Loss on disposal of assets
|
266
|
|
|
0.1
|
|
|
278
|
|
|
0.1
|
|
|
(12
|
)
|
|
(4.3
|
)
|
|||
Recovery of securities lawsuits related legal expenses
|
(10,000
|
)
|
|
(2.3
|
)
|
|
(8,356
|
)
|
|
(1.9
|
)
|
|
(1,644
|
)
|
|
19.7
|
|
|||
Impairment and closed-store reserves
|
4,852
|
|
|
1.1
|
|
|
9,650
|
|
|
2.2
|
|
|
(4,798
|
)
|
|
(49.7
|
)
|
|||
Loss on disposition of restaurants
|
5,058
|
|
|
1.1
|
|
|
—
|
|
|
—
|
|
|
5,058
|
|
|
N/A
|
|
|||
Total expenses
|
404,004
|
|
|
91.3
|
|
|
445,289
|
|
|
102.2
|
|
|
(46,343
|
)
|
|
(9.3
|
)
|
|||
Income (loss) from operations
|
38,326
|
|
|
8.7
|
|
|
(9,461
|
)
|
|
(2.2
|
)
|
|
47,787
|
|
|
(505.1
|
)
|
|||
Interest expense, net
|
3,687
|
|
|
0.8
|
|
|
3,502
|
|
|
0.8
|
|
|
185
|
|
|
5.3
|
|
|||
Income tax receivable agreement expense (income)
|
57
|
|
|
0.0
|
|
|
(761
|
)
|
|
(0.2
|
)
|
|
818
|
|
|
(107.5
|
)
|
|||
Income (loss) before provision for income taxes
|
34,582
|
|
|
7.8
|
|
|
(12,202
|
)
|
|
(2.8
|
)
|
|
46,784
|
|
|
(383.4
|
)
|
|||
Provision (benefit) for income taxes
|
9,682
|
|
|
2.2
|
|
|
(3,208
|
)
|
|
(0.7
|
)
|
|
12,890
|
|
|
(401.8
|
)
|
|||
Net income (loss)
|
$
|
24,900
|
|
|
5.6
|
|
|
$
|
(8,994
|
)
|
|
(2.1
|
)
|
|
$
|
33,894
|
|
|
(376.9
|
)
|
(1)
|
Percentages for line items relating to cost of operations and company restaurant expenses are calculated with company-operated restaurant revenue as the denominator. All other percentages use total revenue.
|
|
Fiscal Year
|
|||||||||||||||||||
|
2018
(52-Weeks)
|
|
2017
(52-Weeks)
|
|
Increase / (Decrease)
|
|||||||||||||||
|
($ ,000)
|
|
(%)
|
|
($ ,000)
|
|
(%)
|
|
($ ,000)
|
|
(%)
|
|||||||||
Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Company-operated restaurant revenue
|
$
|
388,835
|
|
|
89.2
|
|
|
$
|
376,615
|
|
|
93.8
|
|
|
$
|
12,220
|
|
|
3.2
|
|
Franchise revenue
|
25,771
|
|
|
5.9
|
|
|
25,086
|
|
|
6.2
|
|
|
685
|
|
|
2.7
|
|
|||
Franchise advertising fee revenue
|
21,222
|
|
|
4.9
|
|
|
—
|
|
|
—
|
|
|
21,222
|
|
|
N/A
|
|
|||
Total revenue
|
435,828
|
|
|
100.0
|
|
|
401,701
|
|
|
100.0
|
|
|
34,127
|
|
|
8.5
|
|
|||
Cost of operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Food and paper costs (1)
|
111,142
|
|
|
28.6
|
|
|
109,898
|
|
|
29.2
|
|
|
1,244
|
|
|
1.1
|
|
|||
Labor and related expenses (1)
|
112,417
|
|
|
28.9
|
|
|
106,584
|
|
|
28.3
|
|
|
5,833
|
|
|
5.5
|
|
|||
Occupancy and other operating expenses (1)
|
91,385
|
|
|
23.5
|
|
|
85,631
|
|
|
22.7
|
|
|
5,754
|
|
|
6.7
|
|
|||
Company restaurant expenses (1)
|
314,944
|
|
|
81.0
|
|
|
302,113
|
|
|
80.2
|
|
|
12,831
|
|
|
4.2
|
|
|||
General and administrative expenses
|
50,261
|
|
|
11.5
|
|
|
38,523
|
|
|
9.6
|
|
|
11,738
|
|
|
30.5
|
|
|||
Legal settlements
|
36,258
|
|
|
8.3
|
|
|
—
|
|
|
—
|
|
|
36,258
|
|
|
N/A
|
|
|||
Franchise expenses
|
24,429
|
|
|
5.6
|
|
|
3,335
|
|
|
0.8
|
|
|
21,094
|
|
|
632.5
|
|
|||
Depreciation and amortization
|
17,825
|
|
|
4.1
|
|
|
18,128
|
|
|
4.5
|
|
|
(303
|
)
|
|
(1.7
|
)
|
|||
Loss on disposal of assets
|
278
|
|
|
0.1
|
|
|
799
|
|
|
0.2
|
|
|
(521
|
)
|
|
(65.2
|
)
|
|||
Recovery of securities lawsuits related legal expenses
|
(8,356
|
)
|
|
(1.9
|
)
|
|
(1,666
|
)
|
|
(0.4
|
)
|
|
(6,690
|
)
|
|
401.6
|
|
|||
Impairment and closed-store reserves
|
9,650
|
|
|
2.2
|
|
|
33,645
|
|
|
8.4
|
|
|
(23,995
|
)
|
|
(71.3
|
)
|
|||
Total expenses
|
445,289
|
|
|
102.2
|
|
|
394,877
|
|
|
98.3
|
|
|
50,412
|
|
|
12.8
|
|
|||
(Loss) income from operations
|
(9,461
|
)
|
|
(2.2
|
)
|
|
6,824
|
|
|
1.7
|
|
|
(16,285
|
)
|
|
(238.6
|
)
|
|||
Interest expense, net
|
3,502
|
|
|
0.8
|
|
|
3,278
|
|
|
0.8
|
|
|
224
|
|
|
6.8
|
|
|||
Income tax receivable agreement income
|
(761
|
)
|
|
(0.2
|
)
|
|
(5,570
|
)
|
|
(1.4
|
)
|
|
4,809
|
|
|
(86.3
|
)
|
|||
(Loss) income before provision for income taxes
|
(12,202
|
)
|
|
(2.8
|
)
|
|
9,116
|
|
|
2.3
|
|
|
(21,318
|
)
|
|
(233.9
|
)
|
|||
(Benefit) provision for income taxes
|
(3,208
|
)
|
|
(0.7
|
)
|
|
497
|
|
|
0.1
|
|
|
(3,705
|
)
|
|
(745.5
|
)
|
|||
Net (loss) income
|
$
|
(8,994
|
)
|
|
(2.1
|
)
|
|
$
|
8,619
|
|
|
2.1
|
|
|
$
|
(17,613
|
)
|
|
(204.4
|
)
|
(1)
|
Percentages for line items relating to cost of operations and company restaurant expenses are calculated with company-operated restaurant revenue as the denominator. All other percentages use total revenue.
|
•
|
Under ASC 740, Income Taxes, we are required to revalue any deferred tax assets or liabilities in the period of enactment by the change in tax rates. The Tax Act lowers the corporate income tax rate from 35% to 21%. We estimated the impact of the revaluation of our deferred tax assets and liabilities, resulting in a decrease to our net deferred income tax liability by $1.4 million which is reflected as a decrease in our income tax expense in our results for fiscal 2017.
|
•
|
The reduced corporate tax rate, also resulted in a TRA benefit to the provision for income tax expense for fiscal 2017 in the amount of $2.0 million.
|
•
|
The Tax Act is generally effective for tax years beginning after December 31, 2017. As such, the reduction in the corporate income tax rate from 35% to 21% is effective for the fiscal year ended December 26, 2018.
|
|
Fiscal Year
|
||||||||||
(Dollar amounts in thousands)
|
2019
|
|
2018
|
|
2017
|
||||||
Company-operated restaurant revenue
|
$
|
391,112
|
|
|
$
|
388,835
|
|
|
$
|
376,615
|
|
Franchise revenue
|
28,819
|
|
|
25,771
|
|
|
25,086
|
|
|||
Franchise advertising fee revenue
|
22,399
|
|
|
21,222
|
|
|
—
|
|
|||
Total Revenue
|
442,330
|
|
|
435,828
|
|
|
401,701
|
|
|||
Franchise revenue
|
(51,218
|
)
|
|
(46,993
|
)
|
|
(25,086
|
)
|
|||
Sales from franchised restaurants
|
503,413
|
|
|
479,574
|
|
|
465,149
|
|
|||
System-wide sales
|
$
|
894,525
|
|
|
$
|
868,409
|
|
|
$
|
841,764
|
|
|
Fiscal Year
|
||||||||||
(Dollar amounts in thousands)
|
2019
|
|
2018
|
|
2017
|
||||||
|
|
|
|
|
|
||||||
Restaurant contribution:
|
|
|
|
|
|
||||||
Income (loss) from operations
|
$
|
38,326
|
|
|
$
|
(9,461
|
)
|
|
$
|
6,824
|
|
Add (less):
|
|
|
|
|
|
||||||
General and administrative expenses
|
40,389
|
|
|
50,261
|
|
|
38,523
|
|
|||
Legal settlements
|
—
|
|
|
36,258
|
|
|
—
|
|
|||
Franchise expenses
|
27,612
|
|
|
24,429
|
|
|
3,335
|
|
|||
Depreciation and amortization
|
17,855
|
|
|
17,825
|
|
|
18,128
|
|
|||
Loss on disposal of assets
|
266
|
|
|
278
|
|
|
799
|
|
|||
Franchise revenue
|
(28,819
|
)
|
|
(25,771
|
)
|
|
(25,086
|
)
|
|||
Franchise advertising fee revenue
|
(22,399
|
)
|
|
(21,222
|
)
|
|
—
|
|
|||
Recovery of securities lawsuits related legal expenses
|
(10,000
|
)
|
|
(8,356
|
)
|
|
(1,666
|
)
|
|||
Impairment and closed-store reserves
|
4,852
|
|
|
9,650
|
|
|
33,645
|
|
|||
Loss on sale of restaurants
|
5,058
|
|
|
—
|
|
|
—
|
|
|||
Restaurant contribution
|
$
|
73,140
|
|
|
$
|
73,891
|
|
|
$
|
74,502
|
|
|
|
|
|
|
|
||||||
Company-operated restaurant revenue:
|
|
|
|
|
|
||||||
Total revenue
|
$
|
442,330
|
|
|
$
|
435,828
|
|
|
$
|
401,701
|
|
Less:
|
|
|
|
|
|
||||||
Franchise revenue
|
(28,819
|
)
|
|
(25,771
|
)
|
|
(25,086
|
)
|
|||
Franchise advertising fee revenue
|
(22,399
|
)
|
|
(21,222
|
)
|
|
—
|
|
|||
Company-operated restaurant revenue
|
$
|
391,112
|
|
|
$
|
388,835
|
|
|
$
|
376,615
|
|
|
|
|
|
|
|
||||||
Restaurant contribution margin (%)
|
18.7
|
%
|
|
19.0
|
%
|
|
19.8
|
%
|
|
Fiscal Year
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Net income (loss)
|
$
|
24,900
|
|
|
$
|
(8,994
|
)
|
|
$
|
8,619
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
|||
Provision (benefit) for income taxes
|
9,682
|
|
|
(3,208
|
)
|
|
497
|
|
|||
Interest expense, net
|
3,687
|
|
|
3,502
|
|
|
3,278
|
|
|||
Depreciation and amortization
|
17,855
|
|
|
17,825
|
|
|
18,128
|
|
|||
EBITDA
|
$
|
56,124
|
|
|
$
|
9,125
|
|
|
$
|
30,522
|
|
Stock-based compensation expense (a)
|
2,474
|
|
|
1,278
|
|
|
1,056
|
|
|||
Loss on disposal of assets (b)
|
266
|
|
|
278
|
|
|
799
|
|
|||
Recovery of securities lawsuits related legal expense (c)
|
(10,000
|
)
|
|
(8,356
|
)
|
|
(1,666
|
)
|
|||
Impairment and closed-store reserves (d)
|
4,852
|
|
|
9,650
|
|
|
33,645
|
|
|||
Loss on disposition of restaurants (e)
|
5,058
|
|
|
—
|
|
|
—
|
|
|||
Legal settlements (f)
|
—
|
|
|
36,258
|
|
|
—
|
|
|||
Income tax receivable agreement expense (income) (g)
|
57
|
|
|
(761
|
)
|
|
(5,570
|
)
|
|||
Securities class action legal expense (h)
|
3,181
|
|
|
13,532
|
|
|
4,236
|
|
|||
Pre-opening costs (i)
|
366
|
|
|
837
|
|
|
1,981
|
|
|||
Executive transition costs (j)
|
151
|
|
|
1,081
|
|
|
284
|
|
|||
Adjusted EBITDA
|
$
|
62,529
|
|
|
$
|
62,922
|
|
|
$
|
65,287
|
|
(a)
|
Includes non-cash, stock-based compensation, excluding stock-based compensation costs associated with the transition of our former CEO.
|
(b)
|
Loss on disposal of assets includes the loss on disposal of assets related to retirements and replacement or write-off of leasehold improvements or equipment.
|
(c)
|
In fiscal 2019, we received insurance proceeds of $10.0 million related to the settlement of the securities class action lawsuit and in fiscal 2018 we received insurance proceeds of $8.4 million related to the reimbursement of certain legal expenses paid in prior years for the defense of securities lawsuits. See "Note 13. Commitments and Contingencies—Legal Matters" in the accompanying "Notes to Consolidated Financial Statements" in this Annual Report.
|
(d)
|
Includes costs related to impairment of long-lived and ROU assets and closing restaurants. During fiscal 2019, we recorded impairment charges of $3.6 million for the year ended December 25, 2019, primarily related to the carrying value of the ROU assets of four restaurants sold to franchisees and one restaurant closed during fiscal 2019, and the long-lived assets of one restaurant in California. Additionally, during fiscal 2019, we closed two restaurants in California and two restaurants in Texas and recognized $1.3 million of closed-store reserve expense for the fiscal year ended 2019, primarily related to the amortization of ROU assets for closed stores.
|
(e)
|
During fiscal 2019, we completed the sale of four company-operated restaurants within the San Francisco area to an existing franchisee, seven company-operated restaurants in the Phoenix area to another existing franchisee and five company-operated restaurants in Texas to a third franchisee, which resulted in cash proceeds of $4.8 million and a net loss on sale of restaurants of $5.1 million for the year ended December 25, 2019.
|
(f)
|
Legal settlements of $36.3 million in fiscal 2018 included (i) an accrual of an expected settlement amount in fiscal 2018 related to an agreement in principle to settle all claims and allegations for the securities class action and (ii) an accrual of an expected settlement amount in fiscal 2018 related to an agreement in principle to settle all claims and allegations, related to multiple wage and hour class action suits. For additional information on legal settlements, see "Note 13. Commitments and Contingencies—Legal Matters" in the accompanying "Notes to Consolidated Financial Statements" in this Annual Report.
|
(g)
|
On July 30, 2014, we entered into the income tax receivable agreement ("TRA"). This agreement calls for us to pay to our pre-IPO stockholders 85% of the savings in cash that we realize in our taxes as a result of utilizing our net operating losses and other tax attributes attributable to preceding periods. For the years ended December 25, 2019 and December 26, 2018, income tax receivable agreement expense (income) consisted of the amortization of interest expense and changes to future forecasted results and the timing of deductibility of certain timing differences, including for fiscal 2018 the legal settlement accruals, related to our total expected TRA payments. For fiscal 2017, the income tax receivable agreement income was primarily due to the Tax Cuts and Jobs Act (the "Tax Act"), and the resulting changes to the Federal corporate income tax rate.
|
(h)
|
Consists of costs related to the defense of securities lawsuits. See "Note 13. Commitments and Contingencies—Legal Matters" in the accompanying "Notes to Consolidated Financial Statements" in this Annual Report.
|
(i)
|
Pre-opening costs are a component of general and administrative expenses, and consist of costs directly associated with the opening of new restaurants and incurred prior to opening, including management labor costs, staff labor costs during training, food and supplies used during training, marketing costs, and other related pre-opening costs. These are generally incurred over the three to five months prior to opening. Pre-opening costs also include occupancy costs incurred between the date of possession and the opening date for a restaurant.
|
(j)
|
Includes costs associated with the transition of our CEO, such as executive recruiting costs and stock-based compensation costs associated with the transition of our former CEO in 2018.
|
|
Fiscal Year
|
||||||||||
(Amounts in thousands)
|
2019
|
|
2018
|
|
2017
|
||||||
Net cash provided by (used in)
|
|
|
|
|
|
|
|
|
|||
Operating activities
|
$
|
36,135
|
|
|
$
|
45,442
|
|
|
$
|
53,671
|
|
Investing activities
|
(10,669
|
)
|
|
(27,802
|
)
|
|
(36,238
|
)
|
|||
Financing activities
|
(24,365
|
)
|
|
(19,221
|
)
|
|
(11,051
|
)
|
|||
Net increase (decrease) in cash and cash equivalents
|
$
|
1,101
|
|
|
$
|
(1,581
|
)
|
|
$
|
6,382
|
|
|
Payments Due by Period
|
||||||||||||||||||
(Amounts in thousands)
|
Total
|
|
2020
|
|
2021-
2022
|
|
2023-
2024
|
|
2025 and
thereafter
|
||||||||||
Operating leases
|
$
|
259,171
|
|
|
$
|
26,808
|
|
|
$
|
50,849
|
|
|
$
|
42,060
|
|
|
$
|
139,454
|
|
Finance leases
|
153
|
|
|
54
|
|
|
99
|
|
|
—
|
|
|
—
|
|
|||||
Long-term debt (1)
|
109,461
|
|
|
3,150
|
|
|
6,207
|
|
|
100,104
|
|
|
—
|
|
|||||
Income tax receivable agreement
|
8,236
|
|
|
4,935
|
|
|
2,292
|
|
|
1,009
|
|
|
—
|
|
|||||
Purchasing commitments—chicken
|
25,185
|
|
|
25,185
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total
|
$
|
402,206
|
|
|
$
|
60,132
|
|
|
$
|
59,447
|
|
|
$
|
143,173
|
|
|
$
|
139,454
|
|
•
|
current financial performance;
|
ITEM 7A.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
Audited Consolidated Financial Statements
|
|
|
December 25, 2019
|
|
December 26, 2018
|
||||
Assets
|
|
|
|
|
|
||
Current assets:
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
8,070
|
|
|
$
|
6,969
|
|
Accounts and other receivables, net
|
8,505
|
|
|
9,599
|
|
||
Inventories
|
2,009
|
|
|
2,479
|
|
||
Prepaid expenses and other current assets
|
5,718
|
|
|
2,998
|
|
||
Income tax receivable
|
376
|
|
|
—
|
|
||
Total current assets
|
24,678
|
|
|
22,045
|
|
||
Property and equipment, net
|
91,778
|
|
|
104,145
|
|
||
Property held under finance lease, net
|
—
|
|
|
16
|
|
||
Property held under operating leases, net (ROU Asset)
|
192,395
|
|
|
—
|
|
||
Goodwill
|
248,674
|
|
|
248,674
|
|
||
Trademarks, net
|
61,888
|
|
|
61,888
|
|
||
Other intangible assets, net
|
—
|
|
|
280
|
|
||
Deferred tax assets
|
3,709
|
|
|
11,709
|
|
||
Other assets
|
1,630
|
|
|
1,469
|
|
||
Total assets
|
$
|
624,752
|
|
|
$
|
450,226
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
||
Current portion of obligations under finance leases
|
$
|
34
|
|
|
$
|
68
|
|
Current portion of obligations under operating leases
|
16,406
|
|
|
—
|
|
||
Accounts payable
|
5,627
|
|
|
9,564
|
|
||
Accrued salaries and benefits
|
8,618
|
|
|
7,574
|
|
||
Accrued insurance
|
9,440
|
|
|
7,076
|
|
||
Accrued income taxes payable
|
—
|
|
|
71
|
|
||
Accrued interest
|
302
|
|
|
149
|
|
||
Current portion of income tax receivable agreement payable
|
4,935
|
|
|
6,637
|
|
||
Other accrued expenses and current liabilities
|
28,597
|
|
|
51,764
|
|
||
Total current liabilities
|
73,959
|
|
|
82,903
|
|
||
Revolver loan
|
97,000
|
|
|
74,000
|
|
||
Obligations under finance leases, net of current portion
|
83
|
|
|
116
|
|
||
Obligations under operating leases, net of current portion
|
197,492
|
|
|
—
|
|
||
Deferred taxes
|
1,672
|
|
|
—
|
|
||
Other intangible liabilities, net
|
—
|
|
|
642
|
|
||
Income tax receivable agreement payable, net of current portion
|
3,301
|
|
|
7,305
|
|
||
Other noncurrent liabilities
|
5,679
|
|
|
20,024
|
|
||
Total liabilities
|
379,186
|
|
|
184,990
|
|
||
Commitments and contingencies (Note 13)
|
|
|
|
|
|
||
Stockholders’ Equity
|
|
|
|
|
|
||
Preferred stock, $0.01 par value—100,000,000 shares authorized; none issued or
outstanding
|
—
|
|
|
—
|
|
||
Common stock, $0.01 par value—200,000,000 shares authorized; 35,126,582 and
39,009,451 shares issued and outstanding as of December 25, 2019 and December 26, 2018, respectively |
351
|
|
|
390
|
|
||
Additional paid-in capital
|
330,950
|
|
|
375,734
|
|
||
Accumulated deficit
|
(85,988
|
)
|
|
(110,888
|
)
|
Accumulated other comprehensive income
|
253
|
|
|
—
|
|
||
Total stockholders’ equity
|
245,566
|
|
|
265,236
|
|
||
Total liabilities and stockholders’ equity
|
$
|
624,752
|
|
|
$
|
450,226
|
|
For the Years Ended
|
December 25, 2019
|
|
December 26, 2018
|
|
December 27, 2017
|
||||||
Revenue
|
|
|
|
|
|
|
|
|
|||
Company-operated restaurant revenue
|
$
|
391,112
|
|
|
$
|
388,835
|
|
|
$
|
376,615
|
|
Franchise revenue
|
28,819
|
|
|
25,771
|
|
|
25,086
|
|
|||
Franchise advertising fee revenue
|
22,399
|
|
|
21,222
|
|
|
—
|
|
|||
Total revenue
|
442,330
|
|
|
435,828
|
|
|
401,701
|
|
|||
Cost of operations
|
|
|
|
|
|
|
|
|
|||
Food and paper costs
|
109,264
|
|
|
111,142
|
|
|
109,898
|
|
|||
Labor and related expenses
|
116,703
|
|
|
112,417
|
|
|
106,584
|
|
|||
Occupancy and other operating expenses
|
92,005
|
|
|
91,385
|
|
|
85,631
|
|
|||
Company restaurant expenses
|
317,972
|
|
|
314,944
|
|
|
302,113
|
|
|||
General and administrative expenses
|
40,389
|
|
|
50,261
|
|
|
38,523
|
|
|||
Legal settlements
|
—
|
|
|
36,258
|
|
|
—
|
|
|||
Franchise expenses
|
27,612
|
|
|
24,429
|
|
|
3,335
|
|
|||
Depreciation and amortization
|
17,855
|
|
|
17,825
|
|
|
18,128
|
|
|||
Loss on disposal of assets
|
266
|
|
|
278
|
|
|
799
|
|
|||
Recovery of securities lawsuits related legal expenses
|
(10,000
|
)
|
|
(8,356
|
)
|
|
(1,666
|
)
|
|||
Impairment and closed-store reserves
|
4,852
|
|
|
9,650
|
|
|
33,645
|
|
|||
Loss on disposition of restaurants
|
5,058
|
|
|
—
|
|
|
—
|
|
|||
Total expenses
|
404,004
|
|
|
445,289
|
|
|
394,877
|
|
|||
Income (loss) from operations
|
38,326
|
|
|
(9,461
|
)
|
|
6,824
|
|
|||
Interest expense, net
|
3,687
|
|
|
3,502
|
|
|
3,278
|
|
|||
Income tax receivable agreement expense (income)
|
57
|
|
|
(761
|
)
|
|
(5,570
|
)
|
|||
Income (loss) before provision (benefit) for income
taxes
|
34,582
|
|
|
(12,202
|
)
|
|
9,116
|
|
|||
Provision (benefit) for income taxes
|
9,682
|
|
|
(3,208
|
)
|
|
497
|
|
|||
Net income (loss)
|
$
|
24,900
|
|
|
$
|
(8,994
|
)
|
|
$
|
8,619
|
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
|||
Basic
|
$
|
0.68
|
|
|
$
|
(0.23
|
)
|
|
$
|
0.22
|
|
Diluted
|
$
|
0.67
|
|
|
$
|
(0.23
|
)
|
|
$
|
0.22
|
|
Weighted average shares used in computing net income (loss) per share:
|
|
|
|
|
|
|
|
|
|||
Basic
|
36,739,209
|
|
|
38,574,553
|
|
|
38,453,347
|
|
|||
Diluted
|
37,441,503
|
|
|
38,574,553
|
|
|
39,086,676
|
|
|
December 25, 2019
|
|
December 26, 2018
|
|
December 27, 2017
|
||||||
Net income (loss)
|
$
|
24,900
|
|
|
$
|
(8,994
|
)
|
|
$
|
8,619
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
||||||
Changes in derivative instruments
|
|
|
|
|
|
||||||
Unrealized gains arising during the period from interest rate swap
|
430
|
|
|
—
|
|
|
—
|
|
|||
Reclassifications of gains into net income
|
(84
|
)
|
|
—
|
|
|
—
|
|
|||
Income tax
|
(93
|
)
|
|
—
|
|
|
—
|
|
|||
Other comprehensive income, net of taxes
|
253
|
|
|
—
|
|
|
—
|
|
|||
Comprehensive income (loss)
|
$
|
25,153
|
|
|
$
|
(8,994
|
)
|
|
$
|
8,619
|
|
|
Common Stock
|
|
Additional
Paid-in Capital
|
|
Accumulated Deficit
|
|
Accumulated Other Comprehensive Income
|
|
Total
Stockholders’ Equity
|
|||||||||||||
|
Shares
|
|
Amount
|
|
|
|
|
|||||||||||||||
Balance, December 28, 2016
|
38,473,772
|
|
|
$
|
385
|
|
|
$
|
371,843
|
|
|
$
|
(107,046
|
)
|
|
$
|
—
|
|
|
$
|
265,182
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
1,056
|
|
|
—
|
|
|
—
|
|
|
1,056
|
|
|||||
Issuance of common stock related to restricted shares, net
|
170,417
|
|
|
2
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Issuance of common stock upon exercise of stock options
|
17,661
|
|
|
—
|
|
|
93
|
|
|
—
|
|
|
—
|
|
|
93
|
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
8,619
|
|
|
—
|
|
|
8,619
|
|
|||||
Balance, December 27, 2017
|
38,661,850
|
|
|
387
|
|
|
372,990
|
|
|
(98,427
|
)
|
|
—
|
|
|
274,950
|
|
|||||
Cumulative effect of accounting change (see Note 2)
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,467
|
)
|
|
—
|
|
|
(3,467
|
)
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
2,005
|
|
|
—
|
|
|
—
|
|
|
2,005
|
|
|||||
Issuance of common stock related to restricted shares, net
|
155,229
|
|
|
1
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Issuance of common stock upon exercise of stock options
|
269,549
|
|
|
3
|
|
|
1,834
|
|
|
—
|
|
|
—
|
|
|
1,837
|
|
|||||
Shares repurchased for employee tax withholdings
|
(10,768
|
)
|
|
—
|
|
|
(114
|
)
|
|
—
|
|
|
—
|
|
|
(114
|
)
|
|||||
Repurchase of common stock
|
(66,409
|
)
|
|
(1
|
)
|
|
(980
|
)
|
|
—
|
|
|
—
|
|
|
(981
|
)
|
|||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,994
|
)
|
|
—
|
|
|
(8,994
|
)
|
|||||
Balance, December 26, 2018
|
39,009,451
|
|
|
390
|
|
|
375,734
|
|
|
(110,888
|
)
|
|
—
|
|
|
265,236
|
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
2,474
|
|
|
—
|
|
|
—
|
|
|
2,474
|
|
|||||
Issuance of common stock related to restricted shares, net
|
309,404
|
|
|
2
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Issuance of common stock upon exercise of stock options
|
234,728
|
|
|
2
|
|
|
1,448
|
|
|
—
|
|
|
—
|
|
|
1,450
|
|
|||||
Shares repurchased for employee tax withholdings
|
(31,397
|
)
|
|
—
|
|
|
(365
|
)
|
|
—
|
|
|
—
|
|
|
(365
|
)
|
|||||
Repurchase of common stock
|
(4,395,604
|
)
|
|
(43
|
)
|
|
(48,339
|
)
|
|
—
|
|
|
—
|
|
|
(48,382
|
)
|
|||||
Other comprehensive income, net of income tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
253
|
|
|
253
|
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
24,900
|
|
|
—
|
|
|
24,900
|
|
|||||
Balance, December 25, 2019
|
35,126,582
|
|
|
$
|
351
|
|
|
$
|
330,950
|
|
|
$
|
(85,988
|
)
|
|
$
|
253
|
|
|
$
|
245,566
|
|
For the Years Ended
|
December 25, 2019
|
|
December 26, 2018
|
|
December 27, 2017
|
||||||
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|||
Net income (loss)
|
$
|
24,900
|
|
|
$
|
(8,994
|
)
|
|
$
|
8,619
|
|
Adjustments to reconcile changes in net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|||
Depreciation and amortization
|
17,855
|
|
|
17,825
|
|
|
18,128
|
|
|||
Stock-based compensation expense
|
2,474
|
|
|
2,005
|
|
|
1,056
|
|
|||
Income tax receivable agreement expense (income)
|
57
|
|
|
(761
|
)
|
|
(5,570
|
)
|
|||
Loss on disposition of restaurants
|
5,058
|
|
|
—
|
|
|
—
|
|
|||
Loss on disposal of assets
|
266
|
|
|
278
|
|
|
799
|
|
|||
Impairment of property, equipment and ROU Asset
|
3,559
|
|
|
5,147
|
|
|
32,594
|
|
|||
Closed-store reserves
|
—
|
|
|
4,503
|
|
|
1,051
|
|
|||
Amortization of deferred financing costs
|
251
|
|
|
280
|
|
|
304
|
|
|||
Amortization of other intangible assets, net
|
—
|
|
|
(47
|
)
|
|
(119
|
)
|
|||
Deferred income taxes, net
|
9,578
|
|
|
(3,428
|
)
|
|
250
|
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|||
Accounts and other receivables, net
|
1,094
|
|
|
(2,387
|
)
|
|
(294
|
)
|
|||
Inventories
|
338
|
|
|
(190
|
)
|
|
(177
|
)
|
|||
Prepaid expenses and other current assets
|
(2,727
|
)
|
|
(319
|
)
|
|
425
|
|
|||
Income taxes receivable/payable
|
(448
|
)
|
|
37
|
|
|
(85
|
)
|
|||
Other assets
|
(412
|
)
|
|
122
|
|
|
47
|
|
|||
Accounts payable
|
(3,192
|
)
|
|
482
|
|
|
1,088
|
|
|||
Accrued salaries and benefits
|
1,044
|
|
|
235
|
|
|
1,585
|
|
|||
Accrued insurance
|
2,364
|
|
|
1,225
|
|
|
407
|
|
|||
Payment related to tax receivable agreement
|
(5,764
|
)
|
|
(7,272
|
)
|
|
(11,109
|
)
|
|||
Other accrued expenses and liabilities
|
(20,160
|
)
|
|
36,701
|
|
|
4,547
|
|
|||
Restricted cash
|
—
|
|
|
—
|
|
|
125
|
|
|||
Net cash flows provided by operating activities
|
36,135
|
|
|
45,442
|
|
|
53,671
|
|
|||
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|||
Proceeds from disposition of restaurants
|
4,770
|
|
|
—
|
|
|
—
|
|
|||
Purchase of property and equipment
|
(15,439
|
)
|
|
(27,802
|
)
|
|
(36,238
|
)
|
|||
Net cash flows used in investing activities
|
(10,669
|
)
|
|
(27,802
|
)
|
|
(36,238
|
)
|
|||
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|||
Proceeds from borrowings on revolver and swingline loans
|
42,000
|
|
|
13,307
|
|
|
8,000
|
|
|||
Payments on revolver and swingline loan
|
(19,000
|
)
|
|
(33,000
|
)
|
|
(19,000
|
)
|
|||
Minimum tax withholdings related to net share settlements
|
(365
|
)
|
|
(114
|
)
|
|
—
|
|
|||
Proceeds from issuance of common stock upon exercise of stock options, net of expenses
|
1,450
|
|
|
1,837
|
|
|
93
|
|
|||
Payment of obligations under finance leases
|
(68
|
)
|
|
(132
|
)
|
|
(144
|
)
|
|||
Deferred financing costs for revolver loan
|
—
|
|
|
(138
|
)
|
|
—
|
|
|||
Repurchases of common stock
|
(48,382
|
)
|
|
(981
|
)
|
|
—
|
|
|||
Net cash flows used in financing activities
|
(24,365
|
)
|
|
(19,221
|
)
|
|
(11,051
|
)
|
|||
Increase (decrease) in cash and cash equivalents
|
1,101
|
|
|
(1,581
|
)
|
|
6,382
|
|
|||
Cash and cash equivalents, beginning of year
|
6,969
|
|
|
8,550
|
|
|
2,168
|
|
|||
Cash and cash equivalents, end of year
|
$
|
8,070
|
|
|
$
|
6,969
|
|
|
$
|
8,550
|
|
|
December 25, 2019
|
|
December 26, 2018
|
|
December 27, 2017
|
||||||
Supplemental cash flow information
|
|
|
|
|
|
|
|
|
|||
Cash paid for interest, net of capitalized interest
|
$
|
3,649
|
|
|
$
|
3,393
|
|
|
$
|
3,314
|
|
Cash paid during the year for income taxes, net
|
$
|
558
|
|
|
$
|
183
|
|
|
$
|
336
|
|
Non-cash investing and financing activity
|
|
|
|
|
|
||||||
Unpaid purchases of property and equipment
|
$
|
746
|
|
|
$
|
1,543
|
|
|
$
|
4,741
|
|
Schedule of non-cash transactions
|
|
|
|
|
|
||||||
Borrowing on revolver for financing fees
|
$
|
—
|
|
|
$
|
693
|
|
|
$
|
—
|
|
•
|
Franchise License - inclusive of advertising services, development agreements, training, access to plans and help desk services;
|
•
|
Discounted renewal option; and
|
•
|
Hardware services.
|
•
|
Level 1: Quoted prices for identical instruments in active markets.
|
•
|
Level 2: Observable prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs or significant value drivers are observable.
|
•
|
Level 3: Unobservable inputs used when little or no market data is available.
|
|
|
|
Fair Value Measurements Using
|
||||||||||||
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Other assets - Interest rate swap
|
$
|
360
|
|
|
$
|
—
|
|
|
$
|
360
|
|
|
$
|
—
|
|
|
|
|
Fair Value Measurements Using
|
|
|
||||||||||||||
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Impairment Losses
|
||||||||||
Certain ROU assets, net
|
$
|
6,196
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,196
|
|
|
$
|
3,220
|
|
Certain property and equipment, net
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
339
|
|
|
|
|
Fair Value Measurements Using
|
|
|
||||||||||||||
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Impairment Losses
|
||||||||||
Certain property and equipment, net
|
$
|
449
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
449
|
|
|
$
|
5,147
|
|
|
|
|
Fair Value Measurements Using
|
|
|
||||||||||||||
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Impairment Losses
|
||||||||||
Certain property and equipment, net
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
32,594
|
|
|
December 25, 2019
|
|
December 26, 2018
|
||||
Land
|
$
|
12,323
|
|
|
$
|
12,323
|
|
Buildings and improvements
|
144,794
|
|
|
156,806
|
|
||
Other property and equipment
|
75,234
|
|
|
76,061
|
|
||
Construction in progress
|
4,213
|
|
|
2,989
|
|
||
|
236,564
|
|
|
248,179
|
|
||
Less: accumulated depreciation and amortization
|
(144,786
|
)
|
|
(144,034
|
)
|
||
|
$
|
91,778
|
|
|
$
|
104,145
|
|
|
December 25, 2019
|
|
December 26, 2018
|
||||
Cost
|
$
|
120,700
|
|
|
$
|
120,700
|
|
Accumulated impairment charges
|
(58,812
|
)
|
|
(58,812
|
)
|
||
Trademarks, net
|
$
|
61,888
|
|
|
$
|
61,888
|
|
|
December 25, 2019
|
|
December 26, 2018
|
||||
Favorable leasehold interest
|
$
|
—
|
|
|
$
|
6,038
|
|
Less: accumulated amortization
|
—
|
|
|
(5,758
|
)
|
||
Total favorable leasehold interest, net
|
$
|
—
|
|
|
$
|
280
|
|
Unfavorable leasehold interest liability
|
$
|
—
|
|
|
$
|
(9,156
|
)
|
Less: accumulated amortization
|
—
|
|
|
8,514
|
|
||
Unfavorable leasehold interest liability, net
|
$
|
—
|
|
|
$
|
(642
|
)
|
|
Property Leases
|
|
Equipment Leases
|
|
Total
|
||||||
Finance lease cost:
|
|
|
|
|
|
||||||
Amortization of right-of-use assets
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
9
|
|
Interest on lease liabilities
|
27
|
|
|
—
|
|
|
27
|
|
|||
Operating lease cost
|
26,212
|
|
|
1,273
|
|
|
27,485
|
|
|||
Short-term lease cost
|
—
|
|
|
34
|
|
|
34
|
|
|||
Variable lease cost
|
455
|
|
|
186
|
|
|
641
|
|
|||
Sublease income
|
(2,430
|
)
|
|
—
|
|
|
(2,430
|
)
|
|||
Total lease cost
|
$
|
24,273
|
|
|
$
|
1,493
|
|
|
$
|
25,766
|
|
|
December 25, 2019
|
||
Lease cost – Occupancy and other operating expenses
|
$
|
24,540
|
|
Lease cost – General & administrative
|
463
|
|
|
Lease cost – Depreciation and amortization
|
9
|
|
|
Lease cost – Interest expense
|
27
|
|
|
Lease cost - Closed-store reserve
|
727
|
|
|
Total lease cost, net
|
$
|
25,766
|
|
|
December 25, 2019
|
||||||||||
|
Property Leases
|
|
Equipment Leases
|
|
Total
|
||||||
Cash paid for amounts included in the measurement of lease liabilities
|
|
|
|
|
|
||||||
Operating cash flows used for operating leases
|
$
|
25,168
|
|
|
$
|
1,282
|
|
|
$
|
26,450
|
|
Financing cash flows used for finance leases
|
$
|
(68
|
)
|
|
$
|
—
|
|
|
$
|
(68
|
)
|
|
|
|
|
|
|
||||||
Non-cash investing and financing activities:
|
|
|
|
|
|
||||||
Operating lease ROU assets obtained in exchange for lease liabilities:
|
|
|
|
|
|
||||||
Operating lease ROU assets
|
10,339
|
|
|
256
|
|
|
$
|
10,595
|
|
||
Derecognition of ROU assets due to terminations, impairment or modifications
|
(4,574
|
)
|
|
(157
|
)
|
|
$
|
(4,731
|
)
|
||
|
|
|
|
|
|
||||||
Operating lease ROU assets obtained and liabilities incurred as a result of adoption of ASC 842:
|
|
|
|
|
|
||||||
Operating lease ROU assets
|
$
|
200,555
|
|
|
$
|
4,668
|
|
|
$
|
205,223
|
|
Operating lease liabilities
|
$
|
217,615
|
|
|
$
|
4,668
|
|
|
$
|
222,283
|
|
|
|
|
|
|
|
||||||
Other Information
|
|
|
|
|
|
||||||
Weighted-average remaining lease term—finance leases
|
2.83
|
|
|
—
|
|
|
|
||||
Weighted-average remaining lease term—operating leases
|
12.08
|
|
|
3.20
|
|
|
|
||||
Weighted-average discount rate—finance leases
|
11.10
|
%
|
|
—
|
|
|
|
||||
Weighted-average discount rate—operating leases
|
4.38
|
%
|
|
3.96
|
%
|
|
|
|
Finance Leases
|
|
Operating Leases
|
||||||||
For the Years Ending
|
Minimum
Lease
Payments
|
|
Minimum
Lease
Payments
|
|
Minimum
Sublease
Income
|
||||||
December 30, 2020
|
$
|
54
|
|
|
$
|
26,808
|
|
|
$
|
2,754
|
|
December 29, 2021
|
54
|
|
|
25,978
|
|
|
2,887
|
|
|||
December 28, 2022
|
45
|
|
|
24,871
|
|
|
3,284
|
|
|||
December 27, 2023
|
—
|
|
|
22,309
|
|
|
3,318
|
|
|||
December 25, 2024
|
—
|
|
|
19,751
|
|
|
3,203
|
|
|||
Thereafter
|
—
|
|
|
139,454
|
|
|
27,265
|
|
|||
Total
|
$
|
153
|
|
|
$
|
259,171
|
|
|
$
|
42,711
|
|
Less: imputed interest (3.96% to 11.1%)
|
(36
|
)
|
|
(45,273
|
)
|
|
|
|
|||
Present value of capital lease obligations
|
117
|
|
|
213,898
|
|
|
|
|
|||
Less: current maturities
|
(34
|
)
|
|
(16,406
|
)
|
|
|
|
|||
Noncurrent portion
|
$
|
83
|
|
|
$
|
197,492
|
|
|
|
|
|
Capital Leases
|
|
Operating Leases
|
||||||||
For the Years Ending
|
Minimum
Lease
Payments
|
|
Minimum
Lease
Payments
|
|
Minimum
Sublease
Income
|
||||||
December 25, 2019
|
$
|
95
|
|
|
$
|
25,388
|
|
|
$
|
1,443
|
|
December 30, 2020
|
54
|
|
|
24,437
|
|
|
1,108
|
|
|||
December 29, 2021
|
54
|
|
|
23,342
|
|
|
1,078
|
|
|||
December 28, 2022
|
45
|
|
|
22,338
|
|
|
1,001
|
|
|||
December 27, 2023
|
—
|
|
|
20,634
|
|
|
989
|
|
|||
Thereafter
|
—
|
|
|
150,342
|
|
|
2,612
|
|
|||
Total
|
$
|
248
|
|
|
$
|
266,481
|
|
|
$
|
8,231
|
|
Less: imputed interest (11.0% to 11.1%)
|
(64
|
)
|
|
|
|
|
|||||
Present value of capital lease obligations
|
184
|
|
|
|
|
|
|||||
Less: current maturities
|
(68
|
)
|
|
|
|
|
|||||
Noncurrent portion
|
$
|
116
|
|
|
|
|
|
|
|
|
December 25, 2019
|
||||||
|
Notional
|
|
Fair value
|
||||
Other Assets - Interest rate swap
|
$
|
40,000
|
|
|
$
|
360
|
|
|
December 25, 2019
|
|
December 26, 2018
|
||||
Interest expense on hedged portion of debt
|
$
|
461
|
|
|
$
|
—
|
|
Interest income on interest rate swap
|
(84
|
)
|
|
—
|
|
||
Interest expense on debt and derivatives, net
|
$
|
377
|
|
|
$
|
—
|
|
|
Gain Recognized in OCI
|
|
(Gain) Reclassified from AOCI into Interest expense
|
||||||||||
|
December 25, 2019
|
|
December 26, 2018
|
|
December 25, 2019
|
|
December 26, 2018
|
||||||
Interest rate swap
|
$
|
430
|
|
|
—
|
|
|
$
|
(84
|
)
|
|
—
|
|
|
December 25, 2019
|
|
December 26, 2018
|
||||
Accrued sales and property taxes
|
$
|
4,665
|
|
|
$
|
5,016
|
|
Accrued legal settlements and professional fees
|
16,901
|
|
|
38,639
|
|
||
Gift card liability
|
3,006
|
|
|
2,512
|
|
||
Deferred franchise and development fees
|
705
|
|
|
369
|
|
||
Other (1)
|
3,320
|
|
|
5,228
|
|
||
Total other accrued expenses and current liabilities
|
$
|
28,597
|
|
|
$
|
51,764
|
|
|
December 25, 2019
|
|
December 26, 2018
|
||||
Deferred rent (1)
|
$
|
—
|
|
|
$
|
10,660
|
|
Deferred franchise and development fees
|
5,612
|
|
|
5,224
|
|
||
Other (2)
|
67
|
|
|
4,140
|
|
||
Total other noncurrent liabilities
|
$
|
5,679
|
|
|
$
|
20,024
|
|
For the Years Ended
|
December 25, 2019
|
|
December 26, 2018
|
|
December 27, 2017
|
||||||
Current income taxes:
|
|
|
|
|
|
|
|
|
|||
Federal
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
State
|
104
|
|
|
220
|
|
|
250
|
|
|||
Total current
|
104
|
|
|
220
|
|
|
250
|
|
|||
Deferred income taxes:
|
|
|
|
|
|
|
|
|
|||
Federal
|
5,991
|
|
|
(3,526
|
)
|
|
1,495
|
|
|||
State
|
3,587
|
|
|
98
|
|
|
192
|
|
|||
Total deferred
|
9,578
|
|
|
(3,428
|
)
|
|
1,687
|
|
|||
Adjustment to deferred taxes for tax rate change
|
—
|
|
|
—
|
|
|
(1,440
|
)
|
|||
Tax provision (benefit) for income taxes
|
$
|
9,682
|
|
|
$
|
(3,208
|
)
|
|
$
|
497
|
|
For the Years Ended
|
December 25, 2019
|
|
December 26, 2018
|
|
December 27, 2017
|
|||
Statutory federal income tax rate applied to
earnings before income taxes and extraordinary items |
21.0
|
%
|
|
21.0
|
%
|
|
35.0
|
%
|
State tax benefit (net of federal benefit)
|
6.0
|
|
|
5.0
|
|
|
0.6
|
|
Change in valuation allowance
|
2.4
|
|
|
(6.9
|
)
|
|
10.9
|
|
TRA expense
|
—
|
|
|
1.3
|
|
|
(21.4
|
)
|
Revaluation of deferred taxes
|
—
|
|
|
—
|
|
|
(15.8
|
)
|
WOTC Credit
|
(0.8
|
)
|
|
3.3
|
|
|
(2.5
|
)
|
Stock option exercises
|
(1.0
|
)
|
|
2.1
|
|
|
—
|
|
Other
|
0.3
|
|
|
0.5
|
|
|
(1.3
|
)
|
Total
|
27.9
|
%
|
|
26.3
|
%
|
|
5.5
|
%
|
|
December 25, 2019
|
|
December 26, 2018
|
||||
Deferred assets:
|
|
|
|
|
|
||
Capital leases
|
$
|
31
|
|
|
$
|
53
|
|
Accrued vacation
|
454
|
|
|
456
|
|
||
Accrued legal
|
4,434
|
|
|
10,343
|
|
||
Deferred rent
|
—
|
|
|
3,788
|
|
||
Accrued workers’ compensation
|
1,090
|
|
|
1,660
|
|
||
Enterprise zone and other credits
|
10,442
|
|
|
13,001
|
|
||
Net operating losses
|
1,814
|
|
|
6,260
|
|
||
Fixed assets
|
2,955
|
|
|
3,374
|
|
||
ROU assets
|
57,931
|
|
|
—
|
|
||
Other
|
4,698
|
|
|
5,239
|
|
||
Total deferred tax assets
|
83,849
|
|
|
44,174
|
|
||
Valuation allowance
|
(5,993
|
)
|
|
(5,149
|
)
|
||
Net deferred tax assets
|
77,856
|
|
|
39,025
|
|
||
Deferred liabilities:
|
|
|
|
|
|
||
Goodwill
|
(6,060
|
)
|
|
(6,229
|
)
|
||
Trademark
|
(16,745
|
)
|
|
(17,654
|
)
|
||
Prepaid expense
|
(791
|
)
|
|
(528
|
)
|
||
ROU liabilities
|
(52,056
|
)
|
|
—
|
|
||
Other
|
(167
|
)
|
|
(2,905
|
)
|
||
Deferred tax liabilities
|
(75,819
|
)
|
|
(27,316
|
)
|
||
Net deferred tax asset
|
$
|
2,037
|
|
|
$
|
11,709
|
|
Range of Exercise Prices
|
|
Number
Outstanding
|
|
Weighted-Average
Remaining
Contractual Life
(in Years)
|
|
Weighted-
Average Exercise
Price
|
|
Number
Exercisable
|
|
Weighted-Average
Exercise Price
|
||||||||
$4.09
|
|
99,531
|
|
|
3.50
|
|
$
|
4.09
|
|
|
99,531
|
|
|
$
|
4.09
|
|
||
$5.84
|
|
1,159,366
|
|
|
2.55
|
|
5.84
|
|
|
1,159,366
|
|
|
$
|
5.84
|
|
|||
$9.65 - $13.95
|
|
731,158
|
|
|
8.54
|
|
11.51
|
|
|
175,097
|
|
|
$
|
11.86
|
|
|||
$15.00
|
|
87,515
|
|
|
4.78
|
|
15.00
|
|
|
84,151
|
|
|
$
|
15.00
|
|
|||
$4.09 - $15.00
|
|
$
|
2,077,570
|
|
|
3.28
|
|
$
|
8.14
|
|
|
$
|
1,518,145
|
|
|
$
|
6.93
|
|
|
December 25, 2019
|
|
December 26, 2018
|
||
Expected volatility
|
28.7
|
%
|
|
28.4
|
%
|
Risk-free interest rate
|
2.3
|
%
|
|
2.9
|
%
|
Expected term (years)
|
6.25
|
|
|
6.25
|
|
Expected dividends
|
—
|
|
|
—
|
|
|
Shares
|
|
Weighted-Average
Fair Value
|
|||
Unvested shares at December 27, 2017
|
196,642
|
|
|
$
|
13.70
|
|
Granted
|
395,880
|
|
|
$
|
10.22
|
|
Released
|
(45,991
|
)
|
|
$
|
13.86
|
|
Forfeited, cancelled, or expired
|
(55,831
|
)
|
|
$
|
13.42
|
|
Unvested shares at December 26, 2018
|
490,700
|
|
|
$
|
10.91
|
|
Granted
|
299,052
|
|
|
$
|
11.62
|
|
Released
|
(147,862
|
)
|
|
$
|
10.73
|
|
Forfeited, cancelled, or expired
|
(53,882
|
)
|
|
$
|
11.81
|
|
Unvested shares at December 25, 2019
|
588,008
|
|
|
$
|
11.23
|
|
For the Years Ended
|
December 25, 2019
|
|
December 26, 2018
|
|
December 27, 2017
|
||||||
Numerator:
|
|
|
|
|
|
|
|
|
|||
Net income (loss)
|
$
|
24,900
|
|
|
$
|
(8,994
|
)
|
|
$
|
8,619
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|||
Weighted-average shares outstanding—Basic
|
36,739,209
|
|
|
38,574,553
|
|
|
38,453,347
|
|
|||
Weighted-average shares outstanding—Diluted
|
37,441,503
|
|
|
38,574,553
|
|
|
39,086,676
|
|
|||
Net income (loss) per share—Basic
|
$
|
0.68
|
|
|
$
|
(0.23
|
)
|
|
$
|
0.22
|
|
Net income (loss) per share—Diluted
|
$
|
0.67
|
|
|
$
|
(0.23
|
)
|
|
$
|
0.22
|
|
Anti-dilutive securities not considered in diluted EPS
calculation
|
526,295
|
|
|
2,593,104
|
|
|
747,985
|
|
For the Years Ended
|
December 25, 2019
|
|
December 26, 2018
|
|
December 27, 2017
|
|||
Weighted-average shares outstanding—Basic
|
36,739,209
|
|
|
38,574,553
|
|
|
38,453,347
|
|
Dilutive effect of stock options and restricted shares
|
702,294
|
|
|
—
|
|
|
633,329
|
|
Weighted-average shares outstanding—Diluted
|
37,441,503
|
|
|
38,574,553
|
|
|
39,086,676
|
|
|
December 25, 2019
|
|
December 26, 2018
|
||||
Core Market(1):
|
|
|
|
||||
Company-operated restaurant revenue
|
$
|
351,624
|
|
|
$
|
340,421
|
|
Franchise revenue
|
14,918
|
|
|
14,144
|
|
||
Franchise advertising fee revenue
|
11,049
|
|
|
10,831
|
|
||
Total core market
|
$
|
377,591
|
|
|
$
|
365,396
|
|
Non-Core Market(2):
|
|
|
|
||||
Company-operated restaurant revenue
|
$
|
39,488
|
|
|
$
|
48,414
|
|
Franchise revenue
|
13,901
|
|
|
11,627
|
|
||
Franchise advertising fee revenue
|
11,350
|
|
|
10,391
|
|
||
Total non-core market
|
$
|
64,739
|
|
|
$
|
70,432
|
|
Total revenue
|
$
|
442,330
|
|
|
$
|
435,828
|
|
|
December 25, 2019
|
|
December 26, 2018
|
||
Greater Los Angeles area market
|
70.5
|
%
|
|
69.2
|
%
|
Other markets
|
29.5
|
%
|
|
30.8
|
%
|
Total
|
100
|
%
|
|
100
|
%
|
December 27, 2017
|
$
|
5,759
|
|
Revenue recognized - beginning balance
|
(396
|
)
|
|
Additional contract liability
|
365
|
|
|
Revenue recognized - additional contract liability
|
(135
|
)
|
|
December 26, 2018
|
$
|
5,593
|
|
Revenue recognized - beginning balance
|
(441
|
)
|
|
Additional contract liability
|
1,457
|
|
|
Revenue recognized - additional contract liability
|
(292
|
)
|
|
December 25, 2019
|
$
|
6,317
|
|
|
2019
|
|
2018
|
|||||||||||||||||||||
(Dollar amounts in thousands, except
share data)
|
December
|
|
September
|
|
June
|
|
March
|
|
December
|
|
September
|
|
June
|
|
March
|
|||||||||
Selected Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total revenue ($)
|
107,546
|
|
|
112,067
|
|
|
113,740
|
|
|
108,977
|
|
|
106,261
|
|
|
112,178
|
|
|
111,633
|
|
|
105,756
|
|
|
Income (loss) from operations ($)
|
5,336
|
|
|
10,118
|
|
|
20,580
|
|
|
2,292
|
|
|
(30,990
|
)
|
(4
|
)
|
9,492
|
|
|
7,589
|
|
|
4,448
|
|
Provision (benefit) for income taxes ($)
|
728
|
|
|
2,940
|
|
|
5,665
|
|
|
349
|
|
|
(8,410
|
)
|
|
2,388
|
|
|
865
|
|
|
1,949
|
|
|
Net income (loss) ($)
|
3,498
|
|
|
6,402
|
|
|
14,087
|
|
|
913
|
|
|
(23,410
|
)
|
(4
|
)
|
6,835
|
|
|
5,052
|
|
|
2,529
|
|
Per Share Data (2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
0.10
|
|
|
0.18
|
|
|
0.37
|
|
|
0.02
|
|
|
-0.60
|
|
|
0.18
|
|
|
0.13
|
|
|
0.07
|
|
|
Diluted
|
0.10
|
|
|
0.18
|
|
|
0.37
|
|
|
0.02
|
|
|
-0.60
|
|
|
0.17
|
|
|
0.13
|
|
|
0.06
|
|
|
Weighted average shares used in computing net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
34,503,722
|
|
|
35,859,502
|
|
|
37,939,912
|
|
|
38,633,702
|
|
|
38,751,522
|
|
|
38,602,658
|
|
|
38,482,074
|
|
|
38,465,208
|
|
|
Diluted
|
35,242,122
|
|
|
36,397,368
|
|
|
38,580,722
|
|
|
39,496,436
|
|
|
38,751,522
|
|
(3)
|
39,205,090
|
|
|
39,043,434
|
|
|
38,987,351
|
|
|
Selected Operating Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of restaurants (at period end)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-operated
|
195
|
|
|
201
|
|
|
200
|
|
|
211
|
|
|
213
|
|
|
212
|
|
|
211
|
|
|
212
|
|
|
Franchised
|
287
|
|
|
284
|
|
|
284
|
|
|
273
|
|
|
271
|
|
|
271
|
|
|
269
|
|
|
268
|
|
|
System-wide
|
482
|
|
|
485
|
|
|
484
|
|
|
484
|
|
|
484
|
|
|
483
|
|
|
480
|
|
|
480
|
|
|
Average unit volume (AUV)
(company-operated) (1)
|
1,931
|
|
|
1,978
|
|
|
1,934
|
|
|
1,838
|
|
|
1,785
|
|
|
1,891
|
|
|
1,890
|
|
|
1,791
|
|
|
Comparable restaurant sales growth (%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-operated
|
4.3
|
|
|
1.6
|
|
|
0.4
|
|
|
1.5
|
|
|
3.7
|
|
|
2.0
|
|
|
(1.6
|
)
|
|
(2.0
|
)
|
|
Franchised
|
3.6
|
|
|
0.6
|
|
|
0.9
|
|
|
3.2
|
|
|
5.1
|
|
|
3.0
|
|
|
(0.3
|
)
|
|
(0.4
|
)
|
|
System-wide
|
3.9
|
|
|
1.1
|
|
|
0.7
|
|
|
2.4
|
|
|
4.4
|
|
|
2.6
|
|
|
(0.9
|
)
|
|
(1.1
|
)
|
(1)
|
AUVs consist of average annualized sales of all company-operated restaurants over the fiscal quarter.
|
(2)
|
Due to the use of weighted average shares outstanding for each quarter of computing earnings per share, the sum of the quarterly per share amounts may not equal the per share amount for the year.
|
(3)
|
Due to a loss for the period, zero incremental shares are included because the effect would be antidilutive.
|
(4)
|
Loss from operations and net loss includes a $36.3 million legal settlement in the period.
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
ITEM 9A.
|
CONTROLS AND PROCEDURES
|
ITEM 9B.
|
OTHER INFORMATION
|
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
ITEM 11.
|
EXECUTIVE COMPENSATION
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
ITEM 14.
|
PRINCIPAL ACCOUNTING FEES AND SERVICES
|
ITEM 15.
|
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
|
(1)
|
Financial Statements: Consolidated financial statements filed as part of this report are listed under Item 8. Financial Statements and Supplementary Data.
|
(2)
|
Financial Statement Schedules: None.
|
(3)
|
Exhibits:
|
|
|
|
|
|
|
Incorporated by Reference
|
|
|
|||||||
Number
|
|
Description
|
|
Filed
Herewith
|
|
Form
|
|
Period
Ended
|
|
Exhibit
|
|
Filing
Date
|
|
SEC File Number
|
|
3.1
|
|
|
|
|
10-Q
|
|
6/25/2014
|
|
3.1
|
|
|
9/5/2014
|
|
001-36556
|
|
3.2
|
|
|
|
|
10-Q
|
|
6/25/2014
|
|
3.2
|
|
|
9/5/2014
|
|
001-36556
|
|
4.1
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
||
10.1
|
|
|
|
|
10-Q
|
|
9/24/2014
|
|
10.1
|
|
|
11/7/2014
|
|
001-36556
|
|
10.2
|
|
|
|
|
8-K
|
|
N/A
|
|
10.1
|
|
|
12/16/2014
|
|
001-36556
|
|
10.3
|
|
|
|
|
8-K
|
|
N/A
|
|
10.1
|
|
|
8/22/2014
|
|
001-36556
|
|
10.4
|
|
|
|
|
8-K
|
|
N/A
|
|
10.2
|
|
|
8/22/2014
|
|
001-36556
|
|
10.5
|
|
|
|
|
S-1/A
|
|
N/A
|
|
10.14
|
|
|
7/14/2014
|
|
333-197001
|
10.6
|
|
|
|
|
S-1
|
|
N/A
|
|
10.3
|
|
|
6/24/2014
|
|
333-197001
|
|
10.7
|
|
|
|
|
S-1
|
|
N/A
|
|
10.4
|
|
|
6/24/2014
|
|
333-197001
|
|
10.8
|
|
|
|
|
S-1
|
|
N/A
|
|
10.5
|
|
|
6/24/2014
|
|
333-197001
|
|
10.9
|
|
|
|
|
S-1
|
|
N/A
|
|
10.6
|
|
|
6/24/2014
|
|
333-197001
|
|
10.10
|
|
|
|
|
S-1
|
|
N/A
|
|
10.7
|
|
|
6/24/2014
|
|
333-197001
|
|
10.11
|
|
|
|
|
S-1
|
|
N/A
|
|
10.8
|
|
|
6/24/2014
|
|
333-197001
|
|
10.12
|
|
|
|
|
S-1
|
|
N/A
|
|
10.9
|
|
|
6/24/2014
|
|
333-197001
|
|
10.13
|
|
|
|
|
S-1
|
|
N/A
|
|
10.12
|
|
|
6/24/2014
|
|
333-197001
|
|
10.14*
|
|
|
|
|
S-1
|
|
N/A
|
|
10.13
|
|
|
6/24/2014
|
|
333-197001
|
|
10.15
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
||
10.16
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
||
10.17
|
|
|
|
|
S-1/A
|
|
N/A
|
|
10.27
|
|
|
7/22/2014
|
|
333-197001
|
|
10.18*
|
|
|
|
|
S-1/A
|
|
N/A
|
|
10.22
|
|
|
7/22/2014
|
|
333-197001
|
|
10.19*
|
|
|
|
|
S-1/A
|
|
N/A
|
|
10.25
|
|
|
7/22/2014
|
|
333-197001
|
10.20*
|
|
|
|
|
S-1/A
|
|
N/A
|
|
10.26
|
|
|
7/22/2014
|
|
333-197001
|
|
10.21*
|
|
|
|
|
10-Q
|
|
6/29/2016
|
|
10.27
|
|
|
8/5/2016
|
|
001-36556
|
|
10.22*
|
|
|
|
|
10-Q
|
|
9/28/2016
|
|
10.28
|
|
|
11/4/2016
|
|
001-36556
|
|
10.23*
|
|
|
|
|
S-8
|
|
N/A
|
|
4.3
|
|
|
8/6/2018
|
|
333-226621
|
|
10.24*
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
||
10.25*
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
||
10.26*
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
||
10.27*
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
||
10.28*
|
|
|
|
|
10-K
|
|
12/27/2017
|
|
10.29
|
|
|
3/9/2018
|
|
001-36556
|
|
10.29*
|
|
|
|
|
S-1
|
|
N/A
|
|
10.15
|
|
|
6/24/2014
|
|
333-197001
|
|
10.30*
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
||
10.31*
|
|
|
|
|
10-Q
|
|
3/27/2019
|
|
10.31
|
|
|
5/3/2019
|
|
001-36556
|
|
10.32*
|
|
|
|
|
10-K
|
|
12/27/2017
|
|
10.30
|
|
|
3/9/2018
|
|
001-36556
|
|
10.33*
|
|
|
|
|
10-Q
|
|
3/27/2019
|
|
10.32
|
|
|
5/3/2019
|
|
001-36556
|
|
10.34*
|
|
|
|
|
S-8
|
|
N/A
|
|
4.3
|
|
|
5/8/2018
|
|
333-224730
|
|
10.35*
|
|
|
|
|
S-8
|
|
N/A
|
|
4.4
|
|
|
5/8/2018
|
|
333-224730
|
|
10.36*
|
|
|
|
|
S-8
|
|
N/A
|
|
4.5
|
|
|
5/8/2018
|
|
333-224730
|
21.1
|
|
|
|
|
S-1
|
|
N/A
|
|
21.1
|
|
|
6/24/2014
|
|
333-197001
|
|
23.1
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
24.1
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
31.1
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
32.1
|
|
|
**
|
|
|
|
|
|
|
|
|
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
*
|
This exhibit is a management contract or a compensatory plan or arrangement.
|
**
|
Furnished herewith.
|
ITEM 16.
|
FORM 10-K SUMMARY
|
|
EL POLLO LOCO HOLDINGS, INC.
|
||
|
|
|
|
|
By:
|
|
/s/ Bernard Acoca
|
|
|
|
Bernard Acoca
|
|
|
|
President and Chief Executive Officer
|
|
Date:
|
March 6, 2020
|
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Bernard Acoca
|
|
Director, President and Chief Executive Officer (principal executive officer)
|
|
March 6, 2020
|
Bernard Acoca
|
|
|
|
|
|
|
|
|
|
/s/ Laurance Roberts
|
|
Chief Financial Officer (principal financial and accounting officer)
|
|
March 6, 2020
|
Laurance Roberts
|
|
|
|
|
|
|
|
|
|
/s/ Michael G. Maselli
|
|
Chairman and Director
|
|
March 6, 2020
|
Michael G. Maselli
|
||||
|
|
|
|
|
/s/ Dean C. Kehler
|
|
Director
|
|
March 6, 2020
|
Dean C. Kehler
|
||||
|
|
|
|
|
/s/ John M. Roth
|
|
Director
|
|
March 6, 2020
|
John M. Roth
|
||||
|
|
|
|
|
/s/ Douglas J. Babb
|
|
Director
|
|
March 6, 2020
|
Douglas J. Babb
|
||||
|
|
|
|
|
/s/ Samuel N. Borgese
|
|
Director
|
|
March 6, 2020
|
Samuel N. Borgese
|
||||
|
|
|
|
|
/s/ Mark Buller
|
|
Director
|
|
March 6, 2020
|
Mark Buller
|
|
|
|
|
|
|
|
|
|
/s/ William R. Floyd
|
|
Director
|
|
March 6, 2020
|
William R. Floyd
|
|
|
|
|
|
|
|
|
|
/s/ Carol Lynton
|
|
Director
|
|
March 6, 2020
|
Carol Lynton
|
|
|
|
•
|
the name and address of the stockholder and the beneficial owner, if any, on whose behalf the proposal or nomination is made;
|
•
|
the class and number of shares that are owned of record and beneficially by the stockholder proposing the business or nominating the nominee;
|
•
|
a representation that the stockholder giving the notice is a holder of record of shares of our voting stock entitled to vote at such annual meeting and intends to appear in person or by proxy at the annual meeting to propose the business or nominate the person or persons specified in the notice, as applicable; and
|
•
|
whether such stockholder or beneficial owner intends to deliver a proxy statement and forms of proxy to holders of at least the percentage of shares of our voting stock required to approve such proposal or nominate such nominee or nominees.
|
•
|
classified board of directors (the election and term of our directors);
|
•
|
the provisions regarding director liability;
|
•
|
the provisions regarding director and officer indemnification;
|
•
|
the provisions regarding competition and corporate opportunities;
|
•
|
the provisions regarding entering into business combinations with interested stockholders;
|
•
|
the provisions regarding stockholder action by written consent;
|
•
|
the provisions regarding calling special meetings of stockholders;
|
•
|
filling vacancies on our board of directors;
|
•
|
the advance notice requirements for stockholder proposals and director nominations; and
|
•
|
the amendment provision requiring that the above provisions be amended only with a 75% supermajority vote.
|
•
|
prior to such date, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;
|
•
|
upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding specified shares; or
|
•
|
at or subsequent to such date of the transaction that resulted in a person or entity becoming an interested stockholder, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder.
|
•
|
owner of 15% or more of the outstanding voting stock of the corporation;
|
•
|
an affiliate or associate of the corporation and was the owner of 15% or more of the outstanding voting stock of the corporation at any time within three years immediately prior to the relevant date; or
|
•
|
an affiliate or associate of the above.
|
•
|
transaction from which the director derives an improper personal benefit;
|
•
|
act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
|
•
|
unlawful payment of dividends or redemption of shares; or
|
•
|
breach of a director’s duty of loyalty to the corporation or its stockholders.
|
Location:
|
Franchisee:
|
Franchisee Notice Address:
|
Franchisee Notice Facsimile Number:
|
1.
|
SCOPE AND PURPOSE OF AGREEMENT
|
2.
|
THE EL POLLO LOCO® MARKS & SYSTEM
|
3.
|
TERM
|
4.
|
SITE DEVELOPMENT
|
5.
|
IMPROVEMENTS, FIXTURES AND EQUIPMENT
|
6.
|
FEES, TAXES AND OTHER CHARGES
|
7.
|
FINANCIAL REPORTING, BILLING AND PAYMENT
|
8.
|
ADVERTISING AND MARKETING
|
9.
|
INSURANCE AND INDEMNIFICATION
|
10.
|
VENDING MACHINES
|
11.
|
COMPLIANCE WITH MANUAL AND WITH SYSTEM STANDARDS
|
12.
|
RESTAURANT MAINTENANCE AND REPAIR
|
13.
|
HOURS OF OPERATION
|
14.
|
PERSONNEL STANDARDS
|
15.
|
INSPECTIONS
|
16.
|
TRAINING
|
17.
|
ASSIGNMENT
|
18.
|
DEFAULT AND TERMINATION
|
19.
|
RIGHTS AND OBLIGATIONS UPON TERMINATION
|
20.
|
RIGHTS TO A SUCCESSOR FRANCHISE
|
21.
|
PROPRIETARY RIGHTS AND UNFAIR COMPETITION
|
22.
|
DISPUTE RESOLUTION
|
23.
|
MISCELLANEOUS PROVISIONS
|
24.
|
EFFECTIVE DATE
|
25.
|
ACKNOWLEDGMENTS
|
26.
|
ANTI-TERRORISM LAW
|
27.
|
SIGNATURES
|
FRANCHISOR:
|
|
FRANCHISEE:
|
||
EL POLLO LOCO, INC., a Delaware Corporation
|
|
____________________________, an individual
|
||
By:
|
|
|
By:
|
|
Name:
|
|
|
Name:
|
|
Title:
|
|
|
Title:
|
An individual
|
Date:
|
|
|
Date:
|
|
FRANCHISEE:
|
|
____________________________, an individual
|
|
By:
|
|
Name:
|
|
Title:
|
An individual
|
Date:
|
|
____________________________, an individual
|
|
By:
|
|
Name:
|
|
Title:
|
An individual
|
Date:
|
|
_______________________________, a ___________________________
|
||
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
|
Date:
|
|
|
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
|
Date:
|
|
By:
|
|
|
By:
|
|
Name:
|
|
|
Name:
|
|
Title:
|
An individual
|
|
Title:
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An individual
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Date:
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|
|
Date:
|
|
Depository:
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Branch:
|
|
Street Address, City, State, Zip Code:
|
||
Bank Transit/ABA Number:
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Account Number:
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SECTION 1.1
|
REGISTERED AND PRINCIPAL OFFICE
|
SECTION 1.2
|
OTHER OFFICES
|
SECTION 1.3
|
REGISTERED AGENT FOR SERVICE OF PROCESS
|
SECTION 2.1
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POWERS
|
SECTION 2.2
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PURPOSES
|
SECTION 2.3
|
USE OF TRADEMARKS
|
SECTION 3.5
|
ANNUAL AND QUARTERLY MEETINGS OF THE MEMBERS
|
SECTION 4.1
|
NUMBER
|
SECTION 4.2
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VACANCIES
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SECTION 4.3
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REMOVAL OF DIRECTORS
|
SECTION 4.4
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QUALIFICATION
|
SECTION 4.5
|
TERMS
|
SECTION 4.6
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RESIGNATION
|
SECTION 4.7
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POWERS
|
SECTION 4.8
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MEETINGS
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SECTION 4.9
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NOTICE OF SPECIAL MEETING
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SECTION 4.10
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ACTION WITHOUT A MEETING
|
SECTION 4.11
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QUORUM AND VOTING
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SECTION 4.12
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ORGANIZATION
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SECTION 4.13
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COMPENSATION
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SECTION 4.14
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ATTENDANCE BY TELEPHONE
|
SECTION 5.1
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OFFICES
|
SECTION 5.2
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TERM OF OFFICE; VACANCIES
|
SECTION 5.3
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REMOVAL OF OFFICERS
|
SECTION 5.4
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RESIGNATIONS
|
SECTION 5.5
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COMPENSATION
|
SECTION 5.6
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REFUND OF PAYMENT
|
SECTION 5.7
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POWERS AND DUTIES
|
SECTION 5.8
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DELEGATION OF DUTIES
|
SECTION 6.1
|
CONTRIBUTIONS
|
SECTION 6.2
|
PAYMENT OF CONTRIBUTIONS
|
SESTION 6.3
|
PAYMENT IN PAYMENTS
|
SECTION 7.1
|
RECORDING
|
SECTION 7.2
|
WAIVER
|
SECTION 8.1
|
DESIGNATED FINANCIAL AGENTS
|
SECTION 8.2
|
OTHER AGREEMENTS
|
SECTION 10.1
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INDEMNIFICATION IN PROCEEDINGS OTHER THAN ACTIONS BY, OR IN THE RIGHT OF THE CORPORATION
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SECTION 10.2
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INDEMNIFICATION OF PERSONS PARTIES TO A PROCEEDING BY OR IN THE RIGHT OF CORPORATION
|
SECTION 10.3
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MANDATORY INDEMNIFICATION
|
SECTION 10.4
|
AUTHORIZATION OF INDEMNIFICATION IS REQUIRED
|
SECTION 10.5
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ADDITIONAL CONDITIONS TO INDEMNIFICATION
|
SECTION 10.6
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PREPAYMENT OF EXPENSES
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SECTION 10.7
|
INDEMNIFICATION DISALLOWED IN CERTAIN CIRCUMSTANCES
|
SECTION 10.8
|
NONEXCLUSIVITY
|
SECTION 11.1
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FISCAL YEAR
|
SECTION 11.2
|
GENDER AND NUMBER
|
SECTION 11.3
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ARTICLES AND OTHER HEADINGS
|
SECTION 11.4
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MINUTES, BOOKS AND RECORDS OF ACCOUNT
|
SECTION 11.5
|
STATUTORY CITES
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(1)
|
Calling meeting to order.
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(2)
|
Proof of notice of meeting and determination of quorum.
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(3)
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Reading and disposing of minutes of previous meeting.
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(4)
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Announcement of purposes for the meeting.
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(5)
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Reports of officers.
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(6)
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Unfinished business.
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(7)
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New business, including election of directors if an annual meeting.
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(8)
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Adjournment.
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|
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Amount
|
%
|
||||
Gross Sales
|
|
$
|
0
|
|
|
||
|
|
|
|
||||
Net Sales
|
|
0
|
|
100.0
|
%
|
||
|
|
|
|
||||
Food Cost
|
|
0
|
|
0.0
|
%
|
||
Paper Cost
|
|
0
|
|
0.0
|
%
|
||
Total Food & Paper
|
|
0
|
|
0.0
|
%
|
||
Gross Profit
|
|
0
|
|
0.0
|
%
|
||
|
|
|
|
||||
Hourly and Manager labor
|
|
0
|
|
0.0
|
%
|
||
Fringe Benefits (a)
|
|
0
|
|
0.0
|
%
|
||
Total Labor
|
|
0
|
|
0.0
|
%
|
||
|
|
|
|
||||
Utilities
|
|
0
|
|
0.0
|
%
|
||
Repair and Maintenance
|
|
0
|
|
0.0
|
%
|
||
Cash Over/Short
|
|
0
|
|
0.0
|
%
|
||
Controllable Costs (b)
|
|
0
|
|
0.0
|
%
|
||
Restaurant Controllable Profit
|
|
0
|
|
0.0
|
%
|
||
|
|
|
|
||||
Advertising
|
|
0
|
|
0.0
|
%
|
||
Royalties
|
|
0
|
|
0.0
|
%
|
||
Indirect Costs (c )
|
|
0
|
|
0.0
|
%
|
||
Occupancy Costs (d)
|
|
0
|
|
0.0
|
%
|
||
|
|
|
|
||||
Restaurant Operating Profit
|
|
$____
|
|
____%
|
|
(a)
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To include payroll taxes, health benefits, vacation, and workers compensation expense
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(b)
|
To include trash, store security, uniforms, laundry, cleaning/janitorial, operating supplies, music and plant service, landscape, and other misc. restaurant costs not captured elsewhere.
|
(c)
|
To include credit card fees, bank charges, licenses, permits, fees, and pre-opening costs
|
(d)
|
To include minimum and percentage rent, property taxes and insurance.
|
Customer:
|
|
Franchise Store Number(s) Covered:
|
|
Customer Site(s):
|
|
Date of Franchise Agreement(s):
|
|
Effective Date:
|
|
Customer’s Authorized Representative(s)/Contacts:
|
|
Invoices to Customer to be sent to:
|
|
Notices, if to Customer, to be sent to:
|
|
El Pollo Loco IT:
|
|
Notices, if to El Pollo Loco IT, to be sent to:
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|
Term Commencement Date:
|
|
Term Expiration Date:
|
Upon expiration of the Franchise Agreement(s), unless sooner terminated as provided by the Franchise Agreement(s)
|
Service Level Description
|
See Attached EPL IT Standard Platinum Service Description
|
Annual Fees:
|
See Attached Franchise Support Options
|
Special Terms:
|
See Website
|
•
|
Back of house system
|
•
|
Two front counter POS terminals with receipt printers
|
•
|
Two drive thru POS terminals with receipt printer
|
•
|
Four KDS systems (four monitors and four controllers)
|
•
|
BROADBAND Wide Area Network connection, router and firewall
|
•
|
All local area network components including equipment rack, UPS, patch panel, patch cords, cabling infrastructure and data jacks
|
•
|
Normal Business Hours are 8:00 A.M. to 5:00 P.M., Pacific Time Monday through Friday excluding EPL IT’s normal published holidays and schedule downtimes for maintenance and support*
|
•
|
Backup internet
|
•
|
WIFI (Consumer/Guest and Internal)
|
•
|
Android Tablet (e.g., Samsung Galaxy Tab A)
|
•
|
Optional - Three (3) digital menu boards (three (3) panels and three (3) controllers)
|
•
|
Micros Enterprise Management, currently version 5.7
|
•
|
Patching of installed MyEpl.Net Web Based Portal
|
•
|
Patching of critical security updates for installed operating system, currently version Windows 10 Professional
|
•
|
Current updates on antivirus software
|
•
|
Current updates on anti-malware software
|
•
|
Endpoint DLP (data loss protection) which includes white listing
|
•
|
Software disaster recovery tool
|
•
|
Proactive monitoring via EPL Alerts program
|
•
|
LMS (EDUonGO learning management solution)
|
•
|
WIFI Cloud Management / Consumer WIFI
|
•
|
Digital Menu Board management / price integration
|
•
|
Acceptance of Visa, MasterCard, American Express and Discover
|
•
|
Secure high speed credit card authorization as primary
|
•
|
Secure low speed credit card authorization as backup
|
•
|
NFC Payments (Apple Pay/Android Pay/Samsung Pay)
|
•
|
Gift card Processing
|
•
|
Educating EPL Franchisees about cardholder data security, the Payment Card Industry (“PCI”) Data Security Standard (“DSS”) and PCI DSS compliance
|
•
|
Providing Automated Quarterly Network Scanning of stores for potential security issues.
|
•
|
Executing a compliance strategy that helps to:
|
o
|
Eliminate the storage of prohibited data
|
o
|
Protect stored data
|
o
|
Secure the merchant network environment via compliance with the PCI DSS
|
o
|
Identify the payment applications used and ensures merchants use or switch to Payment Application (“PA”) that comply with the PA-DSS
|
•
|
Tracking and reporting on the program’s progress each month
|
•
|
Repair and/or replacement cost of firewall
|
•
|
Software maintenance on firewall
|
•
|
Remote monitoring of up/down state
|
•
|
Latest security updates to prevent unauthorized intrusion attacks
|
•
|
Quarterly PCI Scanning
|
•
|
WIFI Firewall / SSID Configuration
|
•
|
High speed access to all credit card processing
|
•
|
High speed access to MyEpl.net Portal
|
•
|
Does not include unrestricted Internet access
|
•
|
24x7 active monitoring and alerting
|
•
|
7:00 am to 12:00 am** Helpdesk via a toll free number 1-888-POLLO-IT
|
•
|
Single point of contact for hardware and cabling dispatch
|
•
|
Menu changes***
|
•
|
Pricing adjustments***
|
•
|
Full portal support
|
•
|
WAN troubleshooting and support
|
•
|
Support on all IT and POS issues
|
•
|
Access to standard corporate reporting
|
•
|
Near real time sales performance data for all stores
|
•
|
Any service outside of the scoop of this Agreement will be billing at the following rates:
|
•
|
Helpdesk rate $60 per hour
|
•
|
Networking rate $120 per hour
|
•
|
Development rate $120 per hour
|
Service Description
|
Annual Cost*
|
Monthly
Cost*
|
Platinum Support Option
|
Payable to:
|
Quarterly PCI Scanning
|
$300**
|
$25**
|
Yes
|
EPL
|
Unlimited Number of Calls for Helpdesk Support including Credit Card Support
|
$2,004
|
$167
|
Yes
|
EPL
|
MyEpl.Net
|
$600
|
$50
|
Yes
|
EPL
|
Backup Internet (3G or LTE)
|
$300
|
$25
|
Yes
|
EPL
|
Network Management Fee
|
$300
|
$25
|
Yes
|
EPL
|
Mobile Device Management (Per Tablet)
|
$36
|
$3
|
Yes
|
EPL
|
WIFI Controller (2 Access Points)
|
$135
|
$11.25
|
Yes
|
EPL
|
Learning Management Platform
|
$228
|
$19
|
Yes
|
EPL
|
Monthly Cost per Store 1
|
|
$325.25
|
|
|
Broadband WAN 2
|
$1,188
|
$99
|
Yes
|
EPL
|
Digital Menu Board 3
|
$672
|
$56
|
Yes
|
EPL
|
Kiosk Software 4
|
$1,920
|
$160
|
Yes
|
EPL
|
Beyond Software 5
|
$720
|
$60
|
Yes
|
EPL
|
Oracle Micros POS Software Support 6
|
Up to $1,000
|
n/a
|
n/a
|
EPL
|
FRANCHISEE:
|
|
If an entity:
___________________, a ______________
|
|
By:
|
|
Name:
|
|
Title:
|
|
Date:
|
|
If an individual:
________________________, an Individual
|
|
By:
|
|
Name:
|
|
Title:
|
An Individual
|
Date:
|
|
ASSIGNEE:
|
|
__________________, a ____________
|
|
By:
|
|
Name:
|
|
Title:
|
|
Date:
|
|
ASSIGNEE:
|
|
__________________, a ____________
|
|
By:
|
|
Name:
|
|
Title:
|
|
Date:
|
|
(a)
|
The tenant entity on the lease must match the franchise entity on the successor franchise agreement; and
|
(b)
|
The term (with renewal options) of the lease must match at least the initial term of the successor franchise agreement; and
|
(c)
|
The landlord consents to your use of the premises as an El Pollo Loco® restaurant which will be open during the required days and hours set out in the Operations Manual.
|
Location No
|
Address
|
City
|
State
|
ZIP
|
Agreement Signed
|
Next Remodel Due
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Territory:
|
Developer:
|
DEVELOPER NAME:
|
|
PRINCIPALS:
|
|
NOTICE ADDRESS:
|
|
FAX NUMBER:
|
|
EMAIL:
|
|
COMMENCEMENT DATE:
|
|
EXPIRATION DATE:
|
|
DEVELOPMENT FEE (SECTION 3):
|
|
|
INITIAL FRANCHISEE AMOUNT
|
RESAC SUBMITTAL DATES
|
SITE COMMITMENT DATES
(Date for delivery of signed leases or purchase agreements)
|
OPENING DATE
OF RESTAURANT
|
Restaurant # 1
|
$40,000.00
|
|
|
|
Restaurant # 2
|
$30,000.00
|
|
|
|
Restaurant # 3
|
$30,000.00
|
|
|
|
1.
|
Specific Terms. The RSUs shall have the following terms:
|
Vesting
|
The RSUs shall vest in four (4) equal installments on each of the first four (4) anniversaries of the Award Date, subject to the terms and conditions of the Plan.
|
Settlement
|
Each RSU shall be settled by the delivery of one (1) share of Common Stock to the Participant within thirty (30) calendar days following the date on which such RSU becomes vested in accordance with this Award Agreement.
|
4.
|
No Right to Continued Employment. The granting of the RSUs evidenced hereby and this Award Agreement shall impose no obligation on the Company or any Affiliate to continue the employment of the Participant and shall not lessen or affect the Company's or any Affiliate's right to terminate the employment of the Participant.
|
6.
|
Transferability.
|
14.
|
Amendment and Termination. To the extent permitted by terms of the Plan, this Award Agreement may be wholly or partially amended, altered or terminated at any time or from time to time by the Administrator or the Board, but no amendment, alteration or termination shall be made that would materially impair the rights of the Participant under the RSUs without the Participant's consent.
|
23.
|
|
1.
|
Term of Employment; Executive Representation.
|
(a)
|
Employment Term. Subject to the terms and conditions set forth in this Agreement, the term of Executive's employment under this Agreement shall commence on December 1, 2018 (the “Effective Date”) and end on the 18th month anniversary of the Effective Date (the “Initial Employment Term”) and on such date and on each subsequent anniversary of such date, the term shall, without further action by Executive or Company, be extended by an additional one-year period (each such one year term, the “Renewal Employment Term”) subject to earlier termination as provided in this Agreement; provided, however, that either Company or Executive may, by written notice to the other given not less than 60 days prior to the scheduled expiration of the Initial Employment Term or Renewal Employment Term (a “Non-Renewal Notice”), as applicable, cause the term not to extend (the period during which Executive is employed under the terms of this Agreement, including the Initial Employment Term and all Renewal Employment Terms, is referred to herein as the “Employment Term”). The Employment Term shall also terminate earlier upon termination of Executive's employment as set forth in Section 7.
|
(b)
|
Executive Representation. Executive hereby represents to the Company that the execution and delivery of this Agreement by Executive and the Company and the performance by Executive of the Executive’s duties hereunder shall not constitute a breach of, or otherwise contravene, the terms of any employment agreement or other agreement or policy to which Executive is a party or otherwise bound.
|
2.
|
Position.
|
(a)
|
During the Employment Term, Executive shall serve as the Company’s Chief Marketing Officer and shall principally perform Executive’s duties to the Company and its affiliates from the Company’s offices in the Orange County, California metropolitan area, subject to normal and customary travel requirements
|
(b)
|
During the Employment Term, Executive will devote Executive’s full business time and best efforts to the performance of Executive’s duties hereunder and will not engage in any other business, profession or occupation (including in an advisory capacity, consulting capacity, or otherwise) for compensation or otherwise which would conflict with the rendition of such services either directly or indirectly, without the prior written consent of the Board of Directors of the Company (the “Board”).
|
3.
|
Compensation.
|
(a)
|
During the Employment Term, the Company shall pay Executive a base salary (the “Base Salary”) at the annual rate of $375,000 (less applicable withholding taxes), payable in regular installments in accordance with the Company’s usual payment practices. Executive shall be entitled to such increases in Executive’s Base Salary, if any, as may be determined from time to time in the sole discretion of the Board.
|
(b)
|
With respect to each full calendar year during the Employment Term, Executive shall be eligible to earn an annual bonus award (an “Annual Bonus”) based on the achievement of specified performance goals, which shall be determined by the Board in its sole discretion within ninety (90) days following the commencement of each calendar year, with a targeted bonus equal to seventy-five percent (75%) of Executive’s then current Base Salary (the “Target Bonus”). The Annual Bonus, if any, will be paid between January 1 and March 15 of the year following the year to which it relates.
|
(c)
|
At the discretion of the Board, during the Employment Term, starting in 2020, Executive will be eligible to receive an annual discretionary equity grant, with the amount and terms thereof determined by the Board.
|
4.
|
Sign on Awards
|
(a)
|
Equity in 2018. As soon as reasonably practical following the Effective Date (but before the close of the scheduled open trading window of the Company), Executive will receive the following equity grants (together, the “2018 Equity Grant”) with aggregate grant-date value targeted at approximately $250,000. The 2018 Equity Grant will consist of the following:
|
(i)
|
Approximately $250,000 worth of time-vested restricted stock units (or restricted shares) that will vest 25%/year, and
|
(b)
|
Equity in 2019. Executive will receive the following equity grants during the Company’s annual equity grant window in 2019, typically in May (together, the “2019 Equity Grant”) with the aggregate grant-date value targeted at approximately $600,000. The 2019 Equity Grant will consist of the following:
|
(i)
|
Approximately $250,000 worth of time-vested 10-year options that will vest 25%/year;
|
(ii)
|
Approximately $350,000 worth of time-vested restricted stock units (or restricted shares) that will vest 25%/year; and
|
(c)
|
Relocation. To assist the Executive with Executive’s relocation expenses, the Company will pay Executive cash payments totaling $150,000, consisting of the following:
|
(i)
|
A lump sum payment in the amount of $25,000 paid no later than the date of Executive’s initial paycheck issued by the Company; and
|
(ii)
|
A lump sum payment in the amount of $125,000 on January 2, 2019.
|
(d)
|
Indemnification. The Executive shall be covered under the Company’s directors and officers liability insurance during the Employment Term and thereafter to the same extent as such coverage is provided from time to time to similarly situated officers of the Company.
|
5.
|
Employee Benefits. During the Employment Term, Executive shall be provided, in accordance with the terms of the Company’s employee benefit plans as in effect from time to time, health insurance, retirement benefits and fringe benefits (collectively “Employee Benefits”) on the same basis as those benefits are generally made available to other senior executives of the Company. Company will also reimburse Executive for COBRA payments to cover the period of time until Executive becomes eligible for medical insurance in accordance with the terms of the Company’s health insurance plan. Executive shall be provided with annual vacation of four (4) weeks per each twelve (12) month period and additional weeks on a basis consistent with Company policy. During the Employment Term, the Company shall provide Executive with an automobile
|
6.
|
Business Expenses. During the Employment Term, reasonable, documented business expenses incurred by Executive in the performance of Executive’s duties hereunder shall be reimbursed by the Company in accordance with Company policies.
|
7.
|
Termination. The Employment Term and Executive’s employment hereunder may be terminated early by either party at any time and for any reason; provided that Executive will be required to give the Company at least ninety (90) days advance written notice of any resignation of Executive’s employment. Notwithstanding any other provision of this Agreement, the provisions of this Section 7 shall exclusively govern Executive’s rights upon termination of employment with the Company and its affiliates prior to expiration of the Employment Term.
|
(a)
|
By the Company For Cause, By Executive’s Resignation without Good Reason or upon Non-Renewal of the Employment Term.
|
(i)
|
The Employment Term and Executive’s employment hereunder may be terminated by the Company for Cause (as defined below) or by Executive’s resignation without Good Reason (as defined below).
|
(ii)
|
For purposes of this Agreement, “Cause” shall mean (a) action by the Executive that constitute acts of (1) fraud; (2) embezzlement; (3) gross insubordination; (4) gross misconduct; (5) material dishonesty which causes material harm to the Company; (b) the Executive’s inability, failure, or refusal to perform any duty, responsibility, or obligation of his position, which (to the extent such inability, failure, or refusal to perform is curable in the judgment of the Company) is not cured by the Executive within five (5) days after receiving written notice from the Company of such inability, failure; (c) Executive's commission of a felony; (d) Executive’s substance abuse or alcohol abuse which renders the Executive unfit to perform his duties; or (e) any breach of the covenants set forth in Section 8 of this Agreement by Executive. Any voluntary termination of employment by the Executive in anticipation of an involuntary termination of the Executive’s employment by the Company for Cause shall be deemed to be a termination for Cause.
|
(iii)
|
If Executive’s employment is terminated by the Company for Cause, if Executive resigns without Good Reason or if the Employment Term expires as a result of the Company delivering to the Executive the Non-Renewal Notice (such event, the “Company Non-Renewal”), Executive shall be entitled to receive:
|
(A)
|
the Base Salary through the date of termination;
|
(B)
|
except in the case of termination for Cause, any Annual Bonus earned but unpaid as of the date of termination for any previously completed calendar year;
|
(C)
|
reimbursement for any unreimbursed business expenses properly incurred by Executive in accordance with Company policy prior to the date of Executive’s termination; and
|
(D)
|
such Employee Benefits, if any, as to which Executive may be entitled under the employee benefit plans of the Company;
|
(E)
|
any additional amounts or benefits due under any applicable plan, program, agreement or arrangement of the Company or its affiliates or pursuant to applicable law (the amounts described in clauses (A) through (E) hereof being referred to as the “Accrued Rights”). The Accrued Rights under this Section 7 shall in all events be paid in accordance with the Company’s normal payroll procedures, expense reimbursement procedures or plan terms, as applicable.
|
(b)
|
Disability or Death.
|
(i)
|
The Employment Term and Executive’s employment hereunder shall terminate upon Executive’s death or if Executive (A) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan, or disability plan, covering employees of the Company or an affiliate of the Company (such incapacity is hereinafter referred to as “Disability”).
|
(ii)
|
Upon termination of Executive’s employment hereunder for either Disability or death, Executive or Executive’s estate (as the case may be) shall be entitled to receive:
|
(A)
|
the Accrued Rights; and
|
(B)
|
the Annual Bonus, if any, that the Executive would have been entitled to receive pursuant to Section 3(b) hereof in respect of the year in which such termination occurs based upon the actual achievement of the performance goals, multiplied by a fraction the numerator of which is the number of days Executive is employed by the Company in such year and the denominator of which is the total number of days in such year, payable when such Annual Bonus would have otherwise been payable in accordance with Section 3(b) had the Executive’s employment not terminated (the "Pro-Rata Bonus").
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(c)
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By the Company Without Cause or by Executive’s Resignation with Good Reason.
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(i)
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The Employment Term and Executive’s employment hereunder may be terminated by the Company without Cause or by Executive with Good Reason.
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(ii)
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For purposes of this Agreement, “Good Reason” shall mean:
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(A)
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Executive’s relocation, without his consent and other than for a temporary work assignment, by the Company outside Orange County, California;
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(B)
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a material diminution of Executive’s authority, duties, title or responsibilities as set forth in Section 2(a) hereof;
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(C)
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a reduction of Executive’s Base Salary (as increased from time to time) as set forth in Section 3(a) hereof;
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(D)
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the material failure of the Company to provide or cause to be provided to Executive any of the Employee Benefits described in Section 5 hereof; or
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(E)
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a requirement that Executive report to anyone other than the Chief Executive Officer or the Board; provided that none of the events described in clauses (A) through (E) of this Section 7(c)(ii) shall constitute Good Reason unless Executive shall have notified the Company in writing describing the event which constitutes Good Reason within thirty (30) days of the initial occurrence of such event and then only if the Company shall have failed to cure such event within thirty (30) days after the Company’s receipt of such written notice.
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(iii)
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If Executive’s employment is terminated by the Company without Cause (other than by reason of death or Disability), by Executive with Good Reason, Executive shall be entitled to receive:
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(A)
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the Accrued Rights;
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(B)
|
subject to Executive’s execution of a general release of claims in a form reasonably determined by the Company (the “Release”), the expiration of the applicable revocation period with respect to such Release within sixty (60) days following the date of termination and Executive’s continued compliance with the provisions of Section 8 and 9, the Pro-Rata Bonus;
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(C)
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subject to Executive’s execution of a Release, the expiration of the applicable revocation period with respect to such Release within sixty (60) days following the date of termination and Executive’s continued compliance with the provisions of Section 8 and 9, continued payment of the Base Salary in accordance with the Company's normal payroll practices for a period of twelve (12) months following the date of such termination, which shall commence on the sixtieth (60th) day following such termination (with the first payment equal to the cumulative amount that would have been paid in such initial sixty (60) day period); and
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(d)
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Notice of Termination. Any purported termination of employment by the Company or by Executive (other than due to Executive’s death) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 12(g) hereof. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the
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8.
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Non-Interference/Non-Solicitation. Executive acknowledges and recognizes that in the course of performing services for the Company, Executive will have access to certain confidential and proprietary information of the Company and its affiliates that is extremely valuable to the Company and its affiliates and is not known to the general public. Accordingly, Executive agrees as follows:
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(a)
|
Executive agrees that during the term of employment and until the first anniversary of the date of termination of Executive's employment with the Company or any subsidiary of the Company, as the case may be (the "Restricted Period"), the Executive will not directly or indirectly, use any Company Confidential Information (as defined in Section 9) to interfere with business relationships (whether formed before or after the date of this Agreement) between the Company or any of its affiliates and customers, suppliers, partners, members or investors of the Company or its affiliates.
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(b)
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Executive further agrees that during the Restricted Period, Executive will not, directly or indirectly, (i) solicit or encourage any employee of the Company or its affiliates to leave the employment of the Company or its affiliates, or (ii) solicit or encourage to cease to work with the Company or its affiliates any consultant then under contract with the Company or its affiliates; provided, however, that general advertising not directed specifically at employees of the Company or any affiliate shall not be deemed to violate this Section 8(b).
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(c)
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It is expressly understood and agreed that although Executive and the Company consider the restrictions contained in this Section 8 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that any restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.
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9.
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Confidentiality and Cooperation. Executive will not at any time (whether during or after Executive's employment with the Company) disclose or use for Executive's own benefit or purposes or the benefit or purposes of any other person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise other than the Company and any of its subsidiaries or affiliates, any trade secrets, information, data, or other confidential information relating to customers, development programs, costs, marketing, trading, investment, sales activities, promotion, credit and financial data, manufacturing processes, financing methods, plans, or the business and affairs of
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10.
|
DEFEND TRADE SECRETS ACT.
|
(a)
|
Notwithstanding anything set forth in this Agreement to the contrary, Executive shall not be prohibited from reporting possible violations of federal or state law or regulation to any governmental agency or entity or making other disclosures that are protected under the whistleblower provisions of federal or state law or regulation, nor is Executive required to notify the Company regarding any such reporting, disclosure or cooperation with the government.
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(b)
|
Pursuant to Section 1833(b) of the Defend Trade Secrets Act of 2016, Executive acknowledges that he shall not have criminal or civil liability under any federal or State trade secret law for the disclosure of a trade secret that (i) is made (A) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney and (B) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Nothing in this Agreement is intended to conflict with Section 1833(b) of the Defend Trade Secrets Act of 2016 or create liability for disclosures of trade secrets that are expressly allowed by such section.
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11.
|
Specific Performance. Executive acknowledges and agrees that the Company's remedies at law for a breach or threatened breach of any of the provisions of Section 8 or Section 9 would be inadequate and, in recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, shall be entitled to cease making any payments or providing any benefit otherwise required by this Agreement and obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available.
|
12.
|
Miscellaneous.
|
(a)
|
Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California, without regard to conflicts of laws principles thereof.
|
(b)
|
Entire Agreement/Amendments. This Agreement contains the entire understanding of the parties with respect to the employment of Executive by the Company. There are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties with respect to the subject matter herein other than those expressly set forth herein. This Agreement supersedes any other agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof which have been made by either party. This Agreement may not be altered, modified, or amended except by written instrument signed by the parties hereto.
|
(c)
|
No Waiver. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such party’s rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.
|
(d)
|
Severability. In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby.
|
(e)
|
Assignment. This Agreement shall not be assignable by Executive. This Agreement may be assigned by the Company to a company which is a successor in interest to substantially all of the business operations of the Company. Such assignment shall become effective when the Company notifies the Executive of such assignment or at such later date as may be specified in such notice. Upon such assignment, the rights and obligations of the Company hereunder shall become the rights and obligations of such successor company, provided that any assignee expressly assumes the obligations, rights and privileges of this Agreement.
|
(f)
|
Successors Binding Agreement. This Agreement shall inure to the benefit of and be binding upon personal or legal representatives, executors, administrators, successors, heirs, distributes, devises and legatees.
|
(g)
|
Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below Agreement, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.
|
(h)
|
Withholding Taxes. The Company may withhold from any amounts payable under this Agreement such Federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.
|
(i)
|
Section 409A. The intent of the parties is that payments and benefits under this Agreement comply with Section 409A of the Internal Revenue Code of 1986, as amended (the "Code"), to the extent subject thereto, and accordingly, to the maximum extent permitted, this Agreement shall be interpreted and administered to be in compliance therewith. Notwithstanding anything contained herein to the contrary, Executive shall not be considered to have terminated employment with the Company for purposes of any payments under this Agreement which are subject to Section 409A of the Code until the Executive has incurred a “separation from service” from the Company within the meaning of Section 409A of the Code. Each amount to be paid or benefit to be provided under this Agreement shall be construed as a separate identified payment for purposes of Section 409A of the Code. Without limiting the foregoing and notwithstanding anything contained herein to the contrary, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to this Agreement during the six-month period immediately following an Executive’s separation from service shall instead be paid on the first business day after the date that is six months following the Executive’s separation
|
(j)
|
Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
|
/s/ Bernard Acoca
|
|
Bernard Acoca
President and Chief Executive Officer
(Principal Executive Officer)
|
|
/s/ Laurance Roberts
|
|
Laurance Roberts
Chief Financial Officer
(Principal Financial Officer)
|
|
/s/ Bernard Acoca
|
|
Bernard Acoca
President and Chief Executive Officer
|
|
/s/ Laurance Roberts
|
|
Laurance Roberts
Chief Financial Officer
|
|