NATH 10-K & 10-Q changes, risk factors and insider trading
Nathans Famous, Inc. · Nasdaq · Retail-Eating Places · CIK 69733 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Risks Related to the Merger with Smithfield Foods”
New heading “The announcement and pendency of the proposed Merger with Smithfield Foods may adversely affect our business, financial condition and results of operations.”
New heading “Failure to complete the Merger could negatively impact the price of our common stock, as well as our future business and financial results.”
New heading “Our ability to complete the Merger is subject to certain closing conditions and the receipt of consents and approvals from government entities which may impose conditions that could adversely affect us or cause the Merger to be abandoned.”
New heading “Expenses related to the pending Merger are significant and will adversely affect our operating results.”
New heading “We are subject to business uncertainties and contractual restrictions while the Merger is pending, which could adversely affect our business.”
New heading “Litigation could result in substantial costs and may delay or prevent the Merger from being completed.”
Removed heading “Changing health or dietary preferences may cause consumers to avoid products offered by us in favor of alternative foods.”
Removed heading “While we have approved a quarterly dividend policy, there can be no assurance as to the declaration of future dividends or the amount of such dividends.”
Largest changes
The use of social media has become a larger element of our advertising and promotional efforts. These marketing initiatives may not be successful, resulting in expenses incurred without a corresponding increase in sales, increased customer awareness or engagement or brand awareness.see in full comparisonTheShouldlawsourandmarketingregulationsinitiativesgoverningorthemarketingusespend decrease, or should our marketing initiatives be less effective than those ofsocial media are evolving and changing. If the Company,ouremployees, our franchisees or business partners do not adhere to the laws and regulations regarding the use of social media,competitors, it may adversely affect our business, results ofoperations,operations and financialcondition and may subject the Company to litigation, fines or penalties.condition.
“Litigation could result in substantial costs and may delay or prevent the Merger from being completed.”see in full comparison
“Aspects of our operations are reliant upon internet-based activities, such as ordering supplies and back-office functions such as accounting and transaction processing, making payments and accepting credit card payments in our restaurants, as well as at third party online ordering and delivery businesses, processing payroll and other administrative functions, etc. …”see in full comparison
“Our declaration and payment of future cash dividends are subject to the final determination by our Board of Directors that (i) the dividend will be made in compliance with laws applicable to the declaration and payment of cash dividends, including Section 170 of the Delaware General Business Corporation Law, (ii) the dividend complies with the terms of our Credit Agreement, and (iii) the payment of dividends remains in our best interests, which determination will be based on a number of factors, including the impact of changing laws and regulations, economic conditions, our results of …”see in full comparison
“Our ability to complete the Merger is subject to certain closing conditions and the receipt of consents and approvals from government entities which may impose conditions that could adversely affect us or cause the Merger to be abandoned.”see in full comparison
“State authorities, including some attorneys general and state franchise regulators, have sought to impose restrictions on enforcement of covenants against competition and similar contractual arrangements between a business and its workers. Such an initiative was adopted in 2026 by the Virginia legislature. Similar undertakings have been proposed in the past at the federal level but have not been adopted. We do not believe that these restrictions will have a significant impact on our operations.”see in full comparison
Full comparison: every changed paragraph (65)
Risks Related to the Merger with Smithfield Foods
The announcement and pendency of the proposed Merger with Smithfield Foods may adversely affect our business, financial condition and results of operations.
There are material uncertainties and risks associated with the proposed Merger, including the timing of the consummation of the Merger, which may adversely affect our business and ongoing operations, financial condition and results of operations, employees, customers, stockholders, other parties and business prospects and a failure to complete the Merger on the terms reflected in the Merger Agreement or at all could have a material and adverse effect on our business, financial condition, results of operations, cash flows, and stock price. Refer to NOTE A – DESCRIPTION AND ORGANIZATION OF THE BUSINESS to our Consolidated Financial Statements in Item 1 of Part I of this Report, for further information.
Failure to complete the Merger could negatively impact the price of our common stock, as well as our future business and financial results.
The Merger Agreement contains a number of conditions that must be satisfied or waived prior to the completion of the Merger, including stockholder approval and regulatory approval. We cannot assure you that all of the conditions to the Merger will be satisfied or waived on a timely basis. If the conditions to the Merger are not satisfied or waived on a timely basis, we may be unable to complete the Merger as quickly as expected or at all.
If the Merger is not completed, our ongoing business may be adversely affected as follows: (i) we may experience negative reactions from the financial markets, including negative impacts on the market price of our common stock; (ii) some of management’s attention will have been directed to the Merger instead of being directed to our own operations and the pursuit of other opportunities that could have been beneficial to us; (iii) the manner in which customers, suppliers and other third parties perceive us may be negatively impacted, which in turn could have an adverse effect on our business; (iv) we may experience negative reactions from employees; (v) we will have expended time and resources that could otherwise have been spent on our business; and (vi) we may be required, in certain circumstances, to pay a termination fee of $10,581,814, as provided in the Merger Agreement. In addition, any significant delay in consummating the Merger could have an adverse effect on our operating results and adversely affect our relationships with customers and suppliers and would likely lead to a significant diversion of management and employee attention.
If the Merger is not completed, neither we nor the holders of our common stock will realize these benefits of the Merger. Moreover, we would also have nevertheless incurred substantial transaction-related fees and costs and the loss of management time and resources.
Our ability to complete the Merger is subject to certain closing conditions and the receipt of consents and approvals from government entities which may impose conditions that could adversely affect us or cause the Merger to be abandoned.
The Merger Agreement contains certain closing conditions, including, among others, the approval by the affirmative vote of the holders of a majority of our outstanding capital stock entitled to vote on the Merger to adopt and approve the Merger Agreement and the absence of any injunction or similar order issued by any government entity with jurisdiction over any party to the Merger Agreement or law that has the effect of prohibiting the consummation of the Merger or that makes consummation of the Merger illegal. The obligation of each party to consummate the Merger is also conditioned upon the other party’s representations and warranties being true and correct to the extent specified in the Merger Agreement and the other party having performed in all material respects its obligations under the Merger Agreement. We cannot assure you that the various closing conditions will be satisfied or will not result in the abandonment or delay of the Merger.
In addition, before the Merger may be completed, regulatory approval under the HSR Act must be obtained and the parties must also have obtained CFIUS Clearance for the Merger (the “Regulatory Approval”). The Company made the filing required under the HSR Act on January 23, 2026 and the applicable waiting period expired on February 23, 2026. Such conditions and the process of obtaining Regulatory Approval could have the effect of delaying completion of the Merger or of imposing additional costs or limitations on the combined company following the completion of the Merger, and the conditions may result in the failure of a closing condition under the Merger Agreement. The Regulatory Approval may not be received at all or may not be received in a timely fashion.
Expenses related to the pending Merger are significant and will adversely affect our operating results.
We have incurred and expect to continue to incur significant expenses in connection with the pending Merger, including legal and investment banking fees. We expect these costs to have an adverse effect on our operating results. We must pay substantially all of these costs and expenses whether or not the Merger is completed. If the Merger is not consummated, we may under certain circumstances be required to pay to Buyer a termination fee of $10,581,814. Our financial position and results of operations would be adversely affected if we were required to pay the termination fee.
We are subject to business uncertainties and contractual restrictions while the Merger is pending, which could adversely affect our business.
The Merger Agreement requires us to operate in the ordinary course of business and restricts us, without the consent of Buyer, from taking certain specified actions agreed by the parties to be outside the ordinary course of business until the pending Merger occurs or the Merger Agreement terminates. These restrictions may prevent us from pursuing otherwise attractive business opportunities and making other changes to our business before completion of the Merger or, if the Merger is not completed, termination of the Merger Agreement. In addition, matters relating to the Merger (including integration planning) will require substantial commitments of time and resources by our management, which could divert their time and attention.
Litigation could result in substantial costs and may delay or prevent the Merger from being completed.
While no lawsuits are currently pending in connection with the Merger, we (along with our directors and officers) may be named in lawsuits to enjoin us from proceeding with or consummating the Merger, or seeking to have the Merger rescinded after its consummation. Defending against such claims, even those without merit, could result in substantial costs and divert management’s time and resources, which may negatively impact our financial condition and adversely affect our business and results of operations. The ultimate resolution of any such lawsuit cannot be predicted, and an adverse ruling in any such lawsuit may cause the Merger to be delayed or not to be completed, which could cause us not to realize some or all of the anticipated benefits of the Merger.
Additionally, one of the conditions to the closing of the Merger is the absence of any injunction or similar order issued by government entity with jurisdiction over any party to the Merger Agreement or law that has the effect of prohibiting the consummation of the Merger or that makes consummation of the Merger illegal. Accordingly, if any lawsuit is successful in obtaining an injunction prohibiting the consummation of the Merger, then such injunction may prevent the Merger from becoming effective, or delay its becoming effective within the expected time frame.
Our results of operations could be adversely affected by pandemics, disease epidemics, or other public health concerns or other catastrophic events.concerns.
AThe actual or perceived effects of a recurrence of coronavirus (“COVID-19”) or the emergence of other healthpandemics, disease epidemics or pandemicsother public health concerns could substantiallynegatively impact customer traffic at our Company-owned and franchised restaurants, as well as sales to our Branded Product Program customers and royalties earned from our licensing activities.
The Company cannot predict if new variants of COVID-19 will be discovered, other healthpandemics, disease epidemics or pandemicsother public health concerns may arise, what restrictions may be enacted by local, state and the federal government, to what extent it can maintain off-premises sales volumes, whether it can maintain sufficient staffing levels at our Company-owned restaurants, or if individuals will be comfortable congregating in our dining rooms or public venues such as professional sports arenas, amusement parks, shopping malls or movie theaters, and what long-lasting effects COVID-19 or other healthpandemics, disease epidemics or pandemicsother public health concerns may have on the Company as a whole.
Additionally, unforeseen or other catastrophic events including natural disasters, military conflicts, terrorism, labor unrest and other political unrest could have an adverse impact on our operations, disrupt the operations of franchisees, suppliers or customers. These events could negatively impact consumer discretionary spending, thereby reducing demand for our products and/or the ability to receive products from suppliers.
Food and paper products represent approximately 25% to 30% of our cost of restaurant sales. We purchase large quantities of beef and beef trimmings and our beef costs represent approximately 80% to 90% of our cost of sales. The market for beef is particularly volatile and is subject to significant price fluctuations due to shrinking cattle herds due, in part, to a multi-year drought and high input costs, as well as seasonal shifts, adverse weather conditions, including the impact of climate change, environmental regulations, industrystrong consumer demand, inflationary pressures, the potential impacts of tariffs and other macroeconomic factors beyond our control.
WhileAlthough we are unable to predict these inflationary pressures eased slightly during fiscal year 2025,pressures, we may continue to experience increases in the cost of food, commodity and paper products which, in turn, may adversely affect our business, results of operations and financial condition.
The Company and our franchisees have increased prices on selected menu items in order to offset rising food and commodity costs. Although we have not experienced significant resistance to our past price increases, futureFuture price increases may deter customers from visiting our Company-owned and franchised restaurants, may decrease our ability to attract new customers, may decrease demand for our products at our Company-owned and franchised restaurants and may adversely affect our restaurant operations.
Our licensing revenue and overall profitability is substantially dependent on our agreement with Smithfield Foods, Inc.Foods and the loss or a significant reduction of this revenue would have a material adverse effect on our financial condition and results of operations.
We earned license royalties from Smithfield Foods, Inc.Foods of approximately $33,589,000 in fiscal 2025 and approximately $30,067,000 in fiscal 20242026 representing 23% and 22%21% of total revenues, respectively.revenues. As a result of our agreement with Smithfield Foods, Inc.Foods which expires in 2032, we expect that most of our license royalties will be earned from Smithfield Foods, Inc.Foods for the foreseeable future. Accordingly, in the event that (i) Smithfield Foods, Inc.Foods experiences financial or operational difficulties, (ii) there is a disruption or termination of the Smithfield Foods, Inc.Foods agreement or (iii) there is a significant decrease in our license royalties from Smithfield Foods, Inc., it would have a material adverse effect on our business, results of operations and financial condition. We cannot assure you that we will be able to renew the license agreement with Smithfield Foods, Inc.Foods.
A small number of our Branded Product Program customers account for a significant portion of our Branded Product Program revenues. Sales to our five largest Branded Product Program customers were 79%approximately and 77%80% of our Branded Product Program revenues in fiscal 2025 and fiscal 2024, respectively.2026. In the event that any one of these Branded Product Program customers experience financial difficulties or, upon the expiration of their existing agreements, if applicable, are not willing to do business with us in the future on terms acceptable to the Company, there could be a material adverse effect on our business, results of operations and financial condition.
Smithfield Foods, Inc.Foods currently has two manufacturing facilities producing different Nathan’s products and a long-term significant interruption of a primary facility could potentially disrupt our operations.
Smithfield Foods, Inc.Foods currently has two manufacturing facilities producing different Nathan’s products. A temporary closure at either of these plants could potentially cause a short-term disruption to the production or distribution of certain products to customers. A longer-term significant interruption at either of these production facilities, whether as a result of a natural disaster or other causes, could significantly impair our ability to operate our business on a day-to-day basis while Smithfield Foods, Inc.Foods determines how to make up for any lost production capabilities, during which time we may not be able to secure sufficient alternative sources of supply on acceptable terms, if at all. In addition, a long-term disruption in supply to our customers could cause our customers to determine not to purchase some or all of their hot dogs from us in the future, which in turn would adversely affect our business, results of operations and financial condition. Furthermore, a supply disruption or other events might affect our brand in the eyes of consumers and the retail trade, which damage might negatively impact our overall business in general, which could result in a material adverse effect on our business, results of operations or financial condition.
We have historically relied on one supplier for the majority of our hot dogs and another supplier for a majority of our supply of frozen crinkle-cut French fries for our restaurant system. An interruption in the supply of product from either of these suppliers without our obtaining an alternative source of supply on comparable terms and equivalent quality could lead to supply disruptions, increased costs and lower operating results. We have an agreement with a secondary hot dog manufacturer that continues to also supply natural casing hot dogs for our restaurant business.
Additionally, there is no assurance that any supplemental sources of supply would be capable of meeting our specifications and quality standards on a timely and consistent basis or that the financial terms of such supply arrangement will be comparable to our present terms.
A significant portion of our earnings has come from royalties paid by our product licensees, such as Smithfield Foods, Inc., Saratoga Food Specialties, Inc., a wholly-owned subsidiary of Solina, and Lamb Weston Holdings,Weston, Inc. Although our agreements with these licensees contain numerous controls and safeguards, and we monitor the operations of our product licensees, our licensees are independent contractors, and their employees are not our employees. Accordingly, we cannot necessarily control the performance of our licensees under their license agreements, including without limitation, the licensee’s continued best efforts to manufacture our products for retail distribution and our foodservice businesses, to timely deliver the licensed products, to market the licensed products and to assure the quality of the licensed products produced and/or sold by a product licensee. Any shortcoming in the quality, quantity and/or timely delivery of a licensed product could cause reputational damage to us, potentially adversely affecting our business, results of operations and financial condition. In addition, a licensee’s failure to effectively market the licensed products may result in decreased sales, which would adversely affect our business, results of operations and financial condition. Also, to the extent that the terms and conditions of any of these license agreements change or we change any of our product licensees, our business, results of operations and financial condition could be materially affected.
The quick-service restaurant business of the foodservice industry is intensely competitive with respect to taste preferences, dietary preferences, price, service, location, brand reputation, advertising and promotional initiatives, personnel, and the type and quality of menu offerings. We and our franchisees compete with international, national, regional and local restaurant chains. We also compete with non-traditional market participants including virtual kitchens, where meals are prepared at separate takeaway premises rather than a restaurant, and with food delivery services, which provide consumers with a convenient access to a broad range of competing restaurant chains. Other key competitive factors include the number and location of restaurants, quality and speed of service, attractiveness of facilities, effectiveness of digital and social media engagement, and new product development. We anticipate competition will continue to focus on quality, convenience and pricing. Many of our competitors have substantially larger marketing budgets which may provide them with a competitive advantage and some of these companies may be more innovative and be able to bring new products to market and more quickly capitalize on new consumer trends or preferences. Changes in pricing or other marketing strategies by these competitors can have an adverse impact on our sales, earnings and growth. ForIf example,we many of those competitors have adopted “value pricing” strategies intended to lure customers away from other companies, including our Company. Consequently, these strategies could have the effect of drawing customers away from companies which do not engage in discount pricing and could also negatively impact the operating margins of competitors which attempt to match their competitors’ price reductions. We may beare unable to change our pricing strategies sufficientlycontinue to compete ineffectively suchon anany environment.of the factors mentioned above, our business, results of operations and financial condition could be adversely affected.
In addition, if patrons have a poor experience at a Company-owned or a franchised restaurant, we may experience a decrease in customer counts which, in turn, may result in a decline in Company-owned restaurant sales or franchise royalties.
We and our franchisees compete within the foodservice market and the quick-service restaurant business not only for customers but also for management and hourly employees and qualified franchisees. If we are unable to maintain our competitive position, we could experience downward pressure on prices, lower demand for products, reduced margins, the inability to take advantage of new business opportunities and the loss of market share.
All such competition may adversely affect our business, results of operations and financial condition.
There has been an increase in theThe use of social media platforms and other forms of internet-based communications, including video sharing, blogs, chat platforms and instant messaging platforms, thatplatforms allow individuals to access a broad audience of consumers and other interested persons. The availability of information on these social media platforms and internet-based communications is virtually immediate, as is its impact. The opportunity for dissemination of information, including inaccurate information, organizing collective actions such as boycotts and other brand-damaging behaviors is seemingly limitless and readily available. Information concerning our business and products may be posted on such platforms at any time. Information posted may be adverse to our interests or may be inaccurate, each of which may harm our performance, prospects or business. The harm may be immediate without affording us an opportunity to investigate, respond to and address an issue. Such platforms could also be used for dissemination of trade secret information, compromising valuable Company assets. The dissemination of information online, regardless of its accuracy, could harm our business, results of operations and financial condition.
The use of social media has become a larger element of our advertising and promotional efforts. These marketing initiatives may not be successful, resulting in expenses incurred without a corresponding increase in sales, increased customer awareness or engagement or brand awareness. TheShould lawsour andmarketing regulationsinitiatives governingor themarketing usespend decrease, or should our marketing initiatives be less effective than those of social media are evolving and changing. If the Company, our employees, our franchisees or business partners do not adhere to the laws and regulations regarding the use of social media,competitors, it may adversely affect our business, results of operations,operations and financial condition and may subject the Company to litigation, fines or penalties.condition.
Changing health or dietary preferences may cause consumers to avoid products offered by us in favor of alternative foods.
The foodservice industry is affected by consumer preferences and perceptions, including calories, sodium, carbohydrates or fat. If prevailing health or dietary preferences, perceptions and governmental regulation cause consumers to avoid the products we offer in favor of alternative or healthier foods, demand for our products may be reduced and could materially adversely affect our business, results of operations and financial condition.
We have registered or applied to register many of our trademarks and service marks both in the United States and in foreign countries. Due to the differences in foreign trademark laws, our trademark rights may not receive the same degree of protection in foreign countries as they would in the United States. We also cannot assure you that our trademark and service mark applications will be approved. In addition, third parties may oppose our trademark and service mark applications, or otherwise challenge our use of the trademarks or service marks. In the event that our trademarks or service marks are successfully challenged, we could be forced to rebrand our products and services, which could result in loss of brand recognition, and could require us to devote resources towards advertising and marketing new brands. Further, we cannot assure you that competitors will not infringe upon our marks, or that we will have adequate resources to enforce our trademarks or service marks. We cannot ensure that all of the steps that we have taken to protect our intellectual property in the United States and foreign countries will be adequate. Furthermore, intellectual property disputes and trademark infringement claims may resultabsorb in a distraction forsignificant management time and significant expense, which may not be recoverable regardless of whether we are successful.
We also license third party franchisees and other licensees to use our trademarks and service marks. We enter into franchise agreements with our franchisees and license agreements with our licensees which govern the use of our trademarks and service marks. Although we make efforts to monitor the use of our trademarks and service marks by our franchisees and licensees, we cannot assure you that these efforts will be sufficient to ensure that our franchisees and licensees abide by the terms of the trademark licenses. In the event that our franchisees and licensees fail to do so, our trademark and service mark rights could be diluted.
Our earnings and business growth strategy depend in large part on the success of our restaurant franchisees and on new restaurant openings. Our corporate reputation or brand reputation may be harmed by actions taken by restaurant franchisees that are otherwise outside of our control.
We sell our products to retail outlets and wholesale distributors including,including traditional supermarkets, mass merchandisers, warehouse clubs, wholesalers, food service distributors and convenience stores. The replacement by or poor performance of our major wholesalers, retailers or chains or our inability to collect accounts receivable from our customers could materially and adversely affect our business, results of operations and financial condition. In addition, our customers offer branded and private label products that compete directly with our products for retail shelf space and consumer purchases. Accordingly, there is a risk that our customers may give higher priority to their own products or to the products of our competitors. In the future, our customers may not continue to purchase our products or provide our products with adequate levels of promotional support. A significant decline in the purchase of our products would have a material adverse effect on our business, results of operations and financial condition.
Consolidation also increases the risk that adverse changes in our customers’ business operations or financial performance will have a corresponding material adverse effect on us. For example, if our customers cannot access sufficient funds or financing, then they may delay, decrease, or cancel purchases of our products, or delay or fail to pay us for previous purchases.
Our sales and operating results can vary from quarter to quarter and year to year depending on various factors, many of which are beyond our control. These events and factors include changes in the cost or availability of commodities, including beef and beef trimmings, or labor and our inability to offset these higher costs with price increases; changes in customer demand and customer visits; seasonal variations in the timing and volume of Company-owned restaurant sales, Branded Product Program sales, licensees’ sales and franchisees’ sales; changes in the terms of our existing license/supply agreements and/or the replacement of existing licenses or suppliers; and changes in general market and macroeconomic conditions in the United States and in other regions of the world.
Our sales and operating results can vary from quarter to quarter and year to year depending on various factors, many of which are beyond our control. These events and factors include:
As of March 30,29, 2025,2026, we and our franchisees (including locations operated pursuant to our Branded Menu Program and excluding virtual kitchen locations) operated Nathan’s restaurants in 1719 states and 1211 foreign countries. As of March 30,29, 2025,2026, the highest concentration of operating units was in the Northeast, principally in New York and New Jersey. This geographic concentration in the Northeast can cause economic conditions in this area of the country to have a disproportionate impact on our overall results of operations. It is possible that adverse economic conditions in states or regions that contain a high concentration of Nathan’s restaurants could have a material adverse impact on our business, results of operations and financial condition.
We are significantly dependent upon our computer systems, our point-of-sales system and information technology to properly conduct our business. A failure or interruption of computer systems, our point-of-sales system or information technology could result in the loss of data, business interruptions or delays in business operations. While we undertake to keep all systems current, there can be no guarantee that we can update and maintain our systems at all times. Many of these systems are provided and managed by third parties, and we are reliant on these third-party providers to implement protective measures that ensure the security, availability and integrity of their systems. Despite our considerable efforts to secure our computer systems and these third-party systems, security breaches, such as unauthorized access and computer viruses, phishing attacks, introduction of malware or ransomware may occur resulting in system disruptions, shutdowns or unauthorized disclosure of confidential information. Any security breach of our computer systems, and/or these third-party systems may result in adverse publicity, loss of sales and profits, penaltiespenalties, legal claims or lossproceedings resulting from misappropriation of information.
Aspects of our operations are reliant upon internet-based activities, including back-office functions such as accounting, processing payroll, making payments and transaction processing, including accepting credit card payments in our restaurants, as well as at third party online ordering and delivery businesses.
Aspects of our operations are reliant upon internet-based activities, such as ordering supplies and back-office functions such as accounting and transaction processing, making payments and accepting credit card payments in our restaurants, as well as at third party online ordering and delivery businesses, processing payroll and other administrative functions, etc. For instance, if we fail to comply with applicable rules or requirements for the payment methods we accept, or if payment-related data is compromised due to a breach or misuse of data, we may be liable for costs incurred by payment card issuing banks and other third parties or subject to fines and higher transaction fees, or our ability to accept or facilitate certain types of payments may be impaired. In addition, our customers could lose confidence in certain payment types, which may result in a shift to other payment types or potential changes to our payment systems that may result in higher costs.
We also use third-party vendors.vendors to support various aspects of our operations. While we select third-party vendors carefully, we do not control their actions. Any problems caused by these third parties, including those resulting from breakdowns or other disruptions in communication services provided by a vendor, failure of a vendor to handle current or higher volumes, cyberattacks and security breaches at a vendor could adversely affect our ability to deliver products and services to conduct our business.
Although we have taken measures to protect our technology systems and infrastructure, including investing in our existing information technology systems and providing employee training around phishing, malware and other cyber risks, there can be no assurance that we will be successful and fully protected against cyber risks and security breaches. The techniques and sophistication used to conduct a cyberattack change frequently and the measures that we have taken do not guarantee that a cyberattack or security breach could not occur. The rapid evolution and increased adoption of artificial intelligence technologies to carry out more sophisticated attacks may intensify our cybersecurity risks. A cyberattack or security breach could result in operational disruptions, theft or fraud, or exposure of sensitive information to unauthorized parties. Such events could result in additional costs related to operational inefficiencies, damages, legal claims or proceedings or fines and may adversely affect our business, results of operations and financial condition. For more information regarding the Company’s cybersecurity activities, see Item 1C. of this Annual Report on Form 10-K.
Additionally, our Company-owned and franchised restaurants are highly service-oriented, and our success depends in part upon the ability to attract, retain and motivate a sufficient number of qualified employees, including franchisee management, restaurant managers and other crew members. The market for qualified employees in the retail food industry is very competitive. We are experiencing and may continue to experience a shortage of labor for positions in our Company-owned and franchised restaurants, due to the current competitive labor market. We and our franchisees have experienced and may continue to experience challenges in hiring and retaining restaurant employees which may result in decreased employee and customer satisfaction. Anticipated changesChanges in immigration laws, work authorization laws and other regulations may decrease the pool of candidates available for hire and may increase the costs, time and requirements to hire new employees.
We must comply with the Fair Labor Standards Act and various federal and state laws governing minimum wages. Increases in the minimum wage and labor regulations have increased our labor costs. On January 1, 2025,2026, the minimum wage increased from $16.00$16.50 to $16.50$17.00 in New York City, Long Island and Westchester which will be followed by an additional $0.50 increase in 2026.Westchester. Further, beginning in 2027, the minimum wage across New York State will increase annually according to the Consumer Price Index. Additionally, the federal government and a number of other states are evaluating various proposals to increase their respective minimum wage. As minimum wage rates increase, we may need to increase not only the wages of our minimum wage employees but also the wages paid to employees at wage rates that are above minimum wage. As a result, we anticipate that our labor costs will continue to increase. If we are unable to pass on these higher labor costs through price increases, our margins and profitability as well as the profitability and margins of our franchisees will be adversely impacted which could have a material adverse effect on our business, results of operations or financial condition.
State authorities, including some attorneys general and state franchise regulators, have sought to impose restrictions on enforcement of covenants against competition and similar contractual arrangements between a business and its workers. Such an initiative was adopted in 2026 by the Virginia legislature. Similar undertakings have been proposed in the past at the federal level but have not been adopted. We do not believe that these restrictions will have a significant impact on our operations.
Supply chain risk could increase our costs and limit the availability of ingredients and supplies that are critical to our operations. The markets for some of our ingredients, such as beef and beef trimmingstrimmings, are particularly volatile due to factors beyond our control such as limitedshrinking sources,cattle herds due, in part, to a multi-year drought and high input costs, as well as seasonal shifts, climate conditions and industrystrong demand,consumer including as a result of animal disease outbreaks, food safety concerns, product recalls and government regulation.demand. In addition, we have a limited number of suppliers and distributors. We remain in regular contact with our major suppliers and to date we have not experienced significant disruptions in our supply chain; however, during fiscal 20252026 the Company experienced significant increased costs for certain supplies and ingredients, such as packaging, beef and beef trimmings, and freight, which combined with inflationary pressures could continue. Such factors may have a material adverse effect on our business, results of operations and financial condition.
California also adopted legislation to address data privacy. The California Consumer Privacy Act (“CCPA”) imposes stringent data security standards which might apply more broadly than only within the borders of that statestate. (forAdditionally, example, if a California resident buys products or has them shipped into the state and pays with a credit or debit card). In total, 14other states have adopted laws that apply (or that will apply as of the effective date) to data and other biometric technology, which may be broadly interpreted. It remains uncertain whether the CCPA and the data privacy laws adopted in other states will have a material impact on our operations or that of our franchisees.
In recent years, there has been an increasing focus by investors, activists, the media, governmental and non-governmental organizations and stakeholders – including employees, franchisees, customers and suppliers on ESG matters. A failure, whether real or perceived, to address ESG could adversely affect our business, including by heightening other risks disclosed in this Item 1A, “Risk Factors.”business. In the restaurant industry, concerns have been expressed regarding energy management, water management, food and packaging waste management, supply chain management and labor practices. If we are perceived to have not responded appropriately to the growing concern of ESG issues, then our restaurantbrand patrons and other customersimage may choose to patronize a competitor that they perceive to be more responsive,suffer and this may adversely affect our business, results of operations and financial condition.
We may also face increased pressure to provide expanded disclosure and establish additional commitments, targets or goals, and take actions to meet them, which could expose us to additional market, operational, execution and reputational costs and risks. We may also experience backlash from individuals and investors who do not support these initiatives, including those who support the enactment of “anti-ESG” legislation.
Management's Discussion & Analysis (MD&A)
New heading “Merger with Smithfield Foods, Inc.”
New heading “Adoption of New Accounting Standard”
Removed heading “Refinancing of Senior Secured Notes due 2025”
Removed heading “Credit Agreement”
Largest changes
Inflationary pressures negatively impacted our consolidated results of operations during fiscalsee in full comparison2025,2026, most notably within our Branded Product Program segment, due primarily to commodity prices on beef andwebeef trimmings. We anticipate continued inflationary pressures on commodity prices, including beef and beeftrimmings, as well as labor inflationtrimmings during fiscal2026.2027. In general, we have been able to offset some of these cost increases resulting from inflationbythrough various actions, such as increasing prices at our Company-owned restaurants and entering into sales agreements with our Branded Product Program customers that are correlated to our cost of beef and beef trimmings. We continue to monitor these inflationary pressures andwillmayattemptneed toimplementadjustmitigationourmeasurespricesasfurtherneeded.to mitigate the impact of these inflationary pressures. Inherent volatility in commodity markets, including beef and beef trimmings, could have a significant impact on our results of operations. Delays in implementing price increases, competitive pressures,recession fears,a decline in consumer spending levels and other factors may limit our ability to implement further price increases in the future.
see in full comparisonInflationaryOurpressuresaverageon labor and rising commodity prices, most notably for beef and beef trimmings, have impacted our consolidated resultscost ofoperationshot dogs during the fiscal 2026 period was approximately 19% higher than during the fiscal 2025period, and this trend may continue into fiscal 2026.period. Our average cost of hot dogs during the fiscal 2025 period was approximately 7% higher than during the fiscal 2024period. Our average cost of hot dogs during the fiscal 2024 period was approximately 10% higher than during the fiscal 2023period. Inherent volatility experienced in certain commodity markets, such as those for beef and beef trimmings due to seasonal shifts, climate conditions, industry demand, inflationary pressures and other macroeconomic factors could have an adverse effect on our results of operations. This impact will depend on our ability to manage such volatility through price increases and product mix. We are unable to predict the future cost of our hot dogs and expect to experience price volatility for our beef products during fiscal2026.2027. To the extent that beef prices increase as compared to earlier periods, it could impact our results of operations. In the past, we entered into purchase commitments for a portion of our hot dogs to reduce the impact of increasing market prices. We may attempt to enter into similar purchase arrangements for hot dogs and other products in the future.
“Inflationary pressures on labor and rising commodity prices, most notably for beef and beef trimmings, have impacted our consolidated results of operations during the fiscal 2026 period, and this trend may continue into fiscal 2027.”see in full comparison
Full comparison: every changed paragraph (58)
Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to facilitate an understanding of our business and results of operations. This MD&A should be read in conjunction with our Consolidated Financial Statements and the accompanying Notes to Consolidated Financial Statements included elsewhere in this Form 10-K.
The following section generally discusses fiscal year 2026 and fiscal year 2025 items and year-to-date comparisons between 2026 and 2025.
Merger with Smithfield Foods, Inc.
On January 20, 2026, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Smithfield Foods, Inc., a Virginia corporation (“Buyer” or “Smithfield Foods”) and Boardwalk Merger Sub, Inc. a Delaware corporation and wholly owned subsidiary of Buyer (“Merger Sub”). Pursuant to the Merger Agreement, and upon the terms and subject to the conditions thereof and in accordance with the General Corporation Law of the State of Delaware, Merger Sub shall merge with and into the Company (the “Merger,” and the effective time of the Merger, the “Effective Time”). As a result of the Merger, at the Effective Time, the separate corporate existence of Merger Sub shall cease, the Company shall continue as the surviving corporation in the Merger (the “Surviving Corporation”) and the Surviving Corporation shall become a wholly owned subsidiary of Buyer. After the Merger, the Company will cease to be publicly traded. Completion of the transaction remains contingent upon meeting several conditions specified in the Merger Agreement. These include securing approval from the holders of a majority of Nathan’s outstanding stock, obtaining clearance from the Committee on Foreign Investment in the United States (CFIUS), and fulfilling other closing requirements. However, given the impact of the partial government shutdown on statutory deadlines for CFIUS’s review process, our anticipated closing timeline has shifted, and we now expect the transaction to close in the second half of 2026. See NOTE N – MERGER to the accompanying Consolidated Financial Statements included in the Annual Report on Form 10-K.
Inflationary PressuresFactors
Inflationary pressures negatively impacted our consolidated results of operations during fiscal 2025,2026, most notably within our Branded Product Program segment, due primarily to commodity prices on beef and webeef trimmings. We anticipate continued inflationary pressures on commodity prices, including beef and beef trimmings, as well as labor inflationtrimmings during fiscal 2026.2027. In general, we have been able to offset some of these cost increases resulting from inflation bythrough various actions, such as increasing prices at our Company-owned restaurants and entering into sales agreements with our Branded Product Program customers that are correlated to our cost of beef and beef trimmings. We continue to monitor these inflationary pressures and willmay attemptneed to implementadjust mitigationour measuresprices asfurther needed.to mitigate the impact of these inflationary pressures. Inherent volatility in commodity markets, including beef and beef trimmings, could have a significant impact on our results of operations. Delays in implementing price increases, competitive pressures, recession fears, a decline in consumer spending levels and other factors may limit our ability to implement further price increases in the future.
Uncertainty in the current macroeconomic environment, including the impact of tariffs,inflation, may have an adverse impact on our sales or increase our cost of goods sold.
Refinancing of Senior Secured Notes due 2025
On July 10, 2024, the Company entered into a five-year unsecured Credit Agreement (the “Credit Agreement”) with Citibank, N.A. and borrowed $60,000,000 in Term Loan borrowings to refinance and redeem our outstanding 6.625% Senior Secured Notes due 2025 (the “2025 Notes”). See NOTE J – LONG TERM DEBT to the consolidated financial statements and “Liquidity and Capital Resources” for additional information on the Credit Agreement and refinancing. Our future results may be impacted by our debt service and repayment obligations under our Credit Agreement.
While we do not expect to significantly increase the number of Company-owned restaurants, we may opportunistically and strategically invest in a small number of new units as showcase locations for prospective franchisees and master developers as we seek to grow our franchise system. We continue to seek opportunities to drive sales in a variety of ways as we adapt to the ever-changing consumer and business climate.
As described in Item 1A. “Risk Factors” and other sections in this Annual Report on Form 10-K for the year ended March 30,29, 2025,2026, our future results could be impacted by many developments including the impact of the inflationary pressures on our business, as well as ourthe dependencependency on Smithfield Foods, Inc. as our principal supplier, andof the dependenceproposed of our licensing revenue and overall profitability on our agreementmerger with Smithfield Foods, Inc. Our future operating results could be impacted by supply constraints on beef or by increased costs of beef, beef trimmings and other commodities due to inflationary pressures compared to earlier periods.Foods.
The Company determined its intangible asset to have a finite useful life based on the expected future use of this intangible asset. Based upon the review of its Arthur Treacher’s Fish & Chips co-branding agreements, the Company determined that the remaining useful lives of these agreements is threetwo years concluding in fiscal 2028 and the intangible asset is subject to annual amortization. The Company’s definite-lived intangible asset is tested for impairment at least annually, or more frequently if events or changes in circumstances indicate that the asset may be impaired. The Company tested for recoverability of its definite-lived intangible asset based on the projected undiscounted cash flows to be derived from such co-branding agreements. Assumptions used to determine projected undiscounted cash flows include future trends and projected sales. Based on the quantitative test performed, the Company determined that the definite-lived intangible asset was recoverable and no impairment charge was recorded for the fiscal years ended March 30,29, 20252026 and March 31,30, 2024.2025. Cash flow and sales projections require significant estimates and assumptions by management. Should the estimates and assumptions prove to be incorrect, the Company may be required to record an impairment charge in future periods and such impairment could be material.
Adoption of New Accounting Standard
See Note B item 22 to the consolidated financial statements included in Part IV, Item 15 of this Form 10-K for a summary of the new accounting standard adopted.
See Note B item 2423 to the consolidated financial statements included in Part IV, Item 15 of this Form 10-K for a summary of the new accounting standards applicable to us.
Total revenues increased by approximately 7%9% to $162,063,000 for the fifty-two weeks ended March 29, 2026 (“fiscal 2026”) as compared to $148,182,000 for the fifty-two weeks ended March 30, 2025 (“fiscal 2025”) as compared to $138,610,000 for the fifty-three weeks ended March 31, 2024 (“fiscal 2024”).
Foodservice sales from the Branded Product Program increased by approximately 6%15% to $105,768,000 for the fiscal 2026 period as compared to $91,828,000 for the fiscal 2025 period as compared to $86,489,000 for the fiscal 2024 period. We estimate that the additional week of operations during fiscal 2024 represented approximately $1,202,000 of additional Branded Product Program sales. During the fiscal 20252026 period, the total volume of hot dogs sold in the Branded Product Program increased by approximately 1.2%1% as compared to the fiscal 20242025 period. Our average selling prices increased by approximately 5%12% as compared to the fiscal 20242025 period.
Total Company-owned restaurant sales increaseddecreased by approximately 5%2% to $12,508,000 during the fiscal 2026 period as compared to $12,714,000 during the fiscal 2025 period as compared to $12,103,000 during the fiscal 2024 period. We estimate that the additional week of operations during fiscal 2024 represented approximately $120,000 of additional sales. Restaurant sales were primarily impacted by highera sales2% decline in customer traffic due to unfavorable weather conditions, particularly at our Coney Island locations dueduring tothe ankey increasesummer in our average check.season.
License royalties increasedwere by approximately 11% to $37,418,000$37,417,000 in the fiscal 20252026 period aswhich comparedwere comparable to $33,581,000 in the fiscal 20242025 period. We do not believe that the additional week of operations during fiscal 2024 had a significant impact on license royalties as our licensees continued to report based upon their fiscal reporting periods. Total royalties earned on sales of hot dogs from our license agreement with Smithfield Foods, Inc.Foods at retail and foodservice, increased towere $33,589,000 for the fiscal 20252026 period aswhich was unchanged compared to $30,068,000 for the fiscal 20242025 period. TheOur increasenet isselling dueprice toincreased anby 11%15%, increasewhich was offset by a 13% decrease in retail volume. The net selling price at retail was comparableincreases year over year.year led to a reduction in promotional activities contributing to the decline in volume. The royalties earned on the foodservice business earneddecreased higherby royalties of $109,000$24,000 as compared to the fiscal 20242025 period. Royalties earned from all other licensing agreements for the manufacture and sale of Nathan’s products increasedwere by $316,000$3,828,000 during the fiscal 20252026 period asincluding compared to the fiscal 2024 period primarily due to higher royalties$1,598,000 earned on sales of French fries,fries; onion rings, proprietary spices, franks-in-a-blanket, mozzarella sticks and bottled mustard offset, in part, by lower royalties$1,561,000 earned on salesproprietary ofspices; pickles.and $669,000 earned on other products including pickles, hors d’oeuvres, mustard and beef sticks.
Franchise fees and royalties decreasedwere by$4,317,000 $208,000in the fiscal 2026 period as compared to $4,148,000 in the fiscal 2025 period. Total royalties were $3,897,000 in the fiscal 2026 period as compared to $4,356,000 in the fiscal 2024 period. Total royalties were $3,767,000 in the fiscal 2025 period as compared to $3,886,000 in the fiscal 2024 period. Royalties earned under the Branded Menu Program were $692,000 in the fiscal 2026 period as compared to $744,000 in the fiscal 2025 and 2024 periods.period. Royalties earned under the Branded Menu Program are not based upon a percentage of restaurant sales but are based upon product purchases. Virtual kitchen royalties were $124,000 in the fiscal 2026 period as compared to $61,000 in the fiscal 2025 period as compared to $81,000 in the fiscal 2024 period. Traditional franchise royalties were $3,081,000 in the fiscal 2026 period as compared to $2,962,000 in the fiscal 2025 period as compared to $3,061,000 in the fiscal 2024 period. Franchise restaurant sales declinedincreased to $70,117,000 in the fiscal 2026 period as compared to $66,905,000 in the fiscal 2025 period asprincipally compareddue to $68,417,000higher sales at travel plazas and airports, offset by lower sales at casino locations primarily in theLas fiscalVegas, 2024 period. We estimate that the additional week of operations during fiscal 2024 resulted in $1,215,000 of additional franchise restaurant sales or royalties of approximately $60,000.Nevada. Comparable domestic franchise sales (consisting of 58 Nathan’s locations, excluding sales under the Branded Menu Program) were $51,250,000$52,449,000 during the fiscal 2026 period as compared to $51,795,000 during the fiscal 2025 period as compared to $53,108,000 during the fiscal 2024 period.
At March 30,29, 2025,2026, 230221 franchised locations, including domestic, international and Branded Menu Program units were operating. Total franchise fee income was $420,000 in the fiscal 2026 period as compared to $381,000 in the fiscal 2025 period as compared to $470,000 in the fiscal 2024 period. Domestic franchise fee income was $97,000 in the fiscal 2026 period as compared to $108,000 in the fiscal 2025 period as compared to $106,000 in the fiscal 2024 period. International franchise fee income was $212,000 in the fiscal 2026 period as compared to $237,000 in the fiscal 2025 period as compared to $241,000 in the fiscal 2024 period. We recognized $36,000$111,000 and $123,000$36,000 of forfeited fees in the fiscal 20252026 and fiscal 20242025 periods, respectively. During the fiscal 2026 period, 23 franchised locations opened and 32 franchised locations closed. During the fiscal 2025 period, 25 franchise locations opened and 25 franchised locations closed. During the fiscal 2024 period, 17 franchised locations opened and 19 franchised locations closed.
Cost of sales in the Branded Product Program increased by 9%approximately 20% to $82,462,000$99,352,000 during the fiscal 20252026 period as compared to $75,966,000$82,462,000 in the fiscal 20242025 period, primarily due to the 1.2% increase in the volume of hot dogs sold, as well as a 7%19% increase in the average cost per pound of our hot dogs.dogs, as well as a 1% increase in the volume of hot dogs sold. A shrinking supply of cattle,cattle due to drought conditions and high input costs, combined with strong industry demand and inflationary pressures have resulted in higher commodity prices, including beef and beef trimmings, contributing to the increase in the average cost per pound of our hot dogs. We did not make any purchase commitments for beef during the fiscal 20252026 and 20242025 periods. If the cost of beef and beef trimmings increases and we are unable to pass on these higher costs through price increases or otherwise reduce any increase in our costs through the use of purchase commitments, our margins will be adversely impacted. With respect to Company-owned restaurants, our cost of sales during the fiscal 20252026 period was $7,245,000$7,167,000 or 57% of restaurant sales, aswhich comparedwere comparable to $7,216,000 or 60% of restaurant sales in the fiscal 20242025 period. Food and paper costs as a percentage of Company-owned restaurant sales were 25%,24.5%, down from 28%25.1% in the fiscal 20242025 period driven, in part, by price increases across most menu offerings.period. Labor and related expenses as a percentage of Company-owned restaurant sales were 32%,32.8% whichup wasfrom comparable31.9% toin the fiscal 20242025 period.period Higher wage rates during fiscal 2025primarily as a result of legislative increases in the New York State minimum wage werewhich offsetbecame byeffective priceJanuary increases1, across most menu offerings.2026.
Restaurant operating expenses increased by $202,000$38,000 to $4,417,000 in the fiscal 2026 period as compared to $4,379,000 in the fiscal 2025 period as compared to $4,177,000 in the fiscal 2024 period. The increase is due primarily to higher occupancy expenses of $203,000, higher repairs and maintenance expenses of $41,000,$35,000, higher utilities expenses of $27,000 and higher insurancedelivery costsfees of $31,000$21,000 which were offset, in part, by lower deliveryoccupancy chargesexpenses of $62,000.$18,000. As a percentage of Company-owned restaurant sales, restaurant operating expenses were 35.3% in the fiscal 2026 period as compared to 34.4% in the fiscal 2025 period.
General and administrative expenses increased by $3,373,000 to $17,903,000 in the fiscal 2026 period as compared to $14,530,000 in the fiscal 2025 period. The increase in general and administrative expenses was primarily attributable to higher professional fees of $3,365,000 principally related to our pending acquisition with Buyer pursuant to the Merger Agreement. Refer to NOTE N – MERGER in the accompanying consolidated financial statements and Item 7. Recent Events Affecting our Results of Operations – Merger Agreement for further information.
General and administrative expenses decreased by $1,082,000 to $14,530,000 in the fiscal 2025 period as compared to $15,612,000 in the fiscal 2024 period. The reduction in general and administrative expenses was primarily attributable to higher share-based compensation expense of $259,000, and a higher provision for credit losses of $119,000 which were offset by lower professional fees of $291,000 and a cash bonus payout of $1,000,000 to the Company’s Executive Chairman of the Board in fiscal 2024.
Interest expense of $2,857,000 in the fiscal 2026 period represented interest expense of $2,787,000 on the Secured Overnight Financing Rate (“SOFR”) Term Loan borrowings and amortization of debt issuance costs of $70,000.
Interest expense of $5,355,000 in the fiscal 2024 period represented interest expense of $5,010,000 on the 2025 Notes and amortization of debt issuance costs of $345,000.
During fiscal 2025, the Company refinanced and redeemed the 2025 Notes. In connection with the refinancing, the Company recorded a loss on extinguishment of debt of $334,000 that reflected the write-off of the remainder of the debt issuance costs on the 2025 Notes.
During fiscal 2025, the Company refinanced and redeemed the 2025 Notes. In connection with the refinancing, the Company recorded a loss on extinguishment of debt of $334,000 that reflected the write-off of the remainder of the debt issuance costs on the 2025 Notes. Additionally, the Company made a voluntary principal prepayment of $8,000,000 of its Term Loan borrowings under the Credit Agreement and recorded a loss on debt extinguishment of $55,000 related to the write-off of a portion of previously recorded debt issuance costs on the Term Loan borrowings.
During fiscal 2024, the Company completed the partial redemption, in the principal amount of $20,000,000 of the 2025 Notes. In connection with this transaction, the Company recorded a loss on extinguishment of debt of $169,000 that reflected the write-off of a portion of previously recorded debt issuance costs. See NOTE J – LONG-TERM DEBT in the accompanying consolidated financial statements for further information.
Interest and dividend income of $672,000$780,000 in the fiscal 20252026 period represented amounts earned by the Company on its interest bearing bank and money market accounts and money market funds as compared to $383,000$672,000 in the fiscal 20242025 period. The increase is due to higher levels of invested cash earning interest at higher rates in the fiscal 20252026 period as compared to the fiscal 20242025 period.
Other income, net was $165,000 in the fiscal 2026 period which primarily relates to sublease income and includes $84,000 of settlement income received in connection with the termination of a lease for certain premises located at 281 Walt Whitman Road, Huntington Station, New York. Other income, net was $87,000 in the fiscal 2025 period which primarily relates to sublease income.
Other income, net was $87,000 in the fiscal 2025 period, which primarily relates to sublease income from a franchised restaurant as compared to $86,000 in the fiscal 2024 period.
The effective income tax rate for the fiscal 20252026 period was 26.7%28.9% compared to 28.5%26.7% for the fiscal 20242025 period. The effective income tax rate for the fiscal 2026 period reflected income tax expense of $8,170,000 recorded on $28,190,000 of pre-tax income. The effective income tax rate for the fiscal 2025 period reflected income tax expense of $8,735,000 recorded on $32,761,000 of pre-tax income. The effective income tax rate for the fiscal 2024 period reflected income tax expense of $7,835,000 recorded on $27,451,000 of pre-tax income. The effective tax rates are higher than the U.S. Federal statutory rates primarily due to state and local taxes, as well as non-deductible executive compensation under the Internal Revenue Code Section 162(m). and non-deductible transaction costs.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others to be implemented through 2027. The OBBBA did not have a material impact to our provision for income taxes for the fiscal 2026 period.
In addition to disclosing results that are determined in accordance with Generally Accepted Accounting Principles in the United States of America ("US GAAP"), the Company has provided EBITDA, a non-GAAP financial measure, which is defined as net income excluding (i) interest expense; (ii) provision for income taxes and (iii) depreciation and amortization expense. The Company has also provided Adjusted EBITDA, a non-GAAP financial measure, which is defined as EBITDA, excluding (i) loss on debt extinguishment; and (ii) share-based compensation; and (iii) nonrecurring transaction costs consisting primarily of professional fees incurred in connection with the pending Merger that the Company believes will impact the comparability of its results of operations.
Cash and cash equivalents at March 30,29, 20252026 aggregated $27,802,000,$24,404,000, a $6,775,000$3,398,000 increasedecrease during the fiscal 20252026 period as compared to cash and cash equivalents of $21,027,000$27,802,000 at March 31,30, 2024.2025. Net working capital increaseddecreased to $28,218,000 at March 29, 2026 as compared to $28,371,000 at March 30, 2025 as compared to $23,203,000 at March 31, 2024.2025.
Our primary sources of liquidity and capital resources are cash flows from operations.operations and our cash and cash equivalents. Our primary cash requirements are to fund our quarterlydividends dividends,as permitted under the Merger Agreement, to satisfy the debt service under our credit facility, capital expenditures, lease obligations, working capital and general corporate needs.
2025 Notes
On May 1, 2024, we paid our first semi-annual interest payment on the 2025 Notes of $1,987,500 for the fiscal 2025 period. On August 13, 2024, in connection with the redemption of all of the outstanding $60,000,000 principal amount of its 2025 Notes, the Company paid its final required interest payment of $1,137,000 on the redeemed 2025 Notes.
Credit Agreement
On September 30, 2024 and December 31, 2024, we paid our quarterly mandatory debt principal repayments of $600,000 each, or $1,200,000 in the aggregate, on our Term Loan borrowings under the Credit Agreement. On October 10, 2024, we made a voluntary principal prepayment of $8,000,000 on our outstanding Term Loan borrowings under the Credit Agreement. The prepayment was primarily funded by operating cash flows. As of March 30, 2025, the Company has made cash interest payments of approximately $2,356,000 on the Term Loan borrowings under the Credit Agreement. Subsequent to the year ending March 30, 2025, on March 31, 2025, the Company paid its next quarterly mandatory debt principal repayment of $600,000.
Cash provided by operations is primarily attributable to net income of $24,026,000$20,020,000 in addition to other non-cash operating items of $2,532,000,$2,168,000, offset by changes in other operating assets and liabilities of $1,318,000.$3,954,000. Non-cash operating expenses consist principally of a loss on debt extinguishment of $389,000, depreciation and amortization of $957,000,$925,000, amortization of debt issuance costs of $153,000,$70,000, share-based compensation expense of $993,000$1,132,000 and a provision for credit losses of $275,000.$129,000. In the fiscal 20252026 period, inventoriesaccounts and other receivables increased by $379,000$5,906,000 due primarily to higher Branded Product Program receivables of $5,740,000. Inventories decreased by $330,000 due to timing and Branded Product Program inventory in transit. Prepaid expenses and other current assets decreased by $128,000$64,000 due primarily to a decrease in prepaid income taxes of $365,000$283,000 which were offset, in part, by an increase in prepaid marketing and insuranceother expenses of $347,000.$221,000. Accounts payable, accrued expenses and other current liabilities decreasedincreased by $1,227,000$2,238,000 due principally to loweran incentiveincrease compensationin accrualsaccounts payable of $253,000 as well as a decrease in accrued interest expense of $1,528,000 resulting from the timing of our debt service payments under our Credit Agreement. Accounts payable increased by $419,000$1,741,000 due to the timing of product purchases for our Branded Product Program and Company-owned restaurants.restaurants, as well as an increase in accrued rebates of $388,000 and an increase in accrued professional fees of $286,000.
Cash used in investing activities ofwas $225,000$370,000 isin the fiscal 2026 period primarily attributable to capital expenditures incurred for our Branded Product Program and our Coney Island restaurants.
In connection with the Company’s refinancing of the 2025 Notes, the Company borrowed $60,000,000 in Term Loan borrowings pursuant to the Credit Agreement and simultaneously redeemed the 2025 Notes. We incurred $431,000 of debt issuance costs in connection with this refinancing. During fiscal 2025,2026, we made $1,200,000$2,400,000 of mandatory principal repayments, as well as an $8,000,000 voluntary principal repaymentrepayments on our Term Loan borrowings under the Credit Agreement. Further,Additionally, the Company paid its four quarterly cash dividends of $0.50 per share, along with a special cash dividend of $2.50 per share totaling $8,172,000.$18,403,000. The Company also paid $437,000$459,000 for withholding taxes on the net share vesting of 10,000 restricted stock units.
In 2016, the Board authorized increases to the sixth stock repurchase plan for the repurchase of up to 1,200,000 shares of its common stock on behalf of the Company. As of March 30,29, 2025,2026, Nathan’s has repurchased 1,101,884 shares at a cost of approximately $39,000,000 under the sixth stock repurchase plan. At March 30,29, 2025,2026, there were 98,116 shares remaining to be repurchased pursuant to the sixth stock repurchase plan. The plan does not have a set expiration date. Purchases under the Company’s stock repurchase program may be made from time to time, depending on market conditions, in open market or privately negotiated transactions, at prices deemed appropriate by management. There is no set time limit on the repurchases. There were no stock repurchases during the fiscal 2026 period and the fiscal 2025 period. WeThe mayterms returnof capitalthe toMerger ourAgreement stockholders through stock repurchases, subject to any restrictions in our Credit Agreement, although there is no assurance thatprohibit the Company willfrom makerepurchasing any repurchases underof its existingcommon stock repurchase plan.stock.
As discussed above, we had cash and cash equivalents at March 30,29, 20252026 aggregating $27,802,000.$24,404,000. Our Board routinely monitors and assesses its cash position and our current and potential capital requirements. During the fiscal 20252026 period, the Company declared and paid four quarterly dividends of $0.50 per share, as well as a special cash dividend of $2.50 per share on December 5, 2025 aggregating $8,172,000.$18,403,000.
Our ability to pay future dividends is limited by the terms of our Merger Agreement (as defined in NOTE N – MERGER). Effective June 10,9, 2025,2026, as permitted under the Merger Agreement, the Board declared its firstregular quarterly cash dividend of $0.50 per share for fiscal 20262027 which is payable on JulyJune 1,30, 20252026 to stockholders of record as of the close of business on June 23,22, 2025.2026 (the “June 2026 Regular Cash Dividend”). After the payment of the June 2026 Regular Cash Dividend, the Company is no longer permitted to declare and pay any further dividends under the Merger Agreement.
If the Company pays regular quarterly cash dividends for fiscal 2026 at the same rate as declared in the first quarter of fiscal 2026, the Company’s total cash requirement for dividends for all of fiscal 2026 would be approximately $8,179,000 based on the number of shares of common stock outstanding at June 5, 2025. The Company intends to declare and pay quarterly cash dividends; however, there can be no assurance that any additional quarterly dividends will be declared or paid or of the amount or timing of such dividends, if any.
Our ability to pay future dividends is limited by the terms of our Credit Agreement. In addition, the payment of any cash dividends in the future are subject to final determination of the Board and will be dependent upon our earnings and financial requirements and the terms of our Credit Agreement.
We expect that in the future we will make investments in certain existing restaurants, support the growth of the Branded Product and Branded Menu Programs, service the principal and interest obligations under the Credit Agreement, fund our dividend program and maypay continuethe ourJune stock2026 repurchaseRegular programs,Cash Dividend, funding those investments from our operating cash flow. We may also incur capital and other expenditures or engage in investing activities in connection with opportunistic situations that may arise on a case-by-case basis. While our Credit Agreement bears interest at a fluctuating interest rate based on the SOFR plus a spread adjustment, if the Company makes its fiscal year 2026 cash interest payments on its outstandingthe Term Loan borrowings at the interest rate effective at March 30,29, 2025,2026, then during the fiscal year ended March 29,28, 2026,2027, we expect to make cash interest payments of approximately $2,895,000$2,305,000 on the Term Loan borrowings.
We may from time to time seek to make voluntary principal prepayments of Term Loan borrowings under our Credit Agreement. Such voluntary prepayments, if any, will depend on market conditions, our liquidity requirements, satisfactory compliance of covenants and conditions pursuant to our Credit Agreement, the Merger Agreement and other factors.
Management believes that available cash and cash equivalents and cash generated from operations should provide sufficient capital to finance our operations, satisfy our debt service requirements, and fund dividendthe distributionsJune and,2026 ifRegular any,Cash stock repurchasesDividend for at least the next 12 months.
At March 30, 2025, we sublet one property to a franchisee that we lease from a third party. We remain contingently liable for all costs associated with this property including rent, property taxes and insurance. We may incur future cash payments with respect to such property, consisting primarily of future lease payments, including costs and expenses associated with terminating such lease.
Inflationary pressures on labor and rising commodity prices, most notably for beef and beef trimmings, have impacted our consolidated results of operations during the fiscal 2026 period, and this trend may continue into fiscal 2027.
InflationaryOur pressuresaverage on labor and rising commodity prices, most notably for beef and beef trimmings, have impacted our consolidated resultscost of operationshot dogs during the fiscal 2026 period was approximately 19% higher than during the fiscal 2025 period, and this trend may continue into fiscal 2026.period. Our average cost of hot dogs during the fiscal 2025 period was approximately 7% higher than during the fiscal 2024 period. Our average cost of hot dogs during the fiscal 2024 period was approximately 10% higher than during the fiscal 2023 period. Inherent volatility experienced in certain commodity markets, such as those for beef and beef trimmings due to seasonal shifts, climate conditions, industry demand, inflationary pressures and other macroeconomic factors could have an adverse effect on our results of operations. This impact will depend on our ability to manage such volatility through price increases and product mix. We are unable to predict the future cost of our hot dogs and expect to experience price volatility for our beef products during fiscal 2026.2027. To the extent that beef prices increase as compared to earlier periods, it could impact our results of operations. In the past, we entered into purchase commitments for a portion of our hot dogs to reduce the impact of increasing market prices. We may attempt to enter into similar purchase arrangements for hot dogs and other products in the future.
We have experienced competitive pressure on labor rates as a result of the increase in the minimum hourly wage for fast food workers where our Company-owned restaurants are located. On January 1, 2025,2026, the minimum wage increased from $16.00$16.50 to $16.50$17.00 in New York City, Long Island and Westchester which will be followed by an additional $0.50 increase in 2026.Westchester. Further, beginning in 2027, the minimum wage across New York State will increase annually according to the Consumer Price Index. There has also been an increased demand for labor at all levels which has resulted in greater challenges retaining adequate staffing levels at our Company-owned restaurants; our franchised restaurants and Branded Menu Program locations; as well as for certain vendors in our supply chain that we depend on for our commodities. We remain in contact with our major suppliers and to date we have not experienced significant disruptions in our supply chain.
We expect to continue experiencing volatility in oil and gas prices on our distribution costs for our food products and utility costs in the Company-owned restaurantsrestaurants, andas well as volatile insurance costs resulting from rising rates.
What changed in the latest 10-Q
Risk Factors
In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in the Annual Report on Form 10-K for the fiscal year ended March 29, 2026, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing Nathan's. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
Removed heading “Risks Related to the Merger”
Removed heading “The announcement and pendency of the proposed Merger may adversely affect our business, financial condition and results of operations.”
Removed heading “Failure to complete the Merger could negatively impact the price of our common stock, as well as our future business and financial results.”
Removed heading “Our ability to complete the Merger is subject to certain closing conditions and the receipt of consents and approvals from government entities which may impose conditions that could adversely affect us or cause the Merger to be abandoned.”
Removed heading “Expenses related to the pending Merger are significant and will adversely affect our operating results.”
Removed heading “We are subject to business uncertainties and contractual restrictions while the Merger is pending, which could adversely affect our business.”
Removed heading “Litigation could result in substantial costs and may delay or prevent the Merger from being completed.”
Largest changes
“Litigation could result in substantial costs and may delay or prevent the Merger from being completed.”see in full comparison
“Our ability to complete the Merger is subject to certain closing conditions and the receipt of consents and approvals from government entities which may impose conditions that could adversely affect us or cause the Merger to be abandoned.”see in full comparison
“We are subject to business uncertainties and contractual restrictions while the Merger is pending, which could adversely affect our business.”see in full comparison
“Failure to complete the Merger could negatively impact the price of our common stock, as well as our future business and financial results.”see in full comparison
“The announcement and pendency of the proposed Merger may adversely affect our business, financial condition and results of operations.”see in full comparison
“Expenses related to the pending Merger are significant and will adversely affect our operating results.”see in full comparison
Full comparison: every changed paragraph (18)
There have not been any significant changes with respect to the risks described in our 2025 Annual Report on Form 10-K, other than the items notes below.
Risks Related to the Merger
The announcement and pendency of the proposed Merger may adversely affect our business, financial condition and results of operations.
There are material uncertainties and risks associated with the proposed Merger, including the timing of the consummation of the Merger, which may adversely affect our business and ongoing operations, financial condition and results of operations, employees, customers, stockholders, other parties and business prospects and a failure to complete the Merger on the terms reflected in the Merger Agreement or at all could have a material and adverse effect on our business, financial condition, results of operations, cash flows, and stock price.
Failure to complete the Merger could negatively impact the price of our common stock, as well as our future business and financial results.
The Merger Agreement contains a number of conditions that must be satisfied or waived prior to the completion of the Merger, including stockholder approval and regulatory approval. We cannot assure you that all of the conditions to the Merger will be satisfied or waived on a timely basis. If the conditions to the Merger are not satisfied or waived on a timely basis, we may be unable to complete the Merger as quickly as expected or at all.
If the Merger is not completed, our ongoing business may be adversely affected as follows: (i) we may experience negative reactions from the financial markets, including negative impacts on the market price of our common stock; (ii) some of management’s attention will have been directed to the Merger instead of being directed to our own operations and the pursuit of other opportunities that could have been beneficial to us; (iii) the manner in which customers, suppliers and other third parties perceive us may be negatively impacted, which in turn could have an adverse effect on our business; (iv) we may experience negative reactions from employees; (v) we will have expended time and resources that could otherwise have been spent on our business; and (vi) we may be required, in certain circumstances, to pay a termination fee of $10,581,814, as provided in the Merger Agreement. In addition, any significant delay in consummating the Merger could have an adverse effect on our operating results and adversely affect our relationships with customers and suppliers and would likely lead to a significant diversion of management and employee attention.
If the Merger is not completed, neither we nor the holders of our common stock will realize these benefits of the Merger. Moreover, we would also have nevertheless incurred substantial transaction-related fees and costs and the loss of management time and resources.
Our ability to complete the Merger is subject to certain closing conditions and the receipt of consents and approvals from government entities which may impose conditions that could adversely affect us or cause the Merger to be abandoned.
The Merger Agreement contains certain closing conditions, including, among others, the approval by the affirmative vote of the holders of a majority of our outstanding capital stock entitled to vote on the Merger to adopt and approve the Merger Agreement and the absence of any injunction or similar order issued by any government entity with jurisdiction over any party to the Merger Agreement or law that has the effect of prohibiting the consummation of the Merger or that makes consummation of the Merger illegal. The obligation of each party to consummate the Merger is also conditioned upon the other party’s representations and warranties being true and correct to the extent specified in the Merger Agreement and the other party having performed in all material respects its obligations under the Merger Agreement. We cannot assure you that the various closing conditions will be satisfied or will not result in the abandonment or delay of the Merger.
In addition, before the Merger may be completed, regulatory approval under the HSR Act must be obtained and that the parties have obtained CFIUS Clearance for the Merger (the “Regulatory Approval”). Such conditions and the process of obtaining Regulatory Approval could have the effect of delaying completion of the Merger or of imposing additional costs or limitations on the combined company following the completion of the Merger, and the conditions may result in the failure of a closing condition under the Merger Agreement. The Regulatory Approval may not be received at all or may not be received in a timely fashion.
Expenses related to the pending Merger are significant and will adversely affect our operating results.
We have incurred and expect to continue to incur significant expenses in connection with the pending Merger, including legal and investment banking fees. We expect these costs to have an adverse effect on our operating results. If the Merger is not consummated, we may under certain circumstances be required to pay to Buyer a termination fee of $10,581,814 million. Our financial position and results of operations would be adversely affected if we were required to pay the termination fee.
We are subject to business uncertainties and contractual restrictions while the Merger is pending, which could adversely affect our business.
The Merger Agreement requires us to operate in the ordinary course of business and restricts us, without the consent of Buyer, from taking certain specified actions agreed by the parties to be outside the ordinary course of business until the pending Merger occurs or the Merger Agreement terminates. These restrictions may prevent us from pursuing otherwise attractive business opportunities and making other changes to our business before completion of the Merger or, if the Merger is not completed, termination of the Merger Agreement. In addition, matters relating to the Merger (including integration planning) will require substantial commitments of time and resources by our management, which could divert their time and attention.
Litigation could result in substantial costs and may delay or prevent the Merger from being completed.
While no lawsuits are currently pending in connection with the Merger, we (along with our directors and officers) may be named in lawsuits to enjoin us from proceeding with or consummating the Merger, or seeking to have the Merger rescinded after its consummation. Defending against such claims, even those without merit, could result in substantial costs and divert management’s time and resources, which may negatively impact our financial condition and adversely affect our business and results of operations. The ultimate resolution of any such lawsuit cannot be predicted, and an adverse ruling in any such lawsuit may cause the Merger to be delayed or not to be completed, which could cause us not to realize some or all of the anticipated benefits of the Merger.
Additionally, one of the conditions to the closing of the Merger is the absence of any injunction or similar order issued by government entity with jurisdiction over any party to the Merger Agreement or law that has the effect of prohibiting the consummation of the Merger or that makes consummation of the Merger illegal. Accordingly, if any lawsuit is successful in obtaining an injunction prohibiting the consummation of the Merger, then such injunction may prevent the Merger from becoming effective, or delay its becoming effective within the expected time frame.
Management's Discussion & Analysis (MD&A)
New heading “Purchase Commitments”
Removed heading “Results of Operations”
Removed heading “Thirty-nine weeks ended December 28, 2025 compared to thirty-nine weeks ended December 29, 2024”
Removed heading “Costs and Expenses”
Removed heading “Provision for Income Taxes”
Largest changes
“As soon as reasonably practicable after the execution of the Merger Agreement (and in any event within forty-five (45) days after the date of the Merger Agreement), the Company shall prepare and file with the Securities and Exchange Commission (the “SEC”) a proxy statement (as amended or supplemented from time to time, the “Proxy Statement”), in preliminary form, relating to the Stockholders’ Meeting (as defined below). …”see in full comparison
“Upon the election of the Company, the Company and Smithfield Packaged Meats Corp., an affiliate of Buyer (“SPMC”), will enter into an amendment to the licensing and supply letter agreement, dated as of December 5, 2012 (the “Licensing Agreement”), by and between Nathan’s Famous Systems, Inc., a subsidiary of the Company, and SPMC, which will extend the term of the Licensing Agreement for an additional four years to March 2, 2036 from the current expiration date of March 2, 2032, and Buyer will be required to pay the Company a termination fee in cash equal to $7,407,270 if the Merger Agreement …”see in full comparison
“Cost of sales in the Branded Product Program increased by 20% to $77,766,000 during the fiscal 2026 period as compared to $64,626,000 during the fiscal 2025 period, primarily due to a 1% increase in the volume of hot dogs sold, as well as a 19% increase in the average cost per pound of our hot dogs. A shrinking supply of cattle due to drought conditions and high input costs, combined with strong industry demand and inflationary pressures have resulted in higher commodity prices, including beef and beef trimmings, contributing to the increase in the average cost per pound of our hot dogs. …”see in full comparison
“Thirty-nine weeks ended December 28, 2025 compared to thirty-nine weeks ended December 29, 2024”see in full comparison
“The Merger Agreement also contains certain termination provisions for the Company and Buyer, including the right of the Company, in certain circumstances, to terminate the Merger Agreement and accept a Superior Proposal. …”see in full comparison
“The consummation of the Merger is subject to certain closing conditions, including but not limited to (a) receipt of the Company Stockholder Approval, (b) that no law or governmental order prohibits, restrains, enjoins or makes illegal the consummation of the Merger, (c) that any waiting period (and any extension thereof) applicable to the Merger and the other transactions under the HSR Act have terminated or expired and (d) that the parties have obtained CFIUS Clearance for the Merger. …”see in full comparison
Full comparison: every changed paragraph (104)
ExceptThis forForm historical10-Q informationcontains contained in this news release, the matters discussed are forward looking“forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties. Words such as “anticipate”, “believe”, “estimate”, “expect”, “intend”, and similar expressions identify forward-looking statements, which are based on the current belief of the Company’s management, as well as assumptions made by and information currently available to the Company’s management. Among the factors that could cause actual results to differ materially include but are not limited to: the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement or the failure to satisfy the closing conditions; the possibility that the consummation of the proposed transaction is delayed or does not occur, including the failure of Nathan's stockholders to approve the proposed transaction; uncertainty as to whether the parties will be able to complete the proposed transaction on the terms set forth in the Merger Agreement; uncertainty regarding the timing of the receipt of required regulatory approvals for the proposed transaction and the possibility that the parties may be required to accept conditions that could reduce or eliminate the anticipated benefits of the proposed transaction as a condition to obtaining regulatory approvals or that the required regulatory approvals might not be obtained at all; the outcome of any legal proceedings that have been or may be instituted against the parties or others following announcement of the transactions contemplated by the Merger Agreement; challenges, disruptions and costs of integrating and achieving anticipated synergies, or that such synergies will take longer to realize than expected, risks that the proposed transaction and other transactions contemplated by the Merger Agreement disrupt current plans and operations that may harm Nathan's businesses; the amount of any costs, fees, expenses, impairments and charges related to the proposed transaction, and uncertainty as to the effects of the announcement or pendency of the proposed transaction on the market price of Nathan's common stock and/or on its financial performance; the impact of disease epidemics such as the COVID-19 pandemic; increases in the cost of food and paper products; the impact of price increases on customer visits; the status of our licensing and supply agreements, including our licensing revenue and overall profitability being substantially dependent on our agreement with Smithfield Foods, Inc.; the impact of our debt service and repayment obligations under our credit facility, including the effect on our ability to fund working capital, operations and make new investments; economic (including inflationary pressures like those currently being experienced); weather (including the impact on sales at our restaurants particularly during the summer months), and changes in the price of beef and beef trimmings; our ability to pass on the cost of any price increases in beef and beef trimmings; legislative and business conditions; potential changes in U.S. income tax or tariff policies; the collectability of receivables; changes in consumer tastes; the continued viability of Coney Island as a destination location for visitors; the ability to attract franchisees; the impact of the minimum wage legislation on labor costs in New York State or other changes in labor laws, including regulations which could render a franchisor as a “joint employer” or the impact of our union contracts; our ability to attract competent restaurant and managerial personnel; the enforceability of international franchising agreements; the future effects of any food borne illness, such as bovine spongiform encephalopathy, BSE and e coli; and the risk factors reported from time to time in the Company’s SEC reports. The Company does not undertake any obligation to update such forward-looking statements.
The following discussion and analysis is intended to help you understand us, our operations and our financial performance. It should be read in conjunction with our condensed consolidated financial statements and the accompanying notes, which are included elsewhere in this report.
As used in this Report, the terms “wewe,”, “usus,”, “ourour,”, “Nathan’s” or the “Company” mean Nathan’s Famous, Inc. and its subsidiaries (unless the context indicates a different meaning).
At DecemberJune 28, 2025,2026, our restaurant system, excluding virtual kitchens, was comprisedconsisted of 225223 locations, including 112111 Branded Menu Program locations, as well as four Company-owned restaurants (including one seasonal unit), located in 1819 states, and 1211 foreign countries.
At DecemberJune 29, 2024,2025, our restaurant system, excluding virtual kitchens, consisted of 236225 locations, including 128115 Branded Menu Program locations, andas well as four Company-owned restaurants (including one seasonal unit), located in 1719 states, and 12 foreign countries.
As previously announced, on January 20, 2026, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Smithfield Foods, Inc., a Virginia corporation (“Buyer”) and Boardwalk Merger Sub, Inc. a Delaware corporation and wholly owned subsidiary of Buyer (“Merger Sub”).
As previously announced, on January 20, 2026, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Smithfield Foods, Inc., a Virginia corporation (“Buyer”) and Boardwalk Merger Sub, Inc. a Delaware corporation and wholly owned subsidiary of Buyer (“Merger Sub”). Pursuant to the Merger Agreement, and upon the terms and subject to the conditions thereof and in accordance with the General Corporation Law of the State of Delaware (“DGCL”), Merger Sub shall merge with and into the Company (the “Merger,” and the effective time of the Merger, the “Effective Time”). As a result of the Merger, at the Effective Time, the separate corporate existence of Merger Sub shall cease, the Company shall continue as the surviving corporation in the Merger (the “Surviving Corporation”) and the Surviving Corporation shall become a wholly owned subsidiary of Buyer. After the Merger, the Company will cease to be publicly traded. Completion of the transaction remains contingent upon meeting several conditions specified in the Merger Agreement which include securing approval from the holders of a majority of Nathan’s outstanding stock, obtaining clearance from the Committee on Foreign Investment in the United States (CFIUS), and fulfilling other closing requirements. We expect the transaction to close in the second half of 2026. For more information regarding the Merger, see NOTE T – MERGER to the accompanying condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
At the Effective Time, as a result of the Merger and without any action on the part of Buyer, Merger Sub, the Company or the holders of any of the following securities: (i) each share of common stock of the Company, par value $0.01 per share (“Company Shares”), issued and outstanding immediately prior to the Effective Time, other than shares to be cancelled in accordance with the terms of the Merger Agreement and shares owned by holders that have exercised their appraisal rights under the DGCL, shall be converted into the right to receive cash in an amount equal to $102.00 without interest (the “Per Share Merger Consideration”), less any applicable withholding tax, payable to the holder in accordance with the terms of the Merger Agreement, (ii) each share of common stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one fully paid, non-assessable share of common stock, par value $0.01 per share, of the Surviving Corporation, and (iii) any Company Shares owned or held in treasury by the Company and any Company Shares owned by Buyer, Merger Sub or any of their respective affiliates immediately prior to the Effective Time shall automatically be cancelled and shall cease to exist and no consideration shall be delivered in exchange for such cancellation or retirement. From and after the Effective Time, all Company Shares converted into the right to receive the Per Share Merger Consideration shall no longer be issued and outstanding and shall automatically be cancelled and cease to exist.
Immediately prior to the Effective Time, (i) each option to purchase Company Shares outstanding under a Company Stock Plan (each a “Company Stock Option”), whether or not vested and exercisable, that is outstanding and unexercised immediately prior to the Effective Time, shall be automatically converted into the right to receive from Buyer or the Surviving Corporation an amount in cash (subject to applicable withholding taxes) equal to the product obtained by multiplying (A) the excess, if any, of the Per Share Merger Consideration over the per share exercise price of such Company Stock Option, by (B) the aggregate number of Company Shares that were issuable upon exercise of such Company Stock Option immediately prior to the Effective Time and (ii) each restricted stock unit of the Company granted and outstanding pursuant to a Company Stock Plan (each a “Company RSU”) shall be deemed to have been earned and become fully vested (in the case of any performance based award, with the applicable performance metrics at the target level), shall be canceled and extinguished as of the Effective Time and, in exchange, each former holder of any such Company RSU shall have the right to receive from Buyer or the Surviving Corporation an amount in cash equal to the product obtained by multiplying (A) the number of Company Shares subject to such Company RSU by (B) the Per Share Merger Consideration (such amount, the “RSU Award Payment”). Any dividend equivalents earned prior to the Effective Time will be paid in cash as soon as administratively practicable following settlement of the Company RSUs. From and after the Effective Time, each Company RSU shall no longer represent the right to receive Company Shares by the former holder thereof, but shall only entitle such holder to the payment of the RSU Award Payment. The Compensation Committee of the Company Board will adopt resolutions to provide that all Company Stock Options and Company RSUs shall terminate conditioned upon, and effective immediately prior to, the Effective Time and the holders thereof will be entitled only to the amount, if any, specified herein in respect thereof.
The Merger Agreement contains representations, warranties and covenants by the parties customary for a transaction of this nature. Among other things, during the period between the execution of the Merger Agreement and the earlier of the consummation of the Merger or termination of the Merger Agreement, the Company has agreed to conduct its business in the ordinary course consistent with past practice and has agreed to certain other operating covenants, as set forth more fully in the Merger Agreement. Notwithstanding the foregoing, the Company will be permitted to declare and pay up to two regular quarterly cash dividends, each in the amount of $0.50 per Company Share.
The Company has also agreed not to, among other things, (i) solicit, initiate, knowingly encourage or knowingly facilitate any alternative competing transaction, (ii) participate in any discussions or negotiations with any third party with respect to any alternative competing transaction, (iii) approve or recommend any alternative competing transaction, (iv) enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, share purchase agreement, asset purchase agreement, share exchange agreement, option agreement or other similar definitive agreement relating to an alternative competing transaction or (v) propose or agree to do any of the foregoing.
Notwithstanding the foregoing customary “no-shop” restrictions, if prior to obtaining the Company Stockholder Approval (as defined in the Merger Agreement) the Company receives an unsolicited written Acquisition Proposal (as defined in the Merger Agreement) from a third party and the Company Board determines in good faith that (x) such Acquisition Proposal constitutes or could be reasonably expected to result in a Superior Proposal (as defined in the Merger Agreement) and (y) the failure to take the actions set forth in clauses (i) and (ii) of this paragraph would be inconsistent with its fiduciary duties under law, the Company may, in response to such Acquisition Proposal, (i) furnish Company information and access to the third party making such Acquisition Proposal and (ii) participate in discussions or negotiations with such third party with respect to such Acquisition Proposal, or otherwise cooperate with or assist or participate in, or facilitate, any such discussions or negotiations.
As soon as reasonably practicable after the execution of the Merger Agreement (and in any event within forty-five (45) days after the date of the Merger Agreement), the Company shall prepare and file with the Securities and Exchange Commission (the “SEC”) a proxy statement (as amended or supplemented from time to time, the “Proxy Statement”), in preliminary form, relating to the Stockholders’ Meeting (as defined below). The Company shall hold a meeting for the purpose of obtaining approval of the stockholders of the Company (the “Stockholders’ Meeting”) as promptly as reasonably practicable, and in no event more than thirty (30) days following the date on which the definitive Proxy Statement is mailed to stockholders of the Company, which mailing shall occur within ten (10) business days after the later of the date (i) on which the Company learns the SEC staff has no further comments on the Proxy Statement or (ii) (A) the applicable waiting period under any applicable Antitrust Law, including the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") has expired or has been terminated and (B) CFIUS Clearance (as defined in the Merger Agreement) has been obtained.
The consummation of the Merger is subject to certain closing conditions, including but not limited to (a) receipt of the Company Stockholder Approval, (b) that no law or governmental order prohibits, restrains, enjoins or makes illegal the consummation of the Merger, (c) that any waiting period (and any extension thereof) applicable to the Merger and the other transactions under the HSR Act have terminated or expired and (d) that the parties have obtained CFIUS Clearance for the Merger. Each of Buyer’s, Merger Sub’s, and the Company’s obligation to consummate the Merger is also subject to certain additional conditions, including (i) subject to certain materiality standards, the accuracy of the representations and warranties of the other party or parties, (ii) performance in all material respects by the other party or parties of its or their obligations under the Merger Agreement and (iii) with respect to Buyer’s and Merger Sub’s obligations to consummate the Merger, the absence of a Company Material Adverse Effect (as defined in the Merger Agreement) with respect to the Company.
The Merger Agreement also contains certain termination provisions for the Company and Buyer, including the right of the Company, in certain circumstances, to terminate the Merger Agreement and accept a Superior Proposal. The Company will be required to pay Buyer a termination fee in cash equal to $10,581,814 if the Merger Agreement is terminated (a) by Buyer because the Company Board changed its recommendation of the Merger, (b) by Buyer or the Company if the approval of the Company’s stockholders is not obtained at the Stockholders’ Meeting and the Company Board previously changed its recommendation of the Merger or (c) (i) by Buyer or the Company following June 22, 2026, subject to extension to October 20, 2026 in accordance with the Merger Agreement (the “End Date”), (ii) by Buyer or the Company because of failure to obtain the approval of the stockholders at the Stockholders’ Meeting or (iii) by Buyer because of certain breaches of the Merger Agreement by the Company, only if, in the case of clauses (i) to (iii), an Acquisition Proposal has been made publicly and within nine (9) months of the termination date the Company consummates or enters into a definitive agreement for an Acquisition Proposal.
Upon the election of the Company, the Company and Smithfield Packaged Meats Corp., an affiliate of Buyer (“SPMC”), will enter into an amendment to the licensing and supply letter agreement, dated as of December 5, 2012 (the “Licensing Agreement”), by and between Nathan’s Famous Systems, Inc., a subsidiary of the Company, and SPMC, which will extend the term of the Licensing Agreement for an additional four years to March 2, 2036 from the current expiration date of March 2, 2032, and Buyer will be required to pay the Company a termination fee in cash equal to $7,407,270 if the Merger Agreement is terminated (a) because of a CFIUS Turndown (as defined in the Merger Agreement) and the Company is not in material breach of the Merger Agreement at the time of termination or (b) following the End Date if, at such time, (i) a government order or other government action would have prevented the consummation of the Merger (solely as it relates to CFIUS) or the parties have not received CFIUS Clearance, (ii) certain other closing conditions have been satisfied, (iii) the Company's breach of the provisions of the Merger Agreement to obtain certain consents and approvals is not the primary cause of a government order or other government action that would prevent the consummation of the Merger and (iv) the Company is not in material breach of the Merger Agreement at the time of termination.
On January 20, 2026, the Company entered into letter agreements (each a “Retention Agreement”) with each of Eric Gatoff, Chief Executive Officer of the Company, and Robert Steinberg, the Chief Financial Officer of the Company. Under the Retention Agreements, each such individual is entitled to a cash retention bonus payment if (1) such individual is actively employed by the Company or a subsidiary as of closing under the Merger Agreement and has not given notice of his intent to resign or (2) the individual is terminated by the Company for any reason and closing under the Merger Agreement later occurs. The retention bonus payment amount is $3,250,000 for Mr. Gatoff and $1,050,000 for Mr. Steinberg. As consideration for the retention bonus payment, Mr. Gatoff agreed to non-competition provisions that apply for one (1) year following the termination of his employment by the Company for any reason.
Inflationary pressures negatively impacted our earnings during the thirty-ninefirst weekthree periodmonths endedof Decemberfiscal 28, 2025, most notably within our Branded Product Program segment, due primarily to commodity prices on beef2027, and beef trimmings. Wewe anticipate continued inflationary pressures on commodity prices, including beef and beef trimmings, as well as rising labor costs during the remainder of fiscal 2026.2027. In general, we have been able to offset some of these cost increases resulting from inflation through various actions, such as increasing prices at our Company-owned restaurants and entering into sales agreements with our Branded Product Program customers that are correlated to our cost of beef and beef trimmings. We continue to monitor these inflationary pressures and may need to adjust our prices further to mitigate the impact of these inflationary pressures. Inherent volatility in commodity markets, including beef and beef trimmings, could have a significant impact on our results of operations. Delays in implementing price increases, competitive pressures, a decline in consumer spending levels and other factors may limit our ability to implementrecover furthersuch pricecost increases in the future.increases.
Uncertainty in the current macroeconomic environment, including the potential impact of tariffs or other changes in U.S. tax policy, may have an adverse impact on our sales or increase our cost of goods sold.
As discussed in our Form 10-K for the fiscal year ended March 30,29, 2025,2026, the discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in those condensed consolidated financial statements. These judgments can be subjective and complex, and consequently, actual results could differ from those estimates. Our most critical accounting estimates relate to impairment of intangible assets; impairment of long-lived assets; current expected credit losses; customer rebates and income taxes (including uncertain tax positions). ThereDuring the thirteen week period ended June 28, 2026, there have been no changes to our critical accounting estimates from those disclosed in our Annual Report on Form 10-K for the fiscal year ended March 30,29, 2025.2026.
In addition to disclosing results that are determined in accordance with US GAAP, the Company has provided EBITDA, a non-GAAP financial measure, which is defined as net income excluding (i) interest expense; (ii) provision for income taxes and (iii) depreciation and amortization expense. The Company has also provided Adjusted EBITDA, a non-GAAP financial measure, which is defined as EBITDA, excluding (i) non-recurring transaction costs consisting primarily of professional fees incurred in connection with the lossMerger on debt extinguishmentAgreement and (ii) share-based compensation that the Company believes will impact the comparability of its results of operations.
Our routine business pattern is affected by seasonal fluctuations, including the effects of weather and economic conditions. Historically, sales from our Company-owned restaurants, principally at Coney Island, and franchised restaurants from which franchised royalties are earned and the Company’s earnings have been highest during our first two fiscal quarters, with the fourth quarter representing the slowest period. Routine seasonality is primarily attributable to weather conditions in the marketplace for our Company-owned and franchised restaurants, which are principally located in the Northeast of the United States. Additionally, revenues from our Branded Product Program, Branded Menu Program and Product Licensinglicensing Programprogram generally follow similar seasonal fluctuations, although not to the same degree. We expect that this seasonality will continue. Working capital requirements may vary throughout the year to support these seasonal patterns.
Due to the above seasonal factors, as well as inflationary pressures, our results of operations for the thirteen and thirty-nine weeks ended DecemberJune 28, 20252026 are not necessarily indicative of those for any other quarter or for a full fiscal year.
Thirteen weeks ended DecemberJune 28, 20252026 compared to thirteen weeks ended DecemberJune 29, 20242025
Revenues
Total revenues increased by approximately 9%15% to $34,312,000$54,062,000 for the thirteen weeks ended DecemberJune 28, 20252026 (“third quarter fiscal 20262027 period”) as compared to $31,519,000$46,998,000 for the thirteen weeks ended DecemberJune 29, 20242025 (“third quarter fiscal 20252026 period”). The increase in total revenues was primarily driven by pricing actions within the Branded Product Program and modest increases in certain license royalty streams, which were partially offset by lower franchise fees and royalties and Company-owned restaurant revenues.
Foodservice sales from the Branded Product Program increased by approximately 13%20% to $23,749,000$35,039,000 forduring the third quarter fiscal 20262027 period as compared to $21,099,000$29,075,000 for the third quarter fiscal 2025.2026 period. During the third quarter fiscal 2026,2027 period, the total volume of hot dogs sold in the Branded Product Program decreasedincreased by approximately 3%8% as compared to the third quarter fiscal 2025.2026 period. Our average selling price, which is partially correlated to the beef markets, increased by approximately 16%17% as compared to the third quarter fiscal 2025.2026 period.
Total Company-owned restaurant sales decreased by approximately 9%1% to $1,646,000$3,951,000 during the third quarter fiscal 20262027 period as compared to $1,804,000$3,986,000 during the third quarter fiscal 2025.2026 period. Restaurant sales were primarily impacted by a 9%1% decline in customeraverage traffic due to unfavorable weather conditions.check.
License royalties increased by approximately 4%10% to $7,385,000$13,587,000 in the third quarter fiscal 20262027 period as compared to $7,105,000$12,381,000 in the third quarter fiscal 2025.2026 period. Total royalties earned on sales of hot dogs from our license agreement with Smithfield Foods, Inc. at retail and foodservicefoodservice, increased 5%by approximately 10% to $6,462,000$12,617,000 forin the third quarter fiscal 20262027 period as compared to $6,146,000$11,464,000 in the third quarter fiscal 2025.2026 period. The increase is due to a 15%3% increase in retail volume, as well as a 7% increase in net selling price which was offset, in part, by a 7% decrease in retail volume. The price increases year over year led to a reduction in promotional activities contributing to the decline in volume.price. The royalties earned on the foodservice business decreased by $37,000$47,000 as compared to the third quarter fiscal 2025.2026 period. Royalties earned from all other licensing agreements for the manufacture and sale of Nathan’s products decreasedincreased by $36,000$53,000 during the third quarter fiscal 20262027 period as compared to the third quarter fiscal 20252026 period primarily due to lowerhigher royalties earned on sales of proprietary spices and Frenchbeef friessticks offset, in part, by higherlower royalties earned on beeffranks-in-a-blanket, sticks.mozzarella sticks and other hors d’oeuvres.
Franchise fees and royalties were $1,074,000 in the fiscal 2027 period as compared to $1,129,000 in the fiscal 2026 period. Total royalties were $1,020,000 in the third quarter fiscal 20262027 period as compared to $991,000$1,001,000 in the third quarter fiscal 2025. Total royalties were $906,000 in the third quarter fiscal 2026 as compared to $897,000 in the third quarter fiscal 2025.period. Royalties earned under the Branded Menu Program were $162,000$179,000 in the third quarter fiscal 20262027 period as compared to $182,000$176,000 in the third quarter fiscal 2025.2026 period. Royalties earned under the Branded Menu Program are not based upon a percentage of restaurant sales but are based upon product purchases. Virtual kitchen royalties were $46,000$48,000 in the third quarter fiscal 20262027 period as compared to $16,000$15,000 in the third quarter fiscal 2025.2026 period. Traditional franchise royalties were $698,000$793,000 in the third quarter fiscal 20262027 period as compared to $699,000$810,000 in the third quarter fiscal 2025.2026 period. Franchise restaurant sales decreased to $15,962,000$18,204,000 in the third quarter fiscal 20262027 period as compared to $16,066,000$18,444,000 in the third quarter fiscal 20252026 period principally due to lower sales at mallsmall locations and casino locations, primarily in Las Vegas, Nevada.Nevada, offset, in part, by higher sales at travel plazas and airports. Comparable domestic franchise sales (consisting of 6160 Nathan’s outlets,franchised restaurants, excluding sales under the Branded Menu Program) were $12,354,000$14,623,000 in the third quarter fiscal 20262027 period as compared to $13,018,000$14,417,000 in the third quarter fiscal 2025.2026 period.
At DecemberJune 28, 2025,2026, 225223 franchised locations, including domestic, international and Branded Menu Program units were operating as compared to 236225 franchised locations, including domestic, international and Branded Menu Program units at DecemberJune 29, 2024.2025. Total franchise fee income was $114,000$54,000 in the third quarter fiscal 20262027 period as compared to $94,000$128,000 in the third quarter fiscal 2025.2026 period. Domestic franchise fee income was $23,000$27,000 in the third quarter fiscal 20262027 period as compared to $25,000$23,000 in the third quarter fiscal 2025.2026 period. International franchise fee income was $53,000$27,000 in the third quarter fiscal 20262027 period as compared to $59,000$54,000 in the thirdfiscal quarter2026 period. We recognized $51,000 in forfeited fees in the fiscal 2025.2026 period. During the fiscal 2027 period, four franchise locations opened and two franchise locations closed. During the fiscal 2026 period, eight franchise locations opened and thirteen franchise locations closed.
We recognized $38,000 and $10,000 in forfeited fees in the third quarter fiscal 2026 and the third quarter fiscal 2025, respectively. During the third quarter fiscal 2026, four franchise locations opened and six franchise locations closed. During the third quarter fiscal 2025, three franchise locations opened and ten franchise locations closed.
Advertising fund revenue, after eliminating Company contributions, was $512,000$411,000 duringin the third quarter fiscal 20262027 period as compared to $520,000$427,000 duringin the third quarter fiscal 20252026 period.
Overall, our cost of sales increased by approximately 18%24% to $23,138,000$35,205,000 in the third quarter fiscal 20262027 period as compared to $19,571,000$28,423,000 in the third quarter fiscal 2025.2026 period. Our gross profit (calculated as total Branded Products sales plus total Company-owned restaurant sales less cost of sales) was $2,257,000 or 9% of sales$3,785,000 during the third quarter fiscal 20262027 period as compared to $3,332,000 or 15% of sales$4,638,000 during the third quarter fiscal 2025.2026 period.
Cost of sales in the Branded Product Program increased by approximately 20%26% to $21,943,000$33,087,000 in the third quarter fiscal 20262027 period as compared to $18,336,000$26,233,000 in the third quarter fiscal 2025,2026 period, primarily due to an 8% increase in the volume of hot dogs sold, as well as a 25%22% increase in the average cost per pound of our hot dogs which was offset, in part, by a 3% decline in the volume of hot dogs sold.dogs. A shrinking supply of cattle due to drought conditions and high input costs, combined with strong industry demand and inflationary pressures have resulted in higher commodity prices, including beef and beef trimmings, contributing to the increase in the average cost per pound of our hot dogs. We did not make any purchase commitments of beef during the thirdfiscal quarter2027 fiscaland 2026 or the third quarter fiscal 2025.periods. If the cost of beef and beef trimmings increases and we are unable to pass on these higher costs through price increases or otherwise reduce any increase in our costs through the use of purchase commitments, our margins will be adversely impacted. With respect to Company-owned restaurants, our cost of sales during the third quarter fiscal 20262027 period was $1,195,000$2,118,000 or 73%54% of restaurant sales, as compared to $2,190,000 or 55% of restaurant sales as compared to $1,235,000 or 68% of restaurant sales induring the third quarter fiscal 2025.2026 period. Food and paper costs as a percentage of Company-owned restaurant sales were 27%,24%, upwhich from 26% in thewas comparable period ofto the prior year. Labor and related expenses as a percentage of Company-owned restaurant sales were 46%29%, updown from 42% in the comparable period of the prior year31% primarily as a result of legislativetighter increasesmanagement inand thestaffing New York State minimum wage which became effective January 1, 2025.stabilization.
Restaurant operating expenses were $907,000$1,216,000 in the third quarter fiscal 20262027 period as compared to $991,000$1,179,000 in the third quarter fiscal 2025.2026 period. The decreaseincrease is due primarily to higher repairs and maintenance expense of $14,000 and higher utilities expense of $36,000 which were offset, in part, by lower credit card processing fees of $59,000, and lower occupancy expenses of $16,000.$29,000. As a percentage of Company-owned restaurant sales, restaurant operating expenses were 55%30.8% in the thirdfiscal quarter2027 period as compared to 29.6% in the fiscal 2026 which was comparable to the third quarter fiscal 2025.period.
Depreciation and amortization, which primarily consists of the depreciation of fixed assets, including leasehold improvements and equipment,equipment and the amortization of a definite-lived intangible asset, was $232,000$239,000 in the third quarter fiscal 20262027 period as compared to $235,000$228,000 in the third quarter fiscal 2025.2026 period.
General and administrative expenses increased by $946,000approximately or 27%9% to $4,396,000$4,323,000 in the third quarter fiscal 20262027 period as compared to $3,450,000$3,950,000 in the third quarter fiscal 2025.2026 period. The increase in general and administrative expenses was primarily attributable to higher professional fees of $852,000$288,000 relateddue primarily to our pending acquisition with Buyer pursuant to the Merger Agreement. Refer to NOTE ST – SUBSEQUENT EVENTSMERGER in the accompanying condensed consolidated financial statements and “Recent Events – Merger Agreement” above for further information.
Advertising fund expense, after eliminating Company contributions, was $411,000 in the fiscal 2027 period as compared to $427,000 in the fiscal 2026 period.
Advertising fund expense, after eliminating Company contributions, was $512,000 during the third quarter fiscal 2026 as compared to $520,000 in the third quarter fiscal 2025. The Company projects that the Advertising Fund normal seasonal deficit will not be fully recovered during the remainder of the fiscal 2026 period and has reflected the projected deficit of $121,000 in the fiscal 2026 period results of operations.
Interest expense of $707,000$638,000 in the third quarter fiscal 20262027 period represented interest expense of $690,000$620,000 on the Secured Overnight Financing Rate (“SOFR”) Term Loan borrowings and amortization of debt issuance costs of $17,000.$18,000.
Interest expense of $842,000$758,000 in the third quarter fiscal 20252026 period represented interest expense of $825,000$739,000 on the SOFR Term Loan borrowings and amortization of debt issuance costs of $17,000.$19,000.
In the third quarter fiscal 2025, the Company made a voluntary prepayment of $8,000,000 on its Term Loan borrowings under the Credit Agreement and recorded a loss on extinguishment of debt of $55,000 related to the write-off of a portion of previously recorded debt issuance costs on the Term Loan borrowings.
Interest and dividend income of $206,000$133,000 in the third quarter fiscal 20262027 period represented amounts earned by the Company on its interest bearing money market accounts and money market funds as compared to $183,000$203,000 in the third quarter fiscal 2025.2026 period. The increasedecrease is due to alower higher levellevels of invested cash earning interest at higher rates in the third quarter fiscal 20262027 period as compared to the third quarter of fiscal 2025.2026 period.
Other income, net was $21,000 in the fiscal 2026 period which primarily relates to sublease income from a franchised restaurant.
Other income, net was $122,000 in the third quarter of fiscal 2026 which primarily relates to sublease income and includes $84,000 of settlement income received in connection with the termination of a lease for certain premises located at 281 Walt Whitman Road, Huntington Station, New York on November 4, 2025. Other income, net was $21,000 in the third quarter of fiscal 2025 which primarily relates to sublease income.
The effective income tax rate for the third quarter fiscal 20262027 period was 35.0%27.4% as compared to 26.0%27.2% in the third quarter fiscal 2025.2026 period. The effective income tax rate for the third quarter fiscal 20262027 period reflected income tax expense of $1,664,000$3,334,000 recorded on $4,748,000$12,163,000 of pre-tax income. The effective income tax rate for the third quarter fiscal 20252026 period reflected income tax expense of $1,575,000$3,329,000 recorded on $6,059,000$12,257,000 of pre-tax income. The effective tax rates are higher than the U.S. Federal statutory rates primarily due to state and local taxes, as well as non-deductible executive compensation under the Internal Revenue Code Section 162(m). The effective income tax rate for the third quarter fiscal 20262027 period included an unfavorable discrete tax adjustment of 5.3%0.6% for non-deductible transaction costs.costs offset, in part, by a favorable discrete tax adjustment of 0.4% for stock compensation activity.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The OBBBA did not have a material impact to our provision for income taxes for the third quarter fiscal 2026.
The amount of unrecognized tax benefits at December 28, 2025 was $491,000 all of which would impact the Company’s effective tax rate, if recognized. As of December 28, 2025, the Company had approximately $438,000 accrued for the payment of interest and penalties in connection with unrecognized tax benefits.
Nathan’s estimates that its unrecognized tax benefit excluding accrued interest and penalties could be further reduced by up to $55,000 during the fiscal year ending March 26, 2026 due primarily to the lapse of statutes of limitations which would favorably impact the Company’s effective tax rate, although no assurances can be given in this regard.
Results of Operations
Thirty-nine weeks ended December 28, 2025 compared to thirty-nine weeks ended December 29, 2024
Total revenues increased by approximately 8% to $126,997,000 for the thirty-nine weeks ended December 28, 2025 (“fiscal 2026 period”) as compared to $117,395,000 for the thirty-nine weeks ended December 29, 2024 (“fiscal 2025 period”).
Foodservice sales from the Branded Product Program increased by approximately 14% to $81,871,000 for the fiscal 2026 period as compared to $71,781,000 for the fiscal 2025 period. During the fiscal 2026 period, the total volume of hot dogs sold in the Branded Product Program increased by approximately 1% as compared to the fiscal 2025 period. Our average selling price, which is partially correlated to the beef markets, increased by approximately 12% as compared to the fiscal 2025 period.
Total Company-owned restaurant sales decreased by approximately 1% to $11,256,000 during the fiscal 2026 period as compared to $11,351,000 during the fiscal 2025 period. Restaurant sales were primarily impacted by a 2% decline in customer traffic offset, in part, by a 1% increase in average check.
License royalties decreased by approximately 2% to $28,993,000 in the fiscal 2026 period as compared to $29,517,000 in the fiscal 2025 period. Total royalties earned on sales of hot dogs from our license agreement with Smithfield Foods, Inc. at retail and foodservice, decreased 2% to $26,315,000 for the fiscal 2026 period as compared to $26,751,000 in the fiscal 2025 period. The decrease is due to a 15% decrease in retail volume which was offset, in part, by a 15% increase in net selling price. The price increases year over year led to a reduction in promotional activities contributing to the decline in volume. The foodservice business earned higher royalties of $72,000 as compared to the fiscal 2025 period. Royalties earned from all other licensing agreements for the manufacture and sale of Nathan’s products decreased by $88,000 during the fiscal 2026 period as compared to the fiscal 2025 period primarily due to lower royalties earned on sales of pickles and proprietary spices offset, in part, by higher royalties earned on beef sticks.
Franchise fees and royalties were $3,372,000 in the fiscal 2026 period as compared to $3,238,000 in the fiscal 2025 period. Total royalties were $3,045,000 in the fiscal 2026 period as compared to $2,944,000 in the fiscal 2025 period. Royalties earned under the Branded Menu Program were $587,000 in the fiscal 2026 period as compared to $604,000 in the fiscal 2025 period. Royalties earned under the Branded Menu Program are not based upon a percentage of restaurant sales but are based upon product purchases. Virtual kitchen royalties were $82,000 in the fiscal 2026 period as compared to $42,000 in the fiscal 2025 period. Traditional franchise royalties were $2,376,000 in the fiscal 2026 period as compared to $2,298,000 in the fiscal 2025 period. Franchise restaurant sales increased to $54,278,000 in the fiscal 2026 period as compared to $52,400,000 in the fiscal 2025 period principally due to higher sales at travel plazas and international venues offset by lower sales at malls and casino locations primarily in Las Vegas, Nevada. Comparable domestic franchise sales (consisting of 61 Nathan’s units, excluding sales under the Branded Menu Program) were $41,030,000 in the fiscal 2026 period as compared to $42,009,000 in the fiscal 2025 period.
At December 28, 2025, 225 franchised locations, including domestic, international and Branded Menu Program units were operating as compared to 236 franchised locations, including domestic, international and Branded Menu Program franchise units at December 29, 2024. Total franchise fee income was $327,000 in the fiscal 2026 period as compared to $294,000 in the fiscal 2025 period. Domestic franchise fee income was $73,000 in the fiscal 2026 period as compared to $83,000 in the fiscal 2025 period. International franchise fee income was $160,000 in the fiscal 2026 period as compared to $178,000 during the fiscal 2025 period. We recognized $94,000 and $33,000 in forfeited fees in the fiscal 2026 period and fiscal 2025 period, respectively. During the fiscal 2026 period, eighteen franchise locations opened and twenty-three franchise locations closed. During the fiscal 2025 period, twenty-four franchise locations opened and eighteen franchise locations closed.
Advertising fund revenue, after eliminating Company contributions, was $1,505,000 in the fiscal 2026 period, as compared to $1,508,000 during the fiscal 2025 period.
Costs and Expenses
NATH insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-06-11 | Levine Andrew M |
Option exercise | 10,000 | $68.50 | $685.0K |
| 2026-06-11 | Levine Andrew M |
Shares withheld for tax | 6,744 | $101.58 | $685.1K |
Well-known investors holding NATH (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Renaissance Technologies | 2026-06-30 | 158,056 | $16.1M | 0.02% | Added 2% |
| Millennium Management (Israel Englander) | 2026-06-30 | 53,409 | $5.4M | 0.0% | Added 25% |
| Two Sigma Investments | 2026-06-30 | 41,367 | $4.2M | 0.0% | Added 7% |
| D. E. Shaw & Co. | 2026-06-30 | 18,619 | $1.9M | 0.0% | Added 28% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 7,500 | $762.0K | 0.0% | Reduced 1% |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 2,107 | $214.1K | 0.0% | Reduced 40% |