NDLS 10-K & 10-Q changes, risk factors and insider trading

The following risk factors and other information included in this Annual Report on Form 10-K should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations. You should carefully consider the risks described below, as well as the other information in this Annual Report on Form 10-K, including our financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well asand our other filings with the Securities and Exchange Commission, beforewhen decidingconsidering whetheran to investinvestment in our common stock. If any of the following risks occur, our business, financial condition, results of operations and future growth prospects could be materially and adversely affected.

We continue to pursue a number of financial, operational and strategic goalsgoals, andincluding wethrough mayour beStrategic unsuccessfulReview in(as achievingdefined some or all of them.below). Our strategies are designed to, among other objectives, improve restaurant operations and increase our restaurant revenue, comparable restaurant sales, net income and adjusted EBITDA, as defined in management’s discussion and analysis. However, our strategieswe may not be successful in achieving these goals in part or at all.

Our strategies and initiatives include innovating our menu offerings, enhancing our menu structure and layout, improving operational effectiveness and strengthening our financial foundation, optimizing our catering offerings, refining our pricing strategies, better understanding and tailoring communications to customers through our customer data platform and digital ecosystem, introducing new technology and equipment, and continuing to focus on manager selection, training and the development of our teams. However,These strategies and initiatives are in various stages of testing, evaluation and implementation, and we expect them to improve our results of operations and financial condition. Our continued menu innovation and limited time offerings, may not achieve the results we desire. Further, customers may not favor new menu offerings and pricing or may not find initiatives aimed at off-premise dininginitiatives appealing, and our efforts to increase our sales growth and improve our offerings may be unsuccessful. Additionally, our operational initiatives may be ineffective at reducing costs or may reduce the quality of the customer experience. Any failure of our new initiatives could materially adversely affect our business, financial condition, results of operations or cash flows.

Our strategic and operational goals are designed to improve our results of operations, including restaurant revenue and profitability. The level of comparable restaurant sales, which represent the change in year-over-year sales for restaurants open for at least 18 full periods, affects our restaurant revenue growth and will continue to be a critical factor affecting profitability. Our ability to increase comparable restaurant sales depends in part on our ability to successfully implement our initiatives, including increasing guest traffic. It is possible that such initiatives will not be successful, that we will not achieve our desired comparable restaurant sales growth or that the change in comparable restaurant sales could be negative, which may cause a decrease in restaurant revenue and profitability that could materially adversely affect our business, financial condition, results of operations or cash flows. For example, in 2023 and 2024 we experienced a decline in same store sales, as well as an increased loss from operations.operations and, during 2025, while we experienced higher comparable sales, we experienced lower operating income.

Changes in political and economic conditions, including higher inflationary pressures and continued elevated interest rates, may reduce customer demand and increase our costs.

Our business,business and the restaurant industry in general,general dependsdepend on consumer discretionary spending. Changes in market conditions, including negative economic conditions resulting from inflation, increased interest rates, recessionary economic cycles, changes in trade policies, including tariffs or other trade restrictions or the threat of such actions, stock market volatility, war, terrorist activities, global economic occurrences or trends or other geo-political events, may result in decreased consumer confidence, increased cost of consumer credit and ultimately reduced consumer disposable income. In turn, consumers may make changes to their discretionary spending behavior in a way that negatively affects our business, including dining out less frequently, reducing the amount they spend while dining out, or choosing to eat at other lower priced restaurants. Additionally, these changes in market conditions may impact our development pipeline, including the availability of new sites, increased construction costs and availability of contract labor.

Changes in economic conditions, particularly with respect to inflationary pressures, may result in increased interest rates persisting for longer than expected and/or further increases in interest rates, labor shortages, and supply chain disruptions. These inflationary pressures may also increase our costscosts, including our labor and raw material costs, utilities, and our cost of borrowing, and we may not be able to fully offset such higher costs through price increases. For example, in 2023 and 2024, we executed amendments to our credit agreement, which resulted in increased borrowing rates. In 2022, the cost of several of our food ingredients increased as a result of inflation in many commodities, particularly the cost of our chicken. As a result, we implemented a temporary chicken-price surcharge of $1.00 for several months while chicken was at its peak of the commodity cycle and made certain other menu price increases throughout 2022.

Several of our competitors compete by offering menu items that are specifically identified as low in carbohydrates, gluten-free, or rich in protein. In addition, manyMany of our competitors emphasize lower-cost value options or meal packages,packages and as such, the competitive environment has resulted in more value oriented offerings, promotions or strategiesdiscounts, including from casual restaurant chains, which we dohave notresponded currentlyto pursue.by the introduction of our Delicious Duos offering in 2025. Any of these competitive factors may materially adversely affect our business, financial condition, results of operations or cash flows.

We incur costs and expend other resources in our marketing efforts on new menu offerings, advertising campaigns, raising brand awareness and to attract and retain customers. These initiatives may not be successful, resulting in expenses incurred without the benefit of higher revenues. Further, if our marketing and advertising strategies are not successful, we may be forced to engage in additional promotional activities to attract and retain customers, including offers for discounted food, and any such additional promotional activities could adversely impact our profitability. Additionally, many of our competitors have more marketing resources and we may not be able to successfully compete. If our competitors increase spending on marketing, or if our marketing funds decrease for any reason, or if our advertising and promotions are less effective than those of our competitors, our financial performance could be materially affected.

Our success is dependent in part upon our ability to maintain and enhance the value of our brand, consumers’ connection to our brand and positive relationships with our franchisees. We may be faced with negative publicity relating to food quality, restaurant facilities, customer complaints or litigation alleging illness or injury, health inspection scores, integrity of our or our suppliers’ food processing, employee relationships or other matters, regardless of whether the allegations are valid or whether we are held to be responsible. The negative impact of adverse publicity relating to one restaurant may extend far beyond the restaurant or franchise involved to affect some or all of our other restaurants. The risk of negative publicity is particularly great with respect to our franchised restaurants because we are limited in the manner in which we can regulate them, especially on a real-time basis. NegativeAdverse information posted on social media platforms can quickly reach a wide audience and resulting harm to our reputation may be immediate, without affording us an opportunity to correct or otherwise respond to the information. It is challenging to monitor and anticipate developments on social media in order to respond in an effective and timely manner. As a result, negative publicity generated by such incidents may be amplified by the use of social media. A similar risk exists with respect to unrelated food service businesses, if consumers associate those businesses with our own operations or are concerned with the food safety of the broader restaurant industry.

A number of other fast-casual restaurant chains have experienced incidents related to foodborne illnessesillnesses, including E. coli, listeria and norovirus outbreaks that have had a material adverse effect on their operations, including E. coli, listeria and norovirus outbreaks at other fast-casual concepts.operations. These incidents at other restaurants could cause some customers to have a negative perception of fast-casual concepts generally, which can negatively affect our restaurants. The occurrence of a similar incident at one or more of our restaurants, or negative publicity or public speculation about an incident, could materially adversely affect our business, financial condition, results of operations or cash flows.

We have historically,historically utilized, and expect to continue to, utilizeutilizing, menu price increases to help offset cost increases, including increased cost for food ingredients and supplies, wages, employee benefits, insurance costs, construction, utilities and other key operating costs. If our selection and amount of menu price increases are not accepted by consumers and reduce guest traffic, or are insufficient to counter increased costs, our financial results could be negatively affected. For example in 2023, primarily in response to inflationary food, labor and operating costs, we made certain menu price increases, which we believe negatively affected our traffic. In 2025, we made certain menu price increases that did not negatively impact our traffic. We cannot provide assurance that menu price increases will not deter guests from visiting our restaurants, reduce the frequency of their visits or affect their purchasing decisions.

The occurrence of one or more unexpected events, including war, acts of terrorism, cybersecurity incidents, pandemics, civil unrest, natural disasters and other forms of severe weather in the United States or in other locations in which our suppliers are located, have affected and could in the future affect our operations and financial performance. It is possible that weather conditions may impact our business more than other businesses in our industry because of the significant concentration of our restaurants in the Upper Midwest, Rocky Mountain and Mid-Atlantic states. Such events could affect our guest traffic, sales and operating costs and/or cause complete or partial closure of one or more distribution centers, cause temporary or long-term disruption or inoperability of our information technology systems (including our digital platform), temporary or long-term disruptions in our delivery channel or the supply of products from suppliers, and disruption and delay in the transport of products, any of which may have a material adverse effect on our business, financial condition, and results of operations. Existing insurance coverage may not provide protection from all the costs that may arise from such events.

We do not own any real property. Payments under our operating leases account for a significant portion of our operating expenses and we expect theany new restaurants we open in the future will similarly be leased. Our leases generally have an initial term of ten years and generally can be extended only in five-year increments (at increased rates). All of our leases require a fixed annual rent, although some require the payment of additional rent if restaurant sales exceed a negotiated amount. Generally, our leases are “net” leases, which require us to pay all of the cost of insurance, taxes, maintenance and utilities. We generally cannot cancel these leases. Additional sites that we may lease are likely to be subject to similar long-term non-cancelable leases. In connection with closing restaurants, we may nonetheless be committed to perform our obligations under the applicable lease including, among other things, paying the base rent for the balance of the lease term. In 2024,2025, we performed a detailed portfolio review that identified approximately 2033 restaurants that we evaluated for potential closure before the end of their lease terms. In addition, as each of our leases expires, we may fail to negotiate renewals, either on commercially acceptable terms or at all, which could cause us to pay increased occupancy costs or to close restaurants in desirable locations.

One element of our long-term operational strategy is the opening of new restaurants and operating those restaurants on a profitable basis with an acceptable return on investment. In 2024,2025, we opened tentwo company-owned restaurants and closed thirteen33 company-owned restaurants.restaurants In 2024,and our franchisees openeddid threenot open any new restaurants and closed sevennine restaurants.

Our ability to successfully open new restaurants also depends on other factors, including: site selection; local economic trends and demographics; proximity of potential development sites to an existing location; anticipated development near our new restaurants; negotiating leases with acceptable terms; identifying, hiring and training qualified employees; the state of the labor market in each local market; timely delivery of leased premises to use; managing construction and development costs; avoiding the impact of inclement weather, natural disasters and other calamities; obtaining construction materials and labor at acceptable costs; securing required governmental approvals, permits and licenses; generating sufficient returns on our new restaurant investments; and accessing capital. OurThe selection of target markets for expansion is challenging. We also must locate and secure appropriate sites for new restaurantrestaurants, growthwhich willis decreaseone of our biggest challenges. There are numerous factors involved in 2025identifying dueand tosecuring loweran thanappropriate expectedsite, ratesincluding, among others: identification and availability of returnlocations; oncompetition; investmentfinancial forconditions ouraffecting recentlydevelopers openedand restaurantspotential aslandlords; well as increasedmanaging construction and development costs.costs; Asdevelopers and potential landlords obtaining licenses or permits for development projects on a result,timely webasis; haveproximity reducedof our new restaurantpotential development pipeline for 2025. We continuesites to enhancean ourexisting operatinglocation; modelavailability of acceptable lease arrangements; and areobtaining researchingconstruction amaterials newand prototypelabor thatat wouldacceptable address costs, as well as changing consumer behaviors.costs.

New restaurants may not be profitable, their sales performance may not follow historical patterns, and/or our average restaurant sales and comparable restaurant sales may underperform our expectations. In addition, the construction costs supporting the new restaurant openings may be higher than historical averages, placing a higher profitability threshold to generate an attractive cash-on-cash return. Our ability to operate new restaurants profitably, maintain an attractive cash-on-cash return, and increase average restaurant sales and comparable restaurant sales will depend on many factors, some of which are beyond our control, including: consumer awareness, understanding and support of our brand; general economic conditions, construction cost inflation, local labor costs and availability and prices we pay for the food products and other supplies we use; changes in consumer preferences; competition; temporary and permanent site characteristics of new restaurants; and changes in government regulation.

If our new restaurants do not perform as planned, our business and future prospects could be harmed. In addition, if we are unable to achieve our expected average restaurant sales, our business, financial condition, results of operations or cash flows could be materially adversely affected. The return on investment on our recent new restaurant openings have not been as expected. As a result, we have reducedpaused our new restaurant development pipeline for 2025.2026.

Our business could be adversely affected by difficulties in hiring and retaining top-performingqualified employees.

Our success depends on the efforts of our employees and our ability to hire, motivate and retain qualified employees. We have taken strategic steps to improve the retention of our labor force, which has improved sequentially since peak levels in mid-2022 and turnover levels are now at lower levels and wage inflation is also moderating. There may be a small supply of qualified individuals in some of the communities in which we operate, and competition in these communities for qualified individuals could require us to pay higher wages and provide greater benefits. We devote significant resources to training our employees and strive to reduce turnover in order to keep top performingqualified employees and better realize our investment in training new employees. However, turnover among our restaurant employees may increase. Failure to hire and retain top-performingqualified employees could impact our financial performance by increasing our training and labor costs and reducing the quality of our customers’ experiences.

Our ability to continue to grow our business depends substantially on the contributions and abilities of our executive leadership team and other key management personnel. Changes in senior management could expose us to significant changes in strategic direction and initiatives. In 2023,August 2025, we hiredpromoted aour newPresident and Chief FinancialOperating Officer andto appointedserve an interim Chief Executive Officer, ultimately naming him our permanent Chief Executive Officer in 2024. We also appointed our new Chief Concept Officer and an Executive Vice President of Marketing in 2024 and recently announced the appointment ofas our new President and Chief OperatingExecutive Officer and the former CEO remains on our board. We have experienced turnover in Februarycertain 2025.other senior management positions which have been replaced by permanent or fractional management. A failure to maintain appropriate organizational capacity and capability to support our strategic initiatives or to build adequate bench strength with key skill sets required for seamless succession of leadership, could jeopardize our ability to meet our business performance expectations and growth targets. If we are unable to attract, develop, retain and incentivize sufficiently experienced and capable management personnel, our business and financial results may suffer.

We have taken strategic steps to attempt to make our restaurant operations more labor-efficient, including reconfigured restaurant operations, increased off-premise offerings, and new technology and equipment, but in certain instances these strategies may require initial investment costs and there can be no assurances that these strategies will succeed.

We rely in part on our franchisees and the manner in which they operate their locations to develop and promote our business. Although we have developed criteria to evaluate and screen prospective franchisees, we cannot be certain that our franchisees will have the business acumen or financial resources necessary to operate successful franchises in their franchise areasareas, and state franchise laws may limit our ability to terminate or modify these franchise arrangements. Moreover, despite our training, support and monitoring, franchisees may not successfully operate restaurants in a manner consistent with our standards and requirements or may not hire and train qualified managers and other restaurant personnel. The failure of our franchisees to operate their franchises successfully could have a material adverse effect on us, our reputation, our brand and our ability to attract prospective franchisees and could materially adversely affect our business, financial condition, results of operations or cash flows. Failure to provide our franchisees with adequate support and resources could also materially adversely affect these franchisees, as well as cause disputes between us and them and potentially lead to material liabilities.

We may be harmed by breaches of security of information technology systems and/or of our confidential consumer, employee, financial, or other proprietary data.

We assess Noodles &the Company’s cybersecurity program using several frameworks including the cybersecurity framework from the National Institute of Standards and Technology (NIST-CSF). This program includes policies, processes and procedures that help assess and identify our cybersecurity risks and inform how security measures and controls are developed, implemented and maintained. The risk assessment along with risk-based analysis and judgment are used to prioritize our cybersecurity initiatives. During this process, the following factors, among others, are considered: likelihood and severity of risk, impact on the Company and others if a risk materializes, feasibility and cost of controls and impact of controls on operations.

We maintain internal resources to perform penetration testing designed to simulate evolving tactics and techniques of real-world threat actors, engage with industry partners and law enforcement and intelligence communities and conduct tabletop exercises and periodic risk interviews across our business. We also engage several independent third parties to perform internal and external penetration testing of our technology environment periodically and engage other third-partiesthird parties to periodically conduct assessments of our cybersecurity processes and capabilities. In addition, we continue to expand training and awareness practices to mitigate risk from human error, including mandatory computer-based training and internal communications for employees. Our employees undergo cybersecurity awareness training and regular phishing awareness campaigns that are based upon and designed to emulate real-world contemporary threats. We provide prompt feedback (and, if necessary, additional training or remedial action) based on the results of such exercises.

We use many information technology systems throughout our operations, including systems that record and process customer sales, manage human resources and generate accounting and financial reports. For example, our restaurants use computerized management information systems, including point-of-sale computers that process customer credit card, debit card and gift card payments, and in-restaurant back office computer systems designed to assist in the management of our restaurants and provide labor and food cost management tools. Our franchisees use similar point of sale systems and are required to report business and operational data through an online reporting network. Through these systems, we have access to and store a variety of consumer, employee, financial and other types of information related to our business. We also rely on third-party vendors to provide information technology systems and to securely process and store related information. Our franchisees also use information technology systems and rely on third-party vendors. If our or our franchisees’ technology systems, or those of third-party vendors we or our franchisees rely upon, are compromised as a result of a cyber-attack (including from circumvention of security systems, denial-of-service attacks, hacking, “phishing” attacks, computer viruses, ransomware, malware, or social engineering) or other external or internal methods, it could materially adversely affect our reputation, business, financial condition, results of operations or cash flows.

The cyber risks we face range from cyber-attacks common to most industries to attacks that target us due to the confidential consumer information we obtain through our electronic processing of credit and debit card transactions. Like others in our industry, we have experienced many attempts to compromise our information technology and data, including a successful attempt in 2016 that we have discussed in previous filings, and we may experience more attempts in the future. These events could result in the misappropriation of our or our customers’ personal information or other proprietary or confidential information, breach of our legal, regulatory or contractual obligations, delays in our operations, or inability to access or rely upon critical business records or systems. In addition to property and casualty insurance, which may cover restoration of data, certain physical damage or third-party injuries, we have cybersecurity insurance related to a breach event. However, damage and claims arising from such incidents may not be covered or may exceed the amount of any available insurance.

Because cyber-attacks take many forms, change frequently, are becoming increasingly sophisticated, and may be difficult to detect for significant periods of time, we may not be able to respond adequately or timely to future cyber-attacks. If we or our franchisees, or third-party vendors, were to experience a material breach resulting in the unauthorized access, use, or destruction of our information technology systems or confidential consumer, employee, financial, or other proprietary data, it could negatively impact our reputation, reduce our ability to attract and retain customers and employees and disrupt the implementation and execution of our strategic goals. Moreover, such breaches could result in a violation of various privacy-related laws, including the various state specific privacy laws, which are subject to differing interpretations and criteria for enforcement, continue to undergo frequent change, and there are likely to be other jurisdictions that propose or enact new or emerging data privacy requirements in the future. The complexity of these privacy and data protection laws may result in significant costs arising from compliance and from any non-compliance, whether or not due to our negligence, and could affect our brand reputation and our results of operations. As a result, we may be subject us to investigations or private litigation, which, in turn, could expose us to civil or criminal liability, fines and penalties imposed by state and federal regulators, claims for purportedly fraudulent transactions arising out of the actual or alleged theft of credit or debit card information, compromised security and information systems, failure of our employees to comply with applicable laws, the unauthorized acquisition or use of such information by third parties, or other similar claims, and various costs associated with such matters.

Our ability to maintain consistent price,pricing, quality and safety throughout our restaurants depends in part upon our ability to acquire specified food products and supplies in sufficient quantities from third-party vendors, suppliers and distributors at a reasonable cost. We do not control the businesses of our vendors, suppliers and distributors and our efforts to specify and monitor the standards under which they perform may not be successful. Furthermore, certain food items are perishable, and we have limited control over whether these items will be delivered to us in appropriate condition for use in our restaurants. If any of our distributors or suppliers perform inadequately, or our distribution or supply relationships are disrupted for any reason, our business, financial condition, results of operations or cash flows could be materially adversely affected. If we cannot replace or engage distributors or suppliers who meet our specifications in a short period of time, including any suppliers who are a sole source of supply of a particular ingredient, that could increase our expenses and cause shortages of food and other items at our restaurants, which could cause a restaurant to remove items from its menu. If that were to happen, affected restaurants could experience significant reductions in sales during the shortage or thereafter, especially if customers change their dining habits as a result. Our focus on a limited menu would make the consequences of a shortage of a key ingredient more severe. In addition, because we provide moderately priced food, we may choose not to, or may be unable to, pass along commodity price increases to consumers. These potential changes in food and supply costs could materially adversely affect our business, financial condition, results of operations or cash flows.

Our profitability depends in part on our ability to anticipate and react to changes in food and supply costs. Shortages or interruptions in the availability of certain supplies caused by seasonal fluctuations, unanticipated demand, problems in production or distribution, food contamination, product recalls, government regulations,regulations (including changes in trade policies), inclement weather or other conditions could materially adversely affect the availability, quality and cost of our ingredients, which could harm our operations. Weather related issues, such as freezes, heavy rains or drought, may also lead to temporary spikes in the prices of some ingredients such as produce or meats. Increasing weather volatility or other long-term changes in global weather patterns, including any changes associated with global climate change, could have a significant impact on the price, availability and timing of delivery of some of our ingredients. In addition, at certain times of the year a substantial volume of our shrimp and produce items isare imported from India, Mexico and other countries. The United States has recently implemented or threatened certain changes in trade policies, including tariffs. Any new or increased import duties, tariffs or taxes, or other changes in U.S. trade or tax policy, could result in higher food and supply costs. Any increase in the prices of the food products most critical to our menu, such as pasta, beef, chicken, wheat flour, cheese and other dairy products, tofu and vegetables, could materially adversely affect our operating results, especially if we are unable to increase our menu prices in order to pass these increased costs on to consumers.

In 2022,the past the cost of several of our food ingredients increased as a result of inflation in many commodities, particularly chicken.chicken Asand ain result,2025 specificallywe forsaw an increase in beef inflation. For our chicken purchases, we entered into temporary formula pricing contracts with our vendors and were susceptible to fluctuations in the commodities markets. While we saw material market improvement in chicken and other food ingredients in 2023 and 2024,ingredients, if food inflation in the chicken market or any other food ingredient were to persist, our financial condition and business operations could be severely impacted. We have, and expect to continue to, enter into fixed-based pricing agreements for certain food ingredients to reduce our exposure to cost increases, but there can be no guarantee that we will be able to do so on favorable terms or at all.

In accordance with accounting guidance as it relates to the impairment of long-lived assets, we make certain estimates and projections with regard to individual restaurant operations, as well as our overall performance, in connection with our impairment analyses for long-lived assets. When impairment triggers are deemed to exist for any location, the estimated undiscounted future cash flows are compared to its carrying value. If the carrying value exceeds the undiscounted cash flows, an impairment charge equal to the difference between the carrying value and the fair value is recorded. The projections of future cash flows used in these analyses require the use of judgment and a number of estimates and projections of future operating results. If actual results differ from our estimates, additional charges for asset impairments may be required in the future. Over the past several years we have recognized significant impairment charges andand, if future impairment charges continue to be significant, this could have a material adverse effect on our business or results of operations.

We are subject to various federal, state and local regulations, including those relating to building and zoning requirements and those relating to the preparation and sale of food. Our restaurants are also subject to state and local licensing and regulation by health, sanitation, food and occupational safety and other agencies. We may experience material difficulties or failures in obtaining the necessary licenses, approvals or permits for our restaurants, which could delay planned restaurant openings or affect the operations at our existing restaurants. In addition, stringent and varied requirements of local regulators with respect to zoning, land use and environmental factors could delay or prevent development of new restaurants in particular locations. Moreover, the current uncertainty surrounding government regulations and policiespolicies, how they are interpreted and enforced and the potential for rapid change could lead to disruptions in our business.

Regulations and consumer eating habits may change as a result of new information or attitudes regarding diet, health and safety. Such changes may include federal, state and local regulations and recommendations from medical and diet professionals pertaining to the ingredients and nutritional content of the food and beverages we offer. The significant rise in weight loss medications, and recent reductions in their costs, could lead to a limitation of the consumption of higher calorie items or portion sizes. The success of our restaurant operations is dependent, in part, upon our ability to effectively respond to changes in any consumer health regulations and our ability to adapt our menu offerings to trends in food consumption. If consumer health regulations or consumer eating habits change significantly, we may choose or be required to modify or remove certain menu items, which may cause us to incur costs to implement those changes and may materially adversely affect the appeal of our menu to new or returning customers. To the extent we are unwilling or unable to respond with appropriate changes to our menu offerings, it could materially affect consumer demand and could have a material adverse impact on our business, financial condition, results of operations or cash flows.

Government regulation and consumer eating habits may impact our business as a result of changes in attitudes regarding diet, medications and health or new information regarding the adverse health effects of consuming certain menu offerings. As discussed in Part I, “Business-Governmental Regulation and Environmental Matters” of this Form 10-K, these changes have resulted in, and may continue to result in, laws and regulations requiring us to disclose the nutritional content of our food offerings, and they have resulted, and may continue to result in, laws and regulations affecting permissible ingredients and menu offerings. Inconsistencies among state laws with respect to presentation of nutritional content could be challenging for us to comply with in an efficient manner. The Patient Protection and Affordable Care Act also requires covered restaurants to provide to consumers, upon request, a written summary of detailed nutritional information for each standard menu item, and to provide a statement on menus and menu boards about the availability of this information upon request. An unfavorable report on, or reaction to, our menu ingredients, the size of our portions or the nutritional content of our menu items could negatively influence the demand for our offerings.

We could be party to litigation that could adversely affect us by distracting management, impairing our reputation, increasing our expenses or subjecting us to material money damages and other remedies.

Our reputation could be harmed if we fail, or are perceived to fail, to comply with various regulatory requirements or if we are unable to meet stakeholder expectations in a number of areas such as health, safety and security; sustainability; environmental stewardship; climate change; human rights; and corporate governance. We manage a broad range of corporate responsibility matters, taking into consideration their expected effect on the sustainability of our business over time, and the potential effect of our business on society and the environment. Such efforts can be costly and complex, and we may not ultimately accomplish our desired objectives, either as intended or at all. In addition, both guest,guest and shareholder and other stakeholder expectations regarding such matters are evolving, and navigating these issues will require us to successfully manage differing views on these matters. Adverse incidents or failure to comply or meet expectations with respect to our corporate responsibility efforts could negatively affect our reputation, the cost of our operations, and relationships with guests and shareholder and other stakeholders, all of which could adversely affect our business, results of operations, and the price of our stock.

Risks Related to Our Debt Financing and Common Stock and Debt Financing

We are required to satisfy the continued listing requirements of the Nasdaq Global Select Market (“Nasdaq”) to maintain such listing, including, among other things, the maintenance of a minimum closing bid price of $1.00 per share. On DecemberJune 24, 2024,2025, we received a notice from Nasdaq indicating that we were not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5450(a)(1) for continued listing on Nasdaq. Nasdaq Listing Rule 5450(a)(1) requires listed securities maintain a minimum closing bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum closing bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The notification of noncompliance had no immediate effect on the listing or trading of our common stock on Nasdaq and we had 180 calendar days from the date of notice to achieve compliance with the minimum bid price requirement.requirement, or until December 22, 2025. To regain compliance, the closing bid price of our common stock must have been at least $1.00 per share for a minimum of 10 consecutive business days at any time prior to the expiration of the 180-calendar day grace period, unless Nasdaq exercised its discretion to extend this ten-day period. As the Company did not regain compliance by December 22, 2025, the Company requested a hearing before a Nasdaq Hearing Panel (“Panel”) to extend its compliance period, which request stayed any further suspension or delisting action by Nasdaq, pending the ultimate conclusion of the hearing process. On January 27, 2026, the Panel notified the Company that it had granted the Company’s request for additional time to complete the steps intended to cause it to regain compliance with the minimum bid price requirement. The Company executed the Reverse Stock Split on February 18, 2026, and as a result, the Company’s common stock traded above $1.00 for the required time period. On March 5, 2025,2026, Nasdaq notified us that, as of February 5, 2025,that we had regained compliance with Nasdaq Listing Rule 5450(a)(1) and that the matter is now closed.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included in Item 8. “Financial Statements and Supplementary Data.” This section of the Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons of 2025 to 2024. Discussions of 2023 items and year-to-year comparisons of 2024 to 2023. Discussions of 2022 items and year-to-year comparisons of 2023 and 2022 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 on our Annual Report on Form 10-K for the year ended JanuaryDecember 2,31, 2024. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors including, but not limited to, those discussed in Item 1A. “Risk Factors” and elsewhere in this report.

We operate on a 52- or 53-week fiscal year ending on the Tuesday closest to December 31. Fiscal years 20242025 and 2023,2024, which ended on December 31,30, 20242025 and JanuaryDecember 2,31, 2024, respectively, contained 52 weeks. We refer to our fiscal years as 20242025 and 2023.2024. Our fiscal quarters each contained 13 operating weeks.

Labor Costs. Similar to much of the restaurant industry, our base labor costs have risen in recent years. In 2024, we have seen the rate of wage inflation decrease. Our wage inflation in 2024 was less than 3%. We have been able to partially mitigate the impact of wage inflation through a continued focus on maximizing efficiencies of labor hour usage per restaurant.restaurant and wage inflation has stabilized to less than 3%.

Other Restaurant Operating Costs. We have incurred, and expect to continue to incurincur, increased third-party delivery fees resultingdue from ato significant andincreased increasing useusage of third-party delivery services.services resulting in a higher mix of third party delivery sales.

Restaurant Development. In 2024,2025, we opened tentwo company-owned restaurants and three franchise restaurants. As of December 31,30, 2024,2025, we had 371340 company-owned restaurants and 9283 franchise restaurants in 31 states. InWe 2025,do wenot plan to open twoany new company-owned restaurants.restaurants in 2026.

Certain Restaurant Closures. We closed thirteen33 and six13 company-owned restaurants in 20242025 and 2023,2024, respectively, most of which were either generating low or negative cash flows, at or approaching the expiration of their leases or in trade areas that are not as well positioned for current consumer trends.trends or a potential for a significant amount of sales transfer given strong off premise sales. We continue to analyze our restaurant portfolio and expect to close certainapproximately 30 to 35 restaurants in 2026, of which 19 have already been closed in the first two months of 2026, that are either generating low or negative cash flows, at or approaching the expiration of their leases or in trade areas that are not as well positioned for current consumer trends.trends or a potential for a significant amount of sales transfer given strong off premise sales.

Impairment of Long-lived Assets. We impaired sixteenfixed assets related to 25 restaurants in 2025 and 16 restaurants in 2024 andprimarily tworelated restaurantsto inclosure 2023.decisions We performed a detailed review of significantlyon underperforming restaurants in 2024 and based on this review, recorded impairments on certain restaurants that we believed had fair market values below their net book values.restaurants. Impairment is based on our current assessment of the expected future cash flows of various restaurants based on recent results and other specific market factors.

Consistent with common industry practice, we present comparable restaurant sales on a calendar-adjusted basis that aligns current year sales weeks with comparable periods in the prior year, regardless of whether they belong to the same fiscal period or not. Since opening new company-owned and franchise restaurants is a part of our long-term growth strategy and we anticipate new restaurants will be a component of our long-term revenue growth, comparableComparable restaurant sales is only one measure of how we evaluate our performance.

AUVs consist of the average annualized sales of all company-owned restaurants for a given time period. AUVs are calculated by dividing restaurant revenue by the number of operating days within each time period and multiplying by the number of operating days we have in a typical year. Based on this calculation, temporarily closed restaurants are excluded from the definition of AUV, however restaurants with temporarily reduced operating hours are included. This measurement allows management to assess changes in consumer traffic and per-person spending patterns at our restaurants. In addition to the factors that impact comparable restaurant sales, AUVs can be further impacted by effective real estate site selection and maturity and trends within new markets.

We define EBITDA as net income (loss) before net interest expense, provision (benefit) for income taxes and depreciation and amortization. We define adjusted EBITDA as net income (loss) before net interest expense, provision (benefit) for income taxes, depreciation and amortization, restaurant impairments, loss on disposal of assets, net lease exit costs (benefits), gain (loss) on sale of restaurants, severance andseverance, executive transition costs, corporate transaction costs and stock-based compensation.

Interest ExpenseExpense, Net

Interest expenseexpense, net consists primarily of interest on our outstanding indebtedness and amortization of debt issuance costs over the life of the related debt reduced by capitalized interest.

Total revenue decreasedincreased by $10.1$1.8 million, or 2.0%,0.4%, in 20242025 compared to 2023.2024. ThisThe decreaseincrease was primarily due to: $8.3an $18.2 million from a declineincrease in company same store sales, $7.1a $4.4 million dueincrease tofrom refranchisingnew andrestaurant $6.7revenue mostly offset by a decrease of $18.3 million due tofrom permanent restaurant closures,closures partiallyand offseta bydecrease $12.0of $2.5 million from growth in new restaurant revenue.refranchising.

Average unit volumes decreasedincreased 3.0%5.5% to $1.36 million in 2025 compared to $1.29 million in 2024 compared to $1.33 million in 2023 primarily due to decreasesincreases in traffic.same store sales and the closure of underperforming restaurants. System-wide comparable restaurant sales decreasedincreased 1.5%4.1% in 2024,2025, comprised of a 1.8%4.3% decreaseincrease at company-owned restaurants and a 0.2%3.2% decreaseincrease at franchise-owned restaurants.

Cost of sales decreasedincreased by $0.4$3.5 million, or 0.3%,2.8%, in 20242025 compared to 2023.2024. As a percentage of restaurant revenue, cost of sales increased to 26.2% in 2025 from 25.6% in 2024 from 25.2% in 2023,2024, primarily due to a 0.8%1.4% impact from a combination of new menu investments, menu mix shiftsshifts, and inflation,inflation partially offset by a 0.4%0.8% benefit from menu price increases.and vendor rebates.

Labor costs decreased by $3.4$0.9 million, or 2.1%,0.6%, in 20242025 compared to 2023.2024. As a percentage of restaurant revenue, labor costs decreased to 31.9%31.6% in 20242025 compared to 32.0%31.9% in 2023,2024, primarily due to a 0.5%1.1% benefit from menusales price increases, a 0.5% benefit from labor efficienciesleverage and a 0.5%0.2% benefit from a combination of lower incentive pay and benefits,benefits partially offset by increases0.7% of 0.8%wage inflation and 0.4% from traffica deleveragetemporary andincrease 0.6%in fromlabor wagehours inflation.related to the new menu rollout.

Occupancy costs increaseddecreased by $0.4$1.7 million, or 1.0%,3.8%, in 20242025 compared to 2023,2024, due primarily to new restaurant openings.closures. As a percentage of restaurant revenue, occupancy costs increaseddecreased to 9.2% in 2025 from 9.6% in 20242024, from 9.3% in 2023,primarily due primarily to asales decrease in restaurant revenue.leverage.

Other restaurant operating costs increased by $3.5$3.8 million, or 3.8%,4.0%, in 20242025 compared to 2023.2024. As a percentage of restaurant revenue, other restaurant operating costs increased to 20.4% in 2025 from 19.7% in 2024 from 18.6% in 2023,2024, primarily due to a 0.5% impact from higher delivery fees driven by higher delivery sales, a 0.4% impact from sales deleverage, and a 0.3% impact from increased marketing spend in 2024.spend.

General and administrative expense decreased by $1.0$1.7 million, or 1.9%,3.3%, in 20242025 compared to 2023,2024, primarily due primarily to decreasesa decrease in wagesseverance costs, lower stock based compensation, and lower labor expenses of $1.5 millioncosts partially offset by increases inhigher marketing spendexpenses and expensessoftware related to our bi-annual manager conference.maintenance. As a percentage of revenue, general and administrative expense remaineddecreased flatto at9.9% in 2025 from 10.3% in 2024 and 2023.2024.

Depreciation and amortization increaseddecreased by $2.3$2.0 million, or 8.5%,6.9%, in 20242025 compared to 2023,2024, due primarily to new restaurant and technology investments, partially offset by restaurants impaired or closed.closed during 2025. As a percentage of revenue, depreciation and amortization increaseddecreased to 5.5% in 2025 compared to 5.9% in 2024 compared to 5.3% in 2023.2024.

Pre-opening costs decreased $0.7by million$1.3 million, or 85.4%, in 20242025 compared to 20232024 due to less new restaurant openings in 20242025 compared to 2023.2024.

Restaurant impairments, closure costs and asset disposals increased by $11.9$6.0 million, or 141.3%,29.6%, in 20242025 compared to 2023.2024. The increase was largely due to an increase in write-downs of lease related assets and fixed asset impairment charges with sixteen25 restaurants impaired in 2025 compared to 16 restaurants impaired in 2024 comparedprimarily related to twoclosure restaurantsdecisions impairedon underperforming restaurants. This was partially offset by a decline in 2023.closure costs as a result of lease remeasurement gains. We performedcontinue ato detailedanalyze reviewour ofrestaurant significantly underperforming restaurants in 2024portfolio and basedexpect onto this review, recorded impairments onclose certain restaurants that weare believedeither hadgenerating fairlow marketor valuesnegative belowcash flows, at or are approaching the expiration of their netleases bookor values.in trade areas that are not as well positioned for current consumer trends. Both years include ongoing equipment costs for restaurants previously impaired and lease related costs and expenses in connection with the divestiture of company-owned restaurants in previous years.

Interest ExpenseExpense, Net

Interest expenseexpense, net increased by $3.6$2.5 million, or 74.5%30.2% in 20242025 compared to 2023.2024. The increase was mainlyprimarily due to higher average borrowings and a higher average interest rate in 20242025 compared to 2023.2024. Interest rates for all amounts outstanding are variable.

As of December 31,30, 2024,2025, our available cash and cash equivalents balance was $1.1$1.3 million, and $19.0$11.9 million was available for future borrowings under our A&R Credit Agreement (defined below).Agreement.

On May 9, 2018, we entered into a Credit Agreement (the “Credit Agreement”) with each other Loan Party (as defined in the Credit Agreement) party thereto, each lender from time to time party thereto, and U.S. Bank National Association, as Administrative Agent, L/C Issuer and Swing Line Lender (each as defined in the Credit Agreement). The Credit Agreement consisted of a term loan facility in an aggregate principal amount of $25.0 million and a revolving line of credit of $65.0 million, which included a letter of credit subfacility in the amount of $15.0 million and a swingline subfacility in the amount of $10.0 million. The Credit Agreement was subsequently amended on November 20, 2019 and June 16, 2020. On July 27, 2022, we amended and restated our Credit Agreement by entering into the Amended and Restated Credit Agreement (as further amended, restated, extended, supplemented, modified and otherwise in effect from time to time, the “A&R Credit Agreement” or the “credit agreement”), with each other Loan Party (as defined in the A&R Credit Agreement) party thereto, each lender from time to time party thereto, and U.S. Bank National Association, as Administrative Agent, L/C Issuer and Swing Line Lender (each as defined in the A&R Credit Agreement). The A&R Credit Agreement matures on July 27, 2027. Among other things, the A&R Credit Agreement: (i) increased the credit facility from $100.0 million to $125.0 million and; (ii) eliminated the term loan and principal amortization components of the credit facility.facility; (iii) removed the Company’s capital expenditure covenant; (iv) enhanced flexibility for certain covenants and restrictions; and (v) lowered the spread of the Company’s cost of borrowing and transitioned from the London Interbank Offered Rate (“LIBOR”) to the Secured Overnight Financing Rate (“SOFR”) plus a margin of 1.50% to 2.50% per annum, based upon the consolidated total lease-adjusted leverage ratio. The A&R Credit Agreement is secured by a pledge of stock of substantially all of the Company’s subsidiaries and a lien on substantially all of the personal property assets of the Company and its subsidiaries. The A&R Credit Agreement was subsequently amended on December 21, 2023.

On October 29, 2024, the Company further amended its A&R Credit Agreement, by entering into that certain Second Amendment to Amended and Restated Credit Agreement (the “Second Amendment”). Among the modifications, the Second Amendment: (i) increased the maximum applicable rate ranges (A) with respect to SOFRcertain loans, from 1.75% - 3.00% to 1.75% - 3.75% per annum and (B) with respect to base rate loans, from 0.75% - 2.00% to 0.75% - 2.75% per annum, in each case as determined by the Consolidated Total Lease Adjusted Leverage Ratio (as defined in the A&R Credit Agreement), (ii) conditioned the use of the general restricted payment basket on satisfaction of a Consolidated Total Lease Adjusted Leverage Ratio (as defined in the A&R Credit Agreement) of less than or equal to 4.00 to 1.00 and a Consolidated Fixed Charge Coverage Ratio (as defined in the A&R Credit Agreement) of greater than or equal to 1.25 to 1.00, (iii) restricted entry into new lease agreements so long as the Consolidated Total Lease Adjusted Leverage Ratio (as defined in the A&R Credit Agreement) in Section 7.11(a) of the A&R Credit Agreement is greater than or equal to 4.50 to 1.00, (iv) increased the Consolidated Total Lease Adjusted Leverage Ratio (as defined in the A&R Credit Agreement) in Section 7.11(a) of the A&R Credit Agreement to be no greater than (x) 5.50 to 1.00 for the fiscal quarter ending on October 1, 2024 until and including the last day of the fiscal quarter ending September 30, 2025 and (y) stepping down to (1) 5.25 to 1.00 per annum for the fiscal quarter ending December 30, 2025, (2) 5.00 to 1.00 per annum for the fiscal quarters ending March 31, 2026 and June 30, 2026, (3) 4.75 to 1.00 for the fiscal quarters ending September 29, 2026 and December 29, 2026 and (4) 4.50 to 1.00 per annum for the fiscal quarter ended March 30, 2027 and thereafter and (v) amended the Consolidated Fixed Charge Coverage Ratio (as defined in the A&R Credit Agreement) in Section 7.11(b) of the A&R Credit Agreement to be no less than (x) 1.05 to 1.00 for the fiscal quarter ending on October 1, 2024 until and including the last day of the fiscal quarter ending September 30, 2025 and (y) stepping up to (1) 1.15 to 1.00 for the fiscal quarters ending December 30, 2025 and March 31, 2026 and (2) 1.25 to 1.00 for the fiscal quarter ending June 30, 2026 and thereafter.Agreement.

As of December 31,30, 2024,2025, wethe Company had $103.0$110.2 million of indebtedness (excluding $2.3$1.4 million of unamortized debt issuance costs) and $3.0 million of letters of credit outstanding under the A&R Credit Agreement.

Availability of borrowings under the A&R Credit Agreement is conditioned upon ourthe Company’s compliance with the terms of the A&R Credit Agreement, including the financial covenants and other customary affirmative and negative covenants, such as limitations on additional borrowings, acquisitions, dividend payments and lease commitments, and customary representations and warranties. As of December 31,30, 2024,2025, wethe wereCompany was in compliance with all of ourits debt covenants.

WeThe expectCompany thatexpects we willto meet all applicable financial covenants in ourits A&R Credit Agreement through at least the next four fiscal quarters. However, there can be no assurance wethat the Company will meet such financial covenants. If such covenants are not met, wethe Company would be required to seek a waiver or amendment from the banks participating in the credit facility. There can be no assurance that such waiver or amendment would be granted, which could have a material adverse impact on ourthe Company’s liquidity.

Net cash used in investing activities decreased $25.1$14.3 million to $26.7$12.4 million in 20242025 compared to 2023.2024. This decrease was primarily due to decreased investment in new restaurant openings and therestaurant completion of installation for our digital menu boardstechnology in 2023.2025. We opened tentwo and eighteen10 company-owned restaurants in 20242025 and 2023,2024, respectively.

Net cash provided by financing activities was $5.2 million in 2025, compared to $17.3 million in 2024, compared to $25.8 million in 2023.2024. The decrease from 20232024 was primarily due to a reduction in net borrowings to fund capital spending in 2024.2025.

Our long-term obligations consist primarily of certain lease and other contractual commitments related to our operations and payment of our outstanding debt obligations. In addition, new store development will require capital in each year that we plan to open new restaurants which is expected to be funded by currentlythen available cash and cash equivalents, cash flows from operations and our revolving credit facility.

Our capital expenditure requirements are primarily dependent upon the pace of our real estate development program and resulting new restaurant openings, costs for maintenance and remodeling of our existing restaurants, as well as information technology expenses and other general corporate capital expenditures. We currently do not plan to open any company-owned restaurants in 2026.

Our total capital expenditures for 20242025 were $28.8$12.4 million,million whichprimarily includesrelated amountsto fortwo new company-owned restaurants, reinvestment in existing restaurants thatand willtechnology be opening in 2025.improvements. We expect our 20252026 capital expenditures to be in the range of $11.0$9.5 million to $13.0$10.5 million. Our capital expenditures in 20252026 are expected to be primarily related to our reinvestment in existing restaurants, the opening of two new restaurants and technology improvements.restaurants.

Our contractual obligations consist of lease obligations, purchase obligations, long-term debt and other liabilities. See Note 4 Long-Term Debt and Note 12 Leases to our consolidated financial statements for further discussion. We are obligated under non-cancelable leases for our restaurants, administrative offices and equipment. In addition to those lease obligations, we have legally binding minimum lease payments for leaseslease renewals signed but not yet commenced amounting to $1.1$0.5 million as of December 31,30, 2024.2025. We enter into various purchase obligations in the ordinary course of business. As of December 31,30, 2024,2025, our binding purchase obligations are approximately $49.4$57.1 million, which includes $29.1$40.5 million to be incurred within the next 12 months. These amounts relate to volume commitments for beverage and food products, as well as binding commitments for the construction of new restaurants.products. Our other liabilities of $2.2$1.0 million as of December 31,30, 20242025 includes our commitment under our non-qualified deferred compensation plan and severance.

We review long-lived assets, such as property and equipment, right of use assets and intangibles, subject to amortization, for impairment when events or circumstances indicate the carrying value of the assets may not be recoverable. In determining the recoverability of the asset value, an analysis is performed at the individual restaurant level and primarily includes an assessment of historical cash flows and other relevant factors and circumstances. The other factors and circumstances include changes in the economic environment, changes in the manner in which assets are used, unfavorable changes in legal factors or business climate, incurring excess costs in construction of the asset, early lease terminations and closures, overall restaurant operating performance and projections for future performance. These estimates result in a wide range of variability on a year to year basis due to the nature of the criteria. Restaurant-level cash flow less than our internal threshold over the previous 12 periods is considered an indicator of potential impairment. In such situations, we evaluate future undiscounted cash flow projections in conjunction with qualitative factors and future operating plans. Our impairment assessment process requires the use of estimates and assumptions regarding the future undiscounted cash flows and operating outcomes, which are based upon a significant degree of management’s judgment.

In addition to historical information, this discussion and analysis contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties such as the number of restaurants we intend to open, projected capital expenditures and estimates of our effective tax rates. In some cases, you can identify forward-looking statements by terms such as “may,” “might,” “will,” “objective,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “design,” “estimate,” “predict,” “potential,” “plan” or the negative of these terms and similar expressions intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are based on currently available operating, financial and competitive information. Examples of forward-looking statements include all matters that are not historical facts, such as statements regarding expectations with respect to projected capital expenditures and our financial results, condition and liquidity needs. Our actual results may differ materially from those anticipated in these forward-looking statements due to reasons including, but not limited to, uncertainties as to the availability, suitability, structure, terms, and timing of any strategic transaction resulting from the strategic review and whether any such transaction will be completed, the impact of any such strategic transaction on Noodles & Company, and whether the strategic benefits of any such strategic transaction can be achieved; current performance trends and our expectations for future performance; andour ability to repay, refinance or obtain new financing on acceptable terms, if at all, and comply with our covenants under the A&R Credit Agreement, which matures on July 27, 2027; our ability to sustain our overall growth, including, our digital sales growth; our ability to effectively optimize our restaurant portfolio including closures; our ability to achieve and maintain increases in comparable restaurant sales and to successfully execute our business strategy, including operational strategies to improve the performance of our restaurant portfolio; the success of our brand strategy and marketing efforts, including our ability to successfully introduce new menu items, including limited time offerings and the success of our promotions; our pricing strategies; economic conditions, including inflation, an economic recession, an elevated interest rate environment, tariffs and trade restrictions and any impact of government shutdowns on overall economic conditions and consumer spending; price and availability of commodities and other supply chain challenges; our ability to adequately staff our restaurants; changes in labor costs; our ability to maintain compliance with requirements for continued listing on the Nasdaq Global Select Market; other conditions beyond our control such as domestic or global conflicts, wars, terrorist activity, weather, natural disasters, disease outbreaks, epidemics or pandemics impacting our customers or food supplies; and consumer reaction to industry related public health issues and health pandemics, including perceptions of food safety and those discussed in “Special Note Regarding Forward-Looking Statements” and “Risk Factors” as filed in our Annual Report on Form 10-K for our fiscal year ended December 30, 2025.

Strategic Review. On September 3, 2025, we announced that our Board of Directors had initiated a review of strategic alternatives in order to explore ways to maximize stockholder value. The review includes a range of potential strategic alternatives, including a refinancing of existing indebtedness,indebtedness that matures on July 27, 2027, refranchising or sale of all or part of the business, and/or other strategic or financial transactions. Such review remains in process.

Revenue. In the firstsecond quarter, we saw an increase in revenue as a result of an increase in comparable restaurant sales, mostlypartially offset by permanent restaurant closures. System-wide comparable restaurant sales increased 9.1%10.3% in the firstsecond quarter of 2026 compared to the same period of 2025, comprised of aan 9.4%11.4% increase at company-owned restaurants and ana 8.0%5.5% increase at franchise-owned restaurants. Our comparable restaurant sales havecontinue beento positivebe since the introduction of our new menupositively aided by menu innovation including the introduction of Delicious Duos in late July,and the introduction of recent successful limited time offerings, like Chili Garlic Ramen andRamen, Steak Stroganoff, Indonesian Peanut Chicken Sauté and Chicken Artichoke & Asparagus Rigatoni, and the benefit of sales transferring from restaurants that we closed to our nearby restaurants.

Cost of Sales. Our firstsecond quarter 2026 cost of sales benefited from an increase in menu prices and reduced food waste related to new menu items, which offset the impact of inflation. We continue to monitor commodity inflation and, throughout periods of volatility, we will continue to work with our suppliers to identify ongoing supply chain efficiencies, including adding additional suppliers as necessary.

We have evaluated and will continue to evaluate the impact of import laws and tariffs, including the potential for any refunds, on our operations as some of our food items are imported from India, Mexico and other countries. As of MarchJune 31,30, 2026, there was no material impact on our business, financial condition, results of operations or cash flows. However, we expect tariffs may impact our operations in certain areas, such as food and beverage costs, construction and equipment costs and other restaurant operating costs, for the remainder of fiscal 2026. We will continue to utilize fixed price contracts for certain key items to mitigate risk.

Labor Costs. Similar to much of the restaurant industry, our base labor costs have risen in recent years. We have been able to partially mitigate the impact of these market factors through a continued focus on maximizing efficiencies of labor hour usage per restaurant and wage inflation has stabilized to less than 3%. As a percentage of restaurant sales, labor costs continue to benefit from sales leverage including the benefit of sales transferring from restaurants that have closed to our nearby restaurants.

Other Restaurant Operating Costs. We have incurred, and expect to continue to incur, increased third-party delivery fees due to significant increased usage of third-party delivery services resulting in a higher mix of third party delivery sales. As a percentage of restaurant sales, other restaurant operating costs continue to benefit from sales leverage including the benefit of sales transferring from restaurants that have closed to our nearby restaurants.

Restaurant Development. We did not open any new company-owned restaurants in the first quartertwo quarters of 2026 and do not plan to open any company-owned restaurants in 2026. As of MarchJune 31,30, 2026, we had 320318 company-owned restaurants and 8078 franchise restaurants in 3130 states.

Impairments and Certain Restaurant Closures. We impaired fixed assets related to three11 restaurants in the first quartertwo quarters of 2026 primarily related to closure decisions on underperforming restaurants. In the first quartertwo quarters of 2026, we wrote down lease-related assets for tensixteen restaurants. We permanently closed 2022 company-owned restaurants in the first quartertwo quarters of 2026 and we anticipate closing an additional 108 to 1513 restaurants in 2026.2026, of which six were closed subsequent to the end of the second quarter. We continue to analyze our restaurant portfolio and expect to close certain restaurants that are either generating low or negative cash flows, approaching the expiration of their leases, in trade areas that are not as well positioned for current consumer trends and /or there is a potential for a significant amount of sales transfer to nearby restaurants given strong off premise sales.

FirstSecond Quarter Ended MarchJune 31,30, 2026 Compared to FirstSecond Quarter Ended AprilJuly 1, 2025

The table below presents our unaudited operating results for the firstsecond quarters of 2026 and 2025, and the related quarter-over-quarter changes.

Total revenue wasincreased flatby at$0.6 $123.8million, or 0.5%, to $127.0 million in the firstsecond quartersquarter of 2026 andcompared to $126.4 million in the second quarter of 2025. During the firstsecond quarter of 2026, significant increases in comparable restaurant sales were mostlypartially offset by a decline in revenue related to 5052 permanent company-owned closures and a decline in franchise revenue from 1113 franchise restaurant closures.closures over the last twelve months. Average unit volumes increased 13.5%15.9% to $1.49$1.57 million in the firstsecond quarter of 2026 compared to $1.31$1.35 million in the firstsecond quarter of 2025 primarily due to increases in same store sales and the closure of underperforming restaurants. System-wide comparable restaurant sales increased 9.1%10.3% in the firstsecond quarter of 2026 compared to the same period of 2025, comprised of aan 9.4%11.4% increase at company-owned restaurants and ana 8.0%5.5% increase at franchise-owned restaurants.

Cost of sales decreased by 4.3%,5.6%, in the firstsecond quarter of 2026 compared to the same period of 2025. As a percentage of restaurant revenue, cost of sales decreased to 25.4%24.9% in the firstsecond quarter of 2026 compared to 26.6%26.5% in firstthe second quarter of 2025, primarily due to 0.8% benefit from reduced food waste related to new menu items, a 0.6% benefit from menu priceprice, a 0.5% benefit from menu mix shifts and a 0.2%0.4% benefit from lowerreduced discounts,food waste, partially offset by a 0.4%0.2% impact from a combination of menu investments and inflation.

Labor costs decreased by $3.0$2.5 million, or 7.6%,6.5%, in the firstsecond quarter of 2026 compared to the same period of 2025. As a percentage of restaurant revenue, labor costs decreased to 30.0%29.4% in the firstsecond quarter of 2026 compared to 32.5%31.7% in the firstsecond quarter of 2025, primarily due to a 1.5%1.7% benefit from sales volume leverage, a 1.1%0.6% benefit from menu price and a 0.6%0.3% benefit from labor efficiencies, partially offset by a 0.7%0.4% impact from wage inflation.

Occupancy costs decreased by $1.1$1.2 million or 9.9%10.8% in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025, primarily due to permanent restaurant closures. As a percentage of restaurant revenue, occupancy costs decreased to 8.5%8.1% in the firstsecond quarter of 2026 compared to 9.5%9.2% in the firstsecond quarter of 2025, primarily due to sales leverage.

Other restaurant operating costs increased by $0.1$1.0 million, or 0.2%,3.9%, in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025. As a percentage of restaurant revenue, other restaurant operating costs increased to 21.2%20.3% in the firstsecond quarter of 2026 compared to 21.1%19.7% in the firstsecond quarter of 2025, primarily due to a 0.4% impact from increased marketing spend and a 0.3%0.9% impact from an increase in delivery fees from higher third-party delivery sales, mostlypartially offset by a 0.3%0.2% benefitimpact from salesdecreased volumemarketing leverage and a 0.3% benefit from lower repairs and maintenance costs.spend.

General and administrative expense decreasedincreased by $0.3$1.5 million, or 2.3%,11.7%, in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025, primarily due to decreasesincreases in wages,incentive-based executive transition costs, software maintenance and consulting feescompensation, partially offset by increasesdecreases in incentivewages pay.and professional fees. As a percentage of revenue, general and administrative expense decreasedincreased to 10.1%10.9% in the firstsecond quarter of 2026 from 10.3%9.8% in the firstsecond quarter of 2025.

Depreciation and amortization decreased by $1.1$1.2 million, or 15.6%,17.4%, in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025, primarily due to restaurant closures since the firstsecond quarter of 2025.

Restaurant impairments, closure costs and asset disposals increaseddecreased $1.4$8.1 million to $2.7$5.5 million in the firstsecond quarter of 2026 compared to $1.3$13.7 million the firstsecond quarter of 2025. We recorded fixed asset impairment on threeeight restaurants and wrote down lease related assets on tensix restaurants during the firstsecond quarter of 2026. In the firstsecond quarter of 2025, we did not record anyrecorded fixed asset impairment.impairment Inon the15 firstrestaurants quarter of 2025,and we wrote down lease related assets on oneten restaurant.restaurants.

Interest expense, net decreased slightly$0.4 million in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025, primarily due to lower average interest rates in the firstsecond quarter of 2026 as compared to the firstsecond quarter of 2025, partially offset by slightly higher average debt balances in 2026.

The effective tax rate for the firstsecond quarter of 2026 and for the firstsecond quarter of 2025 reflect the impact of the previously recorded valuation allowance. The primary components of the provision for income tax (for both quarters) are related to state tax and the change in our valuation allowance. For the remainder of fiscal 2026, we do not anticipate material income tax expense or benefit as a result of the valuation allowance recorded. We will maintain a valuation allowance against deferred tax assets until there is sufficient evidence to support a full or partial reversal. The reversal of a previously recorded valuation allowance will generally result in a benefit from income tax.

We have historically used cash and our revolving credit facility under our A&R Credit Agreement to fund capital expenditures for new restaurant openings, reinvest in our existing restaurants, invest in infrastructure and information technology and maintain working capital. Our working capital position benefits from the fact that we generally collect cash from sales to customers the same day, or in the case of credit or debit card transactions, within several days of the related sale, and we typically have up to 30 days to pay our vendors.

We believe that we will have sufficient sources of cash to meet our liquidity needs and capital resource requirements for attwelve leastmonths from the nextdate twelveof months,this report, through currently available cash and cash equivalents, availability under our revolving credit facility and cash flows from operations. We were in compliance with our covenants as of MarchJune 31,30, 2026, and expect to continue to be in compliance for attwelve leastmonths from the nextdate twelveof months.this report. The Company will require new financing or other sources of capital to repay or an agreement with its current lenders to extend or refinance the amounts outstanding under the A&R Credit Agreement on or before maturity on July 27, 2027. The Company continues to review its options with respect to such debt obligation in connection with its review of strategic alternatives; however, there is no assurance that the Company will obtain such financing, other sources of capital, an extension or refinancing on or before the maturity date.

Net cash provided by operating activities was $6.0$9.3 million in the first quartertwo quarters of 2026 compared to net cash provided by operating activities of $4.0$3.2 million in the first quartertwo quarters of 2025. The increase in operating cash flow resulted primarily from a decrease in net loss as adjusted for non cash items including depreciation and impairments, as well as changes in working capital related to the timing of accounts payable, payroll and accrued liabilities.

Net cash used in investing activities decreased $0.8$2.7 million to $2.1$3.6 million in the first quartertwo quarters of 2026 from $2.9$6.3 million in the first quartertwo quarters of 2025. This decrease was primarily due to decreasedthe investmentabsence of capital expenditures for new restaurant development in new restaurants2026 and restaurantlower spending on certain technology in 2026.projects.

Net cash used in financing activities was $3.8$5.7 million in the first quartertwo quarters of 2026, compared to $0.9net cash provided by financing of $4.3 million in the first quartertwo quarters of 2025. The increasechange from the first quartertwo quarters of 2025 was primarily due to payments on our revolving credit facility.facility in 2026 versus borrowings on our revolving credit facility during 2025.

Our long-term obligations consist primarily of certain lease and other contractual commitments related to our operations and payment of our outstanding debt obligations.obligations, including our debt under our A&R Credit Agreement, which matures on July 27, 2027. We are obligated under non-cancelable leases for our restaurants, administrative offices and equipment. In addition, when we have a target for new store development this will require capital for such year, which is expected to be funded by currently available cash and cash equivalents, cash flows from operations and our revolving credit facility. Our capital expenditure requirements are primarily dependent upon the pace of our real estate development program and any resulting new restaurant openings, costs for maintenance and remodeling of our existing restaurants as well as information technology expenses and other general corporate capital expenditures. We currently do not plan to open any company-owned restaurants in 2026.

Liquidity. As of MarchJune 31,30, 2026,2026 and December 30, 2025, we had a cash balance of $1.4 million compared to $1.3 million as of December 30, 2025.million. The amount available for future borrowings under our A&R Credit Agreement (defined below) was $15.2$16.6 million as of MarchJune 31,30, 2026. We believe that our current cash and cash equivalents, the expected cash flows from company-owned restaurant operations, the expected franchise fees and royalties and available borrowings under the revolving credit facility under our A&R Credit Agreement will be sufficient to fund our cash requirements for working capital needs and capital improvements and maintenance of existing restaurants for attwelve leastmonths from the nextdate twelveof months.this report. The Company will require new financing or other sources of capital to repay or an agreement with its current lenders to extend or refinance the amounts outstanding under the A&R Credit Agreement on or before maturity on July 27, 2027. The Company continues to review its options with respect to such debt obligation in connection with its review of strategic alternatives; however, there is no assurance that the Company will obtain such financing, other sources of capital, an extension or refinancing on or before the maturity date.

On July 27, 2022, we amended and restated our Credit Agreement by entering into the Amended and Restated Credit Agreement as further amended, restated, extended, supplemented, modified and otherwise in effect from time to time, the (“A&R Credit Agreement”), with each other Loan Party (as defined in the A&R Credit Agreement) party thereto, each lender from time to time party thereto, and U.S. Bank National Association, as Administrative Agent, L/C Issuer and Swing Line Lender (each as defined in the A&R Credit Agreement). The A&R Credit Agreement matures on July 27, 2027. Among other things, the A&R Credit Agreement: (i) increased the credit facility from $100.0 million to $125.0 million; (ii) eliminated the term loan2027 and principal amortization components of the credit facility; (iii) removed the Company’s capital expenditure covenant; (iv) enhanced flexibility for certain covenants and restrictions; and (v) lowered the spread of the Company’s cost of borrowing and transitioned from the London Interbank Offered Rate (“LIBOR”) to the Secured Overnight Financing Rate (“SOFR”) plus a margin of 1.50% to 2.50% per annum, based upon the consolidated total lease-adjusted leverage ratio. The A&R Credit Agreement is secured by a pledge of stock of substantially all of the Company’s subsidiaries and a lien on substantially all of the personal property assets of the Company and its subsidiaries. The A&R Credit Agreement was subsequently amended on December 21, 2023.

OnAmong other things, the A&R Credit Agreement: (i) increased the credit facility from $100.0 million to $125.0 million; (ii) eliminated the term loan and principal amortization components of the credit facility; (iii) removed the Company’s capital expenditure covenant; (iv) enhanced flexibility for certain covenants and restrictions; and (v) lowered the spread of the Company’s cost of borrowing and transitioned from the London Interbank Offered Rate (“LIBOR”) to the Secured Overnight Financing Rate (“SOFR”) plus a margin of 1.50% to 2.50% per annum, based upon the consolidated total lease-adjusted leverage ratio. The A&R Credit Agreement was subsequently amended on December 21, 2023 and on October 29, 2024, wethe amendedCompany our A&R Credit Agreement, by enteringentered into that certain Second Amendment to Amended and Restated Credit Agreement (the “Second Amendment”). Among the modifications, the Second Amendment: (i) increased the maximum applicable rate ranges (A) with respect to SOFR loans, from 1.75% - 3.00% to 1.75% - 3.75% per annum and (B) with respect to base rate loans, from 0.75% - 2.00% to 0.75% - 2.75% per annum, in each case as determined by the Consolidated Total Lease Adjusted Leverage Ratio (as defined in the A&R Credit Agreement), (ii) conditioned the use of the general restricted payment basket on satisfaction of a Consolidated Total Lease Adjusted Leverage Ratio (as defined in the A&R Credit Agreement) of less than or equal to 4.00 to 1.00 and a Consolidated Fixed Charge Coverage Ratio (as defined in the A&R Credit Agreement) of greater than or equal to 1.25 to 1.00, (iii) restricted entry into new lease agreements so long as the Consolidated Total Lease Adjusted Leverage Ratio (as defined in the A&R Credit Agreement) in Section 7.11(a) of the A&R Credit Agreement is greater than or equal to 4.50 to 1.00, (iv) increased the Consolidated Total Lease Adjusted Leverage Ratio (as defined in the A&R Credit Agreement) in Section 7.11(a) of the A&R Credit Agreement to be no greater than (1) 5.00 to 1.00 for the fiscal quarters ending March 31, 2026 and June 30, 2026, (2) 4.75 to 1.00 for the fiscal quarters ending September 29, 2026 and December 29, 2026 and (3) 4.50 to 1.00 for the fiscal quarter ended March 30, 2027 and thereafter and (v) amended the Consolidated Fixed Charge Coverage Ratio (as defined in the A&R Credit Agreement) in Section 7.11(b) of the A&R Credit Agreement to be no less than (1) 1.15 to 1.00 for the fiscal quarters ending December 30, 2025 and March 31, 2026 and (2) 1.25 to 1.00 for the fiscal quarter ending June 30, 2026 and thereafter.

As of MarchJune 31,30, 2026, we had $106.8$105.4 million of indebtedness under the credit facility (excluding $1.2$0.9 million of unamortized debt issuance costs) and $3.0 million of letters of credit outstanding under our A&R Credit Agreement.

We had no off-balance sheet arrangements or obligations as of MarchJune 31,30, 2026.