Good Times(GTIM) - 2025 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, shareholders' equity, and cash flows, along with detailed notes explaining the basis of presentation, accounting policies, and specific financial line items for Good Times Restaurants Inc. and its subsidiaries Condensed Consolidated Balance Sheets (Unaudited) Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | July 1, 2025 | September 24, 2024 | Change ($) | Change (%) | | :-------------------------------- | :----------- | :----------------- | :--------- | :--------- | | Cash and cash equivalents | $3,138 | $3,853 | $(715) | -18.56% | | Total current assets | $6,499 | $6,557 | $(58) | -0.88% | | Total net property and equipment | $22,710 | $22,797 | $(87) | -0.38% | | Total assets | $85,750 | $87,118 | $(1,368) | -1.57% | | Total current liabilities | $14,956 | $15,687 | $(731) | -4.66% | | Total long-term liabilities | $36,984 | $38,343 | $(1,359) | -3.54% | | Total shareholders' equity | $33,810 | $33,088 | $722 | 2.18% | Condensed Consolidated Statements of Operations (Unaudited) Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Quarter Ended July 1, 2025 | Quarter Ended June 25, 2024 | YTD July 1, 2025 | YTD June 25, 2024 | | :------------------------------------ | :------------------------- | :-------------------------- | :--------------- | :---------------- | | Total net revenues | $37,025 | $37,950 | $107,637 | $106,554 | | Income from operations | $1,233 | $1,228 | $796 | $1,498 | | Net income | $1,545 | $1,398 | $1,092 | $1,595 | | Net income attributable to common shareholders | $1,487 | $1,321 | $1,027 | $1,383 | | Basic EPS | $0.14 | $0.12 | $0.10 | $0.12 | | Diluted EPS | $0.14 | $0.12 | $0.10 | $0.12 | Consolidated Statements of Shareholders' Equity (Unaudited) Shareholders' Equity Activity (Year-to-Date, in thousands) | Metric | July 1, 2025 | June 25, 2024 | | :-------------------------------- | :----------- | :------------ | | Balances, beginning of period | $33,088 | $32,994 | | Stock-based compensation cost | $90 | $106 | | Repurchases of common stock | $(364) | $(1,789) | | Non-controlling interests (net) | $18 | $206 | | Net income attributable to Good Times Restaurants Inc. | $1,027 | $1,383 | | Balances, end of period | $33,810 | $33,018 | Condensed Consolidated Statements of Cash Flows (Unaudited) Condensed Consolidated Statements of Cash Flows Highlights (Year-to-Date, in thousands) | Cash Flow Activity | July 1, 2025 | June 25, 2024 | | :-------------------------------- | :----------- | :------------ | | Net cash provided by operating activities | $1,461 | $4,736 | | Net cash used in investing activities | $(3,192) | $(2,802) | | Net cash provided by (used in) financing activities | $1,016 | $(1,297) | | (Decrease) Increase in cash and cash equivalents | $(715) | $637 | | Cash and cash equivalents, end of period | $3,138 | $4,819 | Notes to Condensed Consolidated Financial Statements (Unaudited) Note 1. Basis of Presentation The Company's financial statements consolidate its wholly-owned subsidiaries and a 50% owned limited partnership where it acts as the sole general partner. It operates two restaurant brands: Bad Daddy's Burger Bar (full-service) and Good Times Burgers & Frozen Custard (drive-thru fast-food). The fiscal year is 52/53 weeks ending the last Tuesday of September, with the current quarters being 13 weeks. Receivables primarily consist of royalties, product rebates, and gift card sales - The Company operates two distinct restaurant brands: Bad Daddy's Burger Bar (full-service, primarily in Colorado and Southeast US) and Good Times Burgers & Frozen Custard (drive-thru fast-food, exclusively in Colorado and Wyoming)[24] - The fiscal year is a 52/53-week year ending on the last Tuesday of September; the quarters ended July 1, 2025, and June 25, 2024, each consisted of 13 weeks[26] Receivables Breakdown (in thousands) | Category | July 1, 2025 | September 24, 2024 | | :------------------------ | :----------- | :----------------- | | Vendor rebates and incentives | $374 | $437 | | Third party delivery partners | $337 | $280 | | Third party retailers | $80 | $120 | | Franchise and other | $62 | $53 | | Total | $853 | $890 | Note 2. Recent Accounting Pronouncements The Company has reviewed recently issued accounting pronouncements, including ASU 2023-07 (Segment Reporting), ASU 2023-09 (Income Tax Disclosures), and ASU 2024-03 (Expense Disaggregation). It expects to implement ASU 2023-07 retrospectively in fiscal year 2025 and ASU 2023-09 prospectively in fiscal year 2026, with none anticipated to have a material effect on its consolidated financial statements. The timing and method for ASU 2024-03 are still being assessed - ASU 2023-07 (Segment Reporting) will be retrospectively implemented in fiscal year 2025, with no material effect anticipated[30] - ASU 2023-09 (Income Tax Disclosures) will be prospectively implemented in fiscal year 2026, with no material effect expected[31] - ASU 2024-03 (Expense Disaggregation) is being assessed for implementation timing and method, but no material effect is expected[32] Note 3. Revenue Revenue is primarily derived from restaurant sales and franchise revenue, recognized when performance obligations are satisfied. Gift card breakage, historically immaterial, was recognized for Bad Daddy's gift cards sold through third-party retailers, amounting to $275,000 for the three quarters ended July 1, 2025, a significant increase from $33,000 in the prior year. The GT Rewards loyalty program activity is immaterial - Gift card breakage for Bad Daddy's, recognized when redemption is remote, was $275,000 for the three quarters ended July 1, 2025, significantly higher than $33,000 for the same period in 2024, primarily from third-party retail sales[36] Note 4. Prepaid expenses and other current assets Prepaid expenses and other current assets increased to $1,070,000 as of July 1, 2025, from $395,000 as of September 24, 2024, primarily driven by increases in prepaid insurance and common area rental expenses Prepaid Expenses and Other Current Assets (in thousands) | Category | July 1, 2025 | September 24, 2024 | | :------------------------------------ | :----------- | :----------------- | | Prepaid insurance | $307 | $- | | Prepaid software licenses and maintenance contracts | $264 | $241 | | Prepaid common area rental expenses | $165 | $17 | | Prepaid licenses and permits | $72 | $49 | | Other | $262 | $88 | | Total | $1,070 | $395 | Note 5. Goodwill and Intangible Assets The Company's indefinite-lived intangible assets include trademarks valued at $3,900,000 and goodwill at $5,713,000, with no impairment losses recorded for either in the periods presented. Goodwill is allocated between the Good Times ($96,000) and Bad Daddy's ($5,617,000) reporting units Goodwill and Intangible Assets (in thousands) | Asset | July 1, 2025 (Net Carrying Amount) | September 24, 2024 (Net Carrying Amount) | | :-------------------------- | :--------------------------------- | :--------------------------------------- | | Trademarks | $3,900 | $3,900 | | Goodwill | $5,713 | $5,713 | - Goodwill is allocated to two reporting units: Good Times ($96,000) and Bad Daddy's ($5,617,000) as of July 1, 2025, and June 25, 2024[58] Note 6. Other Accrued Liabilities Other accrued liabilities decreased to $5,931,000 as of July 1, 2025, from $6,437,000 as of September 24, 2024, primarily due to a decrease in wages and other employee benefits and general expense accruals Other Accrued Liabilities (in thousands) | Category | July 1, 2025 | September 24, 2024 | | :------------------------------ | :----------- | :----------------- | | Wages and other employee benefits | $2,253 | $2,681 | | Taxes, other than income taxes | $1,450 | $1,318 | | Gift card liability, net of breakage | $1,341 | $1,460 | | General expense accrual and other | $887 | $978 | | Total | $5,931 | $6,437 | Note 7. Notes Payable and Long-Term Debt The Company maintains an $8 million Cadence Credit Facility maturing in April 2028, secured by substantially all assets, with $2 million borrowed as of July 1, 2025, at a weighted average interest rate of 7.41%. Additionally, there is an unsecured Parker Promissory Note with an outstanding balance of $348,000, maturing in June 2034 at 5.00% interest. The Company was in compliance with all covenants - The Cadence Credit Facility provides up to $8 million, maturing April 20, 2028, with $2 million borrowed as of July 1, 2025, and $5.99 million committed funds available[43][47] - The weighted average interest rate on Cadence Credit Facility borrowings was 7.41% as of July 1, 2025[45] - The Parker Promissory Note has an outstanding principal balance of $348,000 as of July 1, 2025, with a 5.00% interest rate and annual principal maturities of approximately $35,000[48] Note 8. Earnings per Common Share Basic earnings per share are calculated based on weighted-average common shares outstanding, while diluted EPS includes the effect of potentially dilutive securities like restricted stock units. For the quarter ended July 1, 2025, basic EPS was $0.14 and diluted EPS was $0.14, with 79,000 restricted stock units considered dilutive Weighted Average Common Shares Outstanding | Metric | Quarter Ended July 1, 2025 | Quarter Ended June 25, 2024 | YTD July 1, 2025 | YTD June 25, 2024 | | :------------------------------------ | :------------------------- | :-------------------------- | :--------------- | :---------------- | | Weighted-average shares outstanding basic | 10,582,491 | 10,933,758 | 10,632,434 | 11,149,181 | | Effect of potentially dilutive securities: Restricted stock units | 79,000 | 89,250 | 79,000 | 89,250 | | Weighted-average shares outstanding diluted | 10,661,491 | 11,034,487 | 10,711,434 | 11,246,353 | Note 9. Contingent Liabilities and Liquidity The Company faces various claims and litigation, which are regularly reviewed. Management believes that any reasonably possible losses from these contingencies have been adequately accrued or would be immaterial to the financial statements - Management believes that any reasonably possible losses associated with contingent liabilities have been adequately accrued or would be immaterial to the financial statements[52] Note 10. Leases The Company primarily leases land and buildings for its restaurants and corporate office, with initial terms of 10-20 years and renewal options. Operating lease costs for the quarter ended July 1, 2025, were $1,720,000. The weighted average remaining lease term is 6.82 years with a discount rate of 5.3%. Future minimum lease payments total $48,992,000 Operating Lease Costs (in thousands) | Lease Cost Type | Quarter Ended July 1, 2025 | Quarter Ended June 25, 2024 | | :-------------------- | :------------------------- | :-------------------------- | | Operating lease cost | $1,832 | $1,876 | | Variable lease cost | $11 | $19 | | Sublease income | $(123) | $(132) | | Total | $1,720 | $1,763 | Weighted Average Lease Term and Discount Rate | Metric | July 1, 2025 | June 25, 2024 | | :-------------------------------- | :----------- | :------------ | | Weighted average remaining lease term (in years) | 6.82 | 7.52 | | Weighted average discount rate | 5.3% | 5.2% | Future Minimum Rent Payments (as of July 1, 2025, in thousands) | Period | Total | | :----------- | :------ | | One Year | $8,316 | | Two Years | $8,112 | | Three Years | $7,493 | | Four Years | $6,218 | | Five Years | $5,372 | | Thereafter | $13,481 | | Total minimum lease payments | $48,992 | Note 11. Impairment of Long-Lived Assets and Trademarks The Company recorded $494,000 in impairment charges for long-lived assets during the three quarters ended July 1, 2025, primarily related to lease right-of-use assets for underperforming restaurants. This is an increase from $199,000 in the prior year. Trademarks and goodwill were not impaired - Impairments of long-lived assets totaled $494,000 for the three quarters ended July 1, 2025, primarily for lease right-of-use assets of underperforming restaurants, compared to $199,000 in the prior year[56] - No impairment was required for acquired trademarks or goodwill as of July 1, 2025, and June 25, 2024[57][40] Note 12. Income Taxes The Company's effective income tax rate for the three quarters ended July 1, 2025, was (43.04%), a decrease from (15.09%) in the prior year, primarily due to a decrease in ordinary income before taxes while tax credits remained consistent. The Company believes its tax positions will be sustained upon audit and has not recorded reserves for uncertain tax positions Effective Income Tax Rates | Period | Effective Income Tax Rate | | :------------------------------------ | :------------------------ | | Three quarters ended July 1, 2025 | (43.04%) | | Three quarters ended June 25, 2024 | (15.09%) | - The change in effective tax rate is primarily due to a decrease in ordinary income from continuing operations before income taxes, while the benefit associated with income tax credits stayed consistent[60] Note 13. Shareholders' Equity The Company maintains equity incentive compensation plans (2008 Plan and 2018 Plan), recognizing stock-based compensation expense over the vesting period. For the three quarters ended July 1, 2025, stock-based compensation was $90,000. Non-controlling interests, primarily from a joint-venture partnership for six Good Times restaurants, increased to $744,000 as of July 1, 2025, reflecting income and contributions Stock-Based Compensation Expense (in thousands) | Period | Quarter Ended July 1, 2025 | Quarter Ended June 25, 2024 | YTD July 1, 2025 | YTD June 25, 2024 | | :------------------------------------ | :------------------------- | :-------------------------- | :--------------- | :---------------- | | Stock-based compensation expense | $25 | $28 | $90 | $106 | Non-Controlling Interests Activity (Three Quarters Ended July 1, 2025, in thousands) | Activity | Amount | | :--------------- | :----- | | Balance at September 24, 2024 | $717 | | Income | $65 | | Contributions | $9 | | Distributions | $(47) | | Balance at July 1, 2025 | $744 | Note 14. Segment Reporting The Company reports financial information for its two segments: Bad Daddy's (full-service) and Good Times (quick-service). For the quarter ended July 1, 2025, Bad Daddy's generated $26.6 million in revenue and $1.1 million in operating income, while Good Times generated $10.4 million in revenue and $0.09 million in operating income. Year-to-date, Bad Daddy's operating income significantly increased to $1.27 million from $0.007 million in the prior year Segment Revenues (in thousands) | Segment | Quarter Ended July 1, 2025 | Quarter Ended June 25, 2024 | YTD July 1, 2025 | YTD June 25, 2024 | | :---------- | :------------------------- | :-------------------------- | :--------------- | :---------------- | | Bad Daddy's | $26,623 | $27,417 | $77,927 | $78,140 | | Good Times | $10,402 | $10,533 | $29,710 | $28,414 | | Total | $37,025 | $37,950 | $107,637 | $106,554 | Segment Income (Loss) from Operations (in thousands) | Segment | Quarter Ended July 1, 2025 | Quarter Ended June 25, 2024 | YTD July 1, 2025 | YTD June 25, 2024 | | :---------- | :------------------------- | :-------------------------- | :--------------- | :---------------- | | Bad Daddy's | $1,139 | $388 | $1,272 | $7 | | Good Times | $94 | $840 | $(476) | $1,491 | | Total | $1,233 | $1,228 | $796 | $1,498 | Segment Capital Expenditures (in thousands) | Segment | Quarter Ended July 1, 2025 | Quarter Ended June 25, 2024 | YTD July 1, 2025 | YTD June 25, 2024 | | :---------- | :------------------------- | :-------------------------- | :--------------- | :---------------- | | Bad Daddy's | $74 | $481 | $928 | $968 | | Good Times | $395 | $1,264 | $2,200 | $1,871 | | Total | $469 | $1,745 | $3,128 | $2,839 | Note 15. Subsequent Event On July 4, 2025, the U.S. enacted H.R.1, the One Big Beautiful Bill Act (OBBBA), which includes tax reform provisions. The Company is assessing its impact but does not expect a material effect on its consolidated financial statements, as the legislation was signed after the fiscal period ended July 1, 2025 - The One Big Beautiful Bill Act (OBBBA) was enacted on July 4, 2025, introducing tax reform provisions[71] - The Company does not expect a material impact on its consolidated financial statements from OBBBA, as it was signed after the reporting period[71] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial performance, condition, and operational results for the quarter and year-to-date periods ended July 1, 2025, compared to the prior year. It covers revenue trends, operating costs, segment performance, liquidity, and the impact of external factors like inflation and seasonality Overview - Good Times Restaurant Inc. operates and licenses full-service Bad Daddy's Burger Bar restaurants and operates and franchises drive-through Good Times Burgers & Frozen Custard restaurants[72] Forward Looking Statements - Forward-looking statements are subject to various factors, including changes in consumer tastes, increases in food, paper, labor, healthcare, or energy costs, inadequate staffing, and decreases in affordable capital resources[74] Growth Strategies and Outlook - The Company aims to grow customer traffic, increase brand awareness, and achieve organic sales growth[75] - Unit growth opportunities exist for both concepts, but the Company is taking a more conservative approach to real estate selection and leverage due to higher costs and volatile inflation[75] Restaurant Locations Company-Owned/Co-Developed Restaurant Count | State | Bad Daddy's (2025) | Bad Daddy's (2024) | Good Times (2025) | Good Times (2024) | Total (2025) | Total (2024) | | :------------ | :----------------- | :----------------- | :---------------- | :---------------- | :----------- | :----------- | | Alabama | 3 | 3 | - | - | 3 | 3 | | Colorado | 10 | 11 | 27 | 26 | 37 | 37 | | Georgia | 5 | 5 | - | - | 5 | 5 | | North Carolina| 14 | 14 | - | - | 14 | 14 | | Oklahoma | 1 | 1 | - | - | 1 | 1 | | South Carolina| 4 | 4 | - | - | 4 | 4 | | Tennessee | 2 | 2 | - | - | 2 | 2 | | Total | 39 | 40 | 27 | 26 | 66 | 66 | Franchise/License Restaurant Count | State | Bad Daddy's (2025) | Bad Daddy's (2024) | Good Times Burgers (2025) | Good Times Burgers (2024) | Total (2025) | Total (2024) | | :------------ | :----------------- | :----------------- | :------------------------ | :------------------------ | :----------- | :----------- | | Colorado | - | - | 1 | 3 | 1 | 3 | | North Carolina| 1 | 1 | - | - | 1 | 1 | | Wyoming | - | - | 2 | 2 | 2 | 2 | | Total | 1 | 1 | 3 | 5 | 4 | 6 | Results of Operations - Fiscal quarter ended July 1, 2025 (13 weeks) compared to fiscal quarter ended June 25, 2024 (13 weeks) For the quarter ended July 1, 2025, total net revenues decreased by 2.4% to $37.0 million, primarily due to reduced customer traffic and restaurant closures, partially offset by menu price increases. Income from operations remained stable at $1.23 million, while net income increased to $1.55 million, benefiting from a higher income tax benefit Net Revenues - Total net revenues decreased by $925,000 (2.4%) to $37,025,000 for the quarter ended July 1, 2025, from $37,950,000 in the prior year quarter[80] - Bad Daddy's revenues decreased by $795,000, driven by a restaurant closure, reduced customer traffic, and negative mix shift, partially offset by a 3.8% menu price increase[80][81] - Good Times revenues decreased by $130,000, primarily due to reduced customer traffic and a restaurant closure, partially offset by acquisitions of two franchisee-owned restaurants[80][82] Same Store Sales - Bad Daddy's same store sales decreased 1.4% for the quarter ended July 1, 2025, primarily due to reduced customer traffic, partially offset by menu price increases[85] - Good Times same store sales decreased 9.0% for the quarter ended July 1, 2025, primarily due to reduced customer traffic[86] Restaurant Operating Costs Food and Packaging Costs - Total food and packaging costs decreased by $340,000 to $11,358,000 (30.8% of restaurant sales) for the quarter ended July 1, 2025, from $11,698,000 (31.0% of restaurant sales) in the prior year[87] - Bad Daddy's food costs decreased as a percent of sales due to lower purchase prices for chicken wings and potatoes and menu price increases, partially offset by increased ground beef costs[88][89] - Good Times food costs increased as a percent of sales due to higher purchase prices on ground beef and eggs, without the benefit of price increases, partially offset by potato savings[90] Payroll and Other Employee Benefit Costs - Total payroll and other employee benefit costs increased by $12,000 to $12,647,000 (34.3% of restaurant sales) for the quarter ended July 1, 2025, from $12,635,000 (33.5% of restaurant sales) in the prior year[91] - Bad Daddy's payroll costs decreased by $124,000 due to a restaurant closure, but increased as a percent of sales due to decreased labor productivity from lower sales[92] - Good Times payroll costs increased due to restaurant acquisitions and higher average wage rates from market forces and CPI-indexed minimum wage in Colorado, partially offset by reduced incentive compensation[93] Occupancy Costs - Total occupancy costs decreased by $88,000 to $2,492,000 (6.8% of restaurant sales) for the quarter ended July 1, 2025, from $2,580,000 (6.8% of restaurant sales) in the prior year[94] - Bad Daddy's occupancy costs decreased due to a restaurant closure and decreases in non-cash rent for impaired right-of-use lease assets[95] - Good Times occupancy costs increased due to restaurant acquisitions, partially offset by a restaurant closure[96] Other Operating Costs - Total other operating costs increased by $207,000 to $5,402,000 (14.7% of restaurant sales) for the quarter ended July 1, 2025, from $5,195,000 (13.8% of restaurant sales) in the prior year[97] - Bad Daddy's other operating costs decreased due to lower customer delivery and credit card fees and a restaurant closure, partially offset by increased utilities[98] - Good Times other operating costs increased due to restaurant acquisitions and higher repair, maintenance, and technology expenses, partially offset by a restaurant closure[99] New Store Preopening Costs - There were no preopening costs in the quarters ended July 1, 2025, or June 25, 2024[100] Depreciation and Amortization Costs - Total depreciation and amortization costs increased by $22,000 to $982,000 for the quarter ended July 1, 2025, from $960,000 in the prior year[100] - Good Times depreciation and amortization costs increased by $29,000 to $240,000, primarily due to newly acquired assets[101] General and Administrative Costs - General and administrative costs decreased by $514,000 to $2,174,000 (5.9% of total revenues) for the quarter ended July 1, 2025, from $2,688,000 (7.1% of total revenues) in the prior year[101] - Decrease in costs associated with multi-unit supervisory roles of $225,000[102] - Decrease in third-party accounting fees of $151,000[102] - Decrease attributable to changes in legal reserves of $130,000[102] Advertising Costs - Total advertising costs decreased by $8,000 to $741,000 (2.0% of total revenues) for the quarter ended July 1, 2025, from $749,000 (2.0% of total revenues) in the prior year[103] - Bad Daddy's advertising costs decreased due to lower third-party gift card commissions, social media, and local store marketing expenses[104] - Good Times advertising costs increased due to social media and agency fees, and a decrease in product rebates, partially offset by reduced radio and streaming media[105] Impairment of Long-Lived Assets Costs - No impairment costs were recorded for the quarter ended July 1, 2025, compared to $199,000 in the prior year quarter, which primarily related to a Bad Daddy's lease right-of-use asset[107] (Gain) Loss on Restaurant Asset and Equipment Sales - A net gain of $4,000 was recorded for the quarter ended July 1, 2025, compared to a net loss of $18,000 in the prior year quarter[108] Income from Operations - Income from operations was $1,233,000 for the quarter ended July 1, 2025, compared to $1,228,000 in the prior year quarter[109] Interest Expense - Interest expense increased to $51,000 for the quarter ended July 1, 2025, from $27,000 in the prior year quarter[109] Provision for Income Taxes - A $363,000 benefit from income taxes was recorded for the quarter ended July 1, 2025, compared to a $197,000 benefit in the prior year quarter[110] Net Income - Net income increased to $1,545,000 for the quarter ended July 1, 2025, from $1,398,000 in the prior year quarter[110] Income Attributable to Non-Controlling Interests - Income attributable to non-controlling interests decreased to $58,000 for the quarter ended July 1, 2025, from $77,000 in the prior year quarter, due to decreased profitability of the joint-venture restaurants[111] Results of Operations - Fiscal three quarters ended July 1, 2025 (40 weeks) compared to fiscal three quarters ended June 25, 2024 (39 weeks) For the three quarters ended July 1, 2025, total net revenues increased by 1.0% to $107.6 million, driven by Good Times restaurant acquisitions and an additional fiscal week, despite reduced customer traffic. Income from operations decreased to $0.8 million from $1.5 million in the prior year, impacted by higher impairment costs and increased operating expenses, while net income also declined Net Revenues - Total net revenues increased by $1,083,000 (1.0%) to $107,637,000 for the three quarters ended July 1, 2025, from $106,554,000 in the prior year period[112] - Bad Daddy's restaurant sales decreased by $488,000 due to a restaurant closure, reduced customer traffic, and negative mix shift, partially offset by an additional fiscal week and a 4.3% menu price increase[113] - Good Times restaurant sales increased by $1,509,000, driven by acquisitions of three franchisee-owned restaurants and an additional fiscal week, partially offset by restaurant closures and remodels, and reduced customer traffic[114] - Franchise and other revenues increased by $62,000 to $663,000, primarily due to an increase in gift card breakage, partially offset by reduced royalties from restaurant acquisitions[116] Same Store Sales - Bad Daddy's same store sales decreased 1.2% for the three quarters ended July 1, 2025, primarily due to reduced customer traffic, partially offset by menu price increases[118] - Good Times same store sales decreased 4.4% for the three quarters ended July 1, 2025, primarily due to decreased customer traffic[119] Restaurant Operating Costs Food and Packaging Costs - Total food and packaging costs increased by $574,000 to $33,198,000 (31.0% of restaurant sales) for the three quarters ended July 1, 2025, from $32,624,000 (30.8% of restaurant sales) in the prior year[120] - Bad Daddy's food costs decreased as a percent of sales due to lower purchase prices for chicken wings and potatoes and menu price increases, partially offset by increased ground beef costs[121] - Good Times food costs increased as a percent of sales due to higher purchase prices on ground beef and eggs, partially offset by savings in chicken wing and potato pricing and menu price increases[122] Payroll and Other Employee Benefit Costs - Total payroll and other employee benefit costs increased by $731,000 to $37,256,000 (34.8% of restaurant sales) for the three quarters ended July 1, 2025, from $36,525,000 (34.5% of restaurant sales) in the prior year[123] - Bad Daddy's payroll costs decreased by $270,000 due to a restaurant closure and decreased manager salaries/incentive compensation, but increased as a percent of sales due to decreased labor productivity[124] - Good Times payroll costs increased by $1,001,000 due to restaurant acquisitions, an additional fiscal week, and higher average wage rates, partially offset by a restaurant closure and decreased incentive compensation[125] Occupancy Costs - Total occupancy costs increased by $60,000 to $7,758,000 (7.3% of restaurant sales) for the three quarters ended July 1, 2025, from $7,698,000 (7.3% of restaurant sales) in the prior year[126] - Bad Daddy's occupancy costs decreased due to a restaurant closure and lower non-cash rent for impaired right-of-use lease assets[127] - Good Times occupancy costs increased due to restaurant acquisitions, partially offset by a restaurant closure[128] Other Operating Costs - Total other operating costs increased by $508,000 to $15,536,000 (14.5% of restaurant sales) for the three quarters ended July 1, 2025, from $15,028,000 (14.2% of restaurant sales) in the prior year[129] - Bad Daddy's other operating costs decreased due to a restaurant closure and lower customer delivery/credit card fees, partially offset by an additional fiscal week and higher utility expenses[130] - Good Times other operating costs increased due to restaurant acquisitions, an additional fiscal week, and higher repair, maintenance, technology, and utility expenses, partially offset by a restaurant closure[131] New Store Preopening Costs - Preopening costs were $8,000 for the three quarters ended July 1, 2025, primarily related to training costs for two Good Times restaurant acquisitions, compared to no preopening costs in the prior year[132] Depreciation and Amortization Costs - Total depreciation and amortization costs increased by $183,000 to $2,996,000 for the three quarters ended July 1, 2025, from $2,813,000 in the prior year[132] - Good Times depreciation and amortization costs increased by $148,000 to $721,000, primarily due to additional depreciation on newly acquired assets[133] General and Administrative Costs - General and administrative costs decreased by $484,000 to $7,340,000 (6.8% of total revenues) for the three quarters ended July 1, 2025, from $7,824,000 (7.3% of total revenues) in the prior year[134] - Decrease in third-party accounting fees of $455,000[139] - Decrease attributable to changes in legal reserves of $365,000[139] - Decrease in costs associated with multi-unit supervisory roles of $46,000[139] - Increases in technology costs ($161,000), health insurance underwriting ($120,000), and home office payroll and benefits costs ($88,000) partially offset the decrease[139] Advertising Costs - Total advertising costs decreased to $2,310,000 (2.1% of total revenues) for the three quarters ended July 1, 2025, from $2,665,000 (2.5% of total revenues) in the prior year[135] - Bad Daddy's advertising costs decreased by $364,000 due to reduced third-party gift card commissions and lower social media/local store marketing expenses[136] - Good Times advertising costs increased due to higher social media expenses, partially offset by decreased radio and research expenses[137] Impairment of Long-Lived Assets Costs - Impairment costs were $494,000 for the three quarters ended July 1, 2025, compared to $199,000 in the prior year, primarily due to lease right-of-use assets and new assets in previously impaired restaurants[138] (Gain) Loss on Restaurant Asset and Equipment Sales - A net gain of $55,000 was recorded for the three quarters ended July 1, 2025, compared to a net loss of $12,000 in the prior year period[140] Litigation Contingency Costs - No litigation contingency costs were recorded for the three quarters ended July 1, 2025, compared to $332,000 of income related to a reserve adjustment in the prior year period[141] Income from Operations - Income from operations was $796,000 for the three quarters ended July 1, 2025, compared to $1,498,000 in the prior year period[141] Interest Expense - Interest expense increased to $153,000 for the three quarters ended July 1, 2025, from $101,000 in the prior year period[142] Other Income - Other income of $140,000 was recorded for the three quarters ended July 1, 2025, related to the termination of a management services agreement and lease negotiations[143] Provision for Income Taxes - A $309,000 benefit from income taxes was recorded for the three quarters ended July 1, 2025, compared to a $198,000 benefit in the prior year period, driven by changes in full-year net income projections and available tax credits[144] Net Income - Net income decreased to $1,092,000 for the three quarters ended July 1, 2025, from $1,595,000 in the prior year period[145] Income Attributable to Non-Controlling Interests - Income attributable to non-controlling interests decreased to $65,000 for the three quarters ended July 1, 2025, from $212,000 in the prior year period[146] Adjusted EBITDA - Adjusted EBITDA is a non-GAAP measure used by management and investors to evaluate performance, excluding non-cash stock-based compensation, preopening expense, non-recurring acquisition costs, asset impairment, and non-cash disposal of assets[148][149] Adjusted EBITDA Reconciliation (in thousands) | Metric | Quarter Ended July 1, 2025 | Quarter Ended June 25, 2024 | YTD July 1, 2025 | YTD June 25, 2024 | | :------------------------------------ | :------------------------- | :-------------------------- | :--------------- | :---------------- | | Net Income, as reported | $1,487 | $1,321 | $1,027 | $1,383 | | Depreciation and amortization | $976 | $959 | $2,997 | $2,817 | | Interest expense, net | $51 | $27 | $153 | $101 | | Provision for income taxes | $(363) | $(197) | $(309) | $(198) | | EBITDA | $2,151 | $2,110 | $3,868 | $4,103 | | Preopening expense | $- | $- | $8 | $- | | Non-cash stock-based compensation | $25 | $28 | $90 | $106 | | Asset impairment | $- | $199 | $494 | $199 | | (Gain) loss on restaurant and equipment asset sales | $(5) | $18 | $(58) | $12 | | Litigation contingencies | $- | $- | $- | $(332) | | Adjusted EBITDA | $2,171 | $2,355 | $4,402 | $4,088 | Liquidity and Capital Resources Cash and Working Capital - As of July 1, 2025, the Company had a working capital deficit of $8,457,000, influenced by short-term lease liabilities[155] - Management believes existing cash and future borrowings from the Cadence Credit Facility will be sufficient to meet working capital and recurring capital expenditure needs in fiscal 2025[155] Financing - The Company's financing arrangements, including the Cadence Credit Facility, are detailed in Note 7 of the financial statements[157] Cash Flows Cash Flow Summary (Year-to-Date, in thousands) | Cash Flow Activity | July 1, 2025 | June 25, 2024 | | :-------------------------------- | :----------- | :------------ | | Net cash provided by operating activities | $1,461 | $4,736 | | Net cash used in investing activities | $(3,192) | $(2,802) | | Net cash provided by (used in) financing activities | $1,016 | $(1,297) | | Net change in cash and cash equivalents | $(715) | $637 | Operating Cash Flows - Net cash from operating activities decreased by $3,275,000 for the period ended July 1, 2025, compared to the prior year, negatively impacted by additional pre-paid rent in ROU assets and reductions in accounts payable and accrued liabilities[159] Investing Cash Flows - Net cash used in investing activities was $3,192,000 for the three quarters ended July 1, 2025, primarily reflecting purchases of property and equipment and acquisitions of Good Times restaurants from franchisees[160] Financing Cash Flows - Net cash provided by financing activities was $1,016,000 for the three quarters ended July 1, 2025, including $2,250,000 from long-term debt borrowings and $364,000 for common stock repurchases[161] - Net cash used in financing activities was $1,297,000 for the three quarters ended June 25, 2024, including $1,789,000 for treasury stock purchases[162] Impact of Inflation and Wage Increases at Both Concepts - Ground beef costs are projected to remain elevated and volatile throughout fiscal year 2025 due to tightening supply[163] - The Company has experienced significant wage increases to attract employees, with additional upward pressure in Colorado from inflation-indexed statutory minimum wages[163] - Menu price increases, historically used to manage profitability, may not sufficiently offset labor cost increases without negatively impacting consumer demand[164] Seasonality - Company revenues are subject to seasonal fluctuations, with winter weather adversely affecting Colorado restaurant sales (December-March) and Bad Daddy's experiencing seasonal reductions between November and January due to consumer spending patterns[165] Item 3. Quantitative and Qualitative Disclosures About Market Risk This item is not required for the Company's filing Item 4. Controls and Procedures This section details the effectiveness of the Company's disclosure controls and procedures and reports on any changes in internal control over financial reporting Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures - The Company's Chief Executive Officer and Senior Vice President of Finance and Accounting concluded that disclosure controls and procedures were effective as of July 1, 2025[167] Changes in Internal Control over Financial Reporting - There have been no significant changes in the Company's internal control over financial reporting during the fiscal quarter ended July 1, 2025, that have materially affected or are reasonably likely to materially affect it[168] PART II – OTHER INFORMATION Item 1. Legal Proceedings The Company is involved in various legal claims and litigation. A significant lawsuit with White Winston Select Asset Funds, LLC, regarding a failed acquisition, resulted in a trial court judgment awarding Good Times $3.83 million plus pre-judgment interest of $0.81 million, with the plaintiffs having until August 29, 2025, to appeal - Management believes any reasonably possible losses from general contingent liabilities have been adequately accrued or would be immaterial[170] - In the White Winston Select Asset Funds lawsuit, a special master recommended damages of $3.826 million plus pre- and post-judgment interest for Good Times' counterclaim[172] - On July 30, 2025, the trial court awarded Good Times $3,826,715.07 plus $813,845.34 in pre-judgment interest, with a 9.5% annual post-judgment interest rate[172] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended September 24, 2024, and its Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2024 - No material changes from the risk factors disclosed in the Annual Report on Form 10-K for FY2024 and the Quarterly Report on Form 10-Q for Q1 FY2025[173] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Company's Board of Directors authorized a $7.0 million share repurchase program, with approximately $2.0 million remaining available as of July 1, 2025. During the quarter, 21,968 shares were repurchased under the program, and an additional 11,331 shares were purchased in a private transaction - The Board of Directors authorized a total of $7.0 million for the share repurchase program, with approximately $2,008,000 remaining available as of July 1, 2025[174][175] Common Stock Repurchases (Fiscal Quarter Ended July 1, 2025) | Period | Total shares purchased | Average price paid per share | | :------------------ | :--------------------- | :--------------------------- | | 04/02/25 – 04/29/25 | 8,000 | $2.13 | | 05/28/25 – 07/01/25 | 13,968 | $1.78 | | Total | 21,968 | | - On May 5, 2025, the Company privately purchased 11,331 shares of common stock at $2.00 per share from its retiring Senior Vice President of Operations[176] Item 3. Defaults Upon Senior Securities The Company reported no defaults upon senior securities during the period - There were no defaults upon senior securities[177] Item 4. Mine Safety Disclosures This item is not applicable to the Company - Mine Safety Disclosures are not applicable to the Company[178] Item 5. Other Information During the quarter ended July 1, 2025, no directors or officers adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended July 1, 2025[179] Item 6. Exhibits This section lists the exhibits furnished as part of the report, including certifications from the Chief Executive Officer and Principal Financial Officer, and various XBRL documents - Exhibit 31.1: Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 - Exhibit 31.2: Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350 - Exhibit 32.1: Certification of Chief Executive Officer and Principal Financial Officer pursuant to Section 906 - Exhibits 101.INS, 101.SCH, 101.CAL, 101.LAB, 101.PRE, 101.DEF: Inline XBRL Taxonomy Extension Documents - Exhibit 104: Cover Page Interactive Data File (formatted as Inline XBRL) SIGNATURES - The report is signed by Ryan M. Zink, Chief Executive Officer, and Keri A. August, Senior Vice President of Finance and Accounting, on August 7, 2025[182][183][184]