Rave Restaurant (RAVE) - 2025 Q4 - Annual Report

PART I ITEM 1. BUSINESS Rave Restaurant Group operates and franchises Pizza Inn and Pie Five pizza concepts, with 135 total units as of June 29, 2025 - Rave Restaurant Group, Inc. operates and franchises pizza concepts under 'Pizza Inn' (Buffet, Delco, Express, Ghost Kitchens, PIE Kiosks) and 'Pie Five' (fast-casual, ghost kitchens)[11] - The company facilitates food, equipment, and supply distribution to its domestic and international restaurant system through third-party agreements[11] General Business Overview The company operates and franchises pizza restaurant concepts under the Pizza Inn and Pie Five brands, with various unit types - Rave Restaurant Group, Inc. operates and franchises pizza concepts under 'Pizza Inn' (Buffet, Delco, Express, Ghost Kitchens, PIE Kiosks) and 'Pie Five' (fast-casual, ghost kitchens)[11] Restaurant Unit Count (June 29, 2025) | Category | Count | | :-------------------------------- | :---- | | Total Franchised Pizza Inn | 117 | | Total Franchised Pie Five | 17 | | Total Licensed PIE Unit | 1 | | Domestic Franchised Pizza Inn | 95 | | International Franchised Pizza Inn | 22 | Company History Pizza Inn opened its first restaurant in 1958, expanded internationally in the late 1970s, and began trading on NASDAQ in 1993 - The first Pizza Inn opened in Dallas, Texas in 1958, with the first franchise awarded in 1963 and international franchising beginning in the late 1970s[13] - The company's stock began trading on NASDAQ in 1993 under the ticker symbol 'RAVE'[13] - The first Pie Five restaurant opened in 2011, and the PIE kiosk solution was launched in 2019[13] Restaurant Concepts The company operates and franchises restaurant concepts under two distinct brands: Pizza Inn and Pie Five - The company operates and franchises restaurant concepts under two distinct brands: Pizza Inn and Pie Five[14] Pizza Inn Concept Details Pizza Inn offers diverse unit types including Buffet, Delco, Express, Ghost Kitchens, and licensed PIE Kiosks - Pizza Inn offers Buffet, Delco (delivery/carryout), Express, and Ghost Kitchen Units, along with licensed PIE Kiosks[15] - Buffet and Delco Units feature hand-made dough and proprietary ingredients, while Express Units use pre-prepared crusts for lower investment and operating costs[15][18] - Pizza Inn Ghost Kitchen Units operate within Pie Five restaurants, serving online customers through third-party delivery[20] Pie Five Concept Details Pie Five is a fast-casual pizza concept offering individualized pizzas with fresh toppings, typically located in high-traffic areas - Pie Five is a fast-casual pizza concept offering individualized pizzas with fresh toppings, baked in specially designed ovens[21] - Traditional Pie Five restaurants are typically 1,800-2,400 square feet, located in high-traffic urban/suburban areas, and serve lunch and dinner[22] Site Selection Process The company considers site selection critical, involving demographic review and evaluation, often leveraging franchisee knowledge - The company considers site selection critical, involving trade area demographics review and evaluation, often relying on franchisee knowledge[23] Development and Operations Strategy The company plans to expand Pizza Inn domestically and internationally, while opportunistically evaluating Pie Five unit development - The company plans to expand the Pizza Inn system domestically and internationally through new franchised restaurants, evaluating international development in fiscal 2026[24] - For Pie Five, the company will opportunistically evaluate franchised unit development, focusing on experienced, well-capitalized operators, and expects a modest decrease in units in future periods[27] Domestic Franchise Operations Franchise agreements require adherence to operating systems, payment of fees, marketing contributions, and ongoing royalties - Franchise agreements require adherence to operating systems, payment of franchise fees, marketing fund contributions, and continuing royalties[28][29] - The company offers training programs focusing on food preparation, service, cost control, sanitation, safety, marketing, and personnel management[30] - Franchisees must comply with written policies and standards for menu, ingredients, decor, and operations, with ongoing support from franchise business consultants[31] Domestic Kiosk License Operations PIE Units are offered under five-year initial license periods without development fees, license fees, royalties, or advertising assessments - PIE Units are offered under five-year initial license periods with renewal options, without development fees, license fees, royalties, or advertising assessments[32] - Licensees must comply with Pizza Inn brand standards, and mandated product sourcing provisions result in supplier rebates for the company[32][34] International Franchise Operations The company offers master license rights for Pizza Inn internationally, with 22 international Pizza Inn restaurants as of June 29, 2025 - The company offers master license rights for Pizza Inn in foreign countries, with negotiated fees, development schedules, and ongoing royalties, but is not actively marketing Pie Five internationally[36] - As of June 29, 2025, there were 22 international Pizza Inn restaurants, primarily in Saudi Arabia and the Middle East, with a few in Honduras and New Zealand[37] Food and Supply Distribution Franchisees and licensees purchase food and supplies from authorized third-party distributors, benefiting from the company's vendor negotiations - Franchisees and licensees purchase food and supplies from authorized third-party distributors, benefiting from the company's direct vendor negotiations and volume purchasing[38] - Proprietary food products (e.g., cheese, pizza sauce, flour mixture) must be purchased from authorized distributors to ensure quality and consistency[38] - The company does not engage in commodity hedging but enters into pricing arrangements for up to a year in advance for certain high-volume products[40] Marketing and Advertising Franchisees contribute a percentage of sales to a marketing fund and conduct local marketing efforts with company support - Franchisees contribute a specified percentage of sales to a marketing fund for various advertising programs and materials, including print, digital, social media, and in-store promotions[42] - Franchisees are also required to conduct independent local marketing efforts, supported by company-provided materials[43] Trademarks and Quality Control The company owns various trademarks, including 'Pizza Inn' and 'Pie Five', which are essential for business protection - The company owns various trademarks, including 'Pizza Inn' and 'Pie Five', registered with the USPTO and in several foreign countries, essential for business protection[44] Government Regulation The company and its franchisees are subject to federal, state, and local laws affecting restaurant operations and franchise sales - The company and its franchisees are subject to federal, state, and local laws affecting restaurant operations, including licensing and regulation by health, safety, and alcoholic beverage authorities[45] - The company is subject to FTC regulations and state laws governing franchise offers and sales, requiring a franchise disclosure document for prospective franchisees[46] Employees As of June 29, 2025, the company had 24 full-time employees, none covered by collective bargaining agreements - As of June 29, 2025, the company had 24 full-time employees, none of whom are covered by collective bargaining agreements[47] Industry and Competition The restaurant industry is intensely competitive across various factors, with numerous established competitors in the pizza segment - The restaurant industry is intensely competitive regarding price, service, location, and food quality, with many well-established competitors[48] - Primary competitors in the pizza segment include national and regional pizza chains, as well as frozen pizza products and fast-casual pizza concepts[48] - Competition for franchise sales is based on product quality, price, value, consumer acceptance, franchisor experience, and support[49] ITEM 1A. RISK FACTORS Risk factors disclosure is not required for a smaller reporting company - Risk factors disclosure is not required for a smaller reporting company[50] [ITEM 1B. UNRESOLVED STAFF COMMENTS](index=6&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS%2