The following management’s discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes of GEN Restaurant Group, Inc., included in Part I, Item 1 of this Quarterly Report on Form 10-Q, and with the audited consolidated financial statements and related notes, which are included in our Annual Report on Form 10-K for the year ended December 31, 2025 (the “Annual Report”), filed with the Securities and Exchange Commission (the “SEC”). The terms “we”, “our”, and “us” as used herein refer to the Operating Company and its consolidated subsidiaries prior to the IPO and related transactions described in this Form 10-Q and to GEN Restaurant Group, Inc. and its consolidated subsidiaries, including the Operating Company, following the IPO and related transactions.
This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. All statements other than statements of historical fact contained in this Quarterly Report, including, without limitation, statements regarding our future results of operations, or financial condition, business strategy, and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “consider,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” or the negative of these words or other similar terms or expressions. You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the Annual Report, and in our subsequent filings with the SEC, which are available on the SEC's website at www.sec.gov. The forward-looking statements made in this Quarterly Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements to reflect future events or circumstances, new information, or the occurrence of unanticipated events, except as required by law.
Overview
GEN Restaurant Group is an Asian casual dining restaurant concept that offers an extensive menu of traditional Korean and Korean-American food, including high-quality meats, poultry, and seafood, all at a superior value. Founded in 2011 by two Korean immigrants, since the opening of our first restaurant in September 2011 we have grown to 54 company-owned restaurants located in California, Arizona, Hawaii, Nevada, Texas, New York, Oregon, Washington, North Carolina, Florida and four restaurants in South Korea. Our restaurants have modern décor, lively Korean pop music playing in the background and embedded grills in the center of each table. We believe we offer our customers a unique dining experience in which guests cook the majority of the food themselves, reducing the need for chefs and servers and providing a similar customer experience across our restaurants. We have also extended the GEN brand beyond our restaurants into consumer-packaged goods (“CPG”), bringing our signature flavors to grocery retailers across the country.
Our near-term priorities for the restaurant business are to protect cash flow and to operate our existing locations well. We intend to be highly selective in committing capital to new restaurant construction, weighing the returns of each potential opening against alternative uses of capital, including the expansion of our CPG distribution. Our restaurants range in size from 4.7 thousand to 12 thousand square feet and are typically located in high-activity commercial areas.
We believe our CPG division represents our single largest opportunity for near-term growth. GEN products are now in nearly 2,000 retail doors nationwide. We launched the division with our core packaged frozen meats and have since expanded into other frozen and non-frozen Korean products. Our products are carried by major grocery retailers and club stores.
Business Trends
During 2023 and 2024 we opened six new restaurants. During the year 2025, we opened 15 new restaurants, including six in South Korea. In the first half of 2026, we opened three restaurants in Tucson, AZ, Denton, TX and McAllen, TX. During the six months ended June 30, 2026, we closed six restaurants, including two in Korea (GEN Guwol and KAN Sushi Guwol) and four restaurants (San Antonio, Texas, Mountain View, California, Edison, New Jersey, and Jacksonville, Florida) that were closed as part of the previously disclosed Chubby Cattle transaction and became unconsolidated equity method investment. We intend to continue optimizing our restaurant portfolio and to further reduce our corporate overhead and general and administrative expenses.
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Our CPG division delivered its strongest quarter to date, with revenue up 341% sequentially from the first quarter of 2026, driven by our core line of frozen raw marinated meats. June 2026 was the division’s largest month, with revenue exceeding $2 million. As of the date of this report, GEN products are in nearly 2,000 supermarkets and club stores nationwide
Recent Events Concerning Our Financial Position
On September 25, 2023, the Company entered into a loan agreement for a $20.0 million line of credit with PCB Bank. The line of credit matures on September 25, 2026, and bears interest at a variable rate per annum equal to 7.00% as of June 30, 2026. The balance outstanding under the line of credit is $12.0 million as of June 30, 2026.
On April 25, 2025, the Company entered into a loan agreement for a $2.0 million loan with PCB Bank. The loan matures on April 25, 2027, and bears interest at a variable interest rate per annum equal to 7.00% as of June 30, 2026. The balance as of June 30, 2026 was $978 thousand.
On July 29, 2025, the Company entered into a loan agreement for $4.0 million with PCB Bank. The loan matures on July 29, 2027, and bears interest at a variable rate per annum equal to 0.25% over the Wall Street Journal Index rate (prime rate), which equals 7.00% as of June 30, 2026. The balance as of June 30, 2026 was $2.6 million.
On October 27, 2025, the Company entered into a loan agreement for $4.0 million with PCB Bank. The loan matures on October 27, 2027, and bears interest at a variable rate per annum equal to 0.25% over the Wall Street Journal Prime Rate, which equaled 7.00% at June 30, 2026. The balance as of June 30, 2026 was $4.0 million.
We assessed our long-lived assets for potential impairment each quarter with the result that no impairment charges were recorded in any of the periods presented.
Key Performance Indicators
In assessing the performance of our business, we consider a variety of financial and performance measures. The key measures for determining how our business is performing include Net (Loss) Income Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Restaurant-Level Adjusted EBITDA, Restaurant-Level Adjusted EBITDA Margin, Adjusted net (loss) income, Adjusted net (loss) income attributable to Class A common stock per share - basic and diluted, Adjusted earnings (loss) per share (“EPS”), Average Unit Volumes, comparable restaurant sales growth, the number of restaurant openings and revenue per square foot.
Net (Loss) Income Margin
Net (Loss) Income Margin is net (loss) income measured under accounting principles generally accepted in the United States of America (“GAAP”) divided by revenue.
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA represents net (loss) income excluding interest expense (income), net, income taxes, depreciation and amortization, stock-based compensation, employee retention credits, litigation accrual for a discrete claim, non-cash lease expense, non-cash lease expense included in pre-opening costs, loss on lease termination, and gain on deconsolidation of restaurants. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by revenue. Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures intended as supplemental measures of our performance and are neither required by, nor presented in accordance with, GAAP. For a discussion of why we consider these measures to be useful and their material risks and limitations, see “Non-GAAP Financial Measures.”
Restaurant-Level Adjusted EBITDA and Restaurant-Level Adjusted EBITDA Margin
Restaurant-Level Adjusted EBITDA is (Loss) Income from operations adjusted to exclude the following items: depreciation and amortization, pre-opening costs, loss on lease termination, gain on deconsolidation of restaurants, general and administrative expenses, and non-cash lease expense. Non-cash items such as charges for asset impairments and asset disposals are not included in Restaurant-Level Adjusted EBITDA. Restaurant-level Adjusted EBITDA Margin is the calculation of Restaurant-Level Adjusted EBITDA divided by revenue. For a discussion of why we consider these measures to be useful and their material risks and limitations, see “Non-GAAP Financial Measures.”
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Adjusted Net (Loss) Income and Adjusted EPS
Adjusted Net (Loss) Income represents net (loss) income, adjusted for pre-opening costs, stock-based compensation, the costs of a discrete legal settlement, loss on lease termination, gain on deconsolidation of restaurants, and the related tax impact of the adjustments. Adjusted net (loss) income per share is defined as adjusted net income divided by the weighted-average number of shares of Class A common stock outstanding for the applicable period.
Average Unit Volume
“Average Unit Volume” (“AUV”) means the average annual restaurant sales for all restaurants open for a full 18 months before the end of the period measured. AUV is calculated by dividing annual revenue for the year presented for all such restaurants by the total number of restaurants in that base. This measurement allows management to assess changes in consumer spending patterns at our restaurants and the overall performance of our restaurant base.
The following table shows the AUV for the twelve months ended June 30, 2026 and 2025:
Twelve Months Ended June 30,
2026 2025
(in thousands)
Average Unit Volume $ 4,995 $ 5,342
Comparable Restaurant Sales Change
Comparable restaurant sales change refers to the change in year-over-year sales for the comparable restaurant base. We include restaurants in the comparable restaurant base that have been in operation for at least 18 full months prior to the accounting period presented. Once a restaurant has been open 18 full months, it must have had continuous operations during both the current period and the prior year period being measured to remain a comparable restaurant. If operations were to be substantially impacted by unusual events that closed the location or significantly changed its capacity, that location is excluded from the comparable sales calculation until it has been operating continuously under normal conditions for both the current period and the prior year comparison period. Since opening new restaurants is expected to be a significant component of our sales change, comparable restaurant sales change is only one measure of how we evaluate our performance.
Three Months Ended June 30, Six months ended June 30,
2026 2025 2026 2025
Comparable restaurant sales change (%) (9.3 )% (7.2 )% (9.1 )% (4.4 )%
Comparable restaurant base 35 36 35 36
Change in Number of Restaurants
The change in number of restaurants reflects the number of restaurants opened or closed during a particular reporting period. Before we open new restaurants, we incur pre-opening costs. New restaurants may not be profitable, and their sales performance may not follow historical patterns. The number and timing of restaurant openings and closings has had, and is expected to continue to have, an impact on our results of operations. The following table shows the change in our restaurant base for the three and six months ended June 30, 2026 and 2025:
Three Months Ended June 30, Six months ended June 30,
2026 2025 2026 2025
Restaurant activity
Beginning of period 59 49 57 43
Openings 1 1 3 7
Closings (6 ) — (6 ) —
End of period 54 50 54 50
Revenue Per Square Foot
Revenue per square foot means the restaurant sales for all restaurants opened a full 18 months before the end of the 18-month period measured divided by the average square footage of such restaurants. This measurement allows management to assess the effectiveness of our approach to real estate selection and the overall performance of our restaurant base. The following table shows the revenue per square foot for the twelve months ended June 30, 2026 and 2025:
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Twelve Months Ended June 30,
2026 2025
Revenue per square foot $ 701 $ 797
Components of Results of Operations
Revenues. Revenues consist primarily of sales of food and beverages in our restaurants, including orders placed through our online portal, and, increasingly, sales of our consumer packaged goods ("CPG") products through grocery retailers and other retail, wholesale and direct-to-consumer channels. Restaurant revenue in a given period is directly impacted by the number of restaurants we operate, menu pricing, customer traffic and comparable restaurant sales change. Revenue also includes gift card revenue earned.
Food costs. Food costs are variable in nature, change with sales volume and are influenced by menu mix and subject to increases or decreases based upon fluctuations in commodity costs. Another important factor causing fluctuations in food costs includes restaurant management of food waste. Food costs are a substantial expense and are expected to change proportionally as our sales levels change.
Payroll and benefits. Payroll and benefits include all restaurant-level management and hourly labor costs, including wages, employee benefits and payroll taxes. Similar to the food costs that we incur, labor and related expenses at our restaurants are expected to change proportionally as our sales levels change. Factors that influence fluctuations in our labor and related expenses include the volume of sales at our restaurants, minimum wage and payroll tax legislation, payroll rate increases due to labor shortages or inflationary pressures, the frequency and severity of workers’ compensation claims, and healthcare costs.
Occupancy expenses. Occupancy expenses include rent, common area maintenance, property insurance and property taxes for all restaurant locations, but exclude any related pre-opening costs.
Operating expenses. Operating expenses include supplies, utilities, repairs and maintenance, and other costs incurred directly at the restaurant level.
Depreciation and amortization expenses. Depreciation and amortization expenses are periodic non-cash charges at our restaurants that consist of depreciation of fixed assets, including equipment, software and capitalized leasehold improvements. Depreciation is determined using the straight-line method over the assets’ estimated useful lives, ranging from five to seven years.
Pre-opening costs. Pre-opening costs include pre-opening period rent, maintenance, taxes, payroll and benefits costs, advertising and other expenses directly incurred by the new restaurant until the date of the restaurant opening. Pre-opening costs can fluctuate significantly from period to period, based on the number and timing of restaurant openings.
General and administrative expenses. General and administrative expenses include expenses associated with corporate management supervisory functions that support the operations of existing restaurants and development of new restaurants, including compensation and benefits, stock-based compensation, travel expenses, legal and professional fees, marketing costs, information systems, corporate office rent and other related corporate costs. General and administrative expenses are expected to grow as our sales grow, including incremental legal, accounting, insurance and other expenses incurred as a public company including becoming compliant with the requirements of Sarbanes-Oxley and addressing our internal control weaknesses through implementing new accounting systems and hiring additional staff.
Loss on lease termination. During the second quarter of 2026, we recorded a lease termination loss of $611 thousand related to the closure of two restaurants in Korea.
Gain on deconsolidation of restaurants. In connection with the previously disclosed Chubby Cattle transaction, we transferred four consolidated restaurants (San Antonio, Texas; Mountain View, California; Edison, New Jersey; and Jacksonville, Florida) into newly formed entities in which we retained a 49% interest accounted for under the equity method, and recorded a net gain on deconsolidation of $53 thousand during the second quarter of 2026.
Depreciation and amortization - corporate. These are periodic non-cash charges at the corporate level that consist of depreciation of fixed assets, including equipment, information systems software and capitalized leasehold improvements, if any. Depreciation is determined using the straight-line method over the assets’ estimated useful lives, ranging from five to seven years.
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Employee retention credits. Employee retention credits include refundable credits recognized under the provisions of the CARES Act and extension thereof.
Other (gain) loss. The gain of $0.6 million in the three and six months ended June 30, 2026 resulted from the derecognition of aged accounts payable balances determined to no longer be payable. The loss of $0.3 million in the prior year periods was a legal settlement accrual.
Gain (loss) on foreign currency. Represents the foreign currency transaction gains and losses in South Korea.
Interest (expense) income, net. Interest (expense) income, net reflects income earned on deposits, net of cash and non-cash charges related to our outstanding debt and finance lease obligations.
(Benefit) provision for income taxes. Represents federal, state, and local current and deferred income tax (benefit) expense.
Results of Operations for the Three Months Ended June 30, 2026 and 2025
The following table presents selected comparative results of operations for the three months ended June 30, 2026 and 2025. Our financial results for these periods are not necessarily indicative of the financial results that we will achieve in future periods.
Three Months Ended June 30, Increase/(Decrease)
($ amounts in thousands) 2026 2025 Amount %
Revenue $ 55,729 $ 55,041 $ 688 1.2 %
Restaurant operating expenses:
Food cost 21,775 18,623 3,152 16.9 %
Payroll and benefits 15,614 16,561 (947 ) (5.7 )%
Occupancy expenses 5,334 5,121 213 4.2 %
Operating expenses 6,755 5,905 850 14.4 %
Depreciation and amortization 2,354 2,221 133 6.0 %
Pre-opening costs 1,327 2,051 (724 ) (35.3 )%
Total restaurant operating expenses 53,159 50,482 2,677 5.3 %
General and administrative 7,113 6,403 710 11.1 %
Loss on lease termination 611 — 611 100.0%
Gain on deconsolidation of restaurants (53 ) — (53 ) 100.0%
Depreciation and amortization - corporate 51 36 15 41.7 %
Total costs and expenses 60,881 56,921 3,960 7.0 %
(Loss) income from operations (5,152 ) (1,880 ) (3,272 ) 174.0 %
Employee retention credits — 313 (313 ) (100.0 )%
Other gain (loss) 621 (300 ) 921 (307.0 )%
Gain (loss) on foreign currency 1 (14 ) 15 (107.1 )%
Interest (expense) income, net (314 ) 67 (381 ) (568.7 )%
Net loss before income taxes (4,844 ) (1,814 ) (3,030 ) 167.0 %
(Benefit) provision for income taxes (211 ) (116 ) (95 ) 81.9 %
Net loss (4,633 ) (1,698 ) (2,935 ) 172.9 %
Net loss attributable to non-controlling interest (3,879 ) (1,437 ) (2,442 ) 169.9 %
Net loss attributable to GEN Restaurant Group, Inc. $ (754 ) $ (261 ) $ (493 ) 188.9 %
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% of Revenue
Three Months Ended June 30,
2026 2025
Revenue 100 % 100 %
Restaurant operating expenses:
Food costs 39.1 % 33.8 %
Payroll and benefits 28.0 % 30.1 %
Occupancy expenses 9.6 % 9.3 %
Operating expenses 12.1 % 10.7 %
Depreciation and amortization 4.2 % 4.0 %
Pre-opening costs 2.4 % 3.7 %
Total restaurant operating expenses 95.4 % 91.7 %
General and administrative 12.8 % 11.6 %
Loss on lease termination 1.1 % 0.0 %
Gain on deconsolidation of restaurants (0.1 )% 0.0 %
Depreciation and amortization - corporate 0.1 % 0.1 %
Total costs and expenses 109.2 % 103.4 %
Income from operations (9.2 )% (3.4 )%
Employee retention credits 0.0 % 0.6 %
Other gain (loss) 1.1 % (0.5 )%
Loss on foreign currency 0.0 % (0.0 )%
Interest (expense) income, net (0.6 )% 0.1 %
Net loss before income taxes (8.7 )% (3.3 )%
(Benefit) provision for income taxes (0.4 )% (0.2 )%
Net loss (8.3 )% (3.1 )%
Net loss attributable to non-controlling interest (7.0 )% (2.6 )%
Net loss attributable to GEN Restaurant Group, Inc. (1.4 )% (0.5 )%
Revenues. Revenues were $55.7 million for the three months ended June 30, 2026, compared to $55.0 million for the three months ended June 30, 2025, an increase of $688 thousand, or 1.2%. Growth in our CPG division and revenue from restaurants opened in 2025 and 2026 were partially offset by a 9.3% decline in comparable restaurant sales and the loss of revenue from the six restaurants we exited during the quarter, which contributed $2.3 million of revenue in the three months ended June 30, 2025. The second quarter represented a return to year-over-year revenue growth, following a 6.0% year-over-year decline in the first quarter of 2026, driven primarily by the continued growth of our CPG division.
Food costs. Food costs were $21.8 million for the three months ended June 30, 2026, compared to $18.6 million for the three months ended June 30, 2025, an increase of $3.2 million, or 16.9%. The CPG accounted for $2.5 million, or 81%, of the increase. The increase in food costs reflects inflationary cost increases and more restaurants in operation. As a percentage of revenue, food costs increased to 39.1% from 33.8%.
Payroll and benefits. Payroll and benefits costs were $15.6 million for the three months ended June 30, 2026, compared to $16.6 million for the three months ended June 30, 2025, a decrease of $0.9 million, or 5.7%, as the Company implemented labor efficiencies. As a percentage of revenue, payroll and benefits costs decreased from 30.1% to 28.0%.
Occupancy expenses. Occupancy expenses were $5.3 million for the three months ended June 30, 2026 compared to $5.1 million for the three months ended June 30, 2025, an increase of $0.2 million, or 4.2%. reflecting locations opened in 2025 and 2026. The restaurants transferred during the second quarter of 2026 operated through their respective transfer dates, so these transactions did not significantly reduce occupancy expenses in the period; we expect the reduction in occupancy expenses from these exits to be reflected beginning in the third quarter of 2026. As a percentage of revenue, occupancy expenses were 9.6% in the three months ended June 30, 2026 compared to 9.3% in the three months ended June 30, 2025.
Operating expenses. Operating expenses were $6.8 million for the three months ended June 30, 2026 compared to $5.9 million for the three months ended June 30, 2025, an increase of $0.9 million, or 14.5%, as expenses increased to support revenue growth from the new stores and reflected inflationary cost increases. As a percentage of revenue, operating expenses were 12.1% in the three months ended June 30, 2026 and 10.7% in the three months ended June 30, 2025.
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Depreciation and amortization expenses. Depreciation and amortization expenses were $2.4 million for the three months ended June 30, 2026 and $2.2 million for the three months ended June 30, 2025. As a percentage of revenue, depreciation and amortization expenses at the restaurant-level remained flat at 4.2% during the three months ended June 30, 2026 and 4.0% during the three months ended June 30, 2025.
Pre-opening costs. Pre-opening costs were $1.3 million for the three months ended June 30, 2026 compared to $2.1 million for the three months ended June 30, 2025. This reflects fewer restaurants in development during the three months ended June 30, 2026, as compared to the three months ended June 30, 2025.
General and administrative expenses. General and administrative expenses were $7.1 million for the three months ended June 30, 2026 compared to $6.4 million for the three months ended June 30, 2025, an increase of $0.7 million, or 11.1%. The increase was primarily due to investment in our CPG go-to-market efforts, including marketing and in-store demonstrations; excluding our CPG division, corporate and restaurant general and administrative expenses declined year over year. As a percentage of revenue, general and administrative expenses increased from 11.6% for the three months ended June 30, 2025 to 12.8% for the three months ended June 30, 2026.
Loss on lease termination. During the second quarter of 2026, we recorded a lease termination loss of $611 thousand related to the closure of two restaurants in Korea.
Gain on deconsolidation of restaurants. With the four transfers of consolidated restaurants into equity method investment accounts, we recorded a gain on the transfer for a 49% equity method interest.
Employee retention credits. Employee retention credits include refundable credits recognized under the provisions of the CARES Act and extension thereof.
Other gain (loss). The gain of $0.6 million in the three months ended June 30, 2026 resulted from the derecognition of aged accounts payable balances determined to no longer be payable. The loss of $0.3 million in the prior year periods was a legal settlement accrual.
Interest (expense) income, net. During the three months ended June 30, 2026, interest expense, net was $314 thousand compared to $67 thousand of interest income, net during the three months ended June 30, 2025. The change from interest income, net to interest expense, net is related to higher debt levels and lower interest income due to lower average cash balances during the three months ended June 30, 2026.
Benefit (provision) for income taxes. Represents federal, state, and local current and deferred income tax expense (benefit).
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Results of Operations for the Six Months Ended June 30, 2026 and June 30, 2025
Six Months Ended June 30, Increase/(Decrease)
($ amounts in thousands) 2026 2025 Amount %
Revenue $ 109,626 $ 112,377 $ (2,751 ) (2.4 )%
Restaurant operating expenses:
Food cost 42,278 37,885 4,393 11.6 %
Payroll and benefits 32,892 34,749 (1,857 ) (5.3 )%
Occupancy expenses 11,113 10,212 901 8.8 %
Operating expenses 13,238 11,831 1,407 11.9 %
Depreciation and amortization 4,690 4,214 476 11.3 %
Pre-opening costs 3,108 4,699 (1,591 ) (33.9 )%
Total restaurant operating expenses 107,319 103,590 3,729 3.6 %
General and administrative 14,010 12,773 1,237 9.7 %
Loss on lease termination 611 — 611 100%
Gain on deconsolidation of restaurants (53 ) — (53 ) 100%
Depreciation and amortization - corporate 99 70 29 41.4 %
Total costs and expenses 121,986 116,433 5,553 4.8 %
(Loss) income from operations (12,360 ) (4,056 ) (8,304 ) 204.7 %
Employee retention credits — 313 (313 ) (100.0 )%
Other gain (loss) 615 (300 ) 915 (305.0 )%
Loss on foreign currency (11 ) (14 ) 3 (21.4 )%
Interest (expense) income, net (540 ) 127 (667 ) (525.2 )%
Net (loss) income before income taxes (12,296 ) (3,930 ) (8,366 ) 212.9 %
(Benefit) provision for income taxes (464 ) (268 ) (196 ) 73.1 %
Net (loss) income (11,832 ) (3,662 ) (8,170 ) 223.1 %
Net (loss) income attributable to non-controlling interest (9,910 ) (3,100 ) (6,810 ) 219.7 %
Net (loss) income attributable to GEN Restaurant Group, Inc. $ (1,922 ) $ (562 ) $ (1,360 ) 242.1 %
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% of Revenue
Six Months Ended June 30,
2026 2025
Revenue 100.0 % 100.0 %
Restaurant operating expenses:
Food cost 38.6 % 33.7 %
Payroll and benefits 30.0 % 30.9 %
Occupancy expenses 10.1 % 9.1 %
Operating expenses 12.1 % 10.5 %
Depreciation and amortization 4.3 % 3.7 %
Pre-opening costs 2.8 % 4.2 %
Total restaurant operating expenses 97.9 % 92.2 %
General and administrative 12.8 % 11.4 %
Loss on lease termination 0.6 % —
Gain on deconsolidation of restaurants (0.0 )% —
Depreciation and amortization - corporate 0.1 % 0.1 %
Total costs and expenses 111.3 % 103.6 %
(Loss) income from operations (11.3 )% (3.6 )%
Employee retention credits 0.0 % 0.3 %
Other gain (loss) 0.6 % (0.3 )%
Loss on foreign currency (0.0 )% (0.0 )%
Interest (expense) income, net (0.5 )% 0.1 %
(Loss) income before income taxes (11.2 )% (3.5 )%
(Benefit) provision for income taxes (0.4 )% (0.2 )%
Net (loss) income (10.8 )% (3.3 )%
Net (loss) income attributable to non-controlling interest (9.0 )% (2.8 )%
Net (loss) income attributable to GEN Restaurant Group, Inc. (1.8 )% (0.5 )%
Revenues. Revenues were $109.6 million for the six months ended June 30, 2026 compared to $112.4 million for the six months ended June 30, 2025 a decrease of $2.8 million, or 2.4%. A decline in comparable restaurant sales of $8.8 million, or 9.1%, and the loss of revenue from the six restaurants we exited during the second quarter of 2026, which contributed $4.7 million of revenue in the six months ended June 30, 2025, were partially offset by growth in our CPG division and revenue from restaurants opened in 2025 and 2026.
Food costs. Food costs were $42.3 million for the six months ended June 30, 2026, compared to $37.9 million for the six months ended June 30, 2025, an increase of $4.4 million, or 11.6%. The increase in food costs reflects a $3.0 million, or 69%, increase due to CPG, which carries retail cost of goods and was not in the prior-year period, and inflationary cost increases. As a percentage of revenue, food costs increased to 38.6% from 33.7%.
Payroll and benefits. Payroll and benefits costs were $32.9 million for the six months ended June 30, 2026, compared to $34.7 million for the six months ended June 30, 2025, a decrease of $1.9 million, or 5.3%, as the Company implemented labor efficiencies. As a percentage of revenue, payroll and benefits costs decreased slightly from 30.9% to 30.0%.
Occupancy expenses. Occupancy expenses were $11.1 million for the six months ended June 30, 2026 compared to $10.2 million for the six months ended June 30, 2025, an increase of $0.9 million, or 8.8%. Stores open in 2026 and Korean stores still open accounted for $482 thousand of the increase, while comparable stores remained flat. As a percentage of revenue, occupancy expenses were 10.1% in the six months ended June 30, 2026 compared to 9.1% in the six months ended June 30, 2025.
Operating expenses. Operating expenses were $13.2 million for the six months ended June 30, 2026 compared to $11.8 million for the six months ended June 30, 2025, an increase of $1.4 million, or 11.9%, primarily as a result of $700 thousand from stores opened in 2025, and an addition of $390 thousand from stores opened in 2026. As a percentage of revenue, operating expenses were 12.1% in the six months ended June 30, 2026 and 10.5% in the six months ended June 30, 2025.
Depreciation and amortization expenses. Depreciation and amortization expenses were $4.7 million for the six months ended June 30, 2026 and $4.2 million for the six months ended June 30, 2025. As a percentage of revenue, depreciation and amortization
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expenses at the restaurant-level were 4.3% during the six months ended June 30, 2026 and 3.7% during the six months ended June 30, 2025.
Pre-opening costs. Pre-opening costs were $3.1 million for the six months ended June 30, 2026 compared to $4.7 million for the six months ended June 30, 2025. This reflects fewer restaurants in development during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025.
General and administrative expenses. General and administrative expenses were $14.0 million for the six months ended June 30, 2026 compared to $12.8 million for the six months ended June 30, 2025, an increase of $1.2 million, or 9.7%. The increase was primarily due to investment in our CPG go-to-market efforts, including marketing and in-store demonstrations.
Loss on lease termination. During the second quarter of 2026, we recorded a lease termination loss of $611 thousand related to the closure of two restaurants in Korea.
Gain on deconsolidation of restaurants. In connection with the previously disclosed Chubby Cattle transaction, we transferred four consolidated restaurants (San Antonio, Texas; Mountain View, California; Edison, New Jersey; and Jacksonville, Florida) into newly formed entities in which we retained a 49% interest accounted for under the equity method, and recorded a net gain on deconsolidation of $53 thousand during the second quarter of 2026.
Employee retention credits. Employee retention credits include refundable credits recognized under the provisions of the CARES Act and extension thereof.
Other gain (loss). The gain of $0.6 million in the six months ended June 30, 2026 resulted from the derecognition of aged accounts payable balances determined to no longer be payable. The loss of $0.3 million in the prior year periods was a legal settlement accrual.
Interest (expense) income, net. During the six months ended June 30, 2026, interest expense, net was $541 thousand compared to $127 thousand of interest income, net during the six months ended June 30, 2025. The change from interest income, net to interest expense, net is related to higher debt levels and lower interest income due to lower average cash balances during the six months ended June 30, 2026.
Benefit (provision) for income taxes. Represents federal, state, and local current and deferred income tax expense (benefit).
Non-GAAP Financial Measures
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA represents net (loss) income excluding interest expense (income), net, income taxes, depreciation and amortization, and also excludes unusual and certain other non-cash items, such as stock-based compensation expense, employee retention credits, litigation accrual for a discrete claim, non-cash lease expense, non-cash lease expense included in pre-opening costs, loss on lease termination and gain on deconsolidation of restaurants . Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by revenue. We believe that Adjusted EBITDA and Adjusted EBITDA Margin provide useful information to management and investors regarding certain financial and business trends relating to our financial condition and operating results, as these measures reflect normal recurring cash operating expenses essential to supporting the operations of our company. We expect Adjusted EBITDA to increase with the number of new restaurants we open and with comparable restaurant sales growth.
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The following table reconciles net loss to Adjusted EBITDA for the three and six months ended June 30, 2026 and 2025.
(amounts in thousands) Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
EBITDA:
Net loss $ (4,633 ) $ (1,698 ) $ (11,832 ) $ (3,662 )
Net Loss Margin (8.3 )% (3.1 )% (10.8 )% (3.3 )%
Interest expense (income), net 314 (67 ) 540 (127 )
Benefit for income taxes (211 ) (116 ) (464 ) (268 )
Depreciation and amortization 2,405 2,257 4,789 4,284
EBITDA $ (2,125 ) $ 376 $ (6,967 ) $ 227
EBITDA Margin (3.8 )% 0.7 % (6.4 )% 0.2 %
Adjustments to EBITDA:
EBITDA $ (2,125 ) $ 376 $ (6,967 ) $ 227
Stock-based compensation expense(1) 734 734 1,468 1,468
Employee retention credits (2) — (313 ) — (313 )
Litigation accrual (3) — 300 6 300
Loss on lease termination (4) 611 — 611 —
Gain on deconsolidation of restaurants (5) (53 ) — (53 ) —
Non-cash lease expense (6) 59 127 199 218
Non-cash lease expense included in pre-opening costs (7) 733 630 1,535 1,204
Adjusted EBITDA $ (41 ) $ 1,854 $ (3,201 ) $ 3,104
Adjusted EBITDA Margin (0.1 )% 3.4 % (2.9 )% 2.8 %
(1)Stock-based compensation expense: During all periods presented, we incurred expenses related to the granting of restricted stock units to employees.
(2)Employee retention credits: These are refundable tax credits against certain employment taxes recognized under the CARES Act.
(3)Litigation accrual: This is an expense related to a specific, discrete, litigation claim. See “Note 11 - Commitments and Contingencies” in the condensed consolidated financial statements.
(4)Loss on lease termination. Related to the closure of restaurants in Korea.
(5)Gain on deconsolidation of restaurants. Related to transfer of four restaurants into an equity method investment.
(6)Non-cash lease expense: This reflects the extent to which lease expense is greater than or less than contractual rent paid.
(7)Non-cash lease expense included in pre-opening costs: Cost for restaurants in development in which the lease expense is greater than the contractual rent paid.
Restaurant-Level Adjusted EBITDA and Restaurant-Level Adjusted EBITDA Margin
We define Restaurant-Level Adjusted EBITDA as loss from operations adjusted to exclude the following items: depreciation and amortization, pre-opening costs, loss on lease termination, gain on deconsolidation of restaurants, general and administrative expense, and non-cash lease expense. We define Restaurant-Level Adjusted EBITDA Margin as Restaurant-Level Adjusted EBITDA divided by revenue.
As with Adjusted EBITDA and Adjusted EBITDA Margin, we believe that Restaurant-Level Adjusted EBITDA and Restaurant-Level Adjusted EBITDA Margin provide useful information to management and investors regarding certain financial and business trends relating to our financial condition and operating results, as these measures depict normal, recurring cash operating expenses essential to supporting the operations of our restaurants.
However, you should be aware that Restaurant-Level Adjusted EBITDA and Restaurant-Level Adjusted EBITDA Margin are financial measures that are not indicative of overall results for our company, and Restaurant-Level Adjusted EBITDA and Restaurant-Level Adjusted EBITDA Margin do not accrue directly to the benefit of stockholders because of corporate-level and non-cash expenses excluded from such measures.
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The following table reconciles Loss from Operations to Restaurant-Level Adjusted EBITDA for the three and six months ended June 30, 2026 and 2025:
Three Months Ended June 30, Six months ended June 30,
2026 2025 2026 2025
Loss from Operations $ (5,152 ) $ (1,880 ) $ (12,360 ) $ (4,056 )
Loss Margin from Operations (9.2 )% (3.4 )% (11.3 )% (3.6 )%
Depreciation and amortization 2,405 2,257 4,789 4,284
Pre-opening costs 1,327 2,051 3,108 4,699
Loss on lease termination 611 — 611 —
Gain on deconsolidation of restaurants (53 ) — (53 ) —
General and administrative 7,113 6,403 14,010 12,773
Non-cash lease expense 59 127 199 218
Restaurant-Level Adjusted EBITDA $ 6,310 $ 8,958 $ 10,304 $ 17,918
Restaurant-Level Adjusted EBITDA Margin 11.3 % 16.3 % 9.4 % 15.9 %
Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted net (loss) income, Adjusted net (loss) income attributable to Class A common stock per share - basic and diluted, Restaurant-Level Adjusted EBITDA, and Restaurant-Level Adjusted EBITDA Margin are non-GAAP measures intended as supplemental measures of our performance and are neither required by, nor presented in accordance with GAAP. Our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Our computation of Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted net (loss) income, Adjusted net (loss) income attributable to Class A common stock per share - basic and diluted, Restaurant-Level Adjusted EBITDA and Restaurant-Level Adjusted EBITDA Margin may not be comparable to other similarly titled measures presented by other companies, because all companies may not calculate Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted net (loss) income, Adjusted net (loss) income attributable to Class A common stock per share, Restaurant-Level Adjusted EBITDA, and Restaurant-Level Adjusted EBITDA Margin in the same fashion. These non-GAAP financial measures have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP.
The following table reconciles net (loss) income to Adjusted net (loss) income and Adjusted net (loss) income per share for the three and six months ended June 30, 2026 and 2025:
Three Months Ended June 30, Six months ended June 30,
2026 2025 2026 2025
Net loss $ (4,633 ) $ (1,698 ) $ (11,832 ) $ (3,662 )
Pre-opening costs 1,327 2,051 3,108 4,699
Stock-based compensation 734 734 1,468 1,468
Legal settlement — 300 6 300
Loss on lease termination 611 — 611 —
Gain on deconsolidation of restaurants (53 ) — (53 ) —
Tax impact of adjustments (123 ) (143 ) (241 ) (299 )
Adjusted Net (loss) income (2,137 ) 1,244 (6,933 ) 2,506
Less: Adjusted net (loss) income attributable to non-controlling interest (1,791 ) 1,052 (5,809 ) 2,120
Adjusted net (loss) income attributable to GEN Restaurant Group, Inc. (346 ) 192 (1,123 ) 386
Adjusted Net (loss) income attributable to Class A common stock - basic and diluted $ (346 ) $ 192 $ (1,123 ) $ 386
Weighted-average shares of Class A common stock outstanding - basic and diluted 5,364 5,132 5,364 5,073
Adjusted Net (loss) income per share of Class A common stock - basic and diluted $ (0.06 ) $ 0.04 $ (0.21 ) $ 0.08
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Liquidity and Capital Resources
As of June 30, 2026 we had $5.9 million of cash and $41.7 million of working capital deficit, which is calculated by subtracting current liabilities from current assets, compared with $2.8 million in cash and $31.3 million of working capital deficit as of December 31, 2025.
Our primary uses of cash are for operational expenditures and capital investments, including new restaurants, costs incurred for restaurant remodels and restaurant equipment and fixtures, as well as investments in our CPG business, including inventory and go-to-market costs. During the year ended 2025, we opened 15 new restaurants which were all self-funded. There is no guarantee that if we need to raise any additional capital that we will be able to do so.
We have also taken actions to strengthen our liquidity: we have slowed new restaurant development and suspended construction at certain sites; the transfers described in Note 3 have eliminated the operating losses and future lease obligations of four underperforming restaurants, with the fifth expected to close in the third quarter of 2026; and our CPG division is generating increasing revenue with lower capital intensity than new restaurant development. Based on our current operating plan, cash on hand, expected cash from operations, drawings under our line of credit, potential sales of Class A common stock and the other actions described above, we believe our sources of liquidity will be sufficient to fund our operations, lease obligations, debt service and capital expenditures for at least the next 12 months from the date of this report.
Upon the IPO transaction, GEN Inc. became a holding company with no operations of its own. Accordingly, GEN Inc. remains dependent on distributions from GEN LLC to pay its taxes, its obligations under the Tax Receivable Agreement and other expenses.
In connection with the IPO and related transactions, certain members of GEN LLC received the right to receive future payments pursuant to the Tax Receivable Agreement. The amount payable under the Tax Receivable Agreement will be based on an annual calculation of the reduction in our U.S. federal, state and local taxes resulting from the utilization of certain tax benefits resulting from sales and exchanges by certain members of GEN LLC. We expect that payments that we may be required to make under the Tax Receivable Agreement may be substantial. Assuming no material changes in the relevant tax laws and that we earn sufficient taxable income to realize all tax benefits that are subject to the Tax Receivable Agreement, we expect that the reduction in tax payments for us associated with the federal, state and local tax benefits described above would aggregate to approximately $117.2 million through 2037. Under such scenario we would be required to pay certain members of GEN LLC 85% of such amount, or $99.6 million through 2037.
The actual amounts may materially differ from these hypothetical amounts as potential future reductions in tax payments for us and Tax Receivable Agreement payments by us will be calculated using prevailing tax rates applicable to us over the life of the Tax Receivable Agreement and will be dependent on us generating sufficient future taxable income to realize the benefit.
We cannot reasonably estimate future annual payments under the Tax Receivable Agreement given the difficulty in determining those estimates as they are dependent on a number of factors, including the extent of exchanges by continuing GEN LLC unitholders, the associated fair value of the underlying GEN LLC units at the time of those exchanges, the tax rates applicable, our future income, if any, and the associated tax benefits that might be realized that would trigger a Tax Receivable Agreement payment requirement.
However, a significant portion of any potential future payments under the Tax Receivable Agreement is anticipated to be payable over 15 years, consistent with the period over which the associated tax deductions would be realized by GEN Inc., assuming GEN LLC generates sufficient income to utilize the deductions. If sufficient income is not generated by GEN LLC, the associated taxable income of GEN Inc. will be impacted and the associated tax benefits to be realized will be limited, thereby similarly reducing the associated Tax Receivable Agreement payments to be made. Given the length of time over which payments would be payable, the impact to liquidity in any single year may be greatly reduced.
Summary of Cash Flows
Our primary sources of liquidity are operating cash flows, cash on hand and debt borrowings. We use these sources to fund expenditures for new restaurant openings, reinvest in our existing restaurants, and increase our working capital. Our working capital position benefits from the fact that we generally collect cash from sales to guests the same day, or in the case of credit or debit card transactions, within several days of the related sale, and we typically have at least 30 days to pay our vendors.
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The following table summarizes our cash flows for the periods presented:
Six Months Ended June 30,
2026 2025
(amounts in thousands)
Summary of Cash Flows
Net cash (used in) provided by operating activities $ (826 ) $ 5,480
Net cash used in investing activities (5,318 ) (16,467 )
Net cash provided by (used in) financing activities 9,404 (3,228 )
Cash Provided by (Used in) Operating Activities
Net cash used in operating activities during the six months ended June 30, 2026 was $826 thousand, the result of net loss of $11.8 million, adjusted by non-cash charges of depreciation and amortization of $4.8 million, amortization of operating lease assets of $3.6 million, stock-based compensation expense of $1.5 million, loss from lease termination of $0.6 million, gain on deconsolidation of restaurants and a deferred tax benefit of $0.4 million. Changes in operating assets and liabilities provided $1.0 million, primarily the collection of gift card distributor receivables of $8.4 million, largely offset by a $7.9 million reduction in gift card liabilities from redemptions.
Net cash provided by operating activities during the six months ended June 30, 2025 was $5.5 million, the result of net loss of $3.6 million, adjusted by non-cash charges of depreciation and amortization of $4.3 million, amortization of operating lease assets of $3.2 million, and stock-based compensation of $1.5 million. Changes in operating assets and liabilities provided $424 thousand.
Cash Used in Investing Activities
Net cash used in investing activities during the six months ended June 30, 2026 was $5.3 million, reflecting the purchase of property and equipment.
Net cash used in investing activities during the six months ended June 30, 2025 was $16.5 million, reflecting the purchase of property and equipment.
Cash Provided by (Used in) Financing Activities
Net cash provided by financing activities during the six months ended June 30, 2026 was $9.4 million, primarily due to net proceeds on the PCB Bank line of credit of $11.0 million, partially offset by payments of $1.6 million on third party notes payable.
Net cash used in financing activities during the six months ended June 30, 2025 was $3.2 million, primarily due to a payment of $3.0 million on the line of credit and $200 thousand for the repurchase of common stock.
Effect of Exchange Rate Changes on Cash
Exchange rate changes decreased cash and cash equivalents by $154 thousand in the six months ended June 30, 2026, compared to an increase of $150 thousand in the prior year period, reflecting the translation of our South Korean subsidiaries' cash balances as the won weakened against the U.S. dollar.
Material Cash Requirements
As of June 30, 2026, we had $24.0 million of debt obligations, consisting of $12.1 million outstanding under our line of credit and $12.0 million of notes payable, including EIDL loans. Of this amount, $14.8 million is due within the next 12 months, including the line of credit maturing September 25, 2026, which we expect to fund through the renewal of the facility, cash on hand, and the other sources described above.
Critical Accounting Estimates
Our discussion and analysis of operating results and financial condition are based upon our financial statements. The preparation of our financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales, expenses and related disclosures of contingent assets and liabilities. We base our estimates on past
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experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis.
Our critical accounting estimates are those that materially affect our financial statements and involve subjective or complex judgments by management. Although these estimates are based on management’s best knowledge of current events and actions that may impact us in the future, actual results may be materially different from the estimates. We believe the following critical accounting estimates are affected by significant judgments and estimates used in the preparation of our financial statements and that the judgments and estimates are reasonable.
Operating and Finance Leases
Our office leases provide for fixed minimum rent payments. Our restaurant leases provide for fixed minimum rent payments and some require additional contingent rent payments based upon sales in excess of specified thresholds. When achievement of such sales thresholds is deemed probable, contingent rent is accrued in proportion to the sales recognized in the period. For operating leases that include free-rent periods and rent escalation clauses, we recognize rent expense based on the straight-line method. For the purpose of calculating rent expenses under the straight-line method, the lease term commences on the date we obtain control of the property. Lease incentives used to fund leasehold improvements are recognized when earned and reduce the operating right-of-use asset related to the lease. These are amortized through the operating right-of-use asset as reductions of expense over the lease term. Restaurant lease expenses are included in the occupancy expenses line item, while office lease expenses are included in the general and administrative expenses line item in the accompanying condensed consolidated statements of comprehensive loss.
We currently lease all of our restaurant locations, corporate office, and some of the equipment used in our restaurants. On January 1, 2022, we adopted ASU 2016-02, Leases (Topic 842), or “Topic 842,” using a modified retrospective approach. See “Note 10—Leases” to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q. At commencement of the lease, we determine the appropriate classification as an operating lease or a finance lease. All of our restaurant and office leases are classified as operating leases and some of our equipment leases are classified as finance leases.
Assets we acquired under finance lease arrangements are recorded at the lower of the present value of future minimum lease payments or fair value of the assets at the inception of the lease. Finance lease assets are amortized over the shorter of the useful life of the assets or the lease term, and the amortization expense is included in depreciation and amortization on the accompanying condensed consolidated financial statements.
Impairment of Long-Lived Assets
We assess potential impairments of our long-lived assets, which includes property and equipment and operating lease right-of-use assets, in accordance with the provisions of Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) 360—Property, Plant and Equipment. An impairment test is performed on a quarterly basis or whenever events or changes in circumstances indicate that 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. Assets are grouped at the individual restaurant-level for purposes of the impairment assessment because a restaurant represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of an asset group is measured by a comparison of the carrying amount of an asset group to its estimated forecasted restaurant cash flows expected to be generated by the asset group. Factors considered by us in estimating future cash flows include, but are not limited to: significant underperformance relative to expected historical or projected future operating results; significant changes in the manner of use of the acquired assets; and significant negative industry or economic trends. If the carrying amount of the asset group exceeds its estimated undiscounted future cash flows, an impairment charge is recognized as the amount by which the carrying amount of the asset exceeds the fair value of the asset.
No impairment loss was recognized during any of the periods presented.
Emerging Growth Company Status
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”), and we have taken advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” We may take advantage of these exemptions until we are no longer an “emerging growth company.” Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. We have elected to use the extended transition period for complying with new or revised accounting standards and as a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. We may take advantage of these exemptions up until the last day of the fiscal year following the fifth anniversary of our IPO or such earlier time that we are no longer an emerging
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growth company. We would cease to be an emerging growth company if 1) we have more than $1.235 billion in annual revenue, 2) we have more than $700.0 million in market value of our stock held by non-affiliates (and we have been a public company for at least 12 months) or 3) we issue more than $1.0 billion of non-convertible debt securities over a three-year period.
Recent Accounting Pronouncements
See Note 2 - Basis of Presentation and Summary of Significant Accounting Policies, for a discussion of recent accounting standards.
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