Overview
Papa John’s International, Inc. (referred to as the “Company,” “Papa John’s,” “Papa Johns” or in the first-person notations of “we,” “us” and “our”) operates and franchises pizza delivery and carryout restaurants and, in certain international markets, dine-in and delivery restaurants under the trademark “Papa John’s”. Papa Johns began operations in 1984. At June 28, 2026, there were 5,978 Papa John’s restaurants in operation, consisting of 469 Company-owned and 5,509 franchised restaurants operating in 51 countries and territories. Our revenues are derived from retail sales of pizza and other food and beverage products to the general public by Company-owned restaurants, franchise royalties, and sales of franchise and development rights. Additionally, we derive revenues from sales to franchisees of various items including food and paper products from our North America Quality Control Centers (“QC Centers”) and operation of our International QC Center in the United Kingdom (“UK”), contributions received by Papa John’s Marketing Fund (“PJMF”) which is our national marketing fund, and fees related to the use of information systems equipment as well as software and related services. We believe that in addition to supporting profitability and growth of both Company-owned and franchised restaurants, these activities contribute to product quality and consistency throughout the Papa Johns system.
In discussions of our business, “Domestic” is defined as within the contiguous United States, “North America” includes Domestic and Canada, and “International” includes the rest of the world other than North America.
Recent Developments and Trends
During the second quarter of 2026, we continued progressing on our business transformation initiatives as we position the business for long-term success amidst a challenging and softer consumer environment in North America and a dynamic International market. We continued to steer our efforts and investments towards initiatives that improve our value perception and enhance the customer journey across our digital platforms to increase conversion and reduce friction within the customer experience. Our key areas of focus include:
•Marketing strategy: We have partnered with our franchisees to re-establish our area advertising cooperative (“Co-op”) program, helping ensure a strong presence in key regional and local markets. Through our mix of national and local advertising, we continued investments in our messaging to highlight our six simple ingredients, fresh, never frozen original dough and the craftsmanship behind the products we serve, which we believe are key differentiators of our brand. We continued work to sharpen our value perception with limited-time promotional offers while continuing to emphasize our Papa Pairings mix and match platform. We also began work to refine our aggregator channel strategy, which remains an important component of our customer acquisition strategy. We believe opportunities exist to enhance both visibility and conversion through a more targeted mix of promotional offers, supported by an ongoing evaluation of our national and local third-party marketing investments. These efforts are intended to improve the efficiency of our spending and drive incremental customer trial. As a brand, we plan to maintain a compelling value proposition while staying true to our premium positioning and layering in exciting menu innovations, such as our new pan pizzas and oven-toasted sandwiches, to expand our addressable market and strengthen our barbell strategy.
•Digital and loyalty strategy: Most of our sales occur through digital channels, and we are making significant investments in our technology infrastructure to deliver a more seamless experience across our owned channels, better connect with customers, and support greater efficiency across our operations. In 2025, we introduced our new omnichannel platform, releasing new mobile apps across both Android and iOS platforms as well as our refreshed website and mobile web experience, which we believe provides a streamlined ordering journey for our customers.
We have also initiated a multi-year transition to a new point-of-sale system across all U.S. Company-owned and franchised restaurants that, if successful, will replace our existing point-of-sale system. We currently expect to fully deploy the new system by the end of 2027, at which point we will retire our current point-of-sale system. During the second quarter of 2026, we began pilot testing our new point-of-sale system; consequently, we began accelerating the remaining useful lives of our existing point-of-sale software assets. We anticipate that we may incur an incremental $5 million to $10 million of accelerated depreciation expense related to these initiatives.
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•Transforming our cost structure: In December 2025 our Board of Directors approved a business transformation program (the “Enterprise Transformation Plan”), with the goal of creating capacity to invest in our next phase of growth by reducing non-consumer-facing spending and optimizing our restaurant portfolio to improve unit economics. The execution of actions approved under the Enterprise Transformation Plan resulted in the closure of 101 restaurants in North America during the six months ended June 28, 2026 as well as the reduction of our corporate workforce by approximately 7%. As of June 28, 2026, the Company had approved the closure of 17 additional Company-owned restaurants, most of which we expect to close by the end of 2026. We incurred restructuring expenses of $4.4 million during the second quarter of 2026 under the Enterprise Transformation Plan, which consisted primarily of professional services fees and non-cash charges related to Company-owned restaurant closures. We currently estimate that we will incur aggregate restructuring charges of approximately $24 million to $31 million under the Enterprise Transformation Plan related to actions approved thus far, inclusive of the $16.4 million recognized during 2025 and the six months ended June 28, 2026 to date. We expect to recognize the remainder of the restructuring charges during 2026 and 2027. We believe that these initiatives will improve systemwide health and facilitate future growth, and we have identified at least $30 million of general and administrative expense savings, exclusive of marketing spend, to be captured across fiscal years 2026 and 2027.
The implementation of the Enterprise Transformation Plan remains ongoing and may result in additional restructuring charges, although the amounts and nature of future expenses relating to any actions yet to be determined or approved by management or our Board of Directors are currently not estimable. Potential future actions likely to be approved are expected to include elevated levels of restaurant closures in North America during 2026 and 2027, as we focus on improving the health of our restaurant portfolio by closing underperforming restaurants that lack a path to sustainable financial improvement, allowing our franchisees to invest resources in their remaining restaurants to accelerate growth.
•Optimizing our supply chain: As part of our efforts to reduce the overall cost to serve our Domestic Company-owned and franchised restaurants, we are realizing benefits from productivity and cost reduction initiatives designed to optimize our commissary business while maintaining our commitment to product quality. We expect to achieve at least $60 million in North America systemwide supply chain savings over the next two years, equating to meaningful restaurant-level margin improvement. We have captured approximately $16 million of cumulative benefits from these initiatives and are on track to realize at least $25 million of savings by the end of 2026.
•Development strategy: Development is a key long-term growth driver as we believe there is significant opportunity to offer our quality products to more customers globally and domestically. Our near-term development plan in North America includes focused development within our priority markets and on improving the quality and profitability of our restaurant portfolio, with fewer new restaurant openings expected in 2026. Our near-term International development pipeline remains strong, as our International business delivered positive comparable sales for the seventh consecutive quarter.
•Partnering with and evolving our franchisee base: We are focused on strengthening franchisee health and supporting long-term system growth through a combination of the supply chain and restaurant optimization initiatives described above, as well as incentive programs tied to operational excellence and restaurant image improvements that began during the second quarter. We believe these actions will further align the interests of our franchisees and the Company, accelerate the execution of our transformation initiatives, and support sustainable growth across the system. In addition, refranchising is a strategic action that we plan to continue to pursue across our Company-owned restaurants as it provides developing franchisees opportunities to expand their businesses and strengthens the long-term health of Papa Johns while providing additional means to reinvest into our transformation initiatives. In the second quarter of 2026 we entered into an agreement to refranchise 28 restaurants in Florida, with the transaction expected to close during the third quarter, and we continue to explore opportunities to refranchise additional markets.
Global Restaurant Sales and Unit Information
“Comparable sales” represents sales for the same base of restaurants for the same fiscal periods. “Comparable sales growth (decline)” represents the change in year-over-year comparable sales. “Global system-wide restaurant sales” represents total restaurant sales for all Company-owned and franchised restaurants open during the comparable periods, and “Global system-wide restaurant sales growth (decline)” represents the change in global system-wide restaurant sales year-over-year. Comparable sales, Comparable sales growth (decline), Global system-wide restaurant sales and Global system-wide sales growth (decline) exclude franchisees for which we suspended corporate support.
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“Equivalent units” represents the number of restaurants open at the beginning of a given period, adjusted for restaurants opened, closed, acquired or sold during the period on a weighted average basis.
We believe Domestic Company-owned, North America franchised, and International Comparable sales growth (decline) and Global system-wide restaurant sales information is useful in analyzing our results since our franchisees pay royalties and marketing fund contributions that are based on a percentage of franchise sales. Comparable sales and Global system-wide restaurant sales results for restaurants operating outside of the United States are reported on a constant dollar basis, which excludes the impact of foreign currency translation. Franchise sales also generate commissary revenue in the United States and in certain international markets. Comparable sales growth (decline) and Global system-wide restaurant sales information is also useful for comparison to industry trends and evaluating the strength of our brand. Management believes the presentation of Global system-wide restaurant sales growth (decline), excluding the impact of foreign currency, provides investors with useful information regarding underlying sales trends and the impact of new unit growth without being impacted by swings in the external factor of foreign currency. Franchise restaurant sales are not included in the Company’s revenues.
Three Months Ended Six Months Ended
Growth rates below exclude the impact of foreign currency June 28, 2026 June 29, 2025 June 28, 2026 (b) June 29, 2025
Comparable sales growth (decline):
Domestic Company-owned restaurants (a) (8.9)% 0.3% (7.4)% (2.1)%
North America franchised restaurants (a) (8.2)% 1.0% (7.4)% (0.7)%
North America restaurants (8.3)% 0.9% (7.4)% (1.0)%
International restaurants 1.5% 3.7% 2.5% 3.5%
Total comparable sales growth (decline) (5.7)% 1.6% (4.9)% 0.1%
System-wide restaurant sales growth (decline):
Domestic Company-owned restaurants (a) (8.4)% 1.5% (6.6)% (0.8)%
North America franchised restaurants (a) (8.3)% 2.7% (7.4)% 1.1%
North America restaurants (8.3)% 2.5% (7.3)% 0.7%
International restaurants 5.1% 6.6% 5.5% 6.1%
Total global system-wide restaurant sales growth (decline) (4.8)% 3.5% (4.0)% 2.1%
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(a)For the three and six months ended June 28, 2026, comparable sales decline and system-wide restaurant sales decline for Domestic Company-owned restaurants and North America franchised restaurants were adjusted to exclude the impact of refranchising 85 restaurants during the fourth quarter of 2025. See “Note 11. Divestitures” of “Notes to Condensed Consolidated Financial Statements” for additional information.
(b)Comparable sales and system-wide restaurant sales for the six months ended June 28, 2026 have been adjusted to remove $1.0 million of Domestic Company-owned restaurant sales that were erroneously overstated in the first quarter of 2026.
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Restaurant Progression Three Months Ended Six Months Ended
June 28, 2026 June 29, 2025 June 28, 2026 June 29, 2025
North America Company-owned:
Beginning of period 457 539 462 539
Opened 2 2 2 3
Closed (3) — (8) (1)
End of period 456 541 456 541
North America franchised:
Beginning of period 3,030 2,977 3,061 2,975
Opened 7 17 15 34
Closed (54) (18) (93) (33)
End of period 2,983 2,976 2,983 2,976
International Company-owned:
Beginning of period 13 13 13 13
End of period 13 13 13 13
International franchised:
Beginning of period 2,520 2,490 2,547 2,503
Opened 41 26 61 55
Closed (35) (57) (82) (99)
End of period 2,526 2,459 2,526 2,459
Total restaurants – end of period 5,978 5,989 5,978 5,989
Trailing four quarters net restaurant growth (11) 106 (11) 106
Results of Operations
Revenues
The following table sets forth the various components of Revenues from the Condensed Consolidated Statements of Operations:
Three Months Ended Six Months Ended Increase (Decrease)
(Dollars in thousands) June 28, 2026 June 29, 2025 June 28, 2026 June 29, 2025 QTD YTD
Revenues:
Company-owned restaurant sales $ 142,182 $ 178,989 $ 285,316 $ 352,870 (20.6) % (19.1) %
Franchise royalties and fees 46,585 48,302 94,163 96,358 (3.6) % (2.3) %
Commissary revenues 230,818 234,576 453,459 463,517 (1.6) % (2.2) %
Other revenues 21,459 23,136 43,247 46,893 (7.2) % (7.8) %
Advertising funds revenue 41,353 44,163 84,821 87,837 (6.4) % (3.4) %
Total revenues $ 482,397 $ 529,166 $ 961,006 $ 1,047,475 (8.8) % (8.3) %
The comparability of 2026 and 2025 results is impacted by a transaction that has changed the composition of our Domestic Company-owned restaurants and Domestic franchised restaurants. On November 24, 2025, the Company completed the refranchising of 85 Domestic Company-owned restaurants previously owned and operated by Colonel’s Limited, LLC, a consolidated joint venture (the “2025 refranchising transaction”). Upon closing of the transaction, the restaurants formerly
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owned by the Company converted to franchised locations. See “Note 21. Divestitures” of the “Notes to Consolidated Financial Statements” of our 2025 Annual Report on Form 10-K for additional information on this transaction.
Total revenues decreased $46.8 million, or 8.8%, to $482.4 million for the three months ended June 28, 2026 and decreased $86.5 million, or 8.3%, to $961.0 million for the six months ended June 28, 2026, as compared to the prior year comparable periods. Changes in total revenues were impacted by the transaction noted above and are detailed in the discussions below.
Company-owned restaurant sales, which include sales from both Domestic and International Company-owned restaurants, decreased $36.8 million, or 20.6%, for the three months ended June 28, 2026 and decreased $67.6 million, or 19.1%, for the six months ended June 28, 2026, as compared to the prior year comparable periods. The decrease for the three and six month periods is primarily attributable to approximately $25 million and $50 million, respectively, in prior-period sales from the formerly-Company owned restaurants refranchised in the 2025 refranchising transaction, as detailed above. The decrease was also due to lower comparable sales of 8.9% and 7.4% for our Domestic Company-owned restaurants for the three and six months ended June 28, 2026, respectively, driven by lower transaction volumes.
Franchise royalties and fees, which include revenues generated from both North American and International franchisees, decreased $1.7 million, or 3.6%, for the three months ended June 28, 2026 and decreased $2.2 million, or 2.3%, for the six months ended June 28, 2026, as compared to the prior year comparable periods. The decrease is primarily due to a $3.3 million and $5.5 million decrease in royalties and fees from our North America franchisees due to declines in comparable sales of 8.2% and 7.4% for the three and six months ended June 28, 2026, respectively. International franchise royalties and fees increased $0.6 million and $1.2 million due to growth in International comparable sales of 1.5% and 2.5% for the three and six months ended June 28, 2026, respectively, and due to an increase in international franchise restaurants over the periods compared.
North America franchise restaurant sales are not included in Company revenues; however, our North America franchise royalties are derived from these sales. North America franchise restaurant sales decreased 5.3% to $712.4 million and decreased 4.4% to $1.4 billion for the three and six months ended June 28, 2026, respectively, compared to the prior year comparable periods and excluding the impact of foreign currency fluctuations. The decline in franchise restaurant sales was primarily due to a decrease in comparable sales of 8.2% and 7.4% for the three and six months ended June 28, 2026, respectively. Franchise equivalent units increased 1.6% for the three months ended June 28, 2026 and increased 0.3% for the six months ended June 28, 2026 compared to the prior year comparable periods.
International franchise restaurant sales are also not included in Company revenues; however, our international royalty revenue is derived from these sales. International franchise restaurant sales increased 5.1% to $344.0 million and increased 5.5% to $673.9 million for the three and six months ended June 28, 2026, respectively, compared to the prior year comparable periods and excluding the impact of foreign currency fluctuations. The increase was due to growth in International comparable sales of 1.5% and 2.5% for the three and six months ended June 28, 2026, respectively, as well as restaurant growth.
Commissary revenues, which includes sales from our North American and International QC Centers, decreased $3.8 million, or 1.6%, for the three months ended June 28, 2026 and decreased $10.1 million, or 2.2%, for the six months ended June 28, 2026 as compared to the prior year comparable periods. The decrease was primarily due to lower transaction volumes, partially offset by higher prices. The decrease in commissary revenues was also partially offset by an increase in franchised restaurants as a result of the 2025 refranchising transaction discussed above, which contributed to an increase of approximately $7 million and $14 million for the three and six months ended June 28, 2026, respectively.
Other revenues, which primarily includes revenues derived from our online and mobile ordering business, decreased $1.7 million, or 7.2%, and decreased $3.6 million, or 7.8%, for the three and six months ended June 28, 2026, respectively, as compared to the prior year comparable periods. The decreases were primarily due to lower revenues generated from technology services as a result of a reduction in the technology fee charged to franchisees that began in the second half of 2025, as well as North America systemwide sales declines of 8.3% and 7.4% for the three and six months ended June 28, 2026, respectively.
Advertising funds revenue, which includes the operations of PJMF as well as local and International marketing funds, decreased $2.8 million, or 6.4%, and decreased $3.0 million, or 3.4% for the three and six months ended June 28, 2026, respectively, as compared to the prior year comparable periods. The decreases were primarily driven by global system-wide restaurant sales decline of 4.8% and 4.0% for the three and six months ended June 28, 2026, respectively.
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Costs and Expenses
The following table sets forth the various components of costs and expenses from the Condensed Consolidated Statements of Operations:
(Dollars in thousands) Three Months Ended Six Months Ended Increase (Decrease)
June 28, 2026 June 29, 2025 June 28, 2026 June 29, 2025 QTD YTD
Costs and expenses:
Cost of sales $ 339,025 $ 371,716 $ 679,917 $ 738,212 (8.8) % (7.9) %
General and administrative expenses 58,954 70,118 114,950 135,285 (15.9) % (15.0) %
Depreciation and amortization 19,248 18,819 36,977 37,162 2.3 % (0.5) %
Advertising funds expense 41,983 44,023 85,217 88,361 (4.6) % (3.6) %
Total costs and expenses $ 459,210 $ 504,676 $ 917,061 $ 999,020 (9.0) % (8.2) %
Total costs and expenses were $459.2 million, or 95.2% of total revenues, and $917.1 million, or 95.4% of total revenues, for the three and six months ended June 28, 2026, respectively, as compared to $504.7 million, or 95.4% of total revenues, and $999.0 million, or 95.4% of total revenues, for the prior year comparable periods, respectively.
Cost of sales primarily consists of Company-owned restaurant and supply chain costs incurred to generate related revenues. Components of cost of sales include food and paper products, labor, freight and delivery, occupancy costs, local advertising costs, insurance expense, and other costs. Costs of sales by segment for the three and six months ended June 28, 2026 and June 29, 2025 were as follows:
Three Months Ended Six Months Ended Increase (Decrease)
(In thousands) June 28, 2026 June 29, 2025 June 28, 2026 June 29, 2025 QTD YTD
Domestic Company-owned restaurants (a) $ 123,711 $ 156,233 $ 247,006 $ 311,489 $ (32,522) $ (64,483)
North America commissaries (a) 224,520 237,187 450,286 472,919 (12,667) (22,633)
International (a) 23,836 24,386 45,788 44,170 (550) 1,618
Total cost of sales by segment (b) 372,067 417,806 743,080 828,578 (45,739) (85,498)
All Other (c) 15,599 12,551 31,420 25,181 3,048 6,239
Intersegment cost of sales (48,641) (58,641) (94,583) (115,547) 10,000 20,964
Total cost of sales $ 339,025 $ 371,716 $ 679,917 $ 738,212 $ (32,691) $ (58,295)
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(a) Segment cost of sales in the table above include stock-based compensation expenses and other adjustments that are excluded from segment expenses in the segment footnote, which are presented on an adjusted basis (see “Note 12. Segment Information”).
(b) The North America franchising segment does not incur costs of sales, and therefore is not included in total cost of sales by segment. The North America franchising segment consists of our franchise sales and support activities for our franchisees located in the United States and Canada.
(c) “All Other” refers to all other business units that do not meet the quantitative or qualitative thresholds for determining reportable segments, and primarily includes our online and mobile ordering business and our marketing funds. These are not considered operating segments.
Cost of sales were $339.0 million and $679.9 million for the three and six months ended June 28, 2026, a decrease of $32.7 million and $58.3 million, respectively, from the prior year comparable periods. The decreases in cost of sales were primarily due the Domestic Company-owned restaurant segment as a result of the 2025 refranchising transaction, which resulted in fewer Company-owned restaurants in 2026 compared to the prior year comparable periods and drove a decrease of approximately $23 million and $46 million in cost of sales for the Domestic Company-owned restaurant segment for the three and six months ended June 28, 2026, respectively. The Domestic Company-owned restaurant segment cost of sales also decreased due to improved labor productivity and lower local advertising costs. Cost of sales for the Domestic Company-owned restaurants and Domestic QC Centers also decreased due to lower transaction volumes as a result of lower North America comparable sales. These decreases were partially offset by increases in labor and technology costs for our online and mobile ordering business and were further offset by decreases in intersegment cost of sales due to a decrease in the number of Domestic Company-owned restaurants as a result of the 2025 refranchising transaction discussed above.
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The decrease for the six months ended June 28, 2026 was also partially offset by higher volumes for our International restaurants due to an increase in International comparable sales.
General and administrative expenses (“G&A”) expenses were $59.0 million, or 12.2% of total revenues, and $115.0 million, or 12.0% of total revenues, for the three and six months ended June 28, 2026, respectively, as compared to $70.1 million, or 13.3% of total revenues, and $135.3 million, or 12.9% of total revenues, for the prior year comparable periods, respectively. G&A expenses consisted of the following:
Three Months Ended Six Months Ended
(In thousands) June 28, 2026 June 29, 2025 June 28, 2026 June 29, 2025
Administrative and other general expenses (a) $ 51,552 $ 64,805 $ 102,555 $ 126,349
Restructuring costs (b) 3,613 2,475 7,849 4,631
Refranchising transaction expense (gain), net (c) 45 — (808) —
Other costs (d) 3,744 2,838 5,354 4,305
General and administrative expenses $ 58,954 $ 70,118 $ 114,950 $ 135,285
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(a)Administrative and other general expenses decreased by $13.3 million and $23.8 million, respectively, for the three and six months ended June 28, 2026. The decrease for the three months ended June 28, 2026 compared to the prior year comparable period was primarily due to a $5.4 million reduction in supplemental advertising costs and a $5.6 million decrease in management and other compensation costs. The decrease for the six months ended June 28, 2026 was primarily due to an $8.0 million year-over-year reduction in supplemental advertising costs, a $6.7 million decrease in management and other compensation costs, and $4.5 million of expenses incurred in the first quarter of 2025 for our bi-annual franchise operating conference that did not recur in 2026.
(b)For the three and six months ended June 28, 2026, represents costs associated with the Enterprise Transformation Plan. For the three and six months ended June 29, 2025, represents costs associated with the International Transformation Plan. Refer to “Note 9. Restructuring” for additional details.
(c)Represents additional net transaction expense (gain), associated with the refranchising of 85 restaurants on November 24, 2025. See “Note 11. Divestitures” for additional details.
(d)For the three and six months ended June 28, 2026, represents costs associated with project-based strategic initiatives that are not related to our ongoing operations.
For the three and six months ended June 29, 2025, other costs is comprised of the following:
i.Losses on disposal of equipment incurred in connection with the termination of a COVID-era program that pre-purchased store equipment due to supply chain challenges;
ii.Costs associated with project-based strategic initiatives that are not related to our ongoing operations; and
iii.Costs incurred, net of anticipated insurance recoveries, arising from tornadoes that damaged the Texas QC Center as well as the restaurant support center and QC Center in Louisville, Kentucky.
Depreciation and amortization expenses were $19.2 million, or 4.0% of total revenues, and $37.0 million, or 3.8% of total revenues, for the three and six months ended June 28, 2026, respectively, as compared to $18.8 million, or 3.6% of total revenues, and $37.2 million, or 3.5% of total revenues, for the prior year comparable periods, respectively. During the three months ended June 28, 2026, we incurred approximately $1.6 million of accelerated depreciation expense related to investments in our new point-of-sale system and omnichannel experience, as well as related to the closure or approved closure of 25 Company-owned restaurants under our Enterprise Transformation Plan. The increase in depreciation expense as a percentage of total revenues over the comparable periods is primarily due to lower transaction volumes and the accelerated depreciation expense discussed above.
Advertising funds expense was $42.0 million, or 101.5% of advertising funds revenue, and $85.2 million, or 100.5% of advertising funds revenue for the three and six months ended June 28, 2026, respectively, compared with $44.0 million, or 99.7% of advertising funds revenue, and $88.4 million, or 100.6% of advertising funds revenue, for the prior year comparable periods, respectively. Advertising funds expense consists primarily of expenses incurred by PJMF, which is designed to operate at break-even as it spends all annual contributions received from the system. Advertising funds expense also contains expenses incurred through our international marketing funds to support our International business, which may lead to Advertising funds expense being less than or in excess of Advertising funds revenue due to timing differences. The decrease in advertising funds expense for the three and six months ended June 28, 2026 compared to the prior year comparable periods was primarily due to declines in global system-wide restaurant sales in 2026.
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Segment Financial Performance
We evaluate the performance of our reportable segments and allocate resources to them based on earnings before interest, taxes, depreciation, amortization, stock-based compensation expense, and other adjustments, referred to as segment adjusted EBITDA. See “Note 12. Segment Information” for further information regarding the Company’s segments. Segment adjusted EBITDA for each of our reportable segments is summarized in the table below.
Three Months Ended Six Months Ended Increase (Decrease)
(In thousands) June 28, 2026 June 29, 2025 June 28, 2026 June 29, 2025 QTD YTD
Domestic Company-owned restaurants $ 6,635 $ 9,864 $ 14,520 $ 14,896 $ (3,229) $ (376)
North America franchising 23,740 26,843 49,093 54,091 (3,103) (4,998)
North America commissaries 22,334 19,652 34,781 39,004 2,682 (4,223)
International 7,371 5,637 15,514 11,019 1,734 4,495
Domestic Company-owned restaurants segment adjusted EBITDA decreased $3.2 million for the three months ended June 28, 2026 primarily due to a decrease in comparable sales of 8.9% and due to fewer Domestic Company-owned restaurants as a result of the 2025 refranchising transaction. The decrease was partially offset by the impact of a prospective change in our internal cost allocation methodology in 2026 to refine internal allocations of certain operating costs to our segments. This change in allocation methodology resulted in a $2.1 million increase in Domestic Company-owned restaurants segment adjusted EBITDA for the three months ended June 28, 2026. Please see “4-wall EBITDA” below for a discussion of this change. Domestic Company-owned restaurants segment adjusted EBITDA decreased $0.4 million for the six months ended June 28, 2026 due primarily to a decrease in comparable sales of 7.4% and due to fewer Domestic Company-owned restaurants as a result of the 2025 refranchising transaction, partially offset by commodity deflation and by the change in cost allocation methodology mentioned above, which resulted in a $4.2 million increase in Domestic Company-owned restaurants segment adjusted EBITDA for the six months ended June 28, 2026.
North America franchising segment adjusted EBITDA decreased $3.1 million and $5.0 million for the three and six months ended June 28, 2026 primarily due to decreases in comparable sales of 8.2% and 7.4%, respectively.
North America commissaries segment adjusted EBITDA increased $2.7 million for the three months ended June 28, 2026 primarily due to higher prices, partially offset by lower transaction volumes in 2026. North America commissaries segment adjusted EBITDA decreased $4.2 million for the six months ended June 28, 2026 primarily due to lower transaction volumes, franchisee food cost subsidies during the first quarter, and timing of planned pricing during the year.
International segment adjusted EBITDA increased $1.7 million and $4.5 million for the three and six months ended June 28, 2026 primarily due to increases in comparable sales of 1.5% and 2.5%, respectively. The six months ended June 28, 2026 also increased year-over-year due to favorable foreign currency exchange rate fluctuations.
4-wall EBITDA
4-wall EBITDA and 4-wall EBITDA margin are non-GAAP measures used to evaluate the performance of our Domestic Company-owned restaurants. See “Non-GAAP Measures” for the definition of 4-wall EBITDA and 4-wall EBITDA margin as well as a reconciliation to the most comparable U.S. GAAP measures.
4-wall EBITDA and 4-wall EBITDA margin are presented in the table below. Segment revenue and segment cost of sales for our Domestic Company-owned restaurants in the table below are presented in the segment footnote to our Condensed Consolidated Financial Statements in accordance with Accounting Standards Codification 280. See “Note 12. Segment
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Information” of the “Notes to Condensed Consolidated Financial Statements,” for further information on our segments.
(Dollars in thousands) Three Months Ended
June 28, 2026 % of Related Revenues June 29, 2025 % of Related Revenues
Segment revenue $ 138,936 $ 175,797
Less segment cost of sales:
COS - Product Costs 43,840 31.6 % 53,196 30.3 %
COS - Salaries & Benefits 45,748 32.9 % 57,203 32.5 %
COS - Other 33,747 24.3 % 45,586 25.9 %
Cost Allocation Change - Domestic Company-owned restaurants (a) — — % (2,095) (1.2) %
4-wall EBITDA $ 15,601 $ 21,907
4-wall EBITDA margin 11.2 % 12.5 %
(Dollars in thousands) Six Months Ended
June 28, 2026 % of Related Revenues June 29, 2025 % of Related Revenues
Segment revenue $ 278,607 $ 346,592
Less segment cost of sales:
COS - Product Costs 85,817 30.8 % 105,333 30.4 %
COS - Salaries & Benefits 92,178 33.1 % 115,180 33.2 %
COS - Other 68,436 24.6 % 90,485 26.1 %
Cost Allocation Change - Domestic Company-owned restaurants (a) — — % (4,190) (1.2) %
4-wall EBITDA $ 32,176 $ 39,784
4-wall EBITDA margin 11.5 % 11.5 %
(a) During the current year, the Company updated its internal cost allocation methodology for certain centrally incurred costs. As a result, a portion of costs previously allocated to the Domestic Company‑owned restaurants segment is now reflected within Unallocated corporate expenses and the North America commissaries segment. The change is prospective and does not affect total reported expenses. We have adjusted for the change in cost allocation in the prior period when calculating 4-wall EBITDA to ensure comparability.
4-wall EBITDA decreased $6.3 million to $15.6 million for the three months ended June 28, 2026 as compared to the prior year comparable period. The decrease was partially due to the 2025 refranchising transaction, which contributed to a decrease of approximately $2 million due to fewer Domestic Company-owned restaurants. The decrease was also due to lower transaction volumes and higher prices, partially offset by lower labor costs due to increased productivity and lower local advertising costs.
4-wall EBITDA margin for the three months ended June 28, 2026 decreased 1.3% primarily due to lower transaction volumes and higher prices, partially offset by lower labor costs due to increased productivity and lower local advertising costs. This decrease was also partially offset by the impact of the 2025 refranchising transaction, which drove a 0.7% margin increase over the comparable periods.
4-wall EBITDA decreased $7.6 million to $32.2 million for the six months ended June 28, 2026, as compared to the prior year comparable period. The decrease was partially due to the 2025 refranchising transaction, which contributed to a decrease of approximately $4 million. The decrease was also due to lower transaction volumes and higher prices, partially offset by lower labor costs due to increased productivity and lower local advertising costs.
4-wall EBITDA margin for the six months ended June 28, 2026 was 11.5%, consistent with the prior year comparable period. Margin decreases due to lower transaction volumes and higher prices in 2026 were offset by commodity deflation,
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lower labor costs due to increased productivity, lower local advertising costs, and were also offset by the impact of the 2025 refranchising transaction, which drove a 0.6% margin increase over the comparable periods.
Items Below Operating Income
The following table sets forth the various items below Operating income from the Condensed Consolidated Statements of Operations:
Three Months Ended Six Months Ended Increase (Decrease)
(In thousands, except per share amounts) June 28, 2026 June 29, 2025 June 28, 2026 June 29, 2025 QTD YTD
Operating income $ 23,187 $ 24,490 $ 43,945 $ 48,455 $ (1,303) $ (4,510)
Net interest expense (9,516) (10,584) (19,199) (20,663) (1,068) (1,464)
Income before income taxes 13,671 13,906 24,746 27,792 (235) (3,046)
Income tax expense (4,971) (4,235) (9,108) (8,778) 736 330
Net income 8,700 9,671 15,638 19,014 (971) (3,376)
Net (income) loss attributable to noncontrolling interests (167) (140) 150 (261) 27 (411)
Net income attributable to the Company $ 8,533 $ 9,531 $ 15,788 $ 18,753 $ (998) $ (2,965)
Basic earnings per common share $ 0.25 $ 0.28 $ 0.46 $ 0.56 $ (0.03) $ (0.10)
Diluted earnings per common share $ 0.24 $ 0.28 $ 0.46 $ 0.56 $ (0.04) $ (0.10)
Net Interest Expense
Net interest expense decreased $1.1 million and $1.5 million for the three and six months ended June 28, 2026, respectively, compared with the prior year comparable periods, primarily due to lower average interest rates.
Income Tax Expense
Our effective income tax rate was 36.4% and 36.8% for the three and six months ended June 28, 2026, respectively, as compared to an effective income tax rate of 30.5% and 31.6% for the prior year comparable periods, respectively. The higher effective tax rate was primarily due to a shift in income between jurisdictions, tax shortfall generated by vesting of restricted shares, and lower projected income tax credits.
Three Months Ended Six Months Ended
(Dollars in thousands) June 28, 2026 June 29, 2025 June 28, 2026 June 29, 2025
Income before income taxes $ 13,671 $ 13,906 $ 24,746 $ 27,792
Income tax expense $ (4,971) $ (4,235) $ (9,108) $ (8,778)
Effective tax rate 36.4 % 30.5 % 36.8 % 31.6 %
Net Income Attributable to Noncontrolling Interests
Net income included $0.2 million of income attributable to noncontrolling interests for the three months ended June 28, 2026 and $0.2 million of losses attributable to noncontrolling interests for the six months ended June 28, 2026, compared with income of $0.1 million and $0.3 million, respectively, in the prior year comparable periods.
Diluted Earnings Per Common Share
Diluted earnings per common share were $0.24 and $0.46 for the three and six months ended June 28, 2026, respectively, as compared to $0.28 and $0.56 for the prior year comparable periods, respectively, representing a decrease of $0.04 and $0.10, respectively. Adjusted diluted earnings per common share, a non-GAAP measure, was $0.46 and $0.78 for the three and six months ended June 28, 2026, respectively, as compared to adjusted diluted earnings per common share of $0.41
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and $0.77 for the prior year comparable periods, respectively, representing an increase of $0.05 and $0.01, respectively. See “Non-GAAP Measures” for additional information.
Non-GAAP Measures
In addition to the results provided in accordance with U.S. GAAP, we provide certain non-GAAP measures, which present results on an adjusted basis. These are supplemental measures of performance that are not required by or presented in accordance with U.S. GAAP and include the following: adjusted EBITDA, 4-wall EBITDA, 4-wall EBITDA margin, adjusted net income attributable to common shareholders, and adjusted diluted earnings per common share. We believe that our non-GAAP financial measures enable investors to assess the operating performance of our business relative to our performance based on U.S. GAAP results and relative to other companies. We believe that the disclosure of these non-GAAP measures is useful to investors as they reflect metrics that our management team and Board utilize to evaluate our operating performance, allocate resources and administer employee incentive plans. The most directly comparable U.S. GAAP measures to adjusted EBITDA, 4-wall EBITDA, adjusted net income attributable to common shareholders, and adjusted diluted earnings per common share, are net income, segment adjusted EBITDA, net income attributable to common shareholders, and diluted earnings per common share, respectively. These non-GAAP measures should not be construed as a substitute for or a better indicator of the Company’s performance than the Company’s U.S. GAAP results.
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The table below reconciles our GAAP financial results to our non-GAAP financial measures.
Three Months Ended Six Months Ended
(In thousands, except per share amounts) June 28, 2026 June 29, 2025 June 28, 2026 June 29, 2025
Net income $ 8,700 $ 9,671 $ 15,638 $ 19,014
Income tax expense 4,971 4,235 9,108 8,778
Net interest expense 9,516 10,584 19,199 20,663
Depreciation and amortization 19,248 18,819 36,977 37,162
Stock-based compensation expense 3,057 3,824 7,466 7,493
Restructuring costs (a) 3,438 2,451 7,548 4,631
Other costs (b) 3,744 3,031 5,354 4,498
Refranchising transaction expense (gain), net (c) 45 — (808) —
Adjusted EBITDA $ 52,719 $ 52,615 $ 100,482 $ 102,239
Segment adjusted EBITDA - Domestic Company-owned restaurants $ 6,635 $ 9,864 $ 14,520 $ 14,896
General & Administrative - Domestic Company-owned restaurants 8,966 9,948 17,656 20,698
Cost Allocation Change - Domestic Company-owned restaurants (f) — 2,095 — 4,190
4-wall EBITDA (g) $ 15,601 $ 21,907 $ 32,176 $ 39,784
Segment revenue - Domestic Company-owned restaurants $ 138,936 $ 175,797 $ 278,607 $ 346,592
4-wall EBITDA margin (g) 11.2 % 12.5 % 11.5 % 11.5 %
Net income attributable to common shareholders $ 8,104 $ 9,267 $ 15,063 $ 18,295
Restructuring costs (a) 4,416 2,475 8,706 4,610
Other costs (b) 3,744 3,031 5,354 4,498
Accelerated software depreciation (d) 910 — 910 —
Refranchising transaction expense (gain), net (c) 289 — (999) —
Tax effect of adjustments (e) (2,112) (1,250) (3,182) (2,068)
Adjusted net income attributable to common shareholders $ 15,351 $ 13,523 $ 25,852 $ 25,335
Diluted earnings per common share $ 0.24 $ 0.28 $ 0.46 $ 0.56
Restructuring costs (a) 0.13 0.07 0.26 0.14
Other costs (b) 0.11 0.10 0.16 0.13
Accelerated software depreciation (d) 0.03 — 0.03 —
Refranchising transaction expense (gain), net (c) 0.01 — (0.03) —
Tax effect of adjustments (e) (0.06) (0.04) (0.10) (0.06)
Adjusted diluted earnings per common share $ 0.46 $ 0.41 $ 0.78 $ 0.77
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(a)For the three and six months ended June 28, 2026, represents costs associated with the Enterprise Transformation Plan. These amounts are inclusive of $1.0 million and $1.1 million for the three and six months ended June 28, 2026, respectively, of non-cash stock-based compensation and depreciation expenses which are excluded from adjusted EBITDA above but are reflected as adjustments to non-GAAP diluted EPS. For the three and six months ended June 29, 2025, represents costs associated with the International Transformation Plan. Refer to “Note 9. Restructuring” for additional details.
(b)For the three and six months ended June 28, 2026, represents costs associated with project-based strategic initiatives that are not related to our ongoing operations.
For the three and six months ended June 29, 2025, other costs is comprised of the following:
i.Losses on disposal of equipment incurred in connection with the termination of a COVID-era program that pre-purchased store equipment due to supply chain challenges;
ii.Costs associated with project-based strategic initiatives that are not related to our ongoing operations; and
iii.Costs incurred, net of anticipated insurance recoveries, arising from tornadoes that damaged the Texas QC Center as well as the restaurant support center and QC Center in Louisville, Kentucky.
(c)Represents additional net transaction expense (gain), associated with the refranchising of 85 restaurants on November 24, 2025. Net loss attributable to noncontrolling interest for the six months ended June 28, 2026 was approximately $0.4 million. See “Note 11. Divestitures ” for additional details.
(d)Represents incremental accelerated depreciation expense related to the shortened useful life of legacy capitalized software assets due to the ongoing development and deployment of our new point-of-sale system and omnichannel platform.
(e)The tax effect on non-GAAP adjustments was calculated by applying the marginal tax rates of 23.2% for the three and six months ended June 28, 2026, and 22.7% for the three and six months ended June 29, 2025. For the three and six months ended June 28, 2026, the income tax effect excludes $0.3 million of additional state income tax expense included as a separate non-GAAP adjustment that was classified within Income tax expense in the Condensed Consolidated Statements.
(f)During the current year, the Company updated its internal cost allocation methodology for certain centrally incurred costs. As a result, a portion of costs previously allocated to the Domestic Company‑owned restaurants segment is now reflected within Unallocated corporate expenses and the North America commissaries segment. The change is prospective and does not affect total reported expenses. We have included a conforming adjustment in the historical period when reconciling segment adjusted EBITDA to 4-wall EBITDA to ensure comparability.
(g)4-wall EBITDA is defined as Domestic Company-owned restaurants segment revenue less total Domestic Company-owned restaurants segment cost of sales. Domestic Company-owned restaurants cost of sales include expenses incurred by our Domestic Company-owned restaurants in generating revenue, including cost of food, paper, and cleaning products (‘COS – Product Costs’), cost of restaurant-level labor (‘COS – Salaries & Benefits’), and costs of delivery expenses, Company-owned restaurant advertising costs, insurance, rent, aggregator fees, and other costs (‘COS – Other’). 4-wall EBITDA margin is defined as 4-wall EBITDA divided by segment revenue for our Domestic Company-owned restaurants segment. We use 4-wall EBITDA for the purposes of internally evaluating the performance of our Domestic Company-owned restaurants, and we believe 4-wall EBITDA provides additional information to investors as to the unit economics and restaurant-level profitability of our Domestic Company-owned restaurants. The most directly comparable U.S. GAAP measure to 4-wall EBITDA is segment adjusted EBITDA, which is our segment performance measure as presented in the segment footnote to our Consolidated Financial Statements in accordance with Accounting Standards Codification 280. See “Note 12. Segment Information” of “Notes to Condensed Consolidated Financial Statements,” for further information regarding the Company’s segments.
In addition, we present free cash flow in this report, which is a non-GAAP measure. Please see “Liquidity and Capital Resources – Free Cash Flow” for a discussion of why we believe free cash flow provides useful information regarding our financial condition and results of operations, and a reconciliation of free cash flow to the most directly comparable U.S. GAAP measure.
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Liquidity and Capital Resources
Our primary sources of liquidity and capital resources are cash flows from operations and borrowings under the revolving credit facility (the “PJI Revolving Facility”) that forms a part of our Second Amended and Restated Credit Agreement dated as of March 26, 2025 (the “Credit Agreement”). The Credit Agreement provides for a senior secured term loan in a principal amount of $200 million (the “Term Loan”) and a principal amount of $600 million available for borrowing under the PJI Revolving Facility.
Our principal uses of cash are operating expenses, capital expenditures, and returning value to our shareholders in the form of cash dividends and share repurchases. Our capital priorities are:
•investing for growth
•maintaining a strong balance sheet, and
•returning capital to shareholders
In accordance with our capital allocation strategy, the Company’s Board of Directors voted to suspend the quarterly dividend beginning with our third quarter dividend in August 2026. This action will allow the Company to accelerate investment in its transformation strategy to drive our next phase of growth and increases our flexibility to make targeted investments in the organization.
The Company believes that its balances of cash and cash equivalents and borrowing capacity, along with cash generated by operations and from asset sales, will be sufficient to satisfy its cash requirements, cash dividends, interest payments and share repurchases over the next twelve months and beyond.
Cash Flows
The table below summarizes our cash flows for the six months ended June 28, 2026 and June 29, 2025:
Six Months Ended
(In thousands) June 28, 2026 June 29, 2025
Total cash provided by (used in):
Operating activities $ 35,828 $ 66,843
Investing activities (17,944) (19,389)
Financing activities (26,148) (52,751)
Effect of exchange rate changes on cash and cash equivalents (196) 641
Change in cash, cash equivalents, and restricted cash $ (8,460) $ (4,656)
Operating Activities
Total cash provided by operating activities was $35.8 million for the six months ended June 28, 2026 compared to $66.8 million for the corresponding period of 2025. The decrease of $31.0 million primarily reflects lower net income, timing of collections and marketing spend within our advertising fund, and higher compensation payments within the period, inclusive of the Enterprise Transformation Plan, partially offset by enactment of the “One Big Beautiful Bill Act” in July 2025 that reduced cash taxes paid during 2026 due to the reinstatement of 100% bonus depreciation and full expensing for domestic research and development expenditures.
Investing Activities
Total cash used in investing activities was $17.9 million for the six months ended June 28, 2026 compared to $19.4 million for the same period in 2025. Net cash used in investing activities during the six months ended June 28, 2026 primarily reflects $27.6 million in capital expenditures, which includes $1.2 million of additional capital expenditures related to natural disasters. Primary sources of cash in investing activities included $4.3 million from the sale of the building occupied by our former print and promotions business in Louisville, Kentucky and additional cash received related to the 2025 refranchising transaction, as well as distributions of $3.2 million related to our deferred compensation plan. Net cash used in investing activities of $19.4 million for the six months ended June 29, 2025 primarily reflects $31.7 million in capital expenditures partially offset by repayment of notes issued of $4.5 million and distributions of $4.7 million related to our deferred compensation plan.
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Capital expenditures declined by $3.9 million compared to the prior year period due to lower remodel and technology spending during the first half of 2026. We estimate that our capital expenditures during 2026 will be approximately $70 million to $80 million. This estimate includes capital outlays for improvements to existing Company-owned restaurants and for development of new restaurants as well as investments in technology platforms and our supply chain. We intend to fund our capital expenditures with cash generated by operations and borrowings under our PJI Revolving Facility, as necessary.
Financing Activities
Total cash used in financing activities was $26.1 million for the six months ended June 28, 2026 compared to $52.8 million for the same period in 2025. The primary uses of cash in financing activities during the first six months of 2026 were dividend payments of $30.9 million, payments related to finance leases of $5.1 million, and tax payments on equity award issuances of $1.6 million. The primary source of cash from financing activities was net proceeds of $11.3 million under the PJI Revolving Facility.
In the first half of 2025, the primary uses of cash for financing activities were $30.5 million in dividend payments, payments related to finance leases of $4.9 million, and tax payments on equity award issuances of $1.2 million. Cash used in financing activities also reflects the impact of net repayments of $16.1 million under the PJI Revolving Facility throughout the year, which includes the refinancing of our debt via the Second Amended and Restated Credit Agreement during the first quarter of 2025 that resulted in borrowings of $200.0 million under the new Term Loan, from which the proceeds were used to repay $196.8 million to the PJI Revolving Facility as well as $3.2 million in related issuance costs.
There were no share repurchases in the first six months of 2026 or 2025.
Debt
Our outstanding debt as of June 28, 2026 was $733.5 million, which was comprised of $400.0 million principal amount of our 3.875% senior notes (the “Notes”), $200.0 million of Term Loan borrowings, and $133.5 million outstanding under the PJI Revolving Facility and PJMF Revolving Facility. Remaining availability under the PJI Revolving Facility as of June 28, 2026 was approximately $468.7 million.
The Credit Agreement contains customary affirmative and negative covenants that, among other things, require customary reporting obligations, and restrict, subject to certain exceptions, the incurrence of additional indebtedness and liens, the consummation of certain mergers, consolidations, sales of assets and similar transactions, the making of investments, equity distributions and other restricted payments, and transactions with affiliates. The Company is also subject to certain financial covenants, as shown in the following table, that could restrict or impose constraints on the liquidity of our business:
Permitted Ratio Actual Ratio as of June 28, 2026
Leverage ratio Not to exceed 5.25 to 1.0 3.3 to 1.0
Interest coverage ratio Not less than 2.00 to 1.0 3.3 to 1.0
Our leverage ratio is defined as outstanding debt divided by Consolidated EBITDA (as defined in the Credit Agreement) for the most recent four fiscal quarters. Our interest coverage ratio is defined as the sum of Consolidated EBITDA and consolidated rental expense for the most recent four fiscal quarters divided by the sum of consolidated interest expense and consolidated rental expense for the most recent four fiscal quarters. We were in compliance with all financial covenants as of June 28, 2026.
In addition, the Indenture governing the Notes contains customary covenants that, among other things and subject to certain exceptions, limit our ability and the ability of certain of our subsidiaries to: incur additional indebtedness and guarantee indebtedness; pay dividends or make other distributions or repurchase or redeem our capital stock; prepay, redeem or repurchase certain debt; issue certain preferred stock or similar equity securities; make loans and investments; sell assets; incur liens; enter into transactions with affiliates; enter into agreements restricting our subsidiaries’ ability to pay dividends; and consolidate, merge or sell all or substantially all of our assets.
PJMF has a $30.0 million revolving line of credit under the PJMF Revolving Facility, pursuant to a Revolving Loan Agreement dated September 30, 2015 and most recently amended on September 30, 2025. As of June 28, 2026, the
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principal amount of debt outstanding under the PJMF Revolving Facility was approximately $2.3 million. The PJMF Revolving Facility is secured by substantially all assets of PJMF. The PJMF Revolving Facility matures on September 30, 2026, but is subject to annual renewals. The borrowings under the PJMF Revolving Facility accrue interest at a variable rate of a one month SOFR plus 1.975%. The PJMF operating results and the related debt outstanding do not impact the financial covenants under the Credit Agreement.
Refer to Note 12 of the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 28, 2025 for additional information.
Share Repurchases
Share repurchases are part of our long-term growth and capital allocation strategy. On October 28, 2021, our Board of Directors approved a share repurchase program with an indefinite duration for up to $425.0 million of the Company’s common stock. There was no share repurchase activity during the three and six months ended June 28, 2026 or June 29, 2025. Approximately $90.2 million remained available under the Company’s share repurchase program as of June 28, 2026.
The Company utilizes a written trading plan under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, from time to time to facilitate the repurchase of shares of our common stock under this share repurchase program. There can be no assurance that we will repurchase shares of our common stock either through a Rule 10b5-1 trading plan or otherwise.
Dividends
Beginning with our third quarter dividend in August 2026, the Company’s Board of Directors voted to suspend the quarterly dividend. The declaration and payment of any future dividends will be at the discretion of our Board of Directors. The Company paid aggregate cash dividends to common stockholders of $30.9 million ($0.92 per share) and $30.5 million ($0.92 per share) for the six months ended June 28, 2026 and June 29, 2025, respectively.
Free Cash Flow
Free cash flow, a non-GAAP measure, is defined as net cash provided by operating activities (from the Condensed Consolidated Statements of Cash Flows) less the purchases of property and equipment, excluding purchases of property and equipment related to damages from natural disasters. We view free cash flow as an important financial measure because it is one factor that management uses in determining the amount of cash available for discretionary investment. Free cash flow is not a term defined by GAAP, and as a result, our measure of free cash flow might not be comparable to similarly titled measures used by other companies. Free cash flow should not be construed as a substitute for or a better indicator of the Company’s performance than the Company’s GAAP measures.
The Company’s free cash flow was as follows for the six month periods of 2026 and 2025:
Six Months Ended
(In thousands) June 28, 2026 June 29, 2025
Net cash provided by operating activities $ 35,828 $ 66,843
Purchases of property and equipment (26,356) (30,305)
Free cash flow $ 9,472 $ 36,538
Cash Requirements
In the first quarter of 2026, the Company entered into a multi-year agreement for point‑of‑sale and restaurant operations software services which will expire on December 23, 2034, with a one year extension option. The agreement includes deployment requirements that specify a minimum number of Company‑owned and franchised restaurants to be installed and activated on the software platform by November 30, 2026 and by November 30, 2027. The total estimated contractual commitment for software services is approximately $125 million to $140 million over the term of the agreement, contingent upon variable components such as the timing of the deployment schedule and associated contractual credits. These amounts are expected to be largely recovered through technology fees charged to our franchisees over the term of the agreement. As of June 28, 2026, the Company had not incurred any amounts related to these provisions.
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Other than the contractual commitment discussed above, there have been no material changes in our cash requirements other than those incurred in the ordinary course of business since the end of 2025. Refer to “Contractual Obligations” presented within “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 28, 2025 for additional information regarding our cash requirements.
Impact of Inflation and Macroeconomic Trends
Inflationary pressures affect our profitability both directly, in our Company-owned restaurants and delivery mechanisms and through gross margins experienced by sales of food and supply items via our QC Centers, as well as indirectly, through higher food ingredient and paper and supply costs, rising fees from delivery aggregators driven by higher wage demands and increases in delivery costs that, once reflected in upward price adjustments on their fees, can exert downward pressure on unit sales, reducing royalty fees we realize from our Domestic and International franchisees. Compensating menu price increases are subject to competitive pressure in the markets in which we operate. Expense control measures are also deployed to offset higher costs when possible. Food costs, in particular the cost of cheese, are managed to an extent by pricing agreements with suppliers and forward purchase contracts we enter into, as discussed in “Item 3. Quantitative and Qualitative Disclosures About Market Risk.”
While we continue to monitor the impact of current and potential tariffs and assess our ability to manage any impacts, tariffs have not had a material impact on our business to date, and we currently do not believe that tariffs imposed by the United States government will have a significant negative impact to our Domestic business, as a substantial proportion of our ingredients and supply items are sourced domestically. However, the extent to which tariffs may increase the price of other goods and services and how they may alter discretionary spending patterns by our customers or impact our franchisees’ profitability is currently unknown.
Forward-Looking Statements
Certain matters discussed in this Quarterly Report on Form 10-Q and other Company communications that are not statements of historical fact constitute forward-looking statements within the meaning of the federal securities laws. Generally, the use of words such as “expect,” “intend,” “estimate,” “believe,” “anticipate,” “will,” “forecast,” “outlook”, “plan,” “project,” or similar words identify forward-looking statements that we intend to be included within the safe harbor protections provided by the federal securities laws. Such forward-looking statements include or may relate to projections or guidance concerning business performance, revenue, earnings, cash flow, earnings per share, depreciation and amortization, interest expenses, tax rates, system-wide sales, transformation plans, growth initiatives, restaurant portfolio optimization, restaurant operational improvements, supply chain and other cost savings initiatives, adjusted EBITDA, 4-wall adjusted EBITDA, the current economic environment, industry trends, consumer behavior and preferences, commodity and labor costs, currency fluctuations, profit margins, supply chain operating margin, net unit growth, unit level performance, capital expenditures, restaurant and franchise development, franchisee profitability, restaurant acquisitions, restaurant closures, labor shortages, labor cost increases, changes in management, inflation, royalty relief, franchisee support and incentives, the effectiveness of our menu innovations and other business initiatives, investments in product, investments in digital, artificial intelligence and technology innovation, marketing efforts and investments, liquidity, compliance with debt covenants, impairments, strategic decisions and actions, changes to our national marketing fund, changes to our commissary model, capital allocation, dividends and changes thereto, share repurchases, effective tax rates, regulatory changes and impacts, impacts of tariffs, insurance recoveries for damages related to natural disasters, restructuring plans, including timing of completion, expected benefits and costs, adoption of new accounting standards, and other financial and operational measures. Such statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict and many of which are beyond our control. Therefore, actual outcomes and results may differ materially from those matters expressed or implied in such forward-looking statements. The risks, uncertainties and assumptions that are involved in our forward-looking statements include, but are not limited to:
•economic conditions in the United States and international markets;
•changes in pricing or other marketing or promotional strategies by competitors, which has adversely affected, and may continue to adversely affect sales and profitability; and new product and concept developments by food industry competitors;
•changes in consumer preferences or consumer buying habits, including the growing popularity of delivery aggregators, as well as changes in general economic conditions or other factors that may affect consumer confidence and discretionary spending, including higher unemployment;
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•increased risks associated with our International operations, including economic and political conditions, instability or uncertainty in our international markets, especially emerging markets, fluctuations in currency exchange rates, difficulty in meeting planned sales targets, regulatory changes, increased tariffs and other trade barriers, and new restaurant growth;
•the adverse impact on the Company or our results caused by global health concerns, product recalls, food quality or safety issues, incidences of foodborne illness, food contamination and other general public health concerns about our Company-owned or franchised restaurants or others in the restaurant industry;
•the ability of the Company to retain key management and manage staffing and labor shortages at Company and/or franchised restaurants and our Quality Control Centers;
•increases in labor costs, food costs, fuel costs or sustained higher other operating costs, including as a result of supply chain disruption, inflation and related impacts, increased tariffs or other trade barriers, immigration policies, geopolitical conflicts or climate change;
•the potential for delayed new restaurant openings, both domestically and internationally;
•the increased risk of phishing, ransomware and other cyber-attacks;
•risks to the global economy and our business related to geopolitical conflicts in areas in which we or our franchisees operate, including those in Ukraine and the Middle East;
•increased costs for branding initiatives and launching new advertising and marketing campaigns and promotions to boost consumer sentiment and sales trends, and the risk that such initiatives will not be effective or that our franchisees will not execute them properly or be aligned with such initiatives;
•risks related to US government shutdowns or possible economic slowdowns that could, among other things, reduce consumer spending or demand and result in changing consumer practices;
•risks related to social media, including publicity adversely and rapidly impacting our brand and reputation;
•the effectiveness of our technology investments and changes in unit-level operations;
•the ability of the Company and its franchisees to meet planned growth targets and operate new and existing restaurants profitably, including difficulties finding qualified franchisees, restaurant level employees or suitable sites;
•increases in insurance claims and related costs for programs funded by the Company up to certain retention limits, including medical, owned and non-owned vehicles, workers’ compensation, general liability and property;
•disruption of our supply chain or commissary operations which could be caused by our sole source of supply of mozzarella cheese, desserts, garlic cups or limited source of suppliers for other key ingredients or more generally due to weather, natural disasters including drought, disease, or geopolitical or other disruptions beyond our control;
•the impact of current or future claims and litigation and our ability to comply with current, proposed or future legislation that could impact our business;
•risks related to our indebtedness and borrowing costs, including prolonged higher interest rates, and the current state of the credit markets;
•the Company’s decision to pay or not pay dividends;
•our ability to effectively operate and improve the performance of Company-owned restaurants;
•disruption of critical business or information technology systems, or those of our suppliers, and risks associated with systems failures and data privacy and cybersecurity incidents, including theft of confidential Company, employee and customer information, including payment cards; and
•changes in Federal or state income, general and other tax laws, rules and regulations and changes in generally accepted accounting principles.
These and other risk factors are discussed in detail in “Part I. Item 1A. – Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 28, 2025. We undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise, except as required by law.