Noodles & Company is a Delaware corporation that was organized in 2002. Noodles & Company and its subsidiaries are sometimes referred to as “we,” “us,” “our” and the “Company” in this report. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes in Item 1 and with the audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K for our fiscal year ended December 30, 2025. We operate on a 52- or 53-week fiscal year ending on the Tuesday closest to December 31. Our fiscal quarters each contain 13 operating weeks, with the exception of the fourth quarter of a 53-week fiscal year, which contains 14 operating weeks. Fiscal years 2026 and 2025 contain 52 weeks. Cautionary Note Regarding Forward-Looking Statements In addition to historical information, this discussion and analysis contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties such as the number of restaurants we intend to open, projected capital expenditures and estimates of our effective tax rates. In some cases, you can identify forward-looking statements by terms such as “may,” “might,” “will,” “objective,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “design,” “estimate,” “predict,” “potential,” “plan” or the negative of these terms and similar expressions intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are based on currently available operating, financial and competitive information. Examples of forward-looking statements include all matters that are not historical facts, such as statements regarding expectations with respect to projected capital expenditures and our financial results, condition and liquidity needs. Our actual results may differ materially from those anticipated in these forward-looking statements due to reasons including, but not limited to, uncertainties as to the availability, suitability, structure, terms, and timing of any strategic transaction resulting from the strategic review and whether any such transaction will be completed, the impact of any such strategic transaction on Noodles & Company, and whether the strategic benefits of any such strategic transaction can be achieved; current performance trends and our expectations for future performance; our ability to repay, refinance or obtain new financing on acceptable terms, if at all, and comply with our covenants under the A&R Credit Agreement, which matures on July 27, 2027; our ability to sustain our overall growth, including, our digital sales growth; our ability to effectively optimize our restaurant portfolio including closures; our ability to achieve and maintain increases in comparable restaurant sales and to successfully execute our business strategy, including operational strategies to improve the performance of our restaurant portfolio; the success of our brand strategy and marketing efforts, including our ability to successfully introduce new menu items, including limited time offerings and the success of our promotions; our pricing strategies; economic conditions, including inflation, an economic recession, an elevated interest rate environment, tariffs and trade restrictions and any impact of government shutdowns on overall economic conditions and consumer spending; price and availability of commodities and other supply chain challenges; our ability to adequately staff our restaurants; changes in labor costs; our ability to maintain compliance with requirements for continued listing on the Nasdaq Global Select Market; other conditions beyond our control such as domestic or global conflicts, wars, terrorist activity, weather, natural disasters, disease outbreaks, epidemics or pandemics impacting our customers or food supplies; and consumer reaction to industry related public health issues and health pandemics, including perceptions of food safety and those discussed in “Special Note Regarding Forward-Looking Statements” and “Risk Factors” as filed in our Annual Report on Form 10-K for our fiscal year ended December 30, 2025. Recent Trends, Risks and Uncertainties Reverse Stock Split. On February 18, 2026, the amendment to our Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) took effect to implement the Reverse Stock Split of our issued and outstanding shares of Class A common stock, par value $0.01 per share, at a ratio of 1-for-8. No fractional shares were issued as a result of the Reverse Stock Split and it did not impact the par value of our common stock. Neither the Reverse Stock Split nor the related amendment to the Certificate of Incorporation had any impact on the number of shares of common stock or preferred stock we are authorized to issue under the Certificate of Incorporation or the number of issued and outstanding shares of our preferred stock (of which there are currently none). 15 Table of Contents All shares of common stock, stock-based compensation awards and per share amounts for the prior periods included in the Consolidated Financial Statements and applicable notes of this 10-Q and elsewhere in this 10-Q have been adjusted retroactively to reflect the effect of the Reverse Stock Split and related amendment to the Certificate of Incorporation. Strategic Review. On September 3, 2025, we announced that our Board of Directors had initiated a review of strategic alternatives in order to explore ways to maximize stockholder value. The review includes a range of potential strategic alternatives, including a refinancing of existing indebtedness that matures on July 27, 2027, refranchising or sale of all or part of the business, and/or other strategic or financial transactions. Such review remains in process. Revenue. In the second quarter, we saw an increase in revenue as a result of an increase in comparable restaurant sales, partially offset by permanent restaurant closures. System-wide comparable restaurant sales increased 10.3% in the second quarter of 2026 compared to the same period of 2025, comprised of an 11.4% increase at company-owned restaurants and a 5.5% increase at franchise-owned restaurants. Our comparable restaurant sales continue to be positively aided by menu innovation including the introduction of Delicious Duos and the recent successful limited time offerings, like Chili Garlic Ramen, Steak Stroganoff, Indonesian Peanut Chicken Sauté and Chicken Artichoke & Asparagus Rigatoni, and the benefit of sales transferring from restaurants that we closed to our nearby restaurants. Cost of Sales. Our second quarter 2026 cost of sales benefited from an increase in menu prices and reduced food waste related to new menu items, which offset the impact of inflation. We continue to monitor commodity inflation and, throughout periods of volatility, we will continue to work with our suppliers to identify ongoing supply chain efficiencies, including adding additional suppliers as necessary. We have evaluated and will continue to evaluate the impact of import laws and tariffs, including the potential for any refunds, on our operations as some of our food items are imported from India, Mexico and other countries. As of June 30, 2026, there was no material impact on our business, financial condition, results of operations or cash flows. However, we expect tariffs may impact our operations in certain areas, such as food and beverage costs, construction and equipment costs and other restaurant operating costs, for the remainder of fiscal 2026. We will continue to utilize fixed price contracts for certain key items to mitigate risk. Labor Costs. Similar to much of the restaurant industry, our base labor costs have risen in recent years. We have been able to partially mitigate the impact of these market factors through a continued focus on maximizing efficiencies of labor hour usage per restaurant and wage inflation has stabilized to less than 3%. As a percentage of restaurant sales, labor costs continue to benefit from sales leverage including the benefit of sales transferring from restaurants that have closed to our nearby restaurants. Other Restaurant Operating Costs. We have incurred, and expect to continue to incur, increased third-party delivery fees due to significant increased usage of third-party delivery services resulting in a higher mix of third party delivery sales. As a percentage of restaurant sales, other restaurant operating costs continue to benefit from sales leverage including the benefit of sales transferring from restaurants that have closed to our nearby restaurants. Restaurant Development. We did not open any new company-owned restaurants in the first two quarters of 2026 and do not plan to open any company-owned restaurants in 2026. As of June 30, 2026, we had 318 company-owned restaurants and 78 franchise restaurants in 30 states. Impairments and Certain Restaurant Closures. We impaired fixed assets related to 11 restaurants in the first two quarters of 2026 primarily related to closure decisions on underperforming restaurants. In the first two quarters of 2026, we wrote down lease-related assets for sixteen restaurants. We permanently closed 22 company-owned restaurants in the first two quarters of 2026 and we anticipate closing an additional 8 to 13 restaurants in 2026, of which six were closed subsequent to the end of the second quarter. We continue to analyze our restaurant portfolio and expect to close certain restaurants that are either generating low or negative cash flows, approaching the expiration of their leases, in trade areas that are not as well positioned for current consumer trends and/or there is a potential for a significant amount of sales transfer to nearby restaurants given strong off premise sales. Key Measures We Use to Evaluate Our Performance To evaluate the performance of our business, we utilize a variety of financial and performance measures. These key measures include revenue, comparable restaurant sales, average unit volumes (“AUVs”), restaurant contribution, restaurant contribution margin, EBITDA and adjusted EBITDA. Restaurant contribution, restaurant contribution margin, EBITDA and adjusted EBITDA are non-GAAP financial measures. 16 Table of Contents Revenue Revenue includes both restaurant revenue and franchise royalties and fees. Restaurant revenue represents sales of food and beverages in company-owned restaurants. Several factors affect our restaurant revenue in any period, including the number of restaurants in operation and per-restaurant sales. Franchise royalties and fees represent royalty income and initial franchise fees. While we expect that the majority of our revenue and net income growth will be driven by company-owned restaurants, our franchise restaurants remain an important factor impacting our revenue and financial performance. Seasonal factors cause our revenue to fluctuate from quarter to quarter. Our revenue per restaurant is typically lower in the first and fourth quarters, due to reduced winter and holiday traffic, and is typically higher in the second and third quarters. As a result of these factors, our quarterly operating results and comparable restaurant sales may fluctuate. Comparable Restaurant Sales Comparable restaurant sales refer to year-over-year sales comparisons for the comparable restaurant base. We define the comparable restaurant base to include restaurants open for at least 18 full periods. This measure highlights the performance of existing restaurants, as the impact of new restaurant openings is excluded. Changes in comparable restaurant sales are generated by changes in traffic, which we calculate as the number of entrées sold, and changes in per-person spend, calculated as sales divided by traffic. Per-person spend can be influenced by changes in menu prices and the mix and number of items sold per person. Measuring our comparable restaurant sales allows us to evaluate the performance of our existing restaurant base. Various factors impact comparable restaurant sales, including, but not limited to: •introduction of new and seasonal menu items and limited time offerings; •consumer recognition of our brand and our ability to respond to changing consumer preferences; •overall economic trends, particularly those related to consumer spending; •our ability to operate restaurants effectively and efficiently to meet consumer expectations; •pricing and perceived value; •the number of restaurant transactions, per-person spend and average check amount; •marketing and promotional efforts; •abnormal weather patterns; •food safety and foodborne illness concerns; •the impact of health pandemics; •local and national competition; •trade area dynamics; •tariffs or trade restrictions; and •opening and closing restaurants in the vicinity of other restaurant locations. Consistent with common industry practice, we present comparable restaurant sales on a calendar-adjusted basis that aligns current year sales weeks with comparable periods in the prior year, regardless of whether they belong to the same fiscal period or not. Comparable restaurant sales is only one measure of how we evaluate our performance. 17 Table of Contents Average Unit Volumes AUVs consist of the average annualized sales of all company-owned restaurants for a given time period. AUVs are calculated by dividing restaurant revenue by the number of operating days within each time period and multiplying by the number of operating days we have in a typical year. This measurement allows management to assess changes in consumer traffic and per person spending patterns at our restaurants. In addition to the factors that impact comparable restaurant sales, AUVs can be further impacted by effective real estate site selection and maturity and trends within new markets. Restaurant Contribution and Restaurant Contribution Margin Restaurant contribution represents restaurant revenue less restaurant operating costs which are cost of sales, labor, occupancy and other restaurant operating costs. Restaurant contribution margin represents restaurant contribution as a percentage of restaurant revenue. We expect restaurant contribution to increase in proportion to the number of new restaurants we open, our comparable restaurant sales growth and cost reduction initiatives. We believe that restaurant contribution and restaurant contribution margin are important tools for investors and other interested parties because they are widely-used metrics within the restaurant industry to evaluate restaurant-level productivity, efficiency and performance. We also use restaurant contribution and restaurant contribution margin as metrics to evaluate the profitability of incremental sales at our restaurants, restaurant performance across periods and restaurant financial performance compared with competitors. Restaurant contribution and restaurant contribution margin are supplemental measures of the operating performance of our restaurants and are not reflective of the underlying performance of our business because corporate-level expenses are excluded from these measures. EBITDA and Adjusted EBITDA We define EBITDA as net income (loss) before net interest expense, provision (benefit) for income taxes and depreciation and amortization. We define adjusted EBITDA as net income (loss) before net interest expense, provision (benefit) for income taxes, depreciation and amortization, restaurant impairments, loss on disposal of assets, net lease exit costs (benefits), severance, executive transition costs, corporate transaction costs and stock-based compensation. We believe that EBITDA and adjusted EBITDA provide clear pictures of our operating results by eliminating certain non-recurring and non-cash expenses that may vary widely from period to period and are not reflective of the underlying business performance. The presentation of restaurant contribution, restaurant contribution margin, EBITDA and adjusted EBITDA, which may not be comparable to similarly titled financial measures used by other companies, is not intended to be considered in isolation or as a substitute for, or to be superior to, the financial information prepared and presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. We believe that they provide useful information to management and investors about operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. 18 Table of Contents Results of Operations The following table presents a reconciliation of net loss to EBITDA and adjusted EBITDA: Fiscal Quarter Ended Two Fiscal Quarters Ended June 30, 2026 July 1, 2025 June 30, 2026 July 1, 2025 (in thousands, unaudited) Net loss $ (3,951) $ (17,552) $ (7,368) $ (26,609) Depreciation and amortization 5,900 7,139 11,881 14,229 Interest expense, net 2,391 2,753 4,989 5,400 Provision for income taxes 20 21 27 44 EBITDA $ 4,360 $ (7,639) $ 9,529 $ (6,936) Restaurant impairments(1) 4,848 11,861 7,508 12,487 Loss on disposal of assets 224 800 1,072 1,763 Lease exit (benefits) costs, net (403) 252 (2,461) (878) Severance, executive transition costs and corporate transaction costs 599 14 846 466 Stock-based compensation expense 1,145 728 1,930 1,518 Adjusted EBITDA $ 10,773 $ 6,016 $ 18,424 $ 8,420 _____________________ (1)Restaurant impairments in all periods presented above include amounts related to restaurants previously impaired. See Note 7, Restaurant Impairments, Closure Costs and Asset Disposals. The following table presents a reconciliation of loss from operations to restaurant contribution: Fiscal Quarter Ended Two Fiscal Quarters Ended June 30, 2026 July 1, 2025 June 30, 2026 July 1, 2025 Loss from operations $ (1,540) $ (14,778) $ (2,352) $ (21,165) Less: Franchising royalties and fees, and other 2,236 2,652 4,582 5,120 Plus: General and administrative 13,857 12,404 26,371 25,214 Depreciation and amortization 5,900 7,139 11,881 14,229 Pre-opening — 69 — 220 Restaurant impairments, closure costs and asset disposals 5,527 13,653 8,261 14,944 Restaurant contribution $ 21,508 $ 15,835 $ 39,579 $ 28,322 Restaurant contribution margin 17.2 % 12.8 % 16.1 % 11.6 % 19 Table of Contents Restaurant Openings, Closures and Relocations The following table shows restaurants opened or closed during the periods indicated: Fiscal Quarter Ended Two Fiscal Quarters Ended June 30, 2026 July 1, 2025 June 30, 2026 July 1, 2025 Company-Owned Restaurant Activity Beginning of period 320 369 340 371 Openings — 1 — 2 Closures (2) (6) (22) (9) Restaurants at end of period 318 364 318 364 Franchise Restaurant Activity Beginning of period 80 91 83 92 Openings — — — — Closures (2) (2) (5) (3) Restaurants at end of period 78 89 78 89 Total restaurants 396 453 396 453 20 Table of Contents Statement of Operations as a Percentage of Revenue The following table summarizes key components of our results of operations for the periods indicated as a percentage of our total revenue, except for the components of restaurant operating costs, which are expressed as a percentage of restaurant revenue. Fiscal Quarter Ended Two Fiscal Quarters Ended June 30, 2026 July 1, 2025 June 30, 2026 July 1, 2025 (unaudited) Revenue: Restaurant revenue 98.2 % 97.9 % 98.2 % 98.0 % Franchising royalties and fees, and other 1.8 % 2.1 % 1.8 % 2.0 % Total revenue 100.0 % 100.0 % 100.0 % 100.0 % Costs and expenses: Restaurant operating costs (exclusive of depreciation and amortization shown separately below): Cost of sales 24.9 % 26.5 % 25.1 % 26.6 % Labor 29.4 % 31.7 % 29.7 % 32.1 % Occupancy 8.1 % 9.2 % 8.3 % 9.3 % Other restaurant operating costs 20.3 % 19.7 % 20.7 % 20.4 % General and administrative 10.9 % 9.8 % 10.5 % 10.1 % Depreciation and amortization 4.6 % 5.6 % 4.7 % 5.7 % Pre-opening — % 0.1 % — % 0.1 % Restaurant impairments, closure costs and asset disposals 4.4 % 10.8 % 3.3 % 6.0 % Total costs and expenses 101.2 % 111.7 % 100.9 % 108.5 % Loss from operations (1.2) % (11.7) % (0.9) % (8.5) % Interest expense, net 1.9 % 2.2 % 2.0 % 2.2 % Loss before income taxes (3.1) % (13.9) % (2.9) % (10.6) % Provision for income taxes — % — % — % — % Net loss (3.1) % (13.9) % (2.9) % (10.6) % 21 Table of Contents Second Quarter Ended June 30, 2026 Compared to Second Quarter Ended July 1, 2025 The table below presents our unaudited operating results for the second quarters of 2026 and 2025, and the related quarter-over-quarter changes. Fiscal Quarter Ended Increase / (Decrease) June 30, 2026 July 1, 2025 $ % (in thousands, unaudited) Revenue: Restaurant revenue $ 124,801 $ 123,781 $ 1,020 0.8 % Franchising royalties and fees, and other 2,236 2,652 (416) (15.7) % Total revenue 127,037 126,433 604 0.5 % Costs and expenses: Restaurant operating costs (exclusive of depreciation and amortization shown separately below): Cost of sales 31,019 32,860 (1,841) (5.6) % Labor 36,737 39,279 (2,542) (6.5) % Occupancy 10,165 11,393 (1,228) (10.8) % Other restaurant operating costs 25,372 24,414 958 3.9 % General and administrative 13,857 12,404 1,453 11.7 % Depreciation and amortization 5,900 7,139 (1,239) (17.4) % Pre-opening — 69 (69) (100.0) % Restaurant impairments, closure costs and asset disposals 5,527 13,653 (8,126) (59.5) % Total costs and expenses 128,577 141,211 (12,634) (8.9) % Loss from operations (1,540) (14,778) 13,238 89.6 % Interest expense, net 2,391 2,753 (362) (13.1) % Loss before taxes (3,931) (17,531) 13,600 77.6 % Provision for income taxes 20 21 (1) (4.8) % Net loss $ (3,951) $ (17,552) $ 13,601 77.5 % Company-owned: Average unit volume $ 1,568 $ 1,353 $ 215 15.9 % Comparable restaurant sales 11.4 % 1.5 % Revenue Total revenue increased by $0.6 million, or 0.5%, to $127.0 million in the second quarter of 2026 compared to $126.4 million in the second quarter of 2025. During the second quarter of 2026, significant increases in comparable restaurant sales were partially offset by a decline in revenue related to 52 permanent company-owned closures and a decline in franchise revenue from 13 franchise restaurant closures over the last twelve months. Average unit volumes increased 15.9% to $1.57 million in the second quarter of 2026 compared to $1.35 million in the second quarter of 2025 primarily due to increases in same store sales and the closure of underperforming restaurants. System-wide comparable restaurant sales increased 10.3% in the second quarter of 2026 compared to the same period of 2025, comprised of an 11.4% increase at company-owned restaurants and a 5.5% increase at franchise-owned restaurants. Cost of Sales Cost of sales decreased by 5.6%, in the second quarter of 2026 compared to the same period of 2025. As a percentage of restaurant revenue, cost of sales decreased to 24.9% in the second quarter of 2026 compared to 26.5% in the second quarter of 2025, primarily due to a 0.6% benefit from menu price, a 0.5% benefit from menu mix shifts and a 0.4% benefit from reduced food waste, partially offset by a 0.2% impact from inflation. 22 Table of Contents Labor Costs Labor costs decreased by $2.5 million, or 6.5%, in the second quarter of 2026 compared to the same period of 2025. As a percentage of restaurant revenue, labor costs decreased to 29.4% in the second quarter of 2026 compared to 31.7% in the second quarter of 2025, primarily due to a 1.7% benefit from sales volume leverage, a 0.6% benefit from menu price and a 0.3% benefit from labor efficiencies, partially offset by a 0.4% impact from wage inflation. Occupancy Costs Occupancy costs decreased by $1.2 million or 10.8% in the second quarter of 2026 compared to the second quarter of 2025, primarily due to permanent restaurant closures. As a percentage of restaurant revenue, occupancy costs decreased to 8.1% in the second quarter of 2026 compared to 9.2% in the second quarter of 2025, primarily due to sales leverage. Other Restaurant Operating Costs Other restaurant operating costs increased by $1.0 million, or 3.9%, in the second quarter of 2026 compared to the second quarter of 2025. As a percentage of restaurant revenue, other restaurant operating costs increased to 20.3% in the second quarter of 2026 compared to 19.7% in the second quarter of 2025, primarily due to a 0.9% impact from an increase in delivery fees from higher third-party delivery sales, partially offset by a 0.2% impact from decreased marketing spend. General and Administrative Expense General and administrative expense increased by $1.5 million, or 11.7%, in the second quarter of 2026 compared to the second quarter of 2025, primarily due to increases in incentive-based compensation, partially offset by decreases in wages and professional fees. As a percentage of revenue, general and administrative expense increased to 10.9% in the second quarter of 2026 from 9.8% in the second quarter of 2025. Depreciation and Amortization Depreciation and amortization decreased by $1.2 million, or 17.4%, in the second quarter of 2026 compared to the second quarter of 2025, primarily due to restaurant closures since the second quarter of 2025. Restaurant Impairments, Closure Costs and Asset Disposals Restaurant impairments, closure costs and asset disposals decreased $8.1 million to $5.5 million in the second quarter of 2026 compared to $13.7 million the second quarter of 2025. We recorded fixed asset impairment on eight restaurants and wrote down lease related assets on six restaurants during the second quarter of 2026. In the second quarter of 2025, we recorded fixed asset impairment on 15 restaurants and we wrote down lease related assets on ten restaurants. Interest Expense, Net Interest expense, net decreased $0.4 million in the second quarter of 2026 compared to the second quarter of 2025, primarily due to lower average interest rates in the second quarter of 2026 as compared to the second quarter of 2025, partially offset by slightly higher average debt balances in 2026. Provision for Income Taxes The effective tax rate for the second quarter of 2026 and for the second quarter of 2025 reflect the impact of the previously recorded valuation allowance. The primary components of the provision for income tax (for both quarters) are related to state tax and the change in our valuation allowance. For the remainder of fiscal 2026, we do not anticipate material income tax expense or benefit as a result of the valuation allowance recorded. We will maintain a valuation allowance against deferred tax assets until there is sufficient evidence to support a full or partial reversal. The reversal of a previously recorded valuation allowance will generally result in a benefit from income tax. 23 Table of Contents Two Quarters Ended June 30, 2026 Compared to Two Quarters Ended July 1, 2025 The table below presents our unaudited operating results for the first two quarters of 2026 and 2025, and the related period-over-period changes. Two Fiscal Quarters Ended Increase / (Decrease) June 30, 2026 July 1, 2025 $ % (in thousands, except percentages) Revenue: Restaurant revenue $ 246,241 $ 245,107 $ 1,134 0.5 % Franchising royalties and fees, and other 4,582 5,120 (538) (10.5) % Total revenue 250,823 250,227 596 0.2 % Costs and expenses: Restaurant operating costs (exclusive of depreciation and amortization shown separately below): Cost of sales 61,912 65,153 (3,241) (5.0) % Labor 73,147 78,675 (5,528) (7.0) % Occupancy 20,519 22,887 (2,368) (10.3) % Other restaurant operating costs 51,084 50,070 1,014 2.0 % General and administrative 26,371 25,214 1,157 4.6 % Depreciation and amortization 11,881 14,229 (2,348) (16.5) % Pre-opening — 220 (220) (100.0) % Restaurant impairments, closure costs and asset disposals 8,261 14,944 (6,683) (44.7) % Total costs and expenses 253,175 271,392 (18,217) (6.7) % Loss from operations (2,352) (21,165) 18,813 88.9 % Interest expense, net 4,989 5,400 (411) (7.6) % Loss before taxes (7,341) (26,565) 19,224 72.4 % Provision for income taxes 27 44 (17) (38.6) % Net loss $ (7,368) $ (26,609) $ 19,241 72.3 % Company-owned: Average unit volumes $ 1,530 $ 1,333 $ 197 14.8 % Comparable restaurant sales 10.4 % 3.0 % Revenue Total revenue increased by $0.6 million, or 0.2%, in the first two quarters of 2026 to $250.8 million compared to $250.2 million in the same period of 2025. The increase was primarily due to increases in company comparable restaurant sales partially offset by a decline in revenue related to 52 permanent company-owned closures and a decline in franchise revenue from 13 franchise restaurant closures over the last twelve months. Comparable restaurant sales increased 9.7% system-wide in the first two quarters of 2026 compared to the first two quarters of 2025, comprised of a 10.4% increase at company-owned restaurants and a 6.7% increase at franchise-owned restaurants. Cost of Sales Cost of sales decreased by $3.2 million, or 5.0%, in the first two quarters of 2026 compared to the same period of 2025. As a percentage of restaurant revenue, cost of sales decreased to 25.1% in the first two quarters of 2026 compared to 26.6% in the first two quarters of 2025, primarily due to a 0.7% benefit from lower food waste and a 0.6% benefit from menu price. 24 Table of Contents Labor Costs Labor costs decreased by $5.5 million, or 7.0%, in the first two quarters of 2026 compared to the same period of 2025. As a percentage of restaurant revenue, labor costs decreased to 29.7% in the first two quarters of 2026 compared to 32.1% in the first two quarters of 2025, primarily due to a 1.6% benefit from sales leverage, a 0.8% benefit from menu price and a 0.3% benefit from labor efficiencies, partially offset by 0.6% of wage inflation. Occupancy Costs Occupancy costs decreased by $2.4 million, or 10.3%, in the first two quarters of 2026 compared to the first two quarters of 2025, primarily due to permanent restaurant closures. As a percentage of restaurant revenue, occupancy costs decreased to 8.3% in the first two quarters of 2026 compared to 9.3% in the first two quarters of 2025, primarily due to sales leverage. Other Restaurant Operating Costs Other restaurant operating costs increased by $1.0 million, or 2.0%, in the first two quarters of 2026 compared to the first two quarters of 2025. As a percentage of restaurant revenue, other restaurant operating costs increased to 20.7% in the first two quarters of 2026 compared to 20.4% in the first two quarters of 2025, primarily due to 0.6% impact from higher delivery fees driven by higher delivery sales, partially offset by 0.4% of sales leverage. General and Administrative Expense General and administrative expense increased by $1.2 million, or 4.6%, in the first two quarters of 2026 compared to the first two quarters of 2025, primarily due to higher incentive-based compensation, partially offset by lower wages and professional fees. As a percentage of revenue, general and administrative expense increased to 10.5% in the first two quarters of 2026 from 10.1% in the first two quarters of 2025. Depreciation and Amortization Depreciation and amortization decreased by $2.3 million, or 16.5%, in the first two quarters of 2026 compared to the first two quarters of 2025, primarily due to restaurant closures. Restaurant Impairments, Closure Costs and Asset Disposals Restaurant impairments, closure costs and asset disposals decreased $6.7 million to $8.3 million in the first two quarters of 2026 compared to the first two quarters of 2025. We recorded fixed asset impairment on 11 restaurants and wrote down lease related assets on 16 restaurants in the first two quarters of 2026. We recorded fixed asset impairment on 15 restaurants and wrote down lease related assets on 11 restaurants in the first two quarters of 2025. Interest Expense Interest expense decreased by $0.4 million in the first two quarters of 2026 compared to the same period of 2025. The decrease was primarily due to lower average interest rates in the first two quarters of 2026 compared to the first two quarters of 2025, partially offset by higher average debt balances in 2026. Provision for Income Taxes The effective tax rate for the first two quarters of 2026 and for the first two quarters of 2025 reflect the impact of the previously recorded valuation allowance. The primary components of the provision for income tax (for all quarters) are related to state tax and the change in our valuation allowance. For the remainder of fiscal 2026, we do not anticipate material income tax expense or benefit as a result of the valuation allowance recorded. We will maintain a valuation allowance against deferred tax assets until there is sufficient evidence to support a full or partial reversal. The reversal of a previously recorded valuation allowance will generally result in a benefit from income tax. We estimate the annual effective tax rate for 2026 to be between (1.0%) and (0%). 25 Table of Contents Liquidity and Capital Resources Summary of Cash Flows We have historically used cash and our revolving credit facility under our A&R Credit Agreement to fund capital expenditures for new restaurant openings, reinvest in our existing restaurants, invest in infrastructure and information technology and maintain working capital. Our working capital position benefits from the fact that we generally collect cash from sales to customers the same day, or in the case of credit or debit card transactions, within several days of the related sale, and we typically have up to 30 days to pay our vendors. We believe that we will have sufficient sources of cash to meet our liquidity needs and capital resource requirements for twelve months from the date of this report, through currently available cash and cash equivalents, availability under our revolving credit facility and cash flows from operations. We were in compliance with our covenants as of June 30, 2026, and expect to continue to be in compliance for twelve months from the date of this report. The Company will require new financing or other sources of capital to repay or an agreement with its current lenders to extend or refinance the amounts outstanding under the A&R Credit Agreement on or before maturity on July 27, 2027. The Company continues to review its options with respect to such debt obligation in connection with its review of strategic alternatives; however, there is no assurance that the Company will obtain such financing, other sources of capital, an extension or refinancing on or before the maturity date. Cash flows from operating, investing and financing activities are shown in the following table (in thousands): Two Fiscal Quarters Ended June 30, 2026 July 1, 2025 Net cash provided by operating activities $ 9,321 $ 3,181 Net cash used in investing activities (3,586) (6,318) Net cash (used in) provided by financing activities (5,701) 4,252 Net increase in cash and cash equivalents $ 34 $ 1,115 Operating Activities Net cash provided by operating activities was $9.3 million in the first two quarters of 2026 compared to net cash provided by operating activities of $3.2 million in the first two quarters of 2025. The increase in operating cash flow resulted primarily from a decrease in net loss as adjusted for non cash items including depreciation and impairments, as well as changes in working capital related to the timing of accounts payable, payroll and accrued liabilities. Investing Activities Net cash used in investing activities decreased $2.7 million to $3.6 million in the first two quarters of 2026 from $6.3 million in the first two quarters of 2025. This decrease was primarily due to the absence of capital expenditures for new restaurant development in 2026 and lower spending on certain technology projects. Financing Activities Net cash used in financing activities was $5.7 million in the first two quarters of 2026, compared to net cash provided by financing of $4.3 million in the first two quarters of 2025. The change from the first two quarters of 2025 was primarily due to payments on our revolving credit facility in 2026 versus borrowings on our revolving credit facility during 2025. Capital Resources Material Cash Requirements. Our short-term obligations consist primarily of certain lease and other contractual commitments related to our operations, normal recurring operating expenses, working capital needs, new store development, capital improvements and maintenance of our restaurants, regular interest payments on our debt obligations and certain non-recurring expenditures. Our long-term obligations consist primarily of certain lease and other contractual commitments related to our operations and payment of our outstanding debt obligations, including our debt under our A&R Credit Agreement, which matures on July 27, 2027. We are obligated under non-cancelable leases for our restaurants, administrative offices and equipment. In addition, when 26 Table of Contents we have a target for new store development this will require capital for such year, which is expected to be funded by currently available cash and cash equivalents, cash flows from operations and our revolving credit facility. Our capital expenditure requirements are primarily dependent upon the pace of our real estate development program and any resulting new restaurant openings, costs for maintenance and remodeling of our existing restaurants as well as information technology expenses and other general corporate capital expenditures. We currently do not plan to open any company-owned restaurants in 2026. We estimate capital expenditures will be approximately $9.0 million to $10.0 million for fiscal year 2026, including $5.0 million to $6.0 million for the remainder of the year, primarily for the reinvestment in existing restaurants and investments in technology. We expect such capital expenditures to be funded by currently available cash and cash equivalents, cash flows from operations and if necessary, undrawn capacity under our revolving credit line. Current Resources. Our operations have not historically required significant working capital and, like many restaurant companies, we operate with negative working capital. Restaurant sales are primarily paid for in cash or by credit or debit card, and restaurant operations do not require significant inventories or receivables. In addition, we receive trade credit for the purchase of food, beverages and supplies, therefore reducing the need for incremental working capital to support growth. Liquidity. As of June 30, 2026 and December 30, 2025, we had a cash balance of $1.3 million. The amount available for future borrowings under our A&R Credit Agreement (defined below) was $16.6 million as of June 30, 2026. We believe that our current cash and cash equivalents, the expected cash flows from company-owned restaurant operations, the expected franchise fees and royalties and available borrowings under the revolving credit facility under our A&R Credit Agreement will be sufficient to fund our cash requirements for working capital needs and capital improvements and maintenance of existing restaurants for twelve months from the date of this report. The Company will require new financing or other sources of capital to repay or an agreement with its current lenders to extend or refinance the amounts outstanding under the A&R Credit Agreement on or before maturity on July 27, 2027. The Company continues to review its options with respect to such debt obligation in connection with its review of strategic alternatives; however, there is no assurance that the Company will obtain such financing, other sources of capital, an extension or refinancing on or before the maturity date. Credit Facility On July 27, 2022, we amended and restated our Credit Agreement by entering into the Amended and Restated Credit Agreement as further amended, restated, extended, supplemented, modified and otherwise in effect from time to time, the (“A&R Credit Agreement”), with each other Loan Party (as defined in the A&R Credit Agreement) party thereto, each lender from time to time party thereto, and U.S. Bank National Association, as Administrative Agent, L/C Issuer and Swing Line Lender (each as defined in the A&R Credit Agreement). The A&R Credit Agreement matures on July 27, 2027 and is secured by a pledge of stock of substantially all of the Company’s subsidiaries and a lien on substantially all of the personal property assets of the Company and its subsidiaries. Among other things, the A&R Credit Agreement: (i) increased the credit facility from $100.0 million to $125.0 million; (ii) eliminated the term loan and principal amortization components of the credit facility; (iii) removed the Company’s capital expenditure covenant; (iv) enhanced flexibility for certain covenants and restrictions; and (v) lowered the spread of the Company’s cost of borrowing and transitioned from the London Interbank Offered Rate (“LIBOR”) to the Secured Overnight Financing Rate (“SOFR”) plus a margin of 1.50% to 2.50% per annum, based upon the consolidated total lease-adjusted leverage ratio. The A&R Credit Agreement was subsequently amended on December 21, 2023 and on October 29, 2024, the Company entered into that certain Second Amendment to Amended and Restated Credit Agreement (the “Second Amendment”). Among the modifications, the Second Amendment: (i) increased the maximum applicable rate ranges (A) with respect to SOFR loans, from 1.75% - 3.00% to 1.75% - 3.75% per annum and (B) with respect to base rate loans, from 0.75% - 2.00% to 0.75% - 2.75% per annum, in each case as determined by the Consolidated Total Lease Adjusted Leverage Ratio (as defined in the A&R Credit Agreement), (ii) conditioned the use of the general restricted payment basket on satisfaction of a Consolidated Total Lease Adjusted Leverage Ratio (as defined in the A&R Credit Agreement) of less than or equal to 4.00 to 1.00 and a Consolidated Fixed Charge Coverage Ratio (as defined in the A&R Credit Agreement) of greater than or equal to 1.25 to 1.00, (iii) restricted entry into new lease agreements so long as the Consolidated Total Lease Adjusted Leverage Ratio (as defined in the A&R Credit Agreement) in Section 7.11(a) of the A&R Credit Agreement is greater than or equal to 4.50 to 1.00, (iv) increased the Consolidated Total Lease Adjusted Leverage Ratio (as defined in the A&R Credit Agreement) in Section 7.11(a) of the A&R Credit Agreement to be no greater than (1) 5.00 to 1.00 for the fiscal quarters ending March 31, 2026 and June 30, 2026, (2) 4.75 to 1.00 for the fiscal quarters ending September 29, 2026 and December 29, 2026 and (3) 4.50 to 1.00 for the fiscal quarter ended March 30, 2027 and thereafter and (v) amended the Consolidated Fixed Charge Coverage Ratio (as defined in the A&R Credit Agreement) in Section 7.11(b) of the A&R Credit Agreement to be no less than (1) 1.15 to 1.00 for the fiscal quarters ending December 30, 2025 and March 31, 2026 and (2) 1.25 to 1.00 for the fiscal quarter ending June 30, 2026 and thereafter. 27 Table of Contents As of June 30, 2026, we had $105.4 million of indebtedness under the credit facility (excluding $0.9 million of unamortized debt issuance costs) and $3.0 million of letters of credit outstanding under our A&R Credit Agreement. Off-Balance Sheet Arrangements We had no off-balance sheet arrangements or obligations as of June 30, 2026. Critical Accounting Policies and Estimates Our condensed consolidated financial statements and accompanying notes are prepared in accordance with GAAP. Preparing consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. These estimates and assumptions are affected by the application of our accounting policies. Our significant accounting policies are described in our Annual Report on Form 10-K for the year ended December 30, 2025. Critical accounting estimates are those that require application of management’s most difficult, subjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods. While we apply our judgment based on assumptions believed to be reasonable under the circumstances, actual results could vary from these assumptions. It is possible that materially different amounts would be reported using different assumptions. Our critical accounting estimates are identified and described in our annual consolidated financial statements and the related notes included in our Annual Report on Form 10-K for our fiscal year ended December 30, 2025.