Table of ~~its operating restaurant properties, a gain of $0.5 million related to an insurance recovery from a fire at one of its restaurants and expense of $1.85 million related to a litigation settlement.~~Contents

ITEM 2—MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Carrols Restaurant Group, Inc. and its consolidated subsidiaries (collectively, "Carrols Restaurant Group", the "Company", “we”, “our”~~We operate on a 52 or ~~“us”) operated, as franchisee, 798 restaurants under the trade name “Burger King ®” in 17 Northeastern, Midwestern and Southeastern states.~~

~~We use a 52-53~~53 week fiscal year ending on the Sunday closest to December 31. ~~The three and nine months ended October 1, 2017 and October 2, 2016 each contained thirteen and thirty-nine~~Our fiscal quarters are comprised of 13 weeks, ~~respectively.~~with the exception of the fourth quarter of a 53 week year, which contains 14 weeks. Our fiscal year ~~ending December 31, 2017 will contain 52~~ended January 3, 2021 contained 53 weeks and our fiscal year ~~ended~~ending January ~~1, 2017 contained~~2, 2022 will contain 52 weeks.

Introduction

We are a holding company and conduct all of our operations through our direct and indirect subsidiaries and have no assets other than the shares of capital stock of Carrols Corporation, our direct wholly-owned subsidiary. The following Management's Discussion and Analysis of Financial Condition and Results of Operations (or "MD&A") is written to help the reader understand our company. The MD&A is provided as a supplement to, and should be read in conjunction with our unaudited ~~interim~~Condensed Consolidated Financial Statements ~~and the accompanying financial statement notes~~ appearing elsewhere in this report and our Annual Report on Form 10-K for the year ended January ~~1, 2017.~~3, 2021. The overview provides our perspective on the individual sections of MD&A, which include the following:

Company Overview—a general description of our business and our key financial measures.

Recent and Future Events Affecting Our Results of Operations—a description of recent events that affect, and future events that may affect, our results of operations.

Results from Operations—an analysis of our results of operations for the three ~~and nine~~ months ended ~~October 1, 2017~~April 4, 2021 compared to the three ~~and nine~~ months ended~~October 2, 2016~~March 29, 2020 including a review of material items and known trends and uncertainties.

Liquidity and Capital Resources—an analysis of historical information regarding our sources of cash and capital expenditures, the existence and timing of commitments and contingencies, changes in capital resources and a discussion of cash flow items affecting liquidity.

Application of Critical Accounting Policies—an overview of accounting policies requiring critical judgments and estimates.

~~Effects of New Accounting Standards—a discussion of new accounting standards and any implications related to our financial statements.~~

Forward Looking Statements—cautionary information about forward-looking statements and a description of certain risks and projections.

Company Overview

~~We are~~Carrols Restaurant Group, Inc. and its consolidated subsidiaries (collectively, "Carrols Restaurant Group", the "Company", “we”, “our” or “us”) is one of the largest restaurant companies in the United States and ~~have~~has been operating restaurants for more than 5560 years. We are the largest Burger King® franchisee in the United States, based on number of ~~restaurants, and have operated Burger King restaurants since 1976.~~restaurants. As of ~~October 1, 2017, our restaurant operations consisted~~April 4, 2021 we operated, as franchisee, a total of ~~798 franchised~~1,075 restaurants in 23 states under the trade names of Burger King® and Popeyes®. This included 1,010 Burger King restaurants in 1723 Northeastern, Midwestern, Southcentral and Southeastern states and 65 Popeyes restaurants in seven Southeastern states.

~~In 2012, as part of an acquisition of restaurants from~~Any reference to “BKC” refers to Burger King Corporation ~~("BKC") we were assigned BKC's right of first refusal on franchisee restaurant sales in 20 states (the "ROFR"~~and its indirect parent company, Restaurant Brands International Inc. (“RBI”). ~~In the first nine months of 2017 we acquired a total of 60restaurants in two separate transactions, 17~~ ~~located in the Baltimore, MD market~~Any reference to “PLK” refers to Popeyes Louisiana Kitchen, Inc. and 43 located in and around the Cincinnati, OH market. During the year ended January 1, 2017 we acquired 56 restaurants in seven separate transactions and during the year ended January 3, 2016 we acquired 55 restaurants in eight separate transactions.

For 2017, we have modified our groupings of restaurants to highlight our most recent acquisition activity within this MD&A for reporting and analysis purposes. We refer to our restaurants acquired in 2015, 2016 and 2017 as our "acquired restaurants”. All of our other restaurants, including restaurants acquired before 2015, are referred to as our "legacy restaurants".its indirect parent company, RBI.

The following is an overview of the key financial measures discussed in our results of operations:

•Restaurant sales ~~consist~~ consists of food and beverage sales at our restaurants, net of sales discounts and excluding sales tax collected. Restaurant sales are influenced by changes in comparable restaurant sales, menu price increases, new restaurant development, ~~acquisition~~acquisitions of restaurants and ~~the closure~~closures of restaurants. Comparable restaurant sales reflect the change in year-over-year sales for a comparable restaurant base. Restaurants ~~including restaurants~~ we acquire are included in comparable restaurant sales after they have been ~~open or~~ owned for 12 months and ~~immediately~~newly developed restaurants are included in comparable restaurant sales after they have been open for 15 months. Restaurants are excluded from ~~being remodeled.~~comparable restaurant sales during

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extended periods of closure, which primarily occur due to restaurant remodeling activity. For comparative purposes, where applicable, the calculation of the changes in comparable restaurant sales is based either on a 53-week or 52-week year and compares against the respective 52-week prior period.

•Cost of sales consists of food, paper and beverage costs ~~including~~(including packaging ~~costs,~~costs) and delivery charges, less purchase ~~discounts.~~discounts and vendor rebates. Cost of sales is generally influenced by changes in commodity costs, the mix of items sold, the level of promotional discounting, ~~and~~ the effectiveness of our restaurant-level controls to manage food and paper ~~costs.~~

costs, and the relative contribution of delivery sales.

•Restaurant wages and related expenses include all restaurant management and hourly productive labor costs and related benefits, employer payroll taxes and restaurant-level bonuses. Payroll and related benefits are subject to inflation, including minimum wage increases and increased costs for health insurance, workers’ compensation insurance and federal and state unemployment insurance.

•Restaurant rent expense includes ~~base rent~~straight-lined lease costs and ~~contingent~~variable rent on our restaurant leases characterized as operating ~~leases, and the amortization of favorable and unfavorable leases, reduced by the amortization of deferred gains on sale-leaseback transactions.~~

leases.

•Other restaurant operating expenses include all other restaurant-level operating costs, the major components of which are royalty expenses paid to BKC and PLK, utilities, repairs and maintenance, real estate taxes and credit card fees.

•Advertising expense includes advertising payments to BKC and PLK based on a percentage of sales as required under our franchise and operating agreements and additional marketing and promotional expenses in certain of our markets.

•General and administrative expenses are comprised primarily of salaries and expenses associated with corporate and administrative functions that support the development and operations of our restaurants, legal, auditing and other professional fees, acquisition costs and stock-based compensation expense.

•EBITDA, Adjusted EBITDA, Adjusted Restaurant-Level EBITDA and Adjusted ~~net income~~Net Loss. EBITDA, Adjusted EBITDA, Adjusted Restaurant-Level EBITDA and Adjusted ~~net income~~Net Loss are non-GAAP financial measures. EBITDA represents net ~~income or~~ loss before ~~provision or benefit for~~ income taxes, interest expense, and depreciation and amortization. Adjusted EBITDA represents EBITDA adjusted to exclude impairment and other lease charges, acquisition and integration costs, ~~stock~~stock-based compensation expense, abandoned development costs, restaurant pre-opening costs, non-recurring litigation and ~~non-recurring~~other professional expenses and other income orand expense. Adjusted Restaurant-Level EBITDA represents ~~income or~~ loss from operations as adjusted to exclude general and administrative

expenses, depreciation and amortization, impairment and other lease charges, restaurant-level integration costs, pre-opening costs and other income orand expense. Adjusted ~~net income~~Net Loss represents net ~~income~~loss as adjusted, net of tax, to exclude ~~loss on extinguishment of debt,~~ impairment and other lease charges, acquisition costs and integration costs, abandoned development costs, pre-opening costs, non-recurring litigation and other professional expenses and other income and expense and the related income tax effect of these adjustments. Adjusted net income also presents the estimated provision or benefit for income taxes as if there was no valuation allowance on our net deferred income tax assets during all periods presented.expense.

We are presenting Adjusted EBITDA, Adjusted Restaurant-Level EBITDA and Adjusted ~~net income~~Net Loss because we believe that they provide a more meaningful comparison than EBITDA and net ~~income~~loss of our core business operating results, as well as with those of other similar companies. Additionally, we present Adjusted Restaurant-Level EBITDA because it excludes restaurant integration costs, restaurant pre-opening costs, other income and expense, and the impact of general and administrative expenses such as salaries and expenses associated with corporate and administrative functions that support the development and operations of our restaurants, legal, auditing and other ~~income or expense which~~professional fees. Although these costs are not directly related to restaurant-level ~~operations.~~operations, these costs are necessary for the profitability of our restaurants. Management believes that Adjusted EBITDA, ~~and~~Adjusted Restaurant-Level EBITDA and Adjusted Net Loss, when viewed with ~~our~~the Company's results of operations in accordance with GAAP and the accompanying reconciliations on page ~~29,~~36, provide useful information about operating performance and period-over-period growth, and provide additional information that is useful for evaluating the operating performance of our core business without regard to potential distortions. Additionally, management believes that Adjusted EBITDA and Adjusted Restaurant-Level EBITDA permit investors to gain an understanding of the factors and trends affecting our ongoing cash earnings, from which capital investments are made and debt is serviced.

However, EBITDA, Adjusted EBITDA, Adjusted Restaurant-Level EBITDA and Adjusted ~~net income~~Net Loss are not measures of financial performance or liquidity under GAAP and, accordingly, should not be

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considered as alternatives to net income, income from operations or cash flow from operating activities as indicators of operating performance or liquidity. Also, these measures may not be comparable to similarly titled captions of other companies. For the reconciliation between ~~net income~~Net Loss to EBITDA, Adjusted EBITDA and Adjusted ~~net income~~Net Loss and the reconciliation of income from operations to Adjusted Restaurant-Level EBITDA, see page ~~29.~~36.

EBITDA, Adjusted EBITDA, Adjusted Restaurant-Level EBITDA and Adjusted ~~net income~~Net Loss have important limitations as analytical tools. These limitations include the following:

•EBITDA, Adjusted EBITDA and Adjusted Restaurant-Level EBITDA do not reflect our capital expenditures, future requirements for capital expenditures or contractual commitments to purchase capital equipment;

•EBITDA, Adjusted EBITDA and Adjusted Restaurant-Level EBITDA do not reflect the interest expense or the cash requirements necessary to service principal or interest payments on our debt;

•Although depreciation and amortization are non-cash charges, the assets that we currently depreciate and amortize will likely have to be replaced in the future, and EBITDA, Adjusted EBITDA and Adjusted Restaurant-Level EBITDA do not reflect the cash required to fund such replacements; and

•EBITDA, Adjusted EBITDA, Adjusted Restaurant-Level EBITDA and Adjusted ~~net income~~Net Loss do not reflect the effect of earnings or charges resulting from matters that our management does not consider to be indicative of our ongoing operations. However, some of these charges (such as impairment and other lease charges and acquisition costs) have recurred and may reoccur.

•Depreciation and amortization primarily includes the depreciation of fixed assets, including equipment, owned buildings and leasehold improvements utilized in our restaurants, the amortization of franchise rights from our acquisitions of ~~Burger King~~ restaurants and the amortization of franchise fees paid to ~~BKC.~~

BKC and PLK.

•Impairment and other lease chargesare determined through our assessment of the recoverability of property and equipment and intangible assets by determining whether the carrying value of these assets can be recovered over their respective remaining lives through undiscounted future operating cash flows. A potential impairment charge is evaluated whenever events or changes in circumstances indicate that the carrying amounts of these assets may not be fully recoverable. ~~Losses on sale-leaseback transactions are recognized when they are incurred.~~ Lease charges are recorded for our obligations under the related leases for closed locations net of estimated sublease recoveries.

•Interest expense consists ~~primarily~~ of interest expense associated with our ~~$275.0 million of 8% Senior Secured Second Lien Notes due 2022 (the "8% Notes"),~~Term Loan B borrowings, Term Loan B-1 borrowings, finance lease liabilities, amortization of deferred financing costs, amortization of ~~bond premium~~original issue discounts and interest on revolving credit ~~borrowings under our senior credit facility.~~

borrowings.

Recent and Future Events Affecting our Results of Operations

Impact of the COVID-19 Pandemic

The impact of the COVID-19 pandemic on restaurant sales at our Burger King ~~Restaurant Acquisitions~~restaurants began during the week ended March 15, 2020. During the week ended March 29, 2020, comparable restaurant sales decreased 33.8% compared to the prior year week. Comparable restaurant sales declines at our Burger King restaurants began easing mid-April of 2020 and for the month of June of 2020 the change in comparable restaurant sales was positive. For our Popeyes restaurants, the impact of the COVID-19 pandemic on restaurant sales started during the week ended March 22, 2020 and began easing mid-April of 2020.

~~From~~In response to the ~~beginning of 2016 through October 1, 2017,~~impact that the COVID-19 pandemic has had on our business operations and the continuing uncertainty in the economy in general, we have ~~acquired 116~~taken steps to adapt our business and strengthen and preserve our liquidity, including the following:

•In March 2020, we closed the dining rooms in all our restaurants ~~from~~and modified operating hours in line with local ordinances and day-part sales trends. These closures were in effect through most of the second quarter of 2020, with each restaurant operating according to their respective local governmental guidelines as well as safety procedures developed by BKC and PLK. As individual states and local governments have allowed reopenings, we have continually evaluated the opportunity to re-open dining

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rooms. By the end of the first quarter of 2021, most of our dining rooms have reopened, however, in most cases, guests have continued to rely on our drive-thru, carry-out and delivery service modes.

•We launched delivery services in March of 2020 at approximately 800 of our restaurants. Since then, we have added additional third-party delivery partners as they became available as well as expanded the number of restaurants where delivery service is offered as new locations were covered by our delivery partners. For the first quarter of 2021, delivery comprised approximately 4.8% of total restaurant sales.

•We temporarily closed 46 restaurants in late March 2020 and early April 2020 that were geographically close to one of our other ~~franchisees~~restaurants, and these closures were in effect for most of the second quarter of 2020. By the end of 2020, we had reopened all of these restaurants with the exception of two Burger King restaurants we permanently closed in the ~~following transactions ($~~third quarter of 2020.

•As discussed below, we increased revolving credit borrowing capacity under our Revolving Credit Facility (as defined below) by $30.8 million to a total of $145.8 million in ~~thousands):~~

Closing Date Number of Restaurants Purchase Price Fee-Owned Restaurants Market Location
2016 Acquisitions:
February 23, 2016 (1) 12
$ 7,127
Scranton/Wilkes-Barre, Pennsylvania
May 25, 2016 6
12,080
5
Detroit, Michigan
July 14, 2016 (1) 4
5,445
3
Detroit, Michigan
August 23, 2016 7
8,755
6
Portland, Maine
October 4, 2016 3
1,623
Raleigh, North Carolina
November 15, 2016 17
7,251
Pittsburgh and Johnstown, Pennsylvania
December 1, 2016 7
5,807
1
Columbus, Ohio
56
48,088
15

2017 Acquisitions:
February 28, 2017 43
20,373
Cincinnati, Ohio
June 6, 2017 (1) 17
16,190
Baltimore, Maryland and Washington, DC
Total 2016 and 2017 Acquisitions 116
$ 84,651
15


~~(1)~~	~~Acquisitions resulting from the exercise of our ROFR.~~

~~The 2016 acquisitions included the purchase~~March and April of ~~15 fee-owned restaurants,~~2020, and again in April of ~~which 14 were sold in sale-leaseback transactions in 2016~~2021 to $175.0 million. In June of 2020, we borrowed Incremental Term B-1 Loans (as defined below) under our Senior Credit Facilities for net proceeds of ~~$19.1 million.~~$71.3 million after original issue discount to increase our liquidity and protect against the uncertainty of a prolonged pandemic.

~~The unaudited pro forma impact on the results~~•We remain committed to active management of ~~operations~~our expenditures and for the ~~2016~~second quarter of 2020 limited spending mainly to necessary restaurant maintenance issues. For the full year of 2020, we reduced operating capital expenditures to $56.9 million from $134.9 million in 2019. We expect capital expenditures in 2021 to be approximately $60 million, net of estimated proceeds from sale-leaseback activity.

•We reduced regional and ~~2017 acquisitions is included below. The unaudited pro forma results~~corporate overhead by streamlining our regional management and support structure, improving our training process and instituted a 10% temporary reduction in all non-restaurant wages for the second quarter of ~~operations are not necessarily indicative~~2020. Given our improved business trajectory, this reduction in wages was restored as of July 1, 2020.

•As allowed under the Coronavirus Aid, Relief and Economic Security Act, as amended (the "CARES Act"), we deferred payment of the ~~results that would~~employer portion of Social Security taxes through the end of 2020. The amount of the cumulative deferral at the end of 2020 was approximately $21.6 million, of which 50% is payable on each of December 31, 2021 and December 31, 2022. This remains unpaid as of April 4, 2021, with $10.8 million included in accrued payroll, related taxes and benefits and $10.8 million included in other liabilities, long-term in the accompanying consolidated balance sheets.

•We negotiated with our landlords other than BKC to secure $5.8 million in deferral or abatement of 2020 cash rent obligations, of which $4.8 million was or is expected to be repaid over various periods which began in the third quarter of 2020. We have ~~occurred had~~repaid $2.1 million related to these deferrals through the ~~acquisitions~~first quarter of 2021.

•During the second quarter of 2020, we optimized payment terms with our key vendors and suppliers and utilized deferral opportunities with our utility vendors. These reverted to normal payment terms in July of 2020. During the year, we have experienced a number of minor and/or temporary supply chain issues which we continue to monitor as the communities we operate in reopen.

•We suspended any acquisition activity and share repurchases during the first quarter of 2020, which we subsequently reinstated during the fourth quarter of 2020.

Throughout the course of the evolving pandemic, we have been ~~consummated~~adapting our business in order to continue operating safely. To support the health and safety of our employees, beginning in March 2020 we mandated, among other things, the use of masks, sanitizers and temperature checks at the beginning of each shift for our team members as well as instituted contactless procedures in our restaurants. We also suspended all non-essential travel for our employees and implemented a work-from-home policy for all non-restaurant personnel effective through the ~~period presented, nor are they necessarily indicative~~second quarter of any future consolidated operating results. This unaudited pro forma financial information does not give effect to any anticipated synergies, operating efficiencies or cost savings or any transaction costs related2020. During the third quarter of 2020, administrative employees returned to the ~~2016~~office on a voluntary basis in compliance with New York's phased re-opening.

Although the COVID-19 pandemic has negatively impacted the Company's customer traffic, the immediate actions taken to continue drive-thru and carry-out business operations and secure additional liquidity have minimized the financial impact on the Company's results of operations, financial condition and cash flows. We believe our business model and world-class brands are ideally positioned to serve value and convenience-seeking

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customers as the communities we operate in are reopening and customers are returning to pre-pandemic behaviors and activities. As of the first quarter of 2021, the dining rooms in most of our restaurants were open although not widely used as guests continue to rely on our drive-thru, carry-out and delivery service modes.

We are currently working through a challenging labor environment that is impacting the quick-serve and casual dining business. We believe that this may ease in the coming months as the communities we operate in continue to reopen, with younger people gaining more access to the vaccine, the supply of potential high school and college-aged hourly team members seasonally increasing in the summer months, and schools returning to more stable pre-pandemic schedules.

While significant uncertainty remains as to when or ~~2017 acquired restaurants. The following table summarizes certain unaudited pro forma financial information related~~the manner in which the circumstances surrounding the COVID-19 pandemic will change, including but not limited to stock price volatility, lower customer traffic, governmental restrictions on restaurant businesses and the unpredictable economic environment, we have been nimble in adapting our ~~operating~~operations to the realities of the marketplace. We saw the results ~~for~~of these efforts in 2020 which have continued into 2021. Our Burger King restaurant sales in the ~~three and nine months endedOctober 1, 2017:~~first quarter of 2021 were 4.3% higher than restaurant sales in the comparable period of 2019, which includes the impact from the severe winter weather we experienced in February of 2021.

Three Months Ended Nine Months Ended
October 1, 2017 October 1, 2017
Restaurant sales $ 285,235
$ 826,347

Income from operations $ 9,186
$ 22,169

Adjusted EBITDA $ 24,220
$ 68,081

~~Capital Expenditures~~Area Development and Remodeling ~~Commitment~~Agreement

The Company, Carrols, Carrols LLC, and BKC entered into a new Area Development Agreement (the "ADA") which commenced on April 30, 2019 and was set to end on September 30, 2024 and which superseded the Operating Agreement dated as of May 30, 2012, as amended, between Carrols LLC and BKC. The ADA was amended and restated by all parties on January 4, 2021 (the "Amended ADA"). Pursuant to the ADA and for a cost of $3.0 million, BKC had assigned to Carrols LLC the right of first refusal on the sale of franchisee-operated restaurants in 16 states and a limited number of counties in four additional states ("ADA ROFR"). The ADA ROFR was terminated in connection with ~~BKC~~the Amended ADA.

Under ~~our operating agreement with BKC, beginning on January 1, 2016~~the Amended ADA, Carrols LLC has agreed to open, build and ~~until we exceed operating 1,000 Burger King restaurants,~~operate a ~~minimum~~total of ~~10% of our annual new restaurant growth (including acquisitions) must come from the development of~~50 new Burger King restaurants, ~~(which includes restaurants we relocate within their market area); provided that for 2016 only, any required restaurant development may be deferred and opened by the end~~80% of ~~2017. At October 1, 2017, we have completed the development of three restaurants towards this commitment. In the~~

~~fourth quarter, we anticipate opening 10 to 12 new restaurants and expect to~~which must be in ~~compliance with this commitment at the end of 2017.~~Kentucky, Tennessee and Indiana. This includes four Burger King restaurants by September 30, 2021, 10 additional Burger King restaurants by September 30, 2022, 12 additional Burger King restaurants by September 30, 2023, 12 additional Burger King restaurants by September 30, 2024 and 12 additional Burger King restaurants by September 30, 2025.

In ~~2017,~~addition, pursuant to the Amended ADA, BKC granted Carrols LLC franchise pre-approval to build new Burger King restaurants or acquire Burger King restaurants from Burger King franchisees with respect to 500 Burger King restaurants in the aggregate in (i) Kentucky, Tennessee and Indiana (excluding certain geographic areas in Indiana) and (ii) (a) 16 states, which include Arkansas, Indiana, Kentucky, Louisiana, Maine, Maryland, Michigan, Mississippi, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont and Virginia (subject to certain exceptions for certain limited geographic areas within certain states) and (b) any other geographic locations that Carrols LLC enters after the commencement date of the Amended ADA pursuant to BKC procedures subject to certain limitations.

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In connection with an acquisition of restaurants from in 2019, we ~~anticipate that total~~also assumed a development agreement for Popeyes®, which included an assignment by PLK of its right of first refusal under its franchise agreements with its franchisees for acquisitions in two southern states, as well as a development commitment to open, build and operate approximately 80 new Popeyes® restaurants over six years. This development agreement with PLK was terminated on March 17, 2021, with certain covenants applicable to us surviving the termination. PLK reserved the right to charge the us a $0.6 million fee if PLK and Carrols are not able to come to a mutually agreeable solution with respect to such fee within a six month period.

Capital Expenditures

We estimate our capital expenditures in 2021 will ~~range from $75~~be approximately $60 million, ~~to $85~~net of estimated sale-leaseback activity. We incurred $10.6 million ~~although the actual amount~~ of capital expenditures ~~may differ from these estimates. Capital expenditures~~ in ~~2017 include remodeling~~the first three months of 2021, net of sale-leaseback proceeds, properties purchased for sale-leaseback, and insurance proceeds.

We opened two Burger King restaurants in the first three months of 2021. We expect to complete development of eight new Burger King restaurants in 2021 and to remodel 14 Burger King restaurants and seven Popeyes restaurants.

Refinancing of Indebtedness and Amendments to our Senior Credit Facilities

On April 30, ~~to 35 restaurants~~2019, we entered into a new senior secured credit facility which provides for senior secured credit facilities in an aggregate principal amount of $550.0 million (as amended the "Senior Credit Facilities"), consisting of (i) a term loan B facility in an aggregate principal amount of $425.0 million (the “Term Loan B Facility”), the entire amount of which was borrowed by us on April 30, 2019 and (ii) a revolving credit facility (including a sub-facility of $35.0 million for standby letters of credit) in an aggregate principal amount of $125.0 million (the "Revolving Credit Facility"). Prior to the ~~BKC 20/20 image standard at an approximate average cost of $600,000 per restaurant, rebuilding 5 to 7 restaurants~~entry into the Second Amendment (as defined below), borrowings under the Term Loan B Facility and the ~~construction~~Revolving Credit Facility initially bore interest at a rate per annum, at our option, of ~~12 to 14 new restaurants,~~(i) the Alternate Base Rate (such definition and all other definitions used herein and otherwise not defined herein shall have the meanings set forth in the Senior Credit Facilities) plus the applicable margin of ~~which 2~~2.25% or ~~3 restaurants will be relocated within their respective markets, at an average cost~~(ii) the LIBOR Rate plus a margin of ~~$1,500,000 per restaurant which excludes~~3.25% (as defined in the ~~cost of land. Capital expenditures in 2017 also include approximately $10 million to $12 million for non-recurring investments in new kitchen production~~Senior Credit Facilities). The Term Loan B Facility matures on April 30, 2026 and ~~food holding systems, new restaurant training systems and certain point-of-sale equipment upgrades. We will review~~the Revolving Credit Facility matures on ~~an ongoing basis our future remodel and development plans in relation to our available capital resources and alternate investment opportunities. At October 1, 2017~~April 30, 2024.

On December 13, 2019, we ~~had 578 restaurants with~~entered into the ~~20/20 restaurant image, which included restaurants converted prior to our acquisition.~~

~~Issuance of Indebtedness and~~First Amendment to our Senior Credit Facilities which amended a financial covenant under the Senior Credit Facilities applicable solely with respect to the Revolving Credit Facility that previously required the Company to maintain quarterly a Total Net Leverage Ratio of not greater than 4.75 to 1.00 (measured on a most recent four quarter basis), to now require that the Company maintain only a First Lien Leverage Ratio of not greater than 5.75 to 1.00 (as measured on a most recent four quarter basis) if, and only if, on the last day of any fiscal quarter (beginning with the fiscal quarter ended December 29, 2019), the sum of the aggregate principal amount of outstanding revolving credit borrowings under the Revolving Credit Facility and the aggregate face amount of letters of credit issued under the Revolving Credit Facility (excluding undrawn letters of credit in an aggregate face amount up to $12.0 million) exceeds 35% of the aggregate amount of the maximum revolving credit borrowings under the Revolving Credit Facility. The First Amendment also reduced the aggregate maximum revolving credit borrowings under the Revolving Credit Facility by $10.0 million to a total of $115.0 million.

On March 25, 2020, we entered into the Second Amendment to our Senior Credit Facilities (the "Second Amendment"). The Second Amendment increased the aggregate maximum commitments available for revolving credit borrowings (including standby letters of credit) under the revolving credit facility (the "Revolving Committed Amount") by $15.4 million to a total of $130.4 million.

The Second Amendment also amended the definition of Applicable Margin (such definition and all other definitions used herein and otherwise not defined herein shall be the meanings set forth in the Senior Credit Facilities) in the Senior Credit Facilities to provide that on and after the date of the Second Amendment (the "Second Amendment Effective Date"), the Applicable Margin for borrowings under the Revolving Credit Facility (including Letter of Credit Fees) shall be at a rate per annum equal to (a) for so long as the Revolving Committed Amount is greater than $115.0 million, (i) for the period commencing on the Second Amendment Effective Date and including the date that is 179 days after the Second Amendment Effective Date, 3.5% for LIBOR Rate Loans and 2.5% for Alternate Base Rate Loans, (ii) for the period commencing on the date that is 180 days after the

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Second Amendment Effective Date, through and including the date that is 269 days after the Second Amendment Effective Date, 4.25% for LIBOR Rate Loans and 3.25% for Alternate Base Rate Loans, (iii) for the period commencing on the date that is 270 days after the Second Amendment Effective Date, through and including the date that is 364 days after the Second Amendment Effective Date, 4.5% for LIBOR Rate Loans and 3.5% for Alternate Base Rate Loans and (iv) for the period commencing on the date that is 365 days after the Second Amendment Effective Date and thereafter, 4.75% for LIBOR Rate Loans and 3.75% for Alternate Base Rate Loans and (b) for so long as the Revolving Committed Amount is equal to or less than $115.0 million, 3.5% for LIBOR Rate Loans and 2.5% for Alternate Base Rate Loans.

The Second Amendment also provides that beginning on the 180th day after the Second Amendment Effective Date and for so long as the Revolving Committed Amount is greater than $115.0 million, we shall pay to the Administrative Agent, for the ratable benefit of the Revolving Facility Lenders, a commitment fee (the "Ticking Fee") on the average daily amount of the Revolving Committed Amount at a rate per annum equal to (a) 0.125% for the 180th day after the Second Amendment Effective Date through and including the 269th day after the Second Amendment Effective Date, (b) 0.25% for the 270th day after the Second Amendment Effective Date through and including the 364th day after the Second Amendment Effective Date and (c) 1.00% for the 365th day after the Second Amendment Effective Date and thereafter. The Second Amendment provides that the Ticking Fee will be due and payable quarterly in arrears (calculated on a 360-day basis) on the last Business Day of each calendar quarter and will accrue from the 180th day after the Second Amendment Effective Date for so long as the Revolving Committed Amount is greater than $115.0 million. The Second Amendment also provides that we shall use the proceeds of an Extension of Credit which results in the sum of the aggregate principal amount of outstanding Revolving Loans plus the aggregate amount of LOC Obligations equaling an amount in excess of $115.0 million, solely for our ongoing operations and our subsidiaries and shall not be held as cash on the balance sheet. Pursuant to the Letter Agreement, (the "Letter Agreement") dated as of March 25, 2020 among the Company, Wells Fargo Securities, LLC, Wells Fargo Bank, National Association and Truist Bank, we agreed to defer rent payments totaling approximately $2.4 million per month under certain real property leases for the period between April 1, 2020 through and including June 30, 2020. We paid these amounts in full according to these terms on July 1, 2020.

On April 8, 2020, we entered into the Third Amendment to our Senior Credit Facilities which increased the aggregate maximum commitments available for revolving credit borrowings (including standby letters of credit) under the Revolving Credit Facility by $15.4 million to a total of $145.8 million.

On April 16, 2020, we entered into the Fourth Amendment to our Senior Credit Facilities (the "Fourth Amendment"). The Fourth Amendment permits us to incur and, if necessary, repay indebtedness incurred pursuant to the Paycheck Protection Program (the "PPP") under the CARES Act. We have decided that we will not be borrowing under the PPP.

On June 23, ~~2017,~~2020 (the "Fifth Amendment Effective Date"), we ~~issued an additional $75 million~~entered into the Fifth Amendment to our Senior Credit Facilities (the "Fifth Amendment"). The Fifth Amendment increased the Term Loan (as defined in the Senior Credit Facilities) borrowings in the aggregate principal amount of ~~8% Notes~~$75 million of Incremental Term B-1 Loans (as defined in the Senior Credit Facilities). The Incremental Term B-1 Loans constitute a new tranche of Term Loans ranking pari passu in right of payment and security with the Initial Term Loans (as defined in the Senior Credit Facilities) for all purposes under the Senior Credit Facilities. The Incremental Term B-1 Loans have the same terms as outstanding borrowings under the Company's existing Term Loan B facility pursuant to and in accordance with the Senior Credit Facilities, provided that (i) borrowings under the Incremental Term B-1 Loans will bear interest at a ~~premium~~rate per annum, at our option, of ~~106.5%~~(a) the Alternate Base Rate (as defined in ~~a private placement~~the Senior Credit Facilities) plus the applicable margin of 5.25% or (b) the LIBOR Rate (as defined in the Senior Credit Facilities) (which shall not be less than 1% for Incremental Term B-1 Loans) plus the applicable margin of 6.25% and ~~used a portion~~(ii) certain prepayments of the ~~net~~Incremental Term B-1 Loans by us prior to the first anniversary of the Fifth Amendment Effective Date are subject to a premium to the Administrative Agent (as defined in the Senior Credit Facilities), for the ratable account of each applicable Term Loan Lender (as defined in the Senior Credit Facilities) holding Incremental Term B-1 Loans on the date of such prepayment equal to the Applicable Make-Whole Amount (as defined in the Senior Credit Facilities) with respect to the principal amount of the Incremental Term B-1 Loans so prepaid. The principal amount of the Incremental Term B-1 Loans will amortize in an aggregate annual amount equal to 1% of the original principal amount of the Incremental Term B-1 Loans and shall be repayable in consecutive quarterly installments on the last day of our fiscal quarters beginning on the third fiscal quarter of 2020

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with the remaining outstanding principal amount of the Incremental Term B-1 Loan and all accrued but unpaid interest and other amounts payable with respect to the Incremental Term B-1 Loan due on April 30, 2026 which is the Term Loan Maturity Date (as defined in the Senior Credit Facilities).

On April 6, 2021, we entered into the Sixth Amendment to Credit Agreement (the "Sixth Amendment"). The Sixth Amendment increased the aggregate maximum commitments available for revolving credit borrowings (including standby letters of credit) under our Revolving Credit Facility by $29.2 million to a total of $175.0 million. The Sixth Amendment also amended the definitions in the Senior Credit Facilities of (i) Applicable Margin, to provide that the Applicable Margin for borrowings under the Revolving Credit Facility (including Letter of Credit Fees) shall be at a rate per annum equal to 3.25% for LIBOR Rate Loans and 2.25% for Alternate Base Rate Loans, and (ii) Revolving Maturity Date, to provide that the Revolving Maturity Date is extended to January 29, 2026. In addition, the Sixth Amendment amended the Senior Credit Facilities to remove our obligation to (i) pay a Ticking Fee pursuant to the Ticking Fee Rate and (ii) use the proceeds of an Extension of Credit which results in the sum of the aggregate principal amount of outstanding Revolving Loans plus the aggregate amount of LOC Obligations equaling an amount in excess of $115.0 million solely for our ongoing operations and not to ~~repay all~~hold as cash on the balance sheet.

As of April 4, 2021, there were no revolving credit borrowings outstanding and $9.0 million of letters of credit were issued under our Revolving Credit Facility. After reserving for issued letters of credit, $136.8 million was available for revolving credit borrowings under our ~~amended senior credit facility~~Senior Credit Facilities at April 4, 2021.

Interest Rate Swap Agreement

We entered into a five year interest rate swap agreement commencing March 3, 2020 and ending February 28, 2025 with a notional amount of $220.0 million to ~~pay related fees and expenses. We received net proceeds~~swap variable rate interest payments (one-month LIBOR plus the applicable margin) under our Senior Credit Facilities for fixed interest payments bearing an interest rate of ~~approximately $35.5 million from~~0.915% plus the ~~offering which will be used for working capital and general corporate purposes, including future restaurant acquisitions.~~applicable margin in our Senior Credit Facilities.

Stock Repurchase Program

On ~~June 20, 2017,~~August 2, 2019, our Board of Directors approved a stock repurchase plan (the "Repurchase Program") under which we ~~entered into an amendment~~may repurchase up to ~~our senior credit facility to increase the permitted indebtedness for our second lien notes to a principal amount not to exceed $300.0 million in order to provide for the additional $75~~$25 million of ~~8% Notes issued on June 23, 2017.~~our outstanding common stock. The authorization became effective August 2, 2019, and expires 24 months thereafter, unless terminated earlier by the Board of Directors. Purchases under the Repurchase Program may be made from time to time in open market transactions at prevailing market prices or in privately negotiated transactions (including, without limitation, the use of Rule 10b5-1 plans) in compliance with applicable federal securities laws, including Rule 10b-18 under the Securities Exchange Act of 1934, as amended.

~~Additionally, on~~During the year ended January ~~13, 2017,~~3, 2021, we ~~entered into~~repurchased in open market transactions 1,534,304 shares at an ~~amendment to our senior credit facility to, among other things, increase the maximum revolving credit borrowings by $18.0 million to~~average share price of $6.52 for a total cost of ~~$73.0 million.~~$10.0 million under the Repurchase Program, all during the fourth quarter of 2020. We have not repurchased any shares in the three months ended April 4, 2021.

As of April 4, 2021, $11.0 million was available to repurchase shares under the Repurchase Program. We have no obligation to repurchase additional shares of stock under the Repurchase Program, and the timing, actual number and value of shares purchased will depend on our stock price, trading volume, general market and economic conditions and other factors.

Future Restaurant Closures

We evaluate the performance of our restaurants on an ongoing basis including an assessment of the current and future operating results of ~~the~~each restaurant in relation to its cash flow and future occupancy costs, and with regard to franchise agreement renewals, the cost of required capital improvements. We may elect to close restaurants based on these evaluations.

In ~~the first nine months of 2017 we closed sixteen restaurants,~~2020, excluding one restaurant relocated within its ~~respective market area. In 2016,~~trade area, we closed ~~seven~~33 Burger King restaurants ~~including six~~which included eleven Burger King restaurants permanently closed ~~on January 1, 2017 and excluding five restaurants relocated within their respective trade areas.~~in the first quarter of 2020. In the first three months of 2021, we permanently closed one Burger King restaurant. We currently anticipate ~~that for all~~less than five restaurant closures in 2021 outside of ~~2017 we will close a total of 20 to 22 restaurants at or near the end of their respective lease term, excluding~~ any restaurants being relocated within their trade ~~area.~~area at the end of their respective lease term.

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Our determination of whether to close restaurants in the future is subject to further evaluation and may change. We may incur lease charges in the future from closures of underperforming restaurants prior to the expiration of their contractual lease term. We do not believe that the future impact on our results of operations due to restaurant closures will be material, although there can be no assurance in this regard.

~~Reversal of Valuation Allowance on Deferred Income Tax Assets~~

In 2014, we recorded a valuation allowance on all of our net deferred tax assets. For the three months ended October 2, 2016 we determined that a valuation allowance was still needed for all of our net deferred income tax assets, based on the required weight of positive and negative evidence under ASC 740, including consideration of our three-year cumulative loss at that date. Consequently, we recorded no provision or benefit for income taxes in the third quarter of 2016.

During the fourth quarter of 2016, we evaluated evidence to consider the reversal of the valuation allowance on our net deferred income tax assets and determined that there was sufficient positive evidence to conclude that it is

more likely than not our deferred income tax assets are realizable. In determining the likelihood of future realization of our deferred income tax assets as of January 1, 2017, we considered both positive and negative evidence and weighted the effect of such evidence based upon its objectivity as required by ASC 740. As a result, we believed that the weight of the positive evidence, including the cumulative income position in the three most recent years (as adjusted for non-recurring items and permanent differences between book and tax) and forecasts for a sustained level of future taxable income, was sufficient to overcome the weight of the negative evidence, and recorded a $30.4 million tax benefit to release the full valuation allowance against our deferred income tax assets in the fourth quarter of 2016.

Effect of Minimum Wage Increases

Certain of the states and municipalities in which we operate have increased their minimum wage rates for ~~2017~~2021 and in many cases have also approved additional increases for future periods. Most notably, New York State has increased the minimum wage applicable to our business to ~~$10.75~~$15.00 an hour on July 1, 2021 from $13.75 an hour in ~~2017 (from $9.75 an~~2020, $12.75 per hour in ~~2016) with subsequent annual increases reaching $15.00~~2019 and $11.75 per hour in 2018. New York State has an ~~hour by July 1, 2021. Since 2015,~~Urban Youth Credit through 2022 for which we have been receiving ~~New York State minimum wage tax credits that partially offset these additional labor costs. These tax credits diminish over the next few years but currently total~~ approximately $500,000 per ~~year.~~year since 2016. We had ~~128~~125 restaurants in New York State at ~~October 1, 2017.~~ April 4, 2021. As of such date, we also had one restaurant in Massachusetts that has annual minimum wage increases reaching $15.00 per hour in 2023, 10 restaurants in New Jersey that have annual minimum wage increases reaching $15.00 per hour in 2024, and 45 total restaurants in Illinois and Maryland that have annual minimum wage increases reaching $15.00 per hour in 2025.

We typically attempt to offset the effects of wage inflation, at least in part, through periodic menu price increases. However, no assurance can be given that we will be able to offset these wage increases in the future.

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Results of Operations

Three ~~and Nine~~ Months Ended ~~October 1, 2017~~April 4, 2021 Compared to Three ~~and Nine~~ Months Ended ~~October 2, 2016~~

March 29, 2020

The following table highlights the key components of sales and the number of restaurants in operation for ~~the three and nine month period~~our first quarter ended ~~October 1, 2017~~April 4, 2021 as compared to the ~~three and nine month period~~first quarter ended ~~October 2, 2016 (dollars in thousands)~~March 29, 2020 (inclusive of restaurants that were temporarily closed due to COVID-19 during the period):


	Three Months Ended
	April 4, 2021		March 29, 2020
Restaurant Sales	389,993		351,518
Burger King	368,488		329,637
Popeyes	21,505		21,881

Change in Comparable Restaurant Sales % (a)	13.8	%	(5.7)	%
Change in Comparable Burger King Restaurant Sales (a)	14.7	%	(5.7)	%
Change in Comparable Popeyes Restaurant Sales (a)	0.5	%

Burger King Restaurants operating at beginning of period:	1,009		1,036
New restaurants opened, including relocations	2		3

Restaurants closed, including relocations	(1)		(11)
Burger King Restaurants at end of period	1,010		1,028
Average number of operating Burger King restaurants	1,009.0		1,030.2

Popeyes Restaurants operating at beginning and end of period:	65		65



Average number of operating Popeyes restaurants	65.0		64.8

Three Months Ended Nine Months Ended
October 1, 2017 October 2, 2016 October 1, 2017 October 2, 2016
Restaurant Sales:
Legacy restaurants $ 225,587
$ 212,880
$ 653,910
$ 634,432
Acquired restaurants 59,648
25,990
150,655
68,325
Total $ 285,235
$ 238,870
$ 804,565
$ 702,757

Change in Comparable Restaurant Sales % 7.5 % 0.0 % 3.9 % 2.0 %
Legacy restaurants 7.5 % 0.0 % 3.9 % 2.0 %
Acquired restaurants (1)
7.7 % 6.3 % 3.8 % 6.7 %

~~(1) Acquired restaurants~~a.Restaurants we acquire are included in comparable restaurant sales after they have been ~~owned~~operated by us for ~~twelve~~12 months. ~~For~~Sales from restaurants we develop are included in comparable restaurant sales after they have been open for 15 months. The calculation of changes in comparable restaurant sales is based on the ~~three and nine months ended October 2, 2016, the acquired restaurants~~ comparable 13-week period.

Restaurant Sales. Total restaurant sales ~~include the nine restaurants acquired during~~in the first ~~nine months~~quarter of ~~2015.~~

~~The following table sets forth~~2021 increased $38.5 million to $390.0 million from the ~~number~~first quarter of ~~stores in operation at the end of the three and nine month periods ended October 1, 2017 and October 2, 2016:~~

Three Months Ended Nine Months Ended
October 1, 2017 October 2, 2016 October 1, 2017 October 2, 2016
Operating at beginning of period 799
723
753
705
New restaurants opened (1)
—
1
2
3
Acquired —
11
60
29
Closed (1)
(1 ) (1 ) (17 ) (3 )
Operating at end of period 798
734
798
734

(1) In the nine months ended October 1, 2017, new restaurants opened included two restaurants relocated with their market area and closed restaurants included one restaurant closed as a result of relocation.

~~Restaurant Sales.~~ ~~Comparable~~2020. Our comparable restaurant sales increased ~~7.5% in~~13.8% compared to the ~~third~~first quarter of ~~2017 consisting of~~2020 which reflected an increase in average check of ~~4.8%, including a 2.5% effect of menu price increases since the beginning of the third quarter of 2016,~~11.2% and an increase in customer traffic of ~~2.7%~~2.4%. ~~Restaurant sales also reflected~~The change in average check included a 0.7% effective price increase compared to the ~~acquisition of 98 restaurants since the beginning of the third~~first quarter of ~~2016.~~

~~For the nine months ended October 1, 2017, comparable restaurant sales increased 3.9% due to an~~2020. The decrease in customer traffic and increase in average check realized during the first quarter of ~~3.6% and an increase customer traffic~~2021 reflects changing consumer behavior as a result of ~~0.3%. The effect~~the COVID-19 pandemic. Promotional sales discounts in the first ~~nine months~~quarter of 2017 from menu price increases taken since the beginning of 2016 was approximately 1.9%. Restaurant sales also increased due to the 116 restaurants acquired since the beginning of 2016 which added $95.3 million2021 were 23.0% of restaurant ~~sales.~~sales at our Burger King restaurants compared to 22.3% in the first quarter of 2020.

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Operating Costs and Expenses (percentages stated as a percentage of total ~~restaurant sales)~~revenue).The following table sets forth, for the three ~~and nine~~ months ended ~~October 1, 2017~~April 4, 2021 and ~~October 2, 2016,~~March 29, 2020, selected operating results as a percentage of total ~~restaurant sales:~~revenue:


	Three Months Ended				Nine Months Ended					Three Months Ended
	October 1, 2017		October 2, 2016		October 1, 2017		October 2, 2016			April 4, 2021		March 29, 2020
Costs and expenses (all restaurants):									Costs and expenses (all restaurants):
Cost of sales	28.7	%	26.7	%	27.9	%	26.3	%	Cost of sales	29.2	%	29.3	%
Restaurant wages and related expenses	32.1	%	31.7	%	32.4	%	31.5	%	Restaurant wages and related expenses	33.2	%	35.4	%
Restaurant rent expense	6.9	%	6.7	%	7.0	%	6.8	%	Restaurant rent expense	7.8	%	8.4	%
Other restaurant operating expenses	15.0	%	15.7	%	15.4	%	15.7	%	Other restaurant operating expenses	15.7	%	16.5	%
Advertising expense	4.1	%	4.5	%	4.1	%	4.4	%	Advertising expense	3.9	%	3.9	%
General and administrative	5.2	%	5.4	%	5.6	%	5.8	%	General and administrative	5.5	%	5.9	%

Table of ~~2017 was $3.2 million, or $0.07 per diluted share, compared to net income in first nine months of 2016 of $16.0 million, or $0.35 per diluted share.~~Contents

Reconciliations of net ~~income~~loss to EBITDA, Adjusted EBITDA and Adjusted ~~net income~~Net Loss, and ~~income~~Loss from operations to Adjusted Restaurant-Level EBITDA for the three ~~and nine~~ months ended ~~October 1, 2017~~April 4, 2021 and ~~October 2, 2016~~March 29, 2020 are as follows (in thousands, except for per share data):


	Three Months Ended
Reconciliation of EBITDA and Adjusted EBITDA:	April 4, 2021		March 29, 2020
Net loss	$	(7,168)	$	(22,209)
Benefit from income taxes	(2,661)		(6,978)
Interest expense	6,726		7,140
Depreciation and amortization	20,609		21,031
EBITDA	17,506		(1,016)
Impairment and other lease charges	353		2,881
Acquisition and integration costs (1)	—		81
Abandoned development costs (2)	—		688
Pre-opening costs (3)	29		89
Litigation and other professional expenses (4)	282		61
Other expense, net (5)	227		56
Stock-based compensation expense	1,469		1,132
Adjusted EBITDA	$	19,866	$	3,972


Reconciliation of Adjusted Restaurant-Level EBITDA:
Loss from operations	$	(3,103)	$	(22,047)
Add:
General and administrative expenses	21,369		20,787

Pre-opening costs (3)	29		89
Depreciation and amortization	20,609		21,031
Impairment and other lease charges	353		2,881
Other expense, net (5)	227		56
Adjusted Restaurant-Level EBITDA	$	39,484	$	22,797


Reconciliation of Adjusted Net Loss:
Net loss	$	(7,168)	$	(22,209)
Add:
Impairment and other lease charges	353		2,881
Acquisition and integration costs (1)	—		81
Abandoned development costs (2)	—		688
Pre-opening costs (3)	29		89
Litigation and other professional expenses (4)	282		61
Other expense, net (5)	227		56
Income tax effect on above adjustments (6)	(223)		(964)
Adjusted Net Loss	$	(6,500)	$	(19,317)
Adjusted diluted net loss per share (7)	$	(0.13)	$	(0.38)
Adjusted diluted weighted average common shares outstanding (in thousands of shares)	49,824		50,821

(1)Acquisition and integration costs for the three months ended March 29, 2020 primarily include legal and professional fees incurred in connection with the acquisition of 165 Burger King and 55 Popeyes restaurants from Cambridge Franchise Holdings, LLC in 2019 which were included in general and administrative expense.

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Three Months Ended Nine Months Ended
Reconciliation of EBITDA and Adjusted EBITDA: October 1, 2017 October 2, 2016 October 1, 2017 October 2, 2016
Net income $ 2,795
$ 4,489
$ 3,238
$ 16,010
Provision (benefit) for income taxes (48 ) —
608
—
Interest expense 5,937
4,560
15,767
13,615
Depreciation and amortization 13,655
12,070
40,172
34,613
EBITDA 22,339
21,119
59,785
64,238
Impairment and other lease charges 1,039
685
2,002
1,193
Acquisition costs (1) 502
453
1,668
1,091
Gain on partial condemnation and fire (2) (383 ) —
(383 ) (906 )
Litigation settlement (2) —
—
—
1,850
Stock-based compensation expense 723
456
2,509
1,627
Adjusted EBITDA $ 24,220
$ 22,713
$ 65,581
$ 69,093
(2)Abandoned development costs for the three months ended March 29, 2020 represents the write-off of capitalized costs due to the abandoned development in 2020 of previously planned new restaurant locations.

(3)Pre-opening costs for the three months ended April 4, 2021 and March 29, 2020 include training, labor and occupancy costs incurred during the construction of new restaurants.

Reconciliation of Restaurant-Level EBITDA:
Income from operations $ 8,684
$ 9,049
$ 19,613
$ 29,625
Add:
General and administrative expenses 14,699
13,000
44,686
40,561
Depreciation and amortization 13,655
12,070
40,172
34,613
Impairment and other lease charges 1,039

685
2,002
1,193
Other expense (income), net (383 )
—
(354 ) 1,035
Restaurant-Level EBITDA $ 37,694
$ 34,804
$ 106,119
$ 107,027

Reconciliation of Adjusted net income:
Net income $ 2,795
$ 4,489
$ 3,238
$ 16,010
Add:
Impairment and other lease charges 1,039
685
2,002
1,193
Gain on partial condemnation and fire (2) (383 ) —
(383 ) (906 )
Litigation settlement (2) —
—
—
1,850
Acquisition costs (1) 502
453
1,668
1,091
Income tax effect on above adjustments (3) (440 ) (432 ) (1,249 ) (1,226 )
Provision for deferred income tax valuation allowance (4) —
466
—
(2,175 )
Adjusted net income $ 3,513
$ 5,661
$ 5,276
$ 15,837
Adjusted diluted net income per share (5) $ 0.08
$ 0.13
$ 0.12
$ 0.35

~~(1)~~

~~Acquisition costs include legal and professional fees incurred in connection~~(4)Litigation and other professional expenses for the three months ended April 4, 2021 and March 29, 2020 includes litigation expenses pertaining to an ongoing lawsuit with restaurant acquisitions and in the three and nine months ended October 1, 2017, include certain payroll and other costs associated with the wind-down of our most recent acquisition's corporate headquarters, which were included in general and administrative expense.


~~(2)~~	~~Other income for the three and nine months ended October 1, 2017~~included a gain of $0.4 million related to an insurance recovery from a fire at one of its restaurants. Other income for the nine months ended October 2, 2016 includes a gain of $0.5 million related to an insurance recovery from a fire at one of our restaurants, a gain of $0.5 million related to a settlement for

~~a partial condemnation on~~ one of the Company's former vendors and other non-recurring professional service expenses.

(5)Other expense, net, for the three months ended April 4, 2021, included a loss on disposal of assets of $0.2 million. Other expense, net, for the three months ended March 29, 2020 included a loss on disposal of assets of $0.1 million, loss on sale-leaseback transactions of $0.2 million and a gain on insurance recoveries from property damage at our ~~operating restaurant properties and an accrual~~restaurants of ~~$1.85 million~~$0.3 million.

(6)The income tax effect related to ~~a litigation settlement.~~the adjustments to Adjusted Net Loss during the periods presented was calculated using an incremental income tax rate of 25% for the three months ended April 4, 2021 and March 29, 2020.


~~(3)~~	The income tax effect related to the adjustments for impairment and other lease charges, acquisition costs, gains on insurance proceeds, gain on partial condemnation and litigation settlement expense during the periods presented was calculated using an effective income tax rate of 38%.

~~(4)~~

Prior to the fourth quarter of 2016, we recognized a valuation allowance on all of our net deferred income tax assets. This valuation allowance was reversed in the fourth quarter of 2016. For comparability, when presenting Adjusted net income, this adjustment reflects the estimated benefit that would have been realized from our deferred income tax assets during the three and nine months ended October 2, 2016 as if such valuation allowance on net deferred income tax assets had been reversed prior to 2016.


~~(5)~~	~~Adjusted diluted net income per share is calculated based on Adjusted net income and the dilutive weighted average common shares outstanding for the respective periods, where applicable.~~

(7)Adjusted diluted net loss per share is calculated based on Adjusted net loss and the dilutive weighted average common shares outstanding for the respective periods.

Liquidity and Capital Resources

~~We do not have significant receivables or inventory~~As is common in the restaurant industry, we maintain relatively low levels of accounts receivable and inventories and receive trade credit based upon negotiated terms infor purchasing food products and other supplies. As a result, we may at times maintain current liabilities in excess of current assets, which results in a working capital deficit. We are able to operate with a substantial working capital deficit because:

•restaurant operations are primarily conducted on a cash basis;

•rapid turnover results in a limited investment in inventories; and

•cash from sales is usually received before related liabilities for food, supplies and payroll ~~are paid.~~

On June 20, 2017, we entered into an amendment to our senior credit facility to, among other things, increase the permitted indebtedness of our second lien notes to a principal amount not to exceed $300.0 million in order to provide for the additional $75 million of the 8% Notes issued on June 23, 2017. On January 13, 2017, we entered into an amendment to our senior credit facility to, among other things, increase the maximum revolving credit borrowings by $18.0 million to a total of $73.0 million.become due.

Interest payments under our debt obligations, capital expenditures including for our remodeling ~~and new restaurant development~~ initiatives, ~~in 2017,~~ payments of royalties and advertising to BKC and PLK and payments related to our lease obligations represent significant liquidity requirements for us, ~~as well as~~not including any discretionary expenditures for the acquisition or development of additional Burger King and Popeyes restaurants.

If our future financing needs increase, we may need to arrange additional debt or equity financing. We continually evaluate and consider various financing alternatives to enhance or supplement our existing financial resources, including our Senior Credit Facilities. However, there can be no assurance that we will be able to enter into any such arrangements on acceptable terms or at all.

We believe our cash balances, cash generated from our operations and availability of revolving credit borrowings under our ~~amended senior credit facility will~~Senior Credit Facilities provide sufficient cash availability to cover our anticipated working capital needs, capital expenditures and debt service requirements for the next twelve months.

Operating Activities. Net cash provided ~~from~~by operating activities ~~in the first nine months of 2017 increased to $56.6 million from $50.8~~was $7.0 million in the first ~~nine~~three months of ~~2016~~2021 compared to net cash used in operating activities of $3.8 million in the first three months of 2020. The increase was due primarily to an increase of $18.5 million in ~~cash from changes in the components of net working capital of $10.4 million~~EBITDA offset by a decrease in ~~Adjusted EBITDA~~cash provided by working capital components of ~~$3.5~~$6.3 million.

Investing Activities. Net cash used for investing activities in the first ~~nine~~three months of ~~2017~~2021 and ~~2016~~2020 was ~~$77.9~~$10.6 million and ~~$72.3~~$22.0 million, respectively.

As discussed above, in the first nine months of 2017 we acquired 60 restaurants in two transactions for a total cash purchase price of $36.6 million and in first nine months of 2016 we acquired 29 restaurants in four transactions for a total cash purchase price of $33.4 million.

Capital expenditures are a large component of our investing activities and include: (1) new restaurant development, which may include the purchase of real estate; (2) restaurant remodeling, which includes the renovation or rebuilding of the interior and exterior of our existing restaurants including expenditures associated with our franchise agreement renewals and certain restaurants that we acquire; (3) other restaurant capital expenditures, which include capital maintenance expenditures for the ongoing reinvestment and enhancement of our restaurants, and from time to time, to support ~~BKC’s~~BKC's and PLK's initiatives; and (4) corporate and restaurant information systems, including expenditures for our point-of-sale systems for restaurants that we acquire.

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The following table sets forth our capital expenditures for the periods presented (in ~~thousands of dollars)~~thousands):


	Three Months Ended
	April 4, 2021		March 29, 2020
New restaurant development	$	1,643	$	10,517
Restaurant remodeling	1,758		5,651
Other restaurant capital expenditures	5,831		3,475
Corporate and restaurant information systems	1,395		4,954
Total capital expenditures	$	10,627	$	24,597
Number of new restaurant openings, including relocations	2		3

Nine Months Ended October 1, 2017
New restaurant development $ 3,726
Restaurant remodeling 23,036
Other restaurant capital expenditures 13,613
Corporate and restaurant information systems 4,285
Total capital expenditures $ 44,660
Number of new restaurant openings, including relocations 2
Nine Months Ended October 2, 2016
New restaurant development $ 5,857
Restaurant remodeling 45,312
Other restaurant capital expenditures 12,037
Corporate and restaurant information systems 2,181
Total capital expenditures $ 65,387
Number of new restaurant openings, including relocations 3

~~Investing activities in~~In the first ~~nine~~three months of ~~2017 and 2016~~2020, investing activities also included ~~proceeds from sale-leaseback transactions of $4.3 million and $29.4 million, respectively, and insurance~~net proceeds of ~~$0.5~~$13.7 million from seven sale-leaseback transaction and ~~$1.2~~$1.4 million ~~respectively,~~of insurance recoveries related to ~~fires~~property damage at ~~one~~four of our ~~restaurants in 2017 and two of our restaurants in 2016.~~restaurants.

Investing activities in the first nine months of 2017 and 2016 also included the purchase of certain operating restaurant properties to be sold in sale-leaseback transaction of $1.4 million and $4.1 million, respectively.

Financing Activities. Net cash ~~provided from~~used in financing activities in the first ~~nine~~three months of ~~2017~~2021 was ~~$63.2~~$1.4 million ~~due primarily to~~and included principal payments of $1.3 million on the ~~proceeds~~Term Loan B Facility. We also made principal payments on finance leases of ~~$79.9 from~~$0.1 million.

Net cash provided by financing activities in the ~~issuance~~three months of ~~the additional $75.0~~2020 was $64.1 million ~~principal amount of 8% Notes at a premium offset by the~~and included net ~~repayment of~~ revolving credit borrowings of ~~$13.5~~$66.0 million under our Revolving Credit Facility, principal payments of $1.1 million on the Term Loan B Facility, financing costs associated with our Senior Credit Facilities of $0.3 million and principal payments on ~~capital~~finance leases of ~~$1.2~~$0.6 million. Net cash used for financing activities in the first nine months of 2016 was $9.3 million due primarily due net revolving credit borrowings of $10.5 million offset by principal payments on capital leases of $1.1 million.

~~8% Senior Secured Second Lien Notes.~~ The $275 million principal amount of 8% Notes mature on May 1, 2022. Interest is payable semi-annually on May 1 and November 1. The 8% Notes are guaranteed by our material subsidiaries and are secured by second-priority liens on substantially all of our and our subsidiaries' assets (including a pledge of all of the capital stock and equity interests of our subsidiaries).

The 8% Notes are redeemable at our option in whole or in part at any time after May 1, 2018 at a price of 104% of the principal amount plus accrued and unpaid interest, if any, if redeemed before May 1, 2019, 102% of the principal amount plus accrued and unpaid interest, if any, if redeemed after May 1, 2019 but before May 1, 2020 and 100% of the principal amount plus accrued and unpaid interest, if any, if redeemed after May 1, 2020. Prior to May 1, 2018, we may redeem some or all of the 8% Notes at a redemption price of 100% of the principal amount of each 8% Note plus accrued and unpaid interest, if any, and a make-whole premium. In addition, the indenture governing the 8% Notes also provides that we may redeem up to 35% of the 8% Notes using the proceeds of certain equity offerings completed before May 1, 2018.

The 8% Notes are jointly and severally guaranteed, unconditionally and in full by our subsidiaries which are directly or indirectly 100% owned by us. Separate condensed consolidating information is not included because Carrols Restaurant Group is a holding company that has no independent assets or operations. There are no significant restrictions on our ability or any of the guarantor subsidiaries' ability to obtain funds from its respective subsidiaries. All consolidated amounts in our financial statements are representative of the combined guarantors.

The indenture governing the 8% Notes includes certain covenants, including limitations and restrictions on our and our subsidiaries who are guarantors under such indenture to, among other things: incur indebtedness or issue preferred stock; incur liens; pay dividends or make distributions in respect of capital stock or make certain other

restricted payments or investments; sell assets; agree to payment restrictions affecting certain subsidiaries; enter into transaction with affiliates; or merge, consolidate or sell substantially all of our assets.

The indenture governing the 8% Notes and the security agreement provide that any capital stock and equity interests of any of our subsidiaries will be excluded from the collateral to the extent that the par value, book value or market value of such capital stock or equity interests exceeds 20% of the aggregate principal amount of the 8% Notes then outstanding.

The indenture governing the 8% Notes contains customary default provisions, including without limitation, a cross default provision pursuant to which it is an event of default under the 8% Notes and the indenture governing the 8% Notes if there is a default under any of our indebtedness having an outstanding principal amount of $20.0 million or more which results in the acceleration of such indebtedness prior to its stated maturity or is caused by a failure to pay principal when due.

Senior Credit Facility.~~On May 30, 2012,~~ As described above under "—Recent and Future Events Affecting Our Results of Operations—Refinancing of Indebtedness and Amendments to our Senior Credit Facilities", we entered into ~~a senior credit facility, which was most recently amended onJune 20, 2017~~the Senior Credit Facilities and subsequent amendments to ~~increase~~ the permitted indebtedness of our second lien notes to a principal amount not to exceed $300.0 million in order to provide for the additional $75 million principal amount of the 8% Notes issued on June 23, 2017. On January 13, 2017, we entered into an amendment to our senior credit facility to, among other things,~~increase maximum revolving credit borrowings to $73.0 million~~(including $20.0 million available for letters of credit). The amended senior credit facility also provides for potential incremental borrowing increases of up to $25.0 million, in the aggregate. As of October 1, 2017, there were no revolving credit borrowings outstanding and $12.8 million of letters of credit were issued under the senior credit facility. After reserving for issued letters of credit, $60.2 million was available for revolving credit borrowings under the amended senior credit facility at October 1, 2017.

~~Borrowings under the senior credit facility bear interest at a rate per annum, at our option, of:~~

~~(i) the Alternate Base Rate plus the applicable margin of 1.75% to 2.75% based on our Adjusted Leverage Ratio, or~~

~~(ii) the LIBOR Rate plus the applicable margin of 2.75% to 3.75% based on our Adjusted Leverage Ratio (all terms as defined under the senior credit facility).~~

~~At October 1, 2017 our LIBOR Rate margin was 3.25% and the Alternate Base Rate margin was 2.25% based on our Adjusted Leverage Ratio at the end of the second quarter of 2017.~~

Senior Credit Facilities. Our obligations under the ~~senior credit facility~~Senior Credit Facilities are ~~jointly and severally~~ guaranteed by our subsidiaries and are secured by first priority liens on substantially all of our assets and our subsidiaries, including a pledge of all of the capital stock and equity interests of our subsidiaries.

Under the ~~amended senior credit facility,~~Senior Credit Facilities, we are required to make mandatory prepayments of borrowings ~~in the event of~~following dispositions of assets, debt issuances and the receipt of insurance and condemnation proceeds (all subject to certain exceptions).

At April 4, 2021, borrowings under our Senior Credit Facilities bore interest as follows:

(i) Revolving Credit Facility: at a rate per annum equal to (a) the Alternate Base Rate (as defined in the Senior Credit Facilities) plus 2.50% or (b) LIBOR Rate (as defined in the Senior Credit Facilities) plus 3.50%.

(ii) Term Loan B borrowings: at a rate per annum equal to (a) the Alternate Base Rate (as defined plus 2.25% or (b) LIBOR Rate plus 3.25%.

(iii) Term Loan B-1 borrowings: at a rate per annum, at our option, of (a) the Alternate Base Rate plus the applicable margin of 5.25% or (b) the LIBOR Rate (which shall not be less than 1% for Incremental Term B-1 Loans) plus the applicable margin of 6.25%.

The ~~amended senior~~weighted average interest rate on borrowings under our Senior Credit Facilities was 4.4% and 4.9% for the three months ended April 4, 2021 and March 29, 2020, respectively.

The Term Loan B and B-1 borrowings are due and payable in quarterly installments, which began on September 30, 2019. Amounts outstanding at April 4, 2021 are due and payable as follows:

(i) twenty quarterly installments of $1.3 million;

(ii) one final payment of $467.0 million on April 30, 2026.

As of April 4, 2021, there were no revolving credit ~~facility contains~~borrowings outstanding and $9.0 million of letters of credit issued under the Revolving Credit Facility. After reserving for issued letters of credit, $136.8 million was available for revolving credit borrowings under the Senior Credit Facilities at April 4, 2021.

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The Senior Credit Facilities contain certain covenants, including without limitation, those limiting our and our subsidiaries' ability to, among other things, incur indebtedness, incur liens, sell or acquire assets or businesses, change the character of its business in ~~all~~any material ~~respects,~~respect, engage in transactions with related parties, make certain investments, make certain restricted payments or pay dividends. In addition, the ~~amended senior credit facility requires~~Senior Credit Facilities require us to meet ~~certain financial ratios, including~~ a ~~Fixed Charge Coverage Ratio, Adjusted Leverage Ratio and~~ First Lien Leverage Ratio ~~(all as~~(as defined in the Senior Credit Facilities). As there were no borrowings under the ~~amended senior credit facility).~~Revolving Credit Facility at April 4, 2021, no First Lien Leverage Ratio calculation was required. We were in compliance with the ~~financial~~ covenants under our ~~senior credit facility~~Senior Credit Facilities at ~~October 1, 2017.~~April 4, 2021.

The ~~amended senior credit facility contains~~Senior Credit Facilities contain customary default provisions, including that the lenders may terminate their obligation to advance and may declare the unpaid balance of borrowings, or any part thereof, immediately due and payable upon the occurrence and during the continuance of customary ~~defaults~~events of default which include, without limitation, payment default, covenant ~~defaults,~~default, bankruptcy ~~type defaults, cross-defaults~~default, cross-default on other indebtedness, ~~judgments or upon~~judgment default and the occurrence of a change of control.

In March 2020, we entered into an interest rate swap agreement with our lenders to mitigate the risk of increases in the variable interest rate related to term loan borrowings under the Term Loan B Facility. The interest rate swap fixes the interest rate on 50% of the outstanding term loan borrowings under the Term Loan B Facility at 0.915% plus the applicable margin in its Senior Credit Facilities. The agreement matures on February 28, 2025 and has a notional amount of $220.0 million at April 4, 2021. The differences between the variable LIBOR rate and the interest rate swap rate of 0.915% are settled monthly. We made payments of $0.4 million to settle the interest rate swap during the three months ended April 4, 2021. The fair value of our interest rate swap agreement was a liability of $1.9 million as of April 4, 2021 and is included in long-term other liabilities in the accompanying consolidated balance sheets. Changes in the valuation of our interest rate swap were included as a component of other comprehensive income, and will be reclassified to earnings as the losses are realized. We expect to reclassify net losses totaling $1.7 million into earnings in the next twelve months.

Contractual Obligations

~~The following~~A table ~~summarizes~~of our contractual obligations ~~and commitments~~ as of ~~October 1, 2017 (in thousands):~~

Payments due by period
Contractual Obligations Total
Less than
1 Year

1 – 3
Years

3 – 5
Years

More than
5 Years
Long-term debt obligations, including interest (1) $ 385,000
$ 22,000
$ 44,000
$ 319,000
$ —
Capital lease obligations, including interest (2) 6,941
2,143
4,007
592
199
Operating lease obligations (3) 926,624
67,711
123,940
109,264
625,709
Lease financing obligations, including interest (4) 1,800
106
215
220
1,259
Total contractual obligations $ 1,320,365
$ 91,960
$ 172,162
$ 429,076
$ 627,167

~~(1)~~

~~Our long term debt at October 1, 2017 included $275 million of 8% Notes. Total interest payments~~January 3, 2021 was included in Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended January 3, 2021. There have been no significant changes to our ~~Notes of $110.0 million for all years presented are included at the coupon rate of 8%.~~


~~(2)~~	~~Includes total interest of $0.9 million for all years presented.~~


~~(3)~~	Represents the aggregate minimum lease payments under operating leases. Many of our leases also require contingent rent based on a percentage of sales in addition to the minimum base rent and require expenses incidental to the use of the property all of which have been excluded from this table.


~~(4)~~	~~Includes total interest of $0.6 million for all years presented.~~

~~We have not included obligations under our postretirement medical benefit plans in the~~ contractual obligations ~~table as our postretirement plan is not required to be funded in advance, but is funded as retiree medical claims are paid. Also excluded from~~during the contractual obligations table are payments we may make for workers' compensation, general liability and employee healthcare claims for which we pay all claims, subject to annual stop-loss limitations both for individual claims and claims in the aggregate. The majority of our recorded liabilities related to self-insured employee health and insurance plans represent estimated reserves for incurred claims that have yet to be filed or settled. The total of these liabilities was $8.6 million at October 1, 2017.

~~Future restaurant development and remodeling obligations to BKC have also been excluded from the table above as well as contractual obligations related to royalties and advertising payable to BKC.~~

~~Off-Balance Sheet Arrangements~~

~~We have no off-balance sheet arrangements other than our operating leases, which are primarily for our restaurant properties and not recorded on our consolidated balance sheet.~~three months ended April 4, 2021.

Inflation

The inflationary factors that have historically affected our results of operations include increases in food and paper costs, labor and other operating expenses, the cost of providing medical and prescription drug insurance to our employees and energy costs. Wages paid in our restaurants are impacted by changes in the Federal and state hourly minimum wage rates and the Fair Labor Standards Act. Accordingly, changes in the Federal and state hourly minimum wage rates and increases in the wage level to not be considered an hourly employee will directly affect our labor costs. We typically attempt to offset the effect of inflation, at least in part, through periodic menu price increases and various cost reduction programs. However, no assurance can be given that we will be able to offset such inflationary cost increases in the future.

Application of Critical Accounting Policies

Our unaudited ~~interim~~condensed consolidated financial statements ~~and accompanying notes~~ are prepared in accordance with accounting principles generally accepted in the United States of America. 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 the ~~“Significant Accounting Policies”~~“Basis of Presentation” footnote in the notes to the

Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January ~~1, 2017.~~3, 2021. 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. There have been no material changes affecting our critical accounting policies previously disclosed in our Annual Report on Form 10-K for the fiscal year ended January ~~1, 2017.~~3, 2021.

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Forward Looking Statements

This Quarterly Report on Form 10-Q contains statements which constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Statements that are predictive in nature or that depend upon or refer to future events or conditions are forward-looking statements. These statements are often identified by the words “may”, “might", “will”, “should”, “anticipate”, “believe”, “expect”, “intend”, “estimate”, “hope”, “plan” or similar expressions. In addition, expressions of our strategies, intentions or plans are also forward looking statements. These statements reflect management’s current views with respect to future events and are subject to risks and uncertainties, both known and unknown. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their date. There are important factors that could cause actual results to differ materially from those in forward-looking statements, many of which are beyond our control. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected or implied in the forward-looking statements. We have identified significant factors that could cause actual results to differ materially from those stated or implied in the forward-looking statements. We believe important factors that could cause actual results to differ materially from our expectations include the following, in addition to other risks and uncertainties discussed herein and in our Annual Report on Form 10-K for the ~~fiscal year~~period ended January ~~1, 2017:~~3, 2021:

•The impact of the COVID-19 pandemic;

•Effectiveness of the Burger King® and Popeyes® advertising programs and the overall success of the Burger ~~King brand;~~King® and Popeyes® brands;

•Increases in food costs and other commodity costs;

•Our ability to hire and retain employees at current or increased wage rates;

•Competitive ~~conditions;~~conditions, including pricing pressures, discounting, aggressive marketing and the potential impact of competitors’ new unit openings and promotions on sales of our restaurants;

•Our ability to integrate any restaurants we acquire;

•Regulatory factors;

•Environmental conditions and regulations;

•General economic conditions, particularly in the retail sector;

•Weather conditions;

•Fuel prices;

•Significant disruptions in service or supply by any of our suppliers or distributors;

•Changes in consumer perception of dietary health and food safety;

•Labor and employment benefit costs, including the effects of minimum wage increases, ~~health care~~healthcare reform and changes in the Fair Labor Standards Act;

•The outcome of pending or future legal claims or proceedings;

•Our ability to manage our growth and successfully implement our business strategy;

•Our inability to service our indebtedness;

•Our borrowing costs and credit ratings, which may be influenced by the credit ratings of our competitors;

•The availability and terms of necessary or desirable financing or refinancing and other related risks and uncertainties; and

•Factors that affect the restaurant industry generally, including recalls if products become adulterated or misbranded, liability if our products cause injury, ingredient disclosure and labeling laws and regulations, reports of cases of food borne illnesses such as ~~"mad cow"~~“mad cow” disease, and the possibility that consumers

could lose confidence in the safety and quality of certain food products as well as negative publicity regarding food quality, illness, injury, or other health concerns.

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ITEM 3—QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There were no material changes from the information presented in Item 7A included in our Annual Report on Form 10-K for the year ended January ~~1, 2017~~3, 2021 with respect to our market risk sensitive instruments.

A 1% change in interest rates would have resulted in a ~~$0.1~~$0.7 million and $1.4 million change to interest expense for the ~~nine~~three months ended ~~October 1, 2017 due to the issuance of additional $75.0 million principal of 8% Notes at a premium in June 2017~~April 4, 2021 and ~~interest our revolving credit borrowings prior to repayment in the nine months ended October 2, 2016.~~March 29, 2020, respectively.

ITEM 4—CONTROLS AND PROCEDURES

Disclosure Controls and ~~Procedures~~.Procedures. Our senior management is responsible for establishing and maintaining disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d – 15(e) under the Exchange Act), designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Evaluation of Disclosure Controls and Procedures. We have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report, with the participation of our Chief Executive Officer and Chief Financial Officer, as well as other key members of our management. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of ~~October 1, 2017.~~April 4, 2021.

~~No change occurred~~Changes in Internal Control. During the three months ended April 4, 2021, we did not make any changes in our internal control over financial reporting ~~during the third quarter of 2017~~ that have materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

All of our administrative employees and employees of our outsourcing partners and other service providers worked remotely beginning in March 2020 as our corporate office was closed in response to the COVID-19 outbreak. Although we have reopened the office on a volunteer basis, many employees continue to work remotely on a full or part-time basis. Despite the hybrid working environment, there were no material changes in our internal control over financial reporting as we were able to continue to maintain our existing controls and procedures over our financial reporting during the quarter ended April 4, 2021. We are continually monitoring and assessing the effect of the COVID-19 pandemic on our internal controls and hybrid working environment to minimize the impact on its design and operating effectiveness.

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PART II—OTHERINFORMATION

Item 1. Legal Proceedings

We are a party to various litigation matters that arise in the ordinary course of business. We do not believe that the outcome of any of these other matters meet the disclosure or recognition standards, nor will they have a material adverse effect on our consolidated financial statements.

Item 1A. Risk Factors

Part ~~I-Item~~I - Item 1A of the Annual Report on Form 10-K for the ~~fiscal year~~period ended January ~~1, 2017~~3, 2021 describes important risk factors that could materially ~~adversely~~ affect our business, consolidated financial condition or results of operations or cause our operating results to differ materially from the indicated or cause our operating results to differ materially from those indicated or suggested by forward-looking statements made in this Form 10-Q or presented elsewhere by management from ~~time-to-time. There~~time to time. Our risk factor disclosure has been updated to add the following:

If we are not able to hire and retain qualified restaurant personnel it could create disruptions in the operation of our restaurants, which could have ~~been no~~a material ~~changes from the risk factors previously disclosed in~~adverse effect on our ~~Annual Report~~results of operation and financial condition.

We rely on ~~Form 10-K~~our restaurant-level employees to provide outstanding service and quality food for the ~~fiscal year ended January 1, 2017.~~thousands of guests we serve every day. We believe that our continued success depends, in part, on our ability to attract and retain the services of qualified restaurant personnel, and we devote significant resources to recruiting and training our restaurant managers and hourly employees.

The COVID-19 pandemic has increased the difficulty of maintaining adequate staffing levels for us and other restaurant operators. It has also caused us to limit operating hours or dine-in services at some of our restaurants due to employee shortages. If we are unable to hire and retain qualified restaurant personnel sufficient to staff our restaurants, it could create disruptions in the operation of our restaurants which could have a material adverse effect on our results of operation and financial condition.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~None~~On January 15, 2021, the Company accepted the surrender of 8,219 shares of the Company's common stock in connection with the payment of taxes upon the vesting of restricted stock.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None

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Item 6. Exhibits

(a)The following exhibits are filed as part of this report.



Exhibit No.
~~31.1~~4.1						Amendment No.1 to Registration Rights and Stockholders' Agreement dated as of April 1, 2021 between Carrols Restaurant Group, Inc. and Cambridge Franchise Holdings, LLC
10.1						Sixth Amendment to Credit Agreement dated as of April 6, 2021 among Carrols Restaurant Group, Inc., certain subsidiaries party thereto, Wells Fargo Bank, National Association and the lenders party thereto
10.2						Offer Letter dated October 4, 2018 between Carrols Restaurant Group, Inc. and Nathan Mucher+
31.1						Chief Executive Officer’s Certificate Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Carrols Restaurant Group, Inc.
31.2						Chief Financial Officer’s Certificate Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Carrols Restaurant Group, Inc.
32.1						Chief Executive Officer’s Certificate Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Carrols Restaurant Group, Inc.
32.2						Chief Financial Officer’s Certificate Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Carrols Restaurant Group, Inc.
101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH						Inline XBRL Taxonomy Extension Schema Document
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

+ compensatory plan or arrangement

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




	CARROLS RESTAURANT GROUP, INC.

Date: ~~November 9, 2017~~May 13, 2021		/s/ Daniel T. Accordino
		(Signature)
		Daniel T. Accordino Chief Executive Officer

Date: ~~November 9, 2017~~May 13, 2021		/s/ ~~Paul R. Flanders~~Anthony E. Hull
		(Signature)
		~~Paul R. Flanders~~ Anthony E. Hull Vice President, – Chief Financial Officer and Treasurer

3644




Delaware		~~16-1287774~~83-3804854
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

968 James Street ~~Syracuse, New York~~		~~13203~~
Syracuse,	New York	13203
(Address of principal executive office)		(Zip Code)


				Page
PART I FINANCIAL INFORMATION

			~~Page~~
~~PART I FINANCIAL INFORMATION~~

Item 1	Interim Condensed Consolidated Financial Statements (Unaudited) ~~- Carrols Restaurant Group, Inc.~~:

		Consolidated Balance Sheets ~~as of October 1, 2017 and January 1, 2017~~		3

		Consolidated Statements of ~~Operations and~~ Comprehensive ~~Income for the Three and Nine Months Ended October 1, 2017 and October 2, 2016~~Loss		4

		Consolidated Statements of Changes in Stockholders' Equity		5

		Consolidated Statements of Cash Flows ~~for the Nine Months Ended October 1, 2017 and October 2, 2016~~		6

		Notes to Unaudited Interim Condensed Consolidated Financial Statements		7

Item 2		Management’s Discussion and Analysis of Financial Condition and Results of Operations		1924

Item 3		Quantitative and Qualitative Disclosures About Market Risk		3441

Item 4		Controls and Procedures		3441

PART II OTHER INFORMATION

Item 1		Legal Proceedings		3542

Item 1A		Risk Factors		3542

Item 2		Unregistered Sales of Equity Securities and Use of Proceeds		3542

Item 3		Defaults Upon Senior Securities		3542

Item 4		Mine Safety Disclosures		3542

Item 5		Other Information		3542

Item 6		Exhibits		3543


	April 4, 2021		January 3, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	59,929	$	64,964
Trade and other receivables	19,524		19,862
Inventories	11,983		11,595
Prepaid rent	8,207		8,046
Prepaid expenses and other current assets	13,328		7,309
Refundable income taxes	169		169

Total current assets	113,140		111,945

Property and equipment, net of accumulated depreciation of $448,904 and $434,328, respectively	345,206		349,555
Franchise rights, net of accumulated amortization of $137,069 and $133,632, respectively (Note 2)	331,160		334,597
Goodwill (Note 2)	122,619		122,619
Franchise agreements, at cost less accumulated amortization of $13,165 and $14,653, respectively	31,139		31,584

Operating right-of-use assets, net (Note 5)	795,157		799,962


Other assets	6,769		6,823
Total assets	$	1,745,190	$	1,757,085
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt and finance lease liabilities (Notes 5 and 6)	$	5,668	$	5,525
Current portion of operating lease liabilities (Note 5)	42,495		41,815
Accounts payable	33,931		27,596


Accrued payroll, related taxes and benefits	41,582		49,417
Accrued real estate taxes	6,430		7,774
Other liabilities	28,671		24,214
Total current liabilities	158,777		156,341
Long-term debt and finance lease liabilities, net of current portion (Notes 5 and 6)	475,281		475,695
Lease financing obligations	1,190		1,191
Operating lease liabilities (Note 5)	805,008		809,969

Deferred income taxes, net (Note 7)	9,747		11,362
Accrued postretirement benefits	1,453		1,523

Other liabilities (Note 4)	24,799		29,472
Total liabilities	1,476,255		1,485,553
Commitments and contingencies (Note 9)	0		0
Stockholders’ equity:
Preferred stock, par value $.01; authorized 20,000,000 shares, issued and outstanding—100 shares	0		0
Voting common stock, par value $.01; authorized—100,000,000 shares, issued—53,607,062 and 52,653,964 shares, respectively, and outstanding—49,903,569 and 49,389,382 shares, respectively	520		515
Additional paid-in capital	307,933		306,469
Accumulated deficit	(25,535)		(18,367)
Accumulated other comprehensive income (loss)	144		(3,015)
Treasury stock, at cost	(14,127)		(14,070)
Total stockholders’ equity	268,935		271,532
Total liabilities and stockholders’ equity	$	1,745,190	$	1,757,085



	October 1, 2017			January 1, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	43,875		$	2,002
Trade and other receivables	9,911			7,623
Inventories	8,003			7,761
Prepaid rent	5,083			4,665
Prepaid expenses and other current assets	7,752			7,465
Refundable income taxes	183			153
Total current assets	74,807			29,669
Property and equipment, net of accumulated depreciation of $279,732 and $254,807, respectively	254,415			247,847
Franchise rights, net of accumulated amortization of $98,838 and $93,799, respectively (Note 3)	153,269			134,153
Goodwill (Note 3)	36,346			22,869
Franchise agreements, at cost less accumulated amortization of $10,626 and $9,734, respectively	23,209			19,591
Favorable leases, net of accumulated amortization of $2,158 and $1,760, respectively (Note 3)	6,065			5,441
Deferred income taxes (Note 7)	27,513			28,841
Other assets	1,808			1,744
Total assets	$	577,432		$	490,155
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt (Note 6)	$	1,757		$	1,616
Accounts payable	21,285			22,445
Accrued interest	9,172			2,676
Accrued payroll, related taxes and benefits	25,355			26,029
Accrued real estate taxes	5,344			5,202
Other liabilities	15,749			10,932
Total current liabilities	78,662			68,900
Long-term debt, net of current portion (Note 6)	278,932			215,108
Lease financing obligations	1,196			2,938
Deferred income—sale-leaseback of real estate	11,846			12,271
Accrued postretirement benefits	4,775			4,566
Unfavorable leases, net of accumulated amortization of $4,787 and $4,643, respectively (Note 3)	13,541			11,686
Other liabilities (Note 5)	24,343			20,030
Total liabilities	413,295			335,499
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, par value $.01; authorized 20,000,000 shares, issued and outstanding—100 shares	—			—
Voting common stock, par value $.01; authorized—100,000,000 shares, issued—36,158,711 and 35,835,800 shares, respectively, and outstanding—35,433,072 and 35,258,579 shares, respectively	354			353
Additional paid-in capital	143,641			141,133
Retained earnings	21,486			14,514
Accumulated other comprehensive loss	(1,203		)	(1,203		)
Treasury stock, at cost	(141		)	(141		)
Total stockholders’ equity	164,137			154,656
Total liabilities and stockholders’ equity	$	577,432		$	490,155


								Three Months Ended
	Nine Months Ended							April 4, 2021		March 29, 2020
	October 1, 2017			October 2, 2016
Cash flows provided from operating activities:
Net income	$	3,238		$	16,010
Adjustments to reconcile net income to net cash provided from operating activities:
Cash flows provided by (used in) operating activities:							Cash flows provided by (used in) operating activities:
Net loss							Net loss	$	(7,168)	$	(22,209)
Adjustments to reconcile net loss to net cash provided by operating activities:							Adjustments to reconcile net loss to net cash provided by operating activities:
Loss on disposals of property and equipment	252			14			Loss on disposals of property and equipment	220		50
Stock-based compensation	2,509			1,627			Stock-based compensation	1,469		1,132
Impairment and other lease charges	2,002			1,193			Impairment and other lease charges	353		2,881
Depreciation and amortization	40,172			34,613			Depreciation and amortization	20,609		21,031
Amortization of deferred financing costs	735			593			Amortization of deferred financing costs	549		482
Amortization of bond premium	(239		)	—
Amortization of deferred gains from sale-leaseback transactions	(1,230		)	(1,348		)
Amortization of discount on debt							Amortization of discount on debt	200		67
Deferred income taxes	608			—			Deferred income taxes	(2,661)		(6,983)
Change in refundable income taxes	(30		)	—			Change in refundable income taxes	0		6
Changes in other operating assets and liabilities	8,551			(1,863		)	Changes in other operating assets and liabilities	(6,535)		(247)
Net cash provided from operating activities	56,568			50,839
Net cash provided by (used in) operating activities							Net cash provided by (used in) operating activities	7,036		(3,790)
Cash flows used for investing activities:							Cash flows used for investing activities:
Capital expenditures:							Capital expenditures:
New restaurant development	(3,726		)	(5,857		)	New restaurant development	(1,643)		(10,517)
Restaurant remodeling	(23,036		)	(45,312		)	Restaurant remodeling	(1,758)		(5,651)
Other restaurant capital expenditures	(13,613		)	(12,037		)	Other restaurant capital expenditures	(5,831)		(3,475)
Corporate and restaurant information systems	(4,285		)	(2,181		)	Corporate and restaurant information systems	(1,395)		(4,954)
Total capital expenditures	(44,660		)	(65,387		)	Total capital expenditures	(10,627)		(24,597)
Acquisition of restaurants, net of cash acquired (Note 2)	(36,556		)	(33,407		)

Properties purchased for sale-leaseback	(1,404		)	(4,096		)	Properties purchased for sale-leaseback	0		(12,441)
Proceeds from sale-leaseback transactions	4,257			29,394			Proceeds from sale-leaseback transactions	0		13,685
Proceeds from insurance recoveries	481			1,216			Proceeds from insurance recoveries	0		1,385
Net cash used for investing activities	(77,882		)	(72,280		)	Net cash used for investing activities	(10,627)		(21,968)
Cash flows provided from financing activities:
Proceeds from issuance of 8% senior secured second lien notes	79,875			—
Borrowings under senior credit facility	183,250			50,250
Repayments under senior credit facility	(196,750		)	(39,750		)
Principal payments on capital leases	(1,222		)	(1,094		)
Cash flows provided by (used in) financing activities:							Cash flows provided by (used in) financing activities:

Repayments of Term Loan B Facility							Repayments of Term Loan B Facility	(1,250)		(1,063)
Borrowings under revolving credit facility							Borrowings under revolving credit facility	0		190,000
Repayments under revolving credit facility							Repayments under revolving credit facility	0		(124,000)

Payments on finance lease liabilities							Payments on finance lease liabilities	(137)		(567)
Costs associated with financing long-term debt	(1,966		)	(102		)	Costs associated with financing long-term debt	0		(314)
Net cash provided from financing activities	63,187			9,304
Net increase (decrease) in cash	41,873			(12,137		)
Purchase of treasury shares							Purchase of treasury shares	(57)		0
Net cash provided by (used in) financing activities							Net cash provided by (used in) financing activities	(1,444)		64,056
Net increase (decrease) in cash and cash equivalents							Net increase (decrease) in cash and cash equivalents	(5,035)		38,298
Cash and cash equivalents, beginning of period	2,002			22,274			Cash and cash equivalents, beginning of period	64,964		2,974
Cash and cash equivalents, end of period	$	43,875		$	10,137		Cash and cash equivalents, end of period	$	59,929	$	41,272
Supplemental disclosures:							Supplemental disclosures:
Interest paid on long-term debt	$	9,310		$	8,941		Interest paid on long-term debt	$	5,960	$	6,705
Interest paid on lease financing obligations	$	93		$	78		Interest paid on lease financing obligations	$	26	$	26
Accruals for capital expenditures	$	3,144		$	3,468		Accruals for capital expenditures	$	2,989	$	5,528
Non-cash reduction of lease financing obligations	$	1,744		$	—
Income taxes refunded (paid)	$	(30	)	$	(3	)
Capital lease obligations acquired or incurred	$	277		$	553
Finance lease obligations incurred							Finance lease obligations incurred	$	546	$	0



x☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934



¨☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934


											Accumulated
							Additional		Retained		Other					Total
	Common Stock			Preferred Stock			Paid-In		Earnings		Comprehensive		Treasury Stock			Stockholders'
	Shares	Amount		Shares	Amount		Capital		(Deficit)		Income (Loss)		Shares	Amount		Equity
Balance, January 3, 2021	51,486,116	$	515	100	$	0	$	306,469	$	(18,367)	$	(3,015)	(2,096,734)	$	(14,070)	$	271,532
Stock-based compensation	—	—		—	—		1,469		—		—		—	—		1,469
Vesting of non-vested shares and RSUs	522,406	5		—	—		(5)		—		—		—	—		0
Net loss	—	—		—	—		—		(7,168)		—		—	—		(7,168)
Purchase of treasury stock	—	—		—	—		—		—		—		(8,219)	(57)		(57)
Change in valuation of interest rate swap, net of income taxes of $1,046 (Note 6)	—	—		—	—		—		—		3,159		—	—		3,159
Balance, April 4, 2021	52,008,522	$	520	100	$	0	$	307,933	$	(25,535)	$	144	(2,104,953)	$	(14,127)	$	268,935














Balance, December 29, 2019	51,049,377	$	510	100	$	—	$	301,251	$	11,096	$	622	(553,112)	$	(4,017)	$	309,462
Stock-based compensation	—	—		—	—		1,132		—		—		—	—		1,132
Vesting of non-vested shares and RSUs	424,963	5		—	—		(5)		—		—		—	—		0
Net loss	—	—		—	—		—		(22,209)		—		—	—		(22,209)
Purchase of treasury stock	—	—		—	—		—		—		—		(9,318)	(54)		(54)
Change in valuation of interest rate swap (Note 6)	—	—		—	—		—		—		(5,209)		—	—		(5,209)
Balance, March 29, 2020	51,474,340	$	515	100	$	0	$	302,378	$	(11,113)	$	(4,587)	(562,430)	$	(4,071)	$	283,122



Closing Date		Number of Restaurants	Purchase Price			Fee-Owned (1)	Market Location
2016 Acquisitions:
February 23, 2016	(2)	12	$	7,127			Scranton/Wilkes-Barre, Pennsylvania
May 25, 2016		6	12,080			5	Detroit, Michigan
July 14, 2016	(2)	4	5,445			3	Detroit, Michigan
August 23, 2016		7	8,755			6	Portland, Maine
October 4, 2016		3	1,623				Raleigh, North Carolina
November 15, 2016		17	7,251				Pittsburgh and Johnstown, Pennsylvania
December 1, 2016		7	5,807			1	Columbus, Ohio
		56	48,088			15
2017 Acquisitions:
February 28, 2017		43	20,373				Cincinnati, Ohio
June 6, 2017	(2)	17	16,190		(3)		Baltimore, Maryland and Washington, DC
Total 2016 and 2017 Acquisitions		116	$	84,651		15


~~(3)~~	The purchase price and the related allocation for this acquisition (included in the presentation below) is preliminary and subject to adjustment related to working capital settlement and related deferred income tax considerations which are expected to be finalized in the fourth quarter of 2017.



Trade and other receivables	$	486
Inventory	566
Prepaid expenses	192
Other assets	52
Restaurant equipment	3,244
Restaurant equipment - subject to capital lease	235
Leasehold improvements	2,326
Franchise fees	1,292
Franchise rights (Note 3)	24,156
Favorable leases (Note 3)	1,100
Deferred income taxes	(4,456		)
Goodwill (Note 3)	13,477
Capital lease obligations for restaurant equipment	(278		)
Unfavorable leases (Note 3)	(2,997		)
Accounts payable	(880		)
Accrued payroll, related taxes and benefits	(270		)
Other liabilities	(1,682		)
Net assets acquired	$	36,563



Balance at January 1, 2017	$	22,869
Acquisitions of restaurants (Note 2)	13,477
Balance at October 1, 2017	$	36,346


Balance at January 3, 2021	$	334,597

Amortization expense	(3,437)
Balance at April 4, 2021	$	331,160



	Nine Months Ended			Year Ended
	October 1, 2017			January 1, 2017
Balance, beginning of the period	$	1,513		$	2,088
Provisions for closures	766			59
Changes in estimates of accrued costs	91			(89		)
Payments, net	(543		)	(691		)
Other adjustments, including the effect of discounting future obligations	411			146
Balance, end of the period	$	2,238		$	1,513


	April 4, 2021		January 3, 2021
Accrued occupancy costs	$	2,345	$	2,394
Accrued workers’ compensation and general liability claims	4,967		5,499
Interest rate swap	1,858		6,062
Deferred compensation	4,528		4,419
Deferred federal payroll taxes	10,808		10,808
Other	293		290
	$	24,799	$	29,472


						Shares	Weighted Average Grant Date Price
	Shares		Weighted Average Grant Date Price
Non-vested at January 1, 2017	577,221		$	10.42
Non-vested at January 3, 2021					Non-vested at January 3, 2021	1,167,848	$	7.02
Granted	366,580		15.05		Granted	938,140	$	6.99
Vested	(174,493	)	9.93		Vested	(502,448)	$	8.04
Forfeited	(43,669	)	12.84		Forfeited	(5,000)	$	5.47
Non-vested at October 1, 2017	725,639		$	12.73
Non-vested at April 4, 2021					Non-vested at April 4, 2021	1,598,540	$	6.69


	Options	Weighted Average Exercise Price	Average Remaining Contractual Life	Aggregate Intrinsic Value (1)
Options outstanding at January 3, 2021	1,050,000	$7.12
Granted	0	$0


Options Outstanding at April 4, 2021	1,050,000	$7.12	6.4	$0
Vested or expected to vest at April 4, 2021	1,050,000	$7.12	6.4	$0
Options exercisable at April 4, 2021	0


			Units
Non-vested at January 3, 2021			37,456
Granted			99,317
Vested			(19,958)

Non-vested at April 4, 2021			116,815



	October 1, 2017		January 1, 2017
Deferred rent	$	13,304	$	11,498
Other accrued occupancy costs	3,285		3,254
Accrued workers’ compensation and general liability claims	4,861		3,364
Deferred compensation	2,719		1,756
Other	174		158
	$	24,343	$	20,030



	October 1, 2017			January 1, 2017
Collateralized:
Carrols Restaurant Group 8% Senior Secured Second Lien Notes	$	275,000		$	200,000
Senior Credit Facility - Revolving credit borrowings	—			13,500
Capital leases	6,071			7,039
	281,071			220,539
Less: current portion	(1,757		)	(1,616		)
Less: deferred financing costs	(5,018		)	(3,815		)
Add: bond premium	$	4,636		$	—
Total Long-term Debt	$	278,932		$	215,108


		Three Months Ended
Lease cost	Classification	April 4, 2021		March 29, 2020
Operating lease cost (1)	Restaurant rent expense	$	25,742	$	25,471
Operating lease cost (2)	General and administrative	256		98
Variable lease cost	Restaurant rent expense	4,598		4,105
Sublease income	Restaurant rent expense	(26)		(122)
Finance lease cost:
Amortization of right-of-use assets	Depreciation and amortization	132		445
Interest on lease liabilities	Interest expense	22		46
Total lease cost		$	30,724	$	30,043


~~(1)~~	Diluted net income per share is equal to basic net income per share for the periods presented due to the allocation of earnings to participating securities under the two-class method of calculating basic net income per share causing basic net income per share to be lower than diluted net income per share calculated under the treasury-stock method.



Reconciliation of Restaurant-Level EBITDA:
Income from operations	$	8,684		$	9,049	$	19,613		$	29,625
Add:
General and administrative expenses	14,699			13,000		44,686			40,561
Depreciation and amortization	13,655			12,070		40,172			34,613
Impairment and other lease charges	1,039			685		2,002			1,193
Other expense (income), net	(383		)	—		(354		)	1,035
Restaurant-Level EBITDA	$	37,694		$	34,804	$	106,119		$	107,027



Reconciliation of Adjusted net income:
Net income	$	2,795		$	4,489		$	3,238		$	16,010
Add:
Impairment and other lease charges	1,039			685			2,002			1,193
Gain on partial condemnation and fire (2)	(383		)	—			(383		)	(906		)
Litigation settlement (2)	—			—			—			1,850
Acquisition costs (1)	502			453			1,668			1,091
Income tax effect on above adjustments (3)	(440		)	(432		)	(1,249		)	(1,226		)
Provision for deferred income tax valuation allowance (4)	—			466			—			(2,175		)
Adjusted net income	$	3,513		$	5,661		$	5,276		$	15,837
Adjusted diluted net income per share (5)	$	0.08		$	0.13		$	0.12		$	0.35



Nine Months Ended October 1, 2017
New restaurant development	$	3,726
Restaurant remodeling	23,036
Other restaurant capital expenditures	13,613
Corporate and restaurant information systems	4,285
Total capital expenditures	$	44,660
Number of new restaurant openings, including relocations	2
Nine Months Ended October 2, 2016
New restaurant development	$	5,857
Restaurant remodeling	45,312
Other restaurant capital expenditures	12,037
Corporate and restaurant information systems	2,181
Total capital expenditures	$	65,387
Number of new restaurant openings, including relocations	3



	Payments due by period
Contractual Obligations	Total		Less than 1 Year		1 – 3 Years		3 – 5 Years		More than 5 Years
Long-term debt obligations, including interest (1)	$	385,000	$	22,000	$	44,000	$	319,000	$	—
Capital lease obligations, including interest (2)	6,941		2,143		4,007		592		199
Operating lease obligations (3)	926,624		67,711		123,940		109,264		625,709
Lease financing obligations, including interest (4)	1,800		106		215		220		1,259
Total contractual obligations	$	1,320,365	$	91,960	$	172,162	$	429,076	$	627,167